The sale of the Government’s interest in British Energy
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.
"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."
Amyas Morse, head of the National Audit Office
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.