British Energy back on the market

17 January 2005

Shares in British Energy (BE) were traded again on 17 January as the company relisted after a complicated restructuring process.

The UK’s largest generator was hit by a fall in wholesale electricity prices and forced to carry out a £1 billion debt-for-equity swap. The company’s creditors wrote off £775 million in return for 97.5% of shares while the UK government took on £4.2 billion in nuclear liabilities in exchange for about two thirds of cashflow.

BE’s shares were listed on the London Stock Exchange at a price of 288p which valued the firm at £1.6 billion ($3 billion). Prices rose to 290p in early trading but analysts estimate each share’s true value to be between 200 and 240p. Morgan Stanley advised caution and warned that “the company is highly exposed to both operational improvement and movements in UK power prices.”

Shareholders, who had been unhappy with their 2.5% stake in the restructured company, were awarded one share and 2.1 warrants for every 50 pre-collapse shares.

BE chief executive Mike Alexander said that since the collapse, “70% of senior executives had been replaced” and 50% of power station directors were new to their posts, but BE’s job was “far from over.”

Alexander told the Financial Times: “The company has suffered from years of underinvestment in terms of numbers of people, skills and expenditure on plants.” Staffing levels will rise by 500 to 5600 and maintenance spending will increase from £130 million to £250 million ($468 million).




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