British Energy stake sale raises £2.1bn - 1 June

The UK government on Friday sold a 25 per cent stake in British Energy, raising £2.1bn to help pay decommissioning costs for nuclear reactors.

The government said 400m shares had been placed with institutional investors, at 520p a share, raising £2.08bn. It has the option to sell a further 50m shares, but has said that it does not intend to cut its stake to below a strategic interest of 29.9 per cent.

The disposal, through an accelerated book-build offering, reduces the state’s stake in British Energy from 64 per cent to 39 per cent. It will fall to 36 per cent if the further shares are sold.

Proceeds from the sale of the stake, acquired as part of the government’s bail-out of British Energy in 2002, will go to the Nuclear Liabilities Fund, to be used to fund the decommissioning of British Energy’s eight existing nuclear power stations.

Shares in British Energy rose 12¼p to 537½p in early trade.

British Energy is in talks with a range of groups, including France’s EDF, about using its UK sites for the construction of new nuclear reactors.

The government flagged the prospect of selling down its interest in British Energy last year, but the disposal was hampered by the discovery of cracks in the boilers at two of the group’s nuclear reactors, which hit the group’s share price.

British Energy suffered a series of long unplanned outages last year with boiler problems at its Hinkley Point B and Hunterston B plants and repairs to ironwork at Hartlepool.

Power output fell almost 15 per cent, although the company benefited from higher electricity prices.

Lazard acted as financial adviser to the government and the Nuclear Liabilities Fund. Citigroup, Deutsche Bank and Merrill Lynch acted as joint book runners.