British Energy chief faces axe

BRITISH Energy chairman Robin Jeffrey is expected to be ousted as the price of a Government rescue of the crippled nuclear generator whose shares were dramatically suspended last week.

He is asking for £300m to keep British Energy afloat - just three weeks after assuring investors that there was no risk of the company going into financial meltdown. Ministers are furious about British Energy's demand.

The Financial Services Authority is launching an inquiry because it is concerned about the rash of conflicting statements coming from British Energy that may have misled investors.

To make matters worse for the generator, there are now grave doubts over the running of one of its biggest nuclear power stations, Heysham 2 in Lancashire. Greenpeace believes Heysham 2 is facing the same technical problems that caused both reactors at its sister plant in Torness, East Lothian, to be shut down last month.

One Department of Trade and Industry adviser close to the talks between the Government and British Energy said: 'It beggars belief that three weeks after saying there was no cash crisis, one suddenly appears.'

It is less than three weeks since Jeffrey reassured investors about the state of British Energy's finances. On August 14 he told analysts: 'I want to emphasise to you that we do not face a financial crisis and that we have a clear, well thought out way forward.'

But after issuing its plea for state funds, Jeffrey said last Thursday: 'We had no alternative other than to seek Government support.'

There is growing suspicion at the DTI that he is trying to force the Government into a bail-out by playing up the risk of insolvency for British Energy. After the fiasco of Railtrack, where the Government forced the track operator into administration when it was making a profit, ministers dare not risk the lights going out if the company, which supplies one fifth of the UK's electricity, went bust. The Government is so alarmed that Energy Minister Brian Wilson has cut short a trip to South America to take command of crisis talks.

This week, Wilson will demand to know exactly what has led to the unexpected cash crisis. The DTI refused to endorse Jeffrey. 'Let's wait and see what happens after the talks,' it said. 'They must show us all their books so we can see what happened.'

British Energy is believed to have been advised by its lawyers that it was not able to use £261m of overdraft facilities because directors were aware of an impending cash crunch.

Heysham 2's closure would add to the company's financial crisis. A spokesman said the checks were taking place with the knowledge of the Nuclear Installations Inspectorate: 'It is running normally while we do some checks into giant circulator fans.'

Shares were suspended at 80 1/2p on Thursday, valuing the company at £526m, but some analysts say they may be worthless. It was privatised by the Tories in 1996 and at its peak was worth £4.7bn.

Any bail-out is likely to involve cutting the cost of a £300m fuel-reprocessing contract with state-owned British Nuclear Fuels, saving £80m a year with an exemption from the climate levy, and finding a buyer for its US business, which includes a sister plant to Three Mile Island, the power station that escaped meltdown by a whisker in 1979.