(February 21, 2003) The splitting up of nuclear utility British Energy has begun. On 14 February, the utility completed the sale of its Canadian joint venture, Bruce Power. It now has until 30 June to dispose of its 50% interest in Amergen, which owns three US reactors. However, finding a buyer for these is proving tricky.
(583.5490) WISE Amsterdam - The sale of Bruce Power is the first stage in the breakup of the crisis-hit utility. British Energy (BE) would have gone bankrupt last year, except that the UK government just won't allow it to go bankrupt.
When liberalization of the UK wholesale electricity market led to falling prices, many generators faced a shortage of cash. BE was particularly hard-hit, since all but one of its power stations are nuclear, and so more expensive than natural gas-fired power stations. The situation was made worse by technical problems at some of BE's nuclear power stations (1).
Citing concerns about nuclear safety and security of electricity supply, the UK government stepped in last year with a series of emergency loans (2). The current loan is 650 million pounds (over US$1 billion) and was set to expire on 9 March.
However, the Bruce Power sale, plus "standstill" agreements with "significant creditors" were enough to persuade the UK government to extend its emergency loan, at a "reduced level", beyond the 9 March deadline (3).
Major BE creditors include BNFL, a state-owned corporation with financial problems of its own, and Enron, whose accounting scandal has made it a household name (4).
Bruce sale
Creditors must be pleased that BE has raised some cash by selling its stake in Bruce Power, which leases and operates Bruce nuclear generating station in Canada. BE was bought out by three companies. Cameco Corp, one of BE's partners in Bruce Power, already owned a 15% stake, but increased this to 31.6% at a cost of C$209 million (US$137 million). However, not all of this is "new" money, since the sale price includes part of a cash advance made to Bruce Power in late December 2002 (5). Two other companies have also bought 31.6% stakes: TransCanada Pipelines Ltd. and BPC Generation Infrastructure Trust, with unions at the Bruce power station continuing to own the remaining 5.2% (6).
As well as generating cash, this sale relieves BE of the pressure from the Canadian Nuclear Safety Commission, which had expressed concerns that BE's financial guarantees might be inadequate (7).
Amergen: no buyer yet
However, there remains the problem of finding a buyer for BE's 50% share in Amergen, which owns three US reactors: Three Mile Island-1, Clinton and Oyster Creek. Amergen , which is co-owned by Exelon Corp., had originally bought the reactors at knock-down prices, with so much money in the decommissioning funds that it was effectively paid to take the reactors off the utilities' hands.
However, BE cannot find a buyer for its stake in Amergen at the much higher price that it is now asking. BE has until 30 June 2003 to find a buyer, as a condition of the UK government's continuing loan, and if it fails, the whole rescue package for the ill-fated nuclear utility could founder.
The British Energy fiasco demonstrates once again that nuclear power is uneconomic. Yet it also shows nuclear proponents are so desperate that they will take anti-nuclear arguments about the danger of accidents and the unsolved nuclear waste problem and use them to justify throwing taxpayers' money at failing nuclear utilities.
References:
- WISE/NIRS Nuclear Monitor 572.5432, "Will the UK government bail out British Energy?"
- WISE/NIRS Nuclear Monitor 573, "In brief" and 574, "In brief".
- Platts Nuclear News Flashes, 14 February 2002
- WISE/NIRS Nuclear Monitor 578.5468, "Huge state handout aims to keep British Energy afloat"
- WNA News Briefing, 12-18 February 2003
- Standard and Poor's, 18 February 2003
- WISE/NIRS Nuclear Monitor 573, "In brief"
Contact: WISE Amsterdam