The Government may consider an outright sale of Britain's most modern nuclear power stations rather than the planned flotation, after announcing yesterday that the nuclear company to be sold, - British Energy - would be forced to carry the liabilities related to its stations, which could amount to billions of pounds.
Tim Eggar, minister for energy and industry, said that the government would pursue an approach to buy British Energy from a United States utility, Duke Power, although the company said last night that it was not in formal discussions.
Meanwhile, the Labour Party called on the Government to abandon all plans to privatise the power stations after warnings from the all-party Commons Trade and Industry Select Committee that the taxpayer could end up making a loss.
Mr Eggar said: "As far as the Government is concerned the liabilities of the advanced gas cooled reactors and the pressurised water reactors will belong with British Energy. It is a fundamental principle that the liabilities will follow the assets."
He declined to comment on figures but British Energy's estimate is up to pounds 7.6bn on a discounted basis - the amount that would need to be set aside now to foot the bill as it falls due. Martin O'Neill, chairman of the committee said the level of liabilities would make it difficult to achieve a satisfactory sale.
Mr O'Neill said: "The question is whether or not the City will be satisfied that the figures add up." He believes that the sale may not raise enough to cover even the pounds 3bn cost to the taxpayer of building the newest reactor, Sizewell B.
The select committee also said that existing plans for an independent fund to cover decommissioning of power stations and site clean-up may have to be expanded to cover management and disposal of waste. This could mean a doubling of British Energy's annual payments into the fund of up to pounds 60m, again reducing the value in the eyes of the City.
Mr O'Neill also warned ministers that it would be against the public interest to allow the nuclear industry to be bought by foreigners. "As far as I am concerned there must be safeguards to ensure continued British ownership of these assets. I do not think that the interests of the UK public could be assured if the industry fell into foreign hands," he said.
The overtures by the North Carolina-based Duke Power were made to the merchant bank advising the Government, Barclays de Zoete Wedd. Mr Eggar said: "If you receive an approach of that kind you have to investigate it because we have to convince the National Audit Office and the Public Accounts Committee that we have maximised value. At the end of the day, a trade sale may be more beneficial than a flotation." He said that plans were still on course to privatise British Energy in the summer.
One City analyst said that a trade sale may now be the only sensible option for the Government because of the problems of attracting City investors. "It is going to be difficult for the Government to get anything like a fair value because investors are sufficiently jaundiced over issues such as regulation and liabilities," he said.
Duke Power is a highly regarded operator of power stations and has assets of about $12bn. Its interest has surprised observers as it operates mostly in the US and Latin America.Reuse content