Lang sweetens nuclear sale

The Government has attempted to sweeten the controversial sale of British Energy by writing down the value of its nuclear power stations by pounds 3bn and halving the value of the environmental liabilities it will take into the private sector.

The moves are designed to help ease what promises to be a more problematic and controversial sell-off than even the Railtrack flotation.

British Energy's fixed assets were shown as pounds 8.2bn in its 1995 accounts. But last night, in reply to a written parliamentary question, the President of the Board of Trade, Ian Lang, disclosed these had been written down to pounds 5bn.

At the same time the Government has adopted a bigger discount rate for calculating the nuclear liabilities British Energy will carry with it for decommissioning stations and reprocessing spent fuel.

This has resulted in the liabilities being shown as pounds 3.7bn compared with a previous figure of pounds 7.6bn.

The sale of British Energy, which owns five advanced gas-cooled reactors in England and Wales, two AGRs in Scotland and the Sizewell B pressurised water reactor, is expected to raise about pounds 2.6bn.

This is the same as Sizewell B cost to build and is about half the value of its fixed assets. In his written answer Mr Lang said the write-down of the assets was a technical matter.

"No cash changes hands as a result of such a write-down. It will have no effect on the cash generated by the stations. Nor will it reduce the proceeds of sale." (The company is expected to be valued by investors on the basis of its dividends and cash flow.)

On this basis, the broking arm of BZW, which is acting as the Government's adviser on the sale, believes British Energy will be worth pounds 2.6bn. But this valuation assumes very high usage of all eight nuclear plants. Even fairly minor reductions in their output could have marked impact on their revenue earning capacity and hence British Energy's value.