[cdn-nucl-l] Canada clash over £650m nuclear loan

["Adam McLean" <adam.mclean@utoronto.ca>]

Posted in the UK Independent on November 3, 2002 and at:
http://news.independent.co.uk/business/news/story.jsp?story=348279

Adam

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Canada clash over £650m nuclear loan
By Jason Nissé
03 November 2002
The Government's £650m bail-out of British Energy is being challenged by
the nuclear energy group's partner in its valuable Canadian business.

Cameco, the uranium producer which owns 15 per cent of British Energy's
subsidiary Bruce Power, has lodged a legal objection to the validity of
the Government's emergency loan to British Energy.

It is aiming to use British Energy's troubles to force it to sell all or
a large part of its 82 per cent stake in Bruce Power at a knock-down
price. Analysts have said Bruce Power could be worth as much as £500m,
but British Energy may have to sell it for substantially less. As
security for the £650m emergency loan, granted in September and
repayable on 29 November, the Treasury demanded cross guarantees from
British Energy's operating businesses.

Cameco claims that British Energy did not give the board of Bruce enough
time or information to decide whether giving these guarantees was in the
business's interest.

"British Energy's financial difficulties created uncertainty around
Bruce Power's operating licence," Cameco said in a statement. "This
uncertainty, coupled with Bruce Power guaranteeing British Energy's
repayment of the British government loan, has increased the risk
associated with Cameco's investment."

British Energy has admitted it is in talks with Cameco about a range of
options for securing the future of Bruce. Most pressing is a meeting of
the Canadian Nuclear Safety Commission on 12 November when Bruce will
have to come up with financial guarantees of C$222m (£92.5m) to renew
its licence to operate. British Energy is in no position to provide
those guarantees and will need Cameco to step into the breach.

Cameco confirmed that it wanted to increase its investment in Bruce and
possibly wrest control of the business from British Energy.

The East Kilbride-based nuclear giant will face a barrage of criticism
from shareholders at a hastily convened extraordinary general meeting in
Edinburgh tomorrow.

The meeting, called at just 19 days' notice, is to pass a resolution
allowing British Energy to raise its borrowing limits to £1.6bn. Without
this, the group has warned that it may have to "cease trading".

Currently it has debts of £1.1bn – twice its shareholders' funds – but
this does not include about £100m it owes BNFL for a reprocessing
contract and more than £100m it owes eight local councils for its
business rates. British Energy has written to the councils asking
whether it can defer payments on the rates until at least February.

Robin Jeffrey, British Energy's chairman, is expected to depart once the
group sorts out its financial problems.