British Energy write-off leads to £4bn loss

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The Independent Online

British Energy, the nuclear power generator, will tomorrow admit it has plunged into record losses of more than £4bn after slashing the value of its UK power stations by more than a half.

The group, which was saved from collapse last year by a Government handout, will write down the value of eight nuclear and one coal-fired power stations by £3.8bn. It will blame the sharp fall in wholesale electricity prices, which have almost halved over the past two years. The plants were valued in the company's books at £4.4bn.

British Energy, which supplies 20 per cent of the country's electricity, was bailed out by a £650m emergency loan from the Government last autumn.

It must wait until next year to learn whether the European Commission will approve a £3bn state aid programme to secure its future. Rivals, such as AES, the owner of the UK's biggest power station, Drax, in Yorkshire, and pressure groups such as Greenpeace have attacked the scale of the Government bailout and are mulling a legal challenge through the European courts.

Adrian Montague, who was parachuted in to replace Robin Jeffrey as chairman last November, flagged up the likelihood of the write-downs when he presented the group's interim results last year. He warned there was "significant doubt" about the assumptions behind the value of the company's assets, adding that the value of the plants would "almost certainly" be reviewed "downwards".

The value of the Eggborough coal-fired power station in North Yorkshire is expected to fall by around £100m. British Energy paid £640m for the plant in 1999 and has already written-off £300m.

The accounting standard FRS 11 deems that assets must be revalued if there has been a significant change affecting the cashflow that they produce. Since the introduction of new arrangements governing the sale of electricity, prices have tumbled by 40 per cent. Some power stations have already been forced out of business as a result.

The Government support package opened the door to an extensive financial restructuring that will see existing shareholders almost wiped out. The company's financial problems, which triggered an investigation from City regulators, stemmed partly from its high fixed costs and lack of a tied retail electricity business to offset the sharp fall in wholesale electricity prices.

Mike Alexander, who joined as chief executive in March, will announce a total loss of at least £4bn, although underlying losses are expected to be around £200,000.

He is likely to confirm that the Government has agreed to give the company longer to sell its stake in the US joint venture Amergen. It has so far failed to find a buyer because bids received have been too low. British Energy sold its Canadian operations last March for £250m, which it used to pay back the Government loan.

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