British Energy hints at cash handout to shareholders

British Energy, the nuclear electricity generator, yesterday hinted at a cash hand-out to shareholders next year as it unveiled better-than- expected interim results and said it was close to appointing a new chief executive. Michael Harrison reports.

Announcing a pounds 4m pre-tax profit for the first half and a further sharp reduction in borrowings, John Robb, chairman, said British Energy now planned to draw up a dividend strategy to present to shareholders in the next 6 to 12 months.

Analysts expect the company to have paid off all the pounds 700m of government debt that it was floated with 18 months ago, making it cash-positive and giving it wide scope to reward shareholders with a special dividend or buyback. British Energy has repaid pounds 521m of debt and now has gearing of just 12 per cent but said it would be comfortable with up to 35 per cent. This would give it enough firepower to finance its planned expansion into gas-fired generation and overseas nuclear markets and support a sizeable return of capital to shareholders.

Mr Robb also disclosed that the group aimed to appoint a new chief executive to replace Dr Robert Hawley early next month. His replacement has been selected and is understood to come from the oil industry, possibly BP or Shell.

British Energy also announced a further extension of its alliance with Southern Electric, the regional power distribution company. The two groups have formed a joint venture, Sabre Power, which intends to invest up to pounds 300m in a series of small gas-fired power stations which will plug directly into the local electricity network and feed large industrial customers.

British Energy and Southern are planning up to 20 mini-stations of about 50 megawatts. The stations, which can be built quickly, typically cost about pounds 15m each.

Including an exceptional credit of pounds 110m resulting from the negotiation of new fuel and waste management contracts with British Nuclear Fuels, pre-tax profits were pounds 114m on sales of pounds 871m.

Mr Robb said British Energy's programme of job cuts remained on track with the workforce cut by 672 over the last year and on course to be below 5,000 by March 2000.

He also sprang to the defence of the Electricity Pool, which is now the subject of a full government review, saying: "We think the pool works pretty well. It is meeting its objectives of lower electricity prices and creating a more competitive market."