British Energy plc - Announcement of restructuring proposals and extension of HMG loan facility

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British Energy plc ("British Energy" or the "Company") Announcement of restructuring proposals and extension of HMG loan facility The Board of British Energy (the "Board") announces a restructuring intended to achieve the long-term financial viability of the British Energy Group. The restructuring will require certain significant creditors of the British Energy Group to compromise their claims and will lead to very significant dilution of existing shareholders. The UK Government ("HMG") has confirmed its intention to support the proposed restructuring and has agreed to extend the facility agreement (the "Facility"), entered into on 26 September 2002, until 9 March 2003 in order to provide financial stability and security whilst British Energy seeks the support of these significant creditors. The principles for restructuring include: British Energy has entered into non-binding Heads of Terms with BNFL, which will provide for two new contracts to replace the agreements under which BNFL currently provides front and back-end fuel related services to British Energy Generation Limited ("BEG") and British Energy Generation (UK) Limited ("BEG(UK)"), British Energy's wholly-owned UK nuclear generating subsidiaries All uncontracted nuclear liabilities, decommissioning liabilities of the nuclear power stations owned by BEG and BEG(UK) and the historic liabilities relating to spent fuel will be met through a Nuclear Liability Fund ("NLF"). British Energy will make ongoing contributions to this fund and HMG has agreed to assume financial responsibility for such liabilities to the extent that they exceed the assets in the NLF British Energy would issue new bonds to significant creditors, together with new ordinary shares, in exchange for the extinguishment of existing obligations they are owed. British Energy would also issue new bonds to the NLF. - Under the proposed restructuring, the Board will not issue more than £700 million in new bonds of which £275 million will be contributed to the NLF The NLF will also receive a contractual entitlement to receive 65 per cent. of the net cash flow of the British Energy Group (after tax, financing costs and transfer to cash reserves) As a result of the restructuring, existing shareholders of British Energy are expected to be very significantly diluted Ordinary trade creditors and employees are expected to be paid in full as the relevant amounts fall due British Energy is continuing discussions with potential buyers for its interests in Bruce Power LP ("Bruce") and Amergen The restructuring plan will need to be approved by the significant creditors whose entitlements are to be compromised, HMG, existing shareholders (if required), the Inland Revenue and the European Commission (under State Aid Rules) prior to being finally implemented. This is expected to be completed by mid 2004 and only then can the restructuring be fully implemented. Prior to 14 February 2003, the Board will seek to agree formal standstill arrangements and agreement in principle to the proposed restructuring with the significant creditors. An application for Restructuring Aid must be submitted to the European Commission prior to 9 March 2003. The Board believes that the proposed restructuring outlined in this announcement is in the best interests of the Company and its creditors and is working closely in conjunction with its advisors to implement a successful restructuring of British Energy within the principles accepted by HMG. The Board believes that the restructuring of the group offers the best available opportunity to achieve the long term financial viability of the British Energy Group. However, the proposed restructuring requires the Company to reach formal agreement with a large number of creditors with respect to diverse financial interests, as well as a successful disposal of British Energy's interests in Bruce and Amergen. If such agreements cannot be reached, the required approvals are not forthcoming within the timescales envisaged, the assumptions underlying the proposal are not fulfilled or the conditions to the restructuring are not satisfied or waived, the Company may be unable to meet its financial obligations as they fall due and therefore the Company may have to take appropriate insolvency proceedings, in which case the distributions to unsecured creditors may represent only a small fraction of their unsecured liabilities and there is unlikely to be any return to shareholders. Contacts: Andrew Dowler, Financial Dynamics, Tel: 0207 831 3113 For full report click here.

 

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