BE bailed out, sells stake in AmerGen

1 October 2003

British Energy (BE) has secured an agreement with its creditors for a financial rescue, after much legal activity during the last days of September.

Under a debt-for-equity swap, £425 million ($709 million) of new bonds will be issued along with 97.5% of the issued ordinary shares of the restructured group, in exchange for around £1.26 billion ($2.10 billion) of debt. Existing shareholders would receive the remaining 2.5% of the new ordinary shares.

The creditors for the Eggborough coal-fired power station have agreed to replace their existing claims ­ around £490 million ($817 million) ­ with £150 million ($250 million) of new bonds.

The government will help meet some of the firm's future liabilities, including the cost of decommissioning nuclear power plants, and will continue to make the credit facility available to BE at its current level of up to £200 million ($330 million). The government is to receive up to 65% of future cashflow in exchange for assuming a reported £3 billion ($5 billion) worth of nuclear decommissioning liabilities.

BE chief executive Mike Alexander acknowledged the company had to improve its performance. "We are determined to see BE return to being a prominent and respected participant in the UK energy market," he said.

Chairman Adrian Monatgue said: "The restructuring recognises the overwhelming claims of creditors and preserves some value for shareholders if we can proceed with their cooperation." While welcoming the deal, the trade and industry secretary Patricia Hewitt issued a warning that the firm could still be put into administration if any of the conditions attached to it were not met. "There remain significant milestones ahead. The government will remain well prepared for administration in case those conditions cannot be met." The restructuring will only be implemented once all the conditions of the formal agreements to the proposed restructuring are met. These include the receipt of state aid approval from the European Commission (EC). The EC announced on 23 July 2003 that it was opening a formal investigation procedure into the government's aid to BE (see NEI August 2003, p12). The government has announced it has contingency plans ready for the administration of the company if any of the restructuring conditions are not met.

Meanwhile, following a $276.5 million offer from Florida Power & Light (FPL) for BE's 50% stake in AmerGen, Exelon has exercised its right to buy the share by matching the FPL offer. BE had agreed to the sale to FPL, but ­ as BE's partner in AmerGen ­ Exelon had a 30-day right of first refusal to purchase the interest in AmerGen. FPL will receive a $8.3 million transaction fee.

Exelon is now the sole owner of the AmerGen plants ­ Clinton, Three Mile Island 1 and Oyster Creek, representing approximately 2480MWe. Craig Nesbit, spokesman for Exelon, said the company had not yet decided whether it would dissolve AmerGen or leave it as a separate entity. The sale should be completed during the first half of 2004.

Exelon currently fully owns eight of the ten stations it operates (a total of 17 operating reactors). The company shares ownership in the Peach Bottom plant, with PSE&G owning 50%; and the Quad Cities plant, with Mid-American Energy owning 25%. In addition, Exelon also owns 50% of the Salem plant, which is operated by PSE&G.

The AmerGen partnership was formed in 1997 between PECO Energy and BE. In 2000 PECO merged with Unicom to form Exelon.



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