British Energy has been told it is in danger of breaching its licence to operate its lucrative Canadian business and may be forced to give up control of the operation.
Duncan Hawthorne, the British Energy executive sent over to run its 82 per cent owned Bruce Power subsidiary, had a difficult meeting with the Canadian Nuclear Safety Commission on Thursday, which failed to resolve the problem.
He had been called before the CNSC because BE's financial problems, first exposed in The Independent on Sunday last month, meant that Bruce could not provide the financial guarantees that are part of its licence to operate.
The CNSC wrote to Bruce late last month asking for assurances that it could meet the C$264m (£110m) financial guarantee, which ensures Bruce could keep operating for six months if its reactors had to be shut down.
The money is provided through Bruce's investors. BE owns 82 per cent of Bruce, for which it paid £130m two years ago. BE admitted 10 days ago that it was in danger of going into administration and last week Patricia Hewitt, the Secretary of State for Trade and Industry, stepped in with an emergency loan of £410m to keep the group running until 27 September.
BE is hoping to agree a rescue package with Ms Hewitt by then, though neither side is thought to be optimistic.
Mr Hawthorne told the CNSC on Thursday that, without a rescue package, Bruce could not provide financial guarantees. "Frankly we were unable to provide the kind of assurance they required," he told the IoS.
The CNCS has asked him to draw up alternate plans, before Bruce's. Though no deadline was set for sorting out the mess, Bruce's existing licence to operate runs out on 12 November.
Mr Hawthorne said there were a number of options including Bruce raising its own finance or taking out insurance. But the most likely solution would be for Cameco, the Canadian uranium miner that owns 15 per cent of Bruce, to come up with the money in exchange for a higher stake in the group. Cameco has indicated it would be prepared to step into the breach created by BE's problems.
BE's beleaguered chairman, Robin Jeffrey, has pinned any hope of orchestrating a recovery for the company on the potential profits from Bruce. The operation delivered £37m for BE last year, despite two of its main reactors being closed. BE is expecting the business to make £80m this financial year and as much as £120m next year.
BE's problems in Canada come on top of financial demands that see it needing £280m in the next year to refinance its bond and bonds loans due for repayment, as well as up to £200m to cover losses in the UK and working capital demands.
BE had been in talks with BNFL, the Government-owned nuclear business, about cutting the amount BNFL charges for dealing with BE's nuclear waste. BE currently pays £300m a year and wants to halve this.
However, BNFL said any reduction would have to come hand in hand with a £70m a year payment towards the Legacies Management Agency, the new body being set up to decommission nuclear power stations. Plans for the LMA are not complete and will not be until next year at the earliest.
BE also wants a contract to run BNFL's ageing Magnox power stations, which lose £150m a year, a cut in its Climate Change Levy and a reduction in its business rates.
However some of these changes would need to go through parliament before they could be put in place.
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