British Energy sells majority stake in Bruce

1 January 2003

British Energy (BE) has entered into binding Heads of Agreement to sell its 82.4% stake in Bruce Power, with 79.8% going to a consortium of Cameco, TransCanada PipeLines, and BPC Generation Infrastructure Trust, and 2.6% being sold to the Power Workers' Union and the Society of Energy Professionals.

In addition, BE will sell its 50% interest in Huron Wind, Ontario's first commercial wind farm, to a consortium of Cameco, TransCanada, and the Ontario Municipal Employees Retirement System.

BE expects to receive C$770 million ($487 million), subject to potential adjustments. Of this, BE will receive C$630 million ($400 million) in cash. In addition, BE expects to receive up to:

• C$100 million ($63 million), contingent on the restart of the two Bruce A units. C$50 million of this will be released to British Energy provided the first unit is restarted by 15 June 2003, and C$50 million will be released if the second unit is restarted by 1 August 2003. Delays in the restart of each unit would result in the payments being reduced by 10% per month.

• C$20 million ($13 million), which will be retained for two months following closure against a potential adjustment in respect of any pension fund deficit.

• C$20 million, which will be retained to cover any successful claims in respect of customary representations and warranties until any claims raised against BE within two years from the date of closure are resolved.

An additional C$80 million ($51 million) will be retained to cover the estimated outstanding tax liabilities of British Energy (Canada).

Meanwhile, BE has announced worse-than-expected half-year results. In the six months to September 2001, BE's UK operating costs averaged 1.85p/kWh (¢2.92/kWh), 0.11p (¢0.17) higher than the same period in 2001 due, it said, to unplanned maintenance at two power stations. Along with exceptional losses in its decommissioning fund and employee share fund, said to be the result of poor market conditions, the company's total loss over the period was £337 million ($532 million). BE's North American operations contributed £81 million ($128 million) towards profit.

BE's share price is now too low to meet the New York Stock Exchange's listing criterion, which requires that the price not be below $1 over a 30-day consecutive trading period. BE said it is "in discussions" with NYSE and reviewing its options.

BE has called an extraordinary meeting of its shareholders to discuss the company's serious loss of capital (set for 14 January 2003). BE said the meeting is a legal requirement before the proposed restructuring of the company can be agreed with creditors.

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