Generator's Cash Crunch Tests UK Nuclear Policy

LONDON, UK, September 9, 2002 (ENS) - A cash crisis at the UK's largest nuclear electricity generator today forced the government to pledge up to £410 million (US$638 million) in emergency funding, that may be followed by a longer term restructuring program.

The near demise of British Energy has brought into sharp focus a rumbling debate over the future of nuclear power in the UK in the context of a major official review of energy policy.

British Energy, Britain’s largest private nuclear operator, generates 20 percent of the UK's electricity, from eight nuclear power stations and one coal fired generator.


British Energy's Hunterston Generating Station (Photos courtesy British Energy)
The roots of its near insolvency spread in many directions, but a key factor has been a 40 percent fall in wholesale electricity prices since 1998, driven by the introduction of new power trading rules early last year.

Options being offereded for rescuing the company and the power stations it operates in the longer term include exempting nuclear electricity from the UK's eco-energy tax, the climate change levy.

Cutting the amount of money British Energy has to pay nuclear services firm British Nuclear Fuels Ltd. (BNFL) for fuel and spent fuel reprocessing also has been proposed. This would be opposed by BNFL, which has financial problems of its own.

Environmental groups would like to see such an outcome as it would undermine BNFL's controversial nuclear fuel reprocessing business.

Green groups oppose any exemption of nuclear power generation from the climate change levy, arguing that it is in fact an energy and not a carbon tax.

Bryony Worthington, nuclear campaigner at Friends of the Earth UK, said of the loan, “It’s outrageous. The government should have allowed British Energy to go into administration rather than bailing it out with a loan. With a market value of just £404 million and existing debts of around £850 million, no commercial lender would have lent this incompetent company any more money. Yet we the taxpayers are being asked to carry the risk.”

“This financial fiasco must force the government to realize the folly of building new nuclear power stations," said Worthington. "They are uneconomic, unsafe and deeply unpopular and are not needed to combat climate change. Nuclear power should be phased out and replaced with clean, safe and renewable forms of energy.”

The setback comes just as an extensive advertising campaign by British Energy is in full swing highlighting the "environmental benefits of nuclear power," primarily that it does not contribute to global warming.


British Energy's Eggborough Generating Station
Sally Smedley, British Energy’s communications director, said, “We are rapidly heading towards dependency on gas and dependency on overseas supplies. Without nuclear we cannot reach our Kyoto targets and in the long term, the alternatives are likely to be far more expensive than nuclear – particularly renewables."

The ads are scheduled to continue through September, through the energy review consultation period.

In 1997 British Energy expanded internationally by forming a U.S. joint venture AmerGen with PECO Energy of Philadelphia, now part of Exelon Corporation. To date AmerGen has purchased one pressurized water reactor and two boiling water reactors in the United States.

In May 2001 British Energy's Canadian subsidiary, Bruce Power, completed the proposed lease transaction of the Bruce nuclear power plant for 17 years in southwestern Ontario, consisting of eight Candu reactors, four of which are currently laid up.

British Energy has some small interest in renewables. The company has partnered with wind farm developer Renewable Energy Systems Ltd and marine design and construction expert Sir Robert McAlpine to form Offshore Wind Power Ltd.

A site off the Lincolnshire coast near Skegness has been chosen for Offshore Wind Power's first wind farm. Consultation and discussions are currently under way, which will include consent processes, capital grant applications and negotiation with the Crown Estate Commissioners, who own the seabed.

Its subsidiary, British Energy (Canada) Ltd., and Ontario Power Generation in March 2001 announced a 50/50 joint venture, Huron Wind, to develop a wind energy facility near Kincardine, Ontario. The project, to be located on land near the Bruce A and B nuclear generating facility on Lake Huron, will be subject to an environmental review.


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