Press Release - The sale of the Government’s interest in
British Energy
22 January 2010
The Government received a good price when selling its interest
in British Energy. But it is too early to say whether the sale will
enable the Government to achieve its strategic objective of
ensuring nuclear operators are able to build and operate new
nuclear power stations from the earliest possible date and with no
public subsidy, according to a report by the National Audit
Office.
British Energy was the largest independent energy generator in
the UK and owner of sites viewed by industry as the most suitable
for new nuclear power stations. The Government sold its 36 per cent
interest in the company to EDF Energy for £4.4 billion in January
2009. The final cash offer from EDF was 774 pence per share – 10
per cent higher than the valuation by the Shareholder Executive,
the Government agency that managed the sale. Movement in energy
prices after completion of the sale show that EDF put forward its
offer when energy prices were at a peak.
The Government’s primary objective for the sale was to ensure
nuclear operators are able to build and operate new nuclear
stations from the earliest date with no public subsidy. The
Department of Energy and Climate Change did not seek, and EDF did
not offer, any binding commitment to build new nuclear power
stations as a condition of the sale. But EDF’s acquisition of
British Energy has improved the prospect of investment in new
nuclear power stations.
While the Government no longer has a direct financial interest
in British Energy, it remains responsible for funding any shortfall
in the future cost of decommissioning British Energy’s existing
nuclear power stations. The Shareholder Executive did not carry out
a formal assessment of the impact of the sale on the risks that
taxpayers might have to bear if, for example, the new owner
operated British Energy’s power stations in a way that required
earlier decommissioning.
Mr Amyas Morse, head of the National Audit Office, said
today:
"The Government sold its stake in British Energy
when energy prices were at a peak, and got a good price. The
biggest priority for the Government was, however, to ensure new
nuclear power stations could be built from the earliest possible
date and with no public subsidy. Whether it will achieve this
remains to be seen. The Department of Energy and Climate Change now
needs to make real progress on its contingency plans should EDF be
unwilling to build new nuclear power
stations."
Notes for Editors
- British Energy was publicly owned until its privatization
through a stock market flotation in 1996. The Government obtained a
financial interest in the business once again in 2005 after helping
British Energy achieve a solvent restructuring, following a
sustained deterioration in its financial position.
- The Government’s interest was in the form of an entitlement to
65 per cent of British Energy’s net annual cash profits. This ‘cash
sweep’ was convertible into 65 per cent of British Energy’s shares.
In June 2007, the Government reduced its interest in British Energy
from 65 per cent to 36 per cent in a sale raising £2.3
billion.
- The Shareholder Executive was created in 2003 to improve the
Government’s performance as a shareholder and had responsibility
for monitoring British Energy’s financial and operational
performance and for advising on decisions to sell the Government’s
interest.
- Press notices and reports are available from the date of
publication on the NAO website, which is at www.nao.org.uk. Hard
copies can be obtained from The Stationery Office on 0845 702
3474.
- The Comptroller and Auditor General, Amyas Morse, is the head
of the National Audit Office which employs some 900 staff. He and
the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 05/10
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