British Energy's eight nuclear stations will be taken over by the Government for a nominal payment of £1 each should yesterday's £4bn rescue of the embattled company fail to secure its future.
The deal, finally clinched after all-night negotiations with bondholders, will see shareholders emerge with just 2.5 per cent of British Energy and the company's £3.9bn in nuclear liabilities offloaded onto the taxpayer.
Creditors owed £1.2bn will receive £425m in new British Energy bonds and 97.5 per cent of the equity. The lion's share of the bonds, £170m worth, will go to the banks which financed British Energy's ill-fated purchase of the Eggborough coal-fired power station. But bondholders will emerge with 52.3 per cent of the equity.
Although formal agreement has been reached with a number of bondholders, British Energy is still short of the 75 per cent backing it needs and has been given until the end of this month to obtain the necessary consents. A spokesman said it was confident of meeting the deadline.
The restructuring deal then needs to be approved by the European Commission under its state aid rules - a process which is expected to take until the middle of next year.
Patricia Hewitt, Secretary of State for Trade and Industry, struck a cautious note, saying there remained "significant milestones ahead" and that the Government remained ready to put British Energy into administration.
"In addition, if the Government is not satisfied that British Energy will be viable in all reasonably foreseeable conditions, or if there is a material adverse change in British Energy's position, the Government has reserved its right to withdraw its support for the restructuring," she added. This would involve the withdrawal of a £200m credit facility, plunging the company into insolvency.
In return for shouldering all its liabilities, the Government will also have the right to 65 per cent of British Energy's cashflow or 65 per cent of its equity. However, at the insistence of creditors, it has agreed to limit its share of voting rights to 29.9 per cent.
Friends of the Earth's energy campaigner, Roger Higman, said: "This agreement may save ministers' blushes but it shouldn't hide their shame. This whole sorry episode highlights the economic madness of nuclear power."
Tim Yeo, the frontbench Conservative trade and industry spokesman, called on the Government to end the "dithering" over the future of nuclear power. "Until ministers decide whether there is a role for nuclear power in Britain's long-term electricity generation needs, expertise will drift away and British Energy will operate in a climate of uncertainty," he said.
Vince Cable, the Liberal Democrats' trade and industry spokesman, said the deal might yet be blocked by Brussels and accused the Government of "double standards" by lobbying against unfair state aid elsewhere and then demanding it for the UK.
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