BusinessBusiness RecoveryA closer look at British Energy

A closer look at British Energy

A privatised company, of national importance finds that its costs far outweigh its income.

It has been reliant on government handouts as all concerned agree that it cannot simply stop trading – a significant proportion of the general public rely upon its continued existence to carry on the daily working lives.

The share price has fallen off a cliff – shareholders are furious, but the unions say that it serves them right for being so greedy in the first place. A year ago, this would have been Railtrack.

The then transport secretary Stephen Byers pulled the plug leading to a year of uncertainty as negotiations continued to find an alternative that wouldn’t look too much like renationalisation.

Fast forward a year, and instead of Railtrack we have British Energy.

But instead of the lights being turned off, the government has handed over £650m to ensure that the turbines keep turning.

But the Europeans are crying foul. This surely is a government subsidy and possibly in contravention of EU law.

The UK government has insisted it will not write out a blank cheque for British Energy, which now has until November to get its house in order.

The government has clearly learnt a lesson from the Railtrack debacle.

A year ago the Treasury was forced to embark on a charm offensive with the City, as many institutional shareholders expressed their displeasure at the way Byers handled the affair. There were even threats that the City would boycott the government’s private finance initiative.

Politically, the government cannot now afford to let insolvency practitioners from, say, Deloitte & Touche, role up at British Energy, but this arguably would be the best thing that could happen.

Railtrack emerged from administration, and has been taken over by Network Rail.

Perhaps the government should consider a similar scheme for British Energy.

  • Philip Smith, deputy news editor of Accountancy Age.

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