Government sets deadline on British Energy restructuring

The Government has warned creditors of British Energy, the stricken nuclear energy group, that they must agree a restructuring deal by the end of this month.

Otherwise the company, which is now dependent on state financial support, will find itself either in administration or in effect renationalised, like Railtrack. The electricity supplier is reliant on a £200m emergency loan provided by the Government, ahead of a full-scale restructuring deal. If that refinancing deal is not in place by the end of this month, the Government will pull the plug.

Separately, British Energy is expected to announce this week that it has sold its 50 per cent stake in Amergen, its US joint venture, for around £100m.

British Energy's creditors - bondholders, banks and trade partners - have yet to agree a detailed restructuring deal, though an outline agreement was reached in February. The deal, which must then be approved by the European Commission, would see creditors write off most of the debt in return for equity in British Energy. Existing shareholders would be left with a tiny proportion of the company. The Government's support in the deal includes tax that will not have to be paid by the company.

Sources close to the bondholders, who are advised by Close Brothers, suggested over the weekend that an agreement was still some way off. However, a British Energy insider insisted that a deal would be completed in time. "The big issue was to get them [creditors] to agree to the deal in principle and that happened earlier this year," he said.

Given British Energy's massive nuclear liabilities, administration would almost inevitably lead to the company being taken back into public ownership.