British Energy’s corporate move gives it more options

World Affairs Talk
Monday, 04 June 2007
The UK government recently raised £2.08 billion from nuclear power provider British Energy PLC’s shares as it undertook a plan of decommissioning the ageing nuclear power stations. The shares were trading at 536 pence after the formal announcement was made. The Citigroup, Deutsche Bank and Merrill Lynch ran this sale process while Lazard Company advised the government on its best interests. Financial analysts however expected that the government would wait until early 2008 to begin the stake sale; but the move was revealed two days ago with British Energy news that annual profits had jumped 44 per cent to £1.2 billion. British Energy for the last couple of months is seeking expressions of interest from potential partners in the development of new nuclear plants to replace reactors coming to the end of their useful lives and help reduce emissions of carbon dioxide. As a consequence, British Department of Trade and Industry on 01 June confirmed that 400 million shares have been placed with institutional investors at 520 pence. It said that the net proceeds of £2.08 billion would go, as expected, to the Nuclear Liabilities Fund. The NLF was initially set up at the time of British Energy’s privatisation in 1996 to meet clean-up costs when the group’s eight existing stations reached the end of their life. This plan of selling the shares takes the government’s stake in British Energy down from 64 per cent to 39 per cent. This will further fall to 36 per cent if the over-allotment option is implemented. The UK Government said earlier that it wanted to keep a strategic stake of at least 29.9 per cent, effectively blocking any hostile move. The stake was first acquired in 2002 to help revive the then struggling nuclear power firm, which had been crippled by falling power prices and the introduction of a nuclear clean-up bill. Since then, British Energy has made a strong recovery on the back of rising natural gas prices, which has lifted electricity prices, despite problems at its ageing power stations. The move has sparked rumor that one of British Energy’s foreign rivals will now dive on the business, given its key role in Britain’s nuclear future. At least two-to-three new nuclear power stations are expected to be built in the coming years to meet Britain’s growing energy needs. It is expected, these will be constructed on sites already owned by British Energy. Scottish & Southern Energy, the gas and electricity power group, on 31 May 2007 revealed it had already held talks with British Energy over what role it could play in any nuclear expansion programme. British Energy shares on the London Stock Exchange rose 2.05 percent to 536 pence right after the move. Prospect of British Energy looks healthier after this as it now possess more flexibility and a large amount of liquid assets at hand. Share & Bookmark
Last Updated ( Wednesday, 06 June 2007 )

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