Privatisation: Government to sell off part of its £6.5bn stake in nuclear power firm

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The Independent Online

The Government is planning to raise billions of pounds by selling off part of its £6.5bn stake in the nuclear power producer British Energy, the Chancellor disclosed yesterday.

The surprise announcement prompted a 3 per cent rise in shares in the company, which was saved from collapse a year ago following a £5bn government bail-out.

Under the terms of the rescue deal, the taxpayer took a 65 per cent majority stake in British Energy in retain for agreeing to shoulder the nuclear liabilities it carried into the private sector when the Conservative government originally privatised the business a decade ago.

The share sale is scheduled to take place after the publication of the Government's latest energy review in the summer. The review is expected to pave the way for a new generation of nuclear power stations.

Gordon Brown gave no details about the proportion of the government shareholding that would be sold, but there is speculation that it will dispose of around half of the company. This would enable it to raise around £5bn - enough to cover the liabilities that the taxpayer has inherited.

It would also enable ministers to claim that British Energy is no longer state-owned should it win the lion's share of any programme to build new nuclear reactors. The nuclear lobby is hoping for the go-ahead to build as many as ten new stations to replace the existing fleet of stations, all of which will have closed by 2035 when the Sizewell B PWR on the Suffolk coast reaches the end of its life.

In total, the Treasury's coffers could be swollen by more than £10bn through the sale of various state-owned nuclear interests. The disposal of BNFL's US division Westinghouse has already brought in £3bn and a further £200m-£300m is expected to be raised by the disposal of British Nuclear Group, the BNFL subsidiary which runs the Sellafield waste reprocessing centre in Cumbria.

In addition, the Government is planning to sell its one-third stake in Urenco, the uranium processing venture it owns jointly with Dutch and German partners. This could also raise several billions of pounds.

Mr Brown said the nuclear sale would be just one of the privatisations planned for the next few years. The proceeds will be in addition to the £30bn the Treasury already aims to bring in through the sale of state assets such as surplus government property and land by 2011, by divesting assets to raise funds for "front-line priorities". That target - which the Chancellor said had reached £6.8bn, after sales worth £6.3bn last year - applies to "fixed assets". Examples have included civil service car parks, redundant army firing ranges and council housing that is no longer needed. These assets are sold as they become available.

There is no public target for the amount the Government is looking to raise by selling what it sees as "financial assets" such as British Energy or the Tote - the betting business that Labour's manifesto last year committed it to sell.

Yesterday Mr Brown said: "The Government will move ahead in the coming year with the sale of the Tote. In order to release new resources for our priorities - central to which is building world-class schools and education - we are reviewing the use of assets in all areas."

It is understood that the Tote will be sold by the end of the next financial year. The idea of selling the Tote has been talked about for at least five years. It is estimated that it could be worth up to £600m.

Another possible source of funds would come from selling the radio frequencies used to transmit TV, radio, and mobile phone signals. The Treasury endorsed the recommendations of an independent review by Martin Cave of spectrum owned by public bodies.

Most of this public spectrum is owned by the Ministry of Defence. The Cave review recommended setting up a system for trading the spectrum. Although the review identified the MoD as the main state entity that would be able to release spectrum, it did not say how much of it was surplus or how much it might raise.

* Treasury Budget site

* Chancellor's Statement in full