Dim prospects at British Energy

BRITISH Energy, the ailing nuclear generator, warned it faced a string of difficulties, each of which could topple it into receivership.

It also admitted recent shutdowns at two of its biggest power stations, Sizewell B and Heysham 1, would cost it £95m instead of the £50m previously estimated.

The pre-tax performance for the full year would therefore come in below the board's previous expectations, the company admitted in a torrid interim results report.

British Energy, which produces 20% of the nation's power and is in the throes of a radical restructuring, might be unable to meet its financial obligations and would have to launch insolvency proceedings if any one of a string of adverse events came about.

Failure to sell its half-share in US operation AmerGen, or to achieve the $277m (£158m) initially agreed, could tip the company into receivership.

So could a failure to meet the conditions of the planned restructuring or difficulties achieving cash generation targets. So could the decision by creditors to pull the plug on a standstill deal or a change of heart by the Government, which last month agreed to an extra £75m emergency credit.

But chief executive Mike Alexander put a brave face on the statement, insisting: 'We believe we can see our way through these problems.'

Operating losses were cut from £337m to £71m in the six months to September, he pointed out. UK nuclear output rose 10% in that time. Operating cash outflow was stemmed from £71m to £26m.

And the group, which has been locked into unfavourably low power price contracts, would start to benefit from higher prices next year.

He was hopeful of receiving the proceeds of the AmerGen sale 'shortly, and in any event no later than 31 March'. BE shareholders vote on the deal on Monday.

The shutdown at Heysham in Lancashire could last until mid-February, far longer than expected. It had been due back in service in mid December, but seawater erosion to pipework was worse than expected. BE now expects its total UK nuclear output to be 65.5 terawatt hours instead of the 67 originally pencilled in for the year.

Shareholders - including 235,000 who remain investors from the privatisation in 1996 - have been all but wiped out by a collapse in the share price. They stand to receive just 2 1/2% of the equity in the restructured company.