Nuclear sale goes through at half price

British Energy: Flotation ends in more controversy as leaks are found at flagship reactor
British Energy will this morning stagger across the finishing line to begin life as a publicly quoted company, valued at just pounds 1.41bn, less than half initial expectations and lower than even the most pessimistic forecasts at the weekend.

The final figure of 203p a share for institutional investors and 198p for individuals is right at the bottom of the range indicated by the Government just a few weeks ago. And the amount raised is only half the cost of building Sizewell B, the flagship nuclear power station at the centre of the latest in a series of safety scares that has dogged the privatisation process.

The sell-off, abandoned seven years ago because of City fears about the huge cost of decommissioning nuclear power stations and disposing of radioactive waste, ended as it had begun - in controversy - after it emerged that a third nuclear power station being privatised had been closed because of safety concerns.

But British Energy, which runs the eight most modern nuclear power stations, denied the lower price was a result of adverse investor reaction to the recent shutdowns.

"It is tightly priced but the markets did us absolutely no favours," a spokeswoman said. "Wall Street had a dreadful week while the UK market was also down." Announcing the share price, Tim Eggar, the energy minister, also put a brave face on the outcome: "I am delighted with the success of the sale. We have completed the final stage of privatising the electricity industry and in the process raised more than pounds 2bn for the taxpayer." Mr Eggar's calculation of the proceeds includes pounds 700m of debt that British Energy will carry on its balance sheet.

BZW, the investment bank handling the sale of British Energy, said a total of 606,000 people had applied for 443 million shares, making the retail offer 2.4 times oversubscribed. In total, the number of shares being offered to the public has been increased to 52 per cent.

Some 40 per cent of all applicants will receive all the shares they bid for. Applications for the minimum 300 or 400 shares will be met in full, while higher bids were marginally scaled down.

The 275 million shares reserved for the international offer were oversubscribed by about 2.4 times. Just under half will go to UK institutions and about 20 per cent to US investors.

The controversial privatisation received another blow yesterday when British Energy confirmed faults had been discovered in the reactor at Sizewell B, its flagship station.

It said leaks had been discovered in "at least one and no more than five" of the fuel pins - the alloy tubes which contain uranium.

The reactor at the Suffolk power station has been out of action since 28 June, when it was shut down for routine maintenance. Its timetable for a 45-day shutdown would mean the reactor should be back in operation on 12 August, said a spokeswoman.

"There is no suggestion the problem with the pins will cause any undue delay. There is no reason to suppose any economic impact," she said.

The news follows the revelation last week that reactors at two other nuclear power stations were being shut down so engineers could check for cracks.

British Energy announced the closure of one reactor at Hinkley Point B in Somerset earlier this month after a crack was found in a pipe.

But on Wednesday evening the company revealed it had decided to close down another, identical, reactor at Hinkley Point B and two identical reactors at Hunterston B in Ayrshire as a precaution.

The decision was made public just hours after the offer of shares to members of the public closed, prompting claims by Labour that the Government was guilty of "organised deceit" by suppressing the information until after the crucial deadline has passed. Labour has called for a Commons debate on the nuclear sell-off on Tuesday.

News of Sizewell B's closure is likely to reinforce City fears that associated safety risks make British Energy a risky investment.

Basis of allocation

No. of shares applied for (by No. of share shop shares applicants) received

300 300

400 400

500 420

600 431

700 450

800 465

900 480

1000 495

1500 540

2000 570

2500 600

3000 nil

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