British Energy mulls FSA complaint after shares slide

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British Energy may complain about the Government's behaviour to the Financial Services Authority, after shares and bonds in the embattled nuclear electricity generator resumed their downwards spiral.

The renewed investor panic was caused by reports over the weekend and yesterday that ministers were looking upon administration as the most likely outcome for the company.

British Energy executives, led by its executive chairman Robin Jeffrey, were yesterday continuing their talks with the Government in an effort to persuade it that keeping the company solvent would be a cheaper option. It is also expected to appoint Merrill Lynch to strengthen its team of financial advisers working on the rescue plan.

Privately, British Energy is furious at the Government for briefing against it when the two are still locked in negotiations and is understood to be considering a complaint to the FSA.

A £410m lifeline provided to British Energy by the Government last week runs out in 10 days. Unless it is rolled over or a long-term restructuring plan is agreed, then there will be little option but to declare British Energy insolvent.

Shares in British Energy fell by a third to close at 12p, valuing the company at £74m. Meanwhile British Energy bonds were trading at just 30 per cent of their face value – a drop of 28 percentage points on Monday night's closing value.

British Energy sources argue that putting the company into administration would cut the value of its assets by £650m and knock a further £100m off the value of its electricity trading contracts.

This compares with the £200m it would cost the Government to keep the company solvent by exempting its electricity from the Climate Change Levy and cutting the cost of its reprocessing contracts with British Nuclear Fuels.

However, sources questioned the company's figures. "This is a company which ought to be able to flourish in the financial sector but which has been mismanaged," one adviser said. "The Government's instinct is still to find a private sector solution but whether that will leave a role for British Energy's existing investors is another matter."

"This is all about getting rid of Robin," one source said. "The Government tried and failed to achieve that by slagging off the management and now they are trying to do it by slagging off the entire company." The sources also accused ministers of undermining morale at British Energy. "They are like little boys in a railway signal box pulling the levers without any idea what the effect will be down the line."