SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
February 26, 2004
BRITISH ENERGY PLC
(Registrant's name)
3 Redwood Crescent
Peel Park
East Kilbride G74 5PR
Scotland
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F..X.. Form 40-F.....
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ..... No ..X..
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b):
Exhibit Index
The following document (bearing the exhibit number listed below) is furnished
herewith and is made a part of this Report pursuant to the General Instructions
for Form 6-K:
Exhibit Description
No. 1 RNS Announcement, re: 3rd Quarter Results dated 26 February 2004
British Energy
26 February 2004
RESULTS FOR THE QUARTER
ended 31 December 2003
Key Points
- Good progress on restructuring continued, with sale of AmerGen interest
(US$277m). Provisional gain on sale of GBP35m. The restructuring remains subject
to significant uncertainties
- Group operating profit, after exceptional items, of GBP12m in the quarter,
compared with loss of GBP21m in the nine month period
- Total UK output of 17.3 TWh in the quarter (down 4% year on year); 52.7
TWh for the nine month period (up 6% year on year)
- Operating cash inflow, after capex, was GBP1m in the nine month period
- Net debt was reduced by GBP167m to GBP454m in the quarter, primarily as a
result of the AmerGen net proceeds. The HMG Credit Facility has reverted to
GBP200m
Update since 31 December 2003
- Total UK output of 59.5 TWh up to 31 January 2004 (up 5% year on year)
- Revised UK nuclear output forecast for the year of around 65.5 TWh
confirmed (up 3% year on year), compared with 63.8 TWh in 2002/03
- Dispute with Siemens settled. Siemens to pay GBP18.3m to British Energy
- Nil drawings under HMG Credit Facility as at 24 February 2004
Key financials are shown below:
3 Months Ended 9 Months Ended
31 Dec 2003 31 Dec 2003
GBPm GBPm
Group turnover 369 1,046
Group operating profit/ (loss) 12 (21)
Loss before tax (10) (81)
Achieved price (excluding misc. income) GBP17.6/MWh GBP16.4/MWh
Total operating costs (excluding revalorisation) GBP17.2/MWh GBP16.7/MWh
Adrian Montague, Chairman, said:
"We continue to make good progress with the Company's restructuring, with the
sale of our interest in AmerGen for US$277m being the highlight of the period.
Whilst a decision by the European Commission on restructuring is pending, we are
focussing on improving British Energy's operational reliability and financial
capability."
Management will host a conference call for analysts and investors today - 26
February 2004 - at 1600 UK time (1100 - Eastern Standard time).
The conference call can be accessed by dialling, UK dial in: 0845 113 0049,
International dial in: + 44 (0) 1452 542 303, US dial in: 1 866 389 9778. There
will be a replay facility for 14 days, UK Dial in: 0845 245 5205, International
dial in: + 44 (0) 1452 55 00 00, Pin: 1032694#
For further information please contact:
Paul Heward British Energy 01355 262201
Andrew Dowler Financial Dynamics 020 7831 3113
Notes for editors
The information in this presentation is drawn from the unaudited third quarter
results of British Energy for the 3 months ended 31 December 2003. This press
release is a summary and reading it is not a substitute for reading the third
quarter results in their entirety.
ITEM 1 : MANAGEMENT'S DISCUSSION AND ANALYSIS - FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
This report contains British Energy's first publication of quarterly results.
In the following discussion the 'three-month period' or the 'quarter' refer to
the three months ended 31 December 2003 and the 'nine-month period' or the '
period' refer to the nine months ended 31 December 2003 unless otherwise stated.
In this discussion reference to 'British Energy' or the 'Company' are to
British Energy plc. References to the 'Group' are to the Company and its
subsidiaries.
British Energy continues to make good progress with its proposed restructuring,
the terms of which were announced on 1 October 2003 (the 'Proposed
Restructuring'). The sale of the Company's 50% interest in AmerGen to Exelon,
the Group's joint venture partner, for consideration of US$277m, pending
finalisation of working capital and certain other closing adjustments, was
successfully completed on 22 December 2003. The sale was an important milestone
and approximately GBP94m of the proceeds were used to repay fully the amounts
outstanding under the revolving credit facility from the UK Government (the '
Credit Facility'). A provisional profit of GBP35m on the sale has been
recognised in these accounts. As at 31 December 2003 and 24 February 2004 there
were no drawings under the Credit Facility. Following its sale of AmerGen,
British Energy has interests in eight nuclear power stations and one coal-fired
plant in the United Kingdom.
As announced during the quarter, the Company's operating performance was
adversely affected by the unplanned outages of both reactors at Heysham 1 and an
extension to the statutory outage at Sizewell B. The resultant loss of output in
the full year is anticipated to amount to some 3.4 TWh, equivalent to some
GBP83m of lost profit contribution inclusive of imbalance costs (previously
estimated at a gross cost of GBP95m, before associated fuel savings). The output
lost in the three-month period was some 2.1 TWh which was equivalent to some
GBP50m of lost profit contribution inclusive of imbalance costs. Sizewell B
returned to service on 15 November 2003, and both units at Heysham 1 commenced
their return to service on 14 February. In December 2003 the Company announced
the reduction in its full year nuclear output forecast to around 65.5 TWh from
the previously forecast level of 67.0 TWh, taking account of the impact of these
outages, other unplanned outages in the year to date and existing allowances for
unplanned outages. The Company continues to expect that total UK nuclear output
will remain around 65.5 TWh for the year ended 31 March 2004. This compares with
63.8 TWh achieved in the prior year.
On 17 December 2003, the Company announced that it was taking forward plans to
improve the operational performance and reliability of its nuclear plants. The
first implementation stage has now commenced, with the emphasis on leadership
and organisational effectiveness, and the Company will give a further update on
progress at the time of its next preliminary results.
By December 2003, the market price for annual forward baseload contracts had
increased by some 25% over those prevailing in March 2003. The Company did not
benefit to any great extent from these increases because of the high proportion
of fixed price contracts in place, which provide protection against falls in
market price and were executed to meet the objectives of the Proposed
Restructuring. However, the price increase has put pressure on liquidity as the
Company has been required to commit cash to fund collateral for trading
counterparties. Fixed price sales contracts are currently in place covering
over half of planned output in 2004/05 at an average price of GBP18.7/MWh.
As at 31 December 2003 and 24 February 2004 the Company had cash, including
amounts posted as collateral, amounting to GBP429m and GBP496m respectively, of
which GBP338m and GBP315m were deposited as collateral in support of trading
activities.
On 4 February 2004 the Company announced the settlement of a long-standing
dispute with Siemens Power Generation Limited ('Siemens') whereby Siemens agreed
to pay the Company GBP18.3m.
On 12 February 2004 British Energy received a notice of warranty claims from the
consortium which purchased the Group's 82.4% interest in Bruce Power alleging
breach of certain warranties and representations relating to tax and to the
condition of certain plant at the Bruce power station. Further details are
provided in the 'Contingent Liabilities' section below.
In accordance with the policy outlined and re-stated below no dividend has been
declared for the period.
The Proposed Restructuring remains subject to a large number of significant
uncertainties and important conditions, including receipt by the Secretary of
State for Trade and Industry (the 'Secretary of State') of a satisfactory
notification from the European Commission (the 'Commission') that in so far as
the proposals involve the grant of State Aid by the UK Government, such aid is
compatible with the common market. The Secretary of State expects to receive
this notification by mid 2004. Furthermore, the Secretary of State is entitled
not to proceed with the Proposed Restructuring if, in her opinion, the Group
will not be viable in all reasonably foreseeable conditions without access to
additional financing beyond that which is committed and will continue to be
available when required.
If for any reason British Energy is unable to implement the Proposed
Restructuring it may be unable to meet its financial obligations as they fall
due in which case it may have to take appropriate insolvency proceedings. If
British Energy were to commence insolvency proceedings, distributions, if any,
to unsecured creditors may represent only a small fraction of their unsecured
liabilities and it is highly unlikely that there would be any return to
shareholders. Even if the Proposed Restructuring is completed, the return, if
any, for shareholders will represent a very significant dilution of their
existing interests.
Key Points on Results
- The Company generated an operating profit, after exceptional operating
items, of GBP12m in the three-month period and an operating loss, after
exceptional operating items, of GBP21m in the nine-month period. Included in the
operating results were exceptional operating items producing net charges of
GBP3m and GBP27m in the three-month period and the nine-month period
respectively (further detail is provided in Note 3 of the financial statements).
- Losses before tax of GBP10m and GBP81m were reported in the three-month
period and nine-month period respectively.
- Nuclear output was up by 5% to 48.0 TWh in the nine-month period,
compared with 45.9 TWh in the equivalent period last year. Nuclear output
performance in the three-month period was down by 6% to 14.7 TWh, compared with
15.6 TWh in the equivalent period last year. The decline in the quarter was
primarily attributable to unplanned outages at Heysham 1 and Sizewell B as
discussed above.
- Achieved prices, excluding miscellaneous income, were GBP17.6/ MWh and
GBP16.4/MWh for the three-month period and the nine-month period respectively.
The higher prices achieved in the quarter primarily reflect market price
seasonality.
- Total operating unit costs, excluding revalorisation (which is calculated
by dividing the total UK operating costs, net of exceptional items and energy
supply costs, by total output), were GBP17.2/MWh and GBP16.7/MWh for the
three-month period and nine-month period respectively. The higher unit costs in
the quarter were due to a high proportion of the costs being fixed in nature and
incurred during a period of unplanned outages.
- Operating cash inflow, after capital expenditure, was GBP1m for the
nine-month period. Net debt was reduced in the quarter by GBP167m to GBP454m,
primarily as a result of the net proceeds from the sale of AmerGen.
- A contingent asset of GBP259m has been accumulated but not recognised in
the financial statements for the period arising from the revised BNFL contracts,
inclusive of GBP137m of benefit for fuel consumed in the nine-month period (of
which GBP39m arose in the quarter).
EXPLANATORY NOTES
Certain statements in this document are 'forward-looking' statements (as defined
in Section 21E of the US Securities Exchange Act of 1934).
Such forward-looking statements include, amongst others:
- Statements concerning the Proposed Restructuring and its effect on the
Group's business and financial condition or results of operations.
- Other matters that are not historical facts concerning the Group's
business operations, financial condition and results of operations.
These forward-looking statements involve known and unknown risks, uncertainties
and other factors which are, in some cases, beyond the Group's control and may
cause its actual results or performance to differ materially from those
expressed or implied by such forward-looking statements. Due to the
uncertainties and risks associated with these forward-looking statements, which
speak only as at the date hereof, the Company is claiming the benefit of the
'safe harbour' provision contained in Section 21E of the US Securities Exchange
Act of 1934.
This is the first set of quarterly results to be published by British Energy and
therefore no comparative quarterly information is provided for the equivalent
periods in the previous year.
The following discussion and analysis should be read in conjunction with the
Financial Statements for the three and nine months ended 31 December 2003 and
the Notes thereto which are included in this report. The full Financial
Statements for the year ended 31 March 2003 and the Notes thereto are not
included in this report but are available on the British Energy website
(www.british-energy.com).
British Energy's Financial Statements have been prepared in accordance with UK
GAAP. A detailed description of the differences between UK GAAP and US GAAP as
they relate to the Group are set out in Note 37 of the Form 20-F for the year
ended 31 March 2003 which is also available on the British Energy website.
KEY EVENTS IN THE PERIOD
Restructuring Developments
Sale of AmerGen
On 22 December 2003, British Energy completed the disposal to Exelon of its
entire 50% interest in AmerGen. At closing, British Energy received
consideration of US$277m subject to adjustments relating to working capital
levels, stocks of unspent nuclear fuel, capital expenditures and low-level waste
disposal costs. A provisional profit on the sale of GBP35m has been recognised
in these accounts pending finalisation of these amounts.
Approximately GBP94m of the AmerGen disposal proceeds were used to repay in full
the amounts outstanding under the Credit Facility. The remaining proceeds are
being used for general working capital purposes and to fund collateral.
Following the AmerGen sale, the temporary increase in the amount of the Credit
Facility to GBP275m, agreed with the Secretary of State on 27 November 2003, was
reduced back to the original amount of GBP200m. The temporary increase in the
amount of the Credit Facility was not utilised at any point during its period of
availability.
Agreement on Terms of Proposed Restructuring
On 1 October 2003 the Company announced that it had agreed the terms of the
Proposed Restructuring of the Group with certain of the Group's creditors and
the Secretary of State, subject to certain initial requirements for creditor
approvals and sign ups being obtained by 31 October 2003. On 31 October 2003,
the Company confirmed that these requirements had been satisfied.
Amendments to the Terms of the Company's Bonds and New Standstill Arrangements
On 19 December 2003 holders of each series of the Company's bonds approved
amendments to the trust deed constituting the bonds to facilitate the
implementation of the Proposed Restructuring and to amend the standstill
arrangements under the trust deed on terms consistent with the agreement reached
with other creditors on 1 October 2003 (the 'Creditors Restructuring
Agreement'). Following formal amendment of the trust deed, a new standstill
agreement has been entered into with creditors in accordance with the Creditor
Restructuring Agreement.
Business Developments
Major Outages
There have been unplanned outages at Heysham 1 when both reactors were shut down
on 28 October 2003. Both units commenced their return to service on 14
February. These outages were due to a cast iron pipework failure in the
seawater cooling system within the turbine hall. The Company carried out
inspections and decided it was necessary to replace a significant amount of cast
iron pipework at Heysham 1. Where similar deficiencies exist at other stations,
plans are being formulated for further cast iron pipework replacement. The
consequential remedial action is expected to be undertaken in a planned manner
and the details will be reported at the time of the Company's preliminary
results.
The statutory outage at Sizewell B was extended by approximately twelve days due
to further inspections following the discovery of an unusual indication from
ultrasonic inspection of two welds in the turbine steam system. This issue was
resolved and the plant returned to service on 15 November 2003.
In aggregate, these recent outages resulted in lost generation of around 2.1 TWh
in the period which was equivalent to some GBP50m of lost profit contribution
inclusive of imbalance costs. Having taken account of these outages, other
unplanned outages in the year to date and remaining allowances for unplanned
outages, in December 2003 the Company announced the reduction in its full year
output forecast to around 65.5 TWh, from the previously forecast level of around
67.0 TWh.
Bruce Power Disposal
Under the terms of a trust agreement (the 'Trust Agreement') entered into on 14
February 2004 in connection with the disposal of the Company's 82.4% interest in
Bruce Power, additional consideration is payable to British Energy contingent
upon the restart of two of the four Bruce A units.
British Energy is seeking the payment of additional consideration under the
Trust Agreement on the basis that Bruce A Unit 4 was restarted in October 2003
and Unit 3 was restarted in January 2004. The Company is in discussion with the
Ontario Provincial Government which has indicated that it considers that the
units may have restarted, for the purposes of the Trust Agreement, at later
dates. None of the potential additional consideration has been recognised in
the financial statements of the quarter because there are remaining
uncertainties regarding its realisation and the amounts recoverable will be
significantly lower than the maximum C$100m. Note 12 to the Financial
Statements provides a fuller discussion.
On 12 February 2004 British Energy received a notice of warranty claims from the
consortium which purchased the Group's 82.4% interest in Bruce Power alleging
breach of certain warranties and representations relating to tax and to the
condition of certain plant at the Bruce power station. Further details are
provided in the 'Contingent Liabilities' section below.
Board Affairs
On 8 December 2003, the Company appointed Martin Gatto to the Board as Interim
Finance Director, as a temporary replacement for Keith Lough who resigned his
directorship on that date.
On 9 February 2004, the Company announced that John Delucca had been appointed
as an Independent Non-Executive Director of the Company with immediate effect.
The Board has undertaken an evaluation of its performance as recommended in the
Higgs Report and is working to be compliant with the revised Combined Code as
issued by the Financial Reporting Council.
Performance Improvements
On 22 August 2003 the Company announced that it had appointed a consortium of
partners led by Ove Arup and Partners International Limited. The role of the
consortium is to develop and assist with the rapid deployment of a number of
programmes to improve the operational reliability of the Group's nuclear plants.
Having considered the consortium's initial recommendations, the Company is now
focusing on finalising the scope of work and developing a detailed
implementation plan. The Company will give a further update on the progress of
these programmes at the time of our next Preliminary Results.
OTHER FACTORS AFFECTING RESULTS OF OPERATIONS
The results of operations are principally affected by changes in plant output,
electricity prices and operating costs. Each of these factors is discussed
below.
Plant Output
Nuclear output was 14.7 TWh (a 70% load factor) for the three-month period and
48.0 TWh (a 76% load factor) for the nine-month period. The nuclear output for
the equivalent periods in 2002 was 15.6 TWh (a 74% load factor) and 45.9 TWh (a
73% load factor) respectively.
Nuclear output for the three-month period and nine-month period was lower than
expected primarily due to the unplanned outages at Sizewell B and Heysham 1
which accounted for 2.1 TWh of lost output.
Output from the coal-fired power station at Eggborough was 2.6 TWh during the
three-month period and 4.7 TWh for the nine-month period. For the equivalent
periods in the previous year, the output was 2.4 TWh and 3.8 TWh respectively.
As Eggborough is operated primarily as a flexible mid-merit plant, its output
level is influenced by market prices, the Company's contracted trading position
and the extent to which it is operated as cover for unplanned outages.
Electricity Prices
By December 2003, the market price for annual forward baseload contracts had
increased by some 25% over those prevailing in March 2003, such that power for
delivery from April 2004 was trading at between GBP21/MWh and GBP22/MWh in
December 2003. In the Company's view, the rise in price reflects, among other
matters, underlying increases in fossil fuel prices, a reduction in available
plant capacity in the UK market and the market's view of the likely impact of
the European Union's emission trading scheme which is due to commence on 1
January 2005. The increase in forward market prices referred to above has only
been of limited benefit to the Company because of its largely hedged contract
portfolio.
British Energy's achieved selling price (which is calculated by dividing UK
turnover, net of energy supply costs and miscellaneous income, by total output
during the period) was GBP17.6/MWh for the three-month period and GBP16.4/MWh
for the nine-month period. The higher prices achieved in this quarter reflect
market price seasonality, as lower prices generally prevail in the Summer (April
- September) when demand is lower than in the Winter (October - March).
Operating Costs
Operating costs after exceptional items were GBP357m for the three-month period
and GBP1,067m for the nine-month period. These are discussed more fully later in
this report in the 'Results of Operations' section.
Exceptional Operating and Financing Items
The financial results of both the three-month period and the nine-month period
were affected by a number of exceptional operating and financing items. The
table below summarises the impact of exceptional operating and financing items
(before tax).
Three months Nine
ended 31
December 2003 months ended
31 December
2003
GBPm GBPm
Restructuring costs 3 40
UK decommissioning fund credit - (13)
Exceptional items included within operating costs 3 27
UK decommissioning fund credit (21) (47)
US decommissioning fund credit (8) (22)
Interest rate swaps provision credit (2) (5)
Exceptional items included within financing costs (31) (74)
Total net exceptional credits (28) (47)
Exceptional operating and financing items are discussed more fully in Notes 3
and 4 to the Financial Statements.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED 31 DECEMBER 2003 AND FOR THE
NINE MONTHS ENDED 31 DECEMBER 2003.
Group Performance
The operating results after exceptional operating items were an operating profit
of GBP12m for the three-month period and a loss of GBP21m for the nine-month
period.
The loss on ordinary activities before taxation was GBP10m for the three-month
period and GBP81m for the nine-month period.
The discussion below will focus on the results of continuing activities for the
three-month period and the nine-month period. Certain comparative figures
extracted from the results of the six-month period ended 30 September 2003 (the
'six-month period') are also set out below to assist with discussion of
operating trends.
Turnover
Turnover was GBP369m in the three-month period and GBP1,046m in the nine-month
period, and is analysed as follows
Three months Six Nine
ended 31
December months months ended
2003 ended 30 31 December
September 2003
2003
GBPm GBPm GBPm
Direct supply sales 209 340 549
Wholesale generation sales 152 323 475
Miscellaneous income 8 14 22
369 677 1,046
The Direct supply sales includes energy supply costs recovered from customers.
Direct Supply Sales
At 31 December 2003, the Direct Supply Business had sales contracts in place,
which taken together with offtake volume achieved in the nine-month period were
expected to achieve an offtake volume of 29.3 TWh for the twelve-month period to
31 March 2004. Over the nine-month period the Company has increased the Direct
Supply Business sales, a consequence of which is to moderate the requirement for
collateral required to support wholesale generation sales. The business had
over 1,300 customers and served over 6,000 business sites. The 2003/04
contracted position at 31 December 2003 prospectively represents increases of
31% in volume over that achieved in the previous financial year. The Direct
Supply Business continues to be highly rated for its customer service, having
been ranked first for the eighteenth consecutive time in the quarterly survey of
industrial customers carried out by the Energy Information Centre.
Wholesale Generation Sales
The level of wholesale generation sales for the quarter reflects the changing
mix of sales being contracted by the Company. The GBP152m of wholesale
generation sales in the quarter represented 42% of turnover excluding
miscellaneous income compared to 49% in the six-month period.
Operating Costs
Total operating costs after exceptional items were GBP357m in the three-month
period and GBP1,067m in the nine-month period, and are further analysed as
follows:
Three months Six Nine
ended 31
December months ended months ended
2003 30 September 31 December
2003 2003
GBPm GBPm GBPm
Continuing activities excluding exceptional items:
Fuel 109 184 293
Material and services 118 262 380
Staff costs 59 112 171
Depreciation 11 25 36
Energy supply costs 57 103 160
354 686 1,040
Continuing activities - exceptional items:
Materials and services 3 37 40
Amounts credited to non-operational assets - (13) (13)
3 24 27
Continuing activities - total costs:
Fuel 109 184 293
Materials and services 121 299 420
Staff costs 59 112 171
Depreciation 11 25 36
Energy supply costs 57 103 160
Amounts credited to non-operational assets - (13) (13)
Total operating costs 357 710 1,067
Fuel
Total fuel costs amounted to GBP109m in the three-month period and GBP293m for
the nine-month period. Nuclear fuel costs were GBP78m for the three-month period
and GBP233m for the nine-month period. The costs of coal consumed were GBP31m
and GBP60m in the respective periods.
The costs of nuclear fuel in the quarter were proportionally higher when
compared to the six-month period, principally reflecting the impact of station
output mix and the effects of higher electricity prices on the BNFL front-end
fuel contracts.
On 16 May 2003, the Company announced that it had exchanged the last of the
suite of contracts covering front-end and back-end fuel services required to
give effect to the non-binding heads of terms entered into with BNFL. The
front-end contracts became effective on 1 April 2003 but may be terminated if
the Proposed Restructuring is not completed. The revised back-end contracts are
conditional on completion of the Proposed Restructuring but payments are being
made as if the revised back-end contracts had become effective on 1 April 2003.
The financial statements for the reporting period have been drawn up on the
basis of the historic BNFL contracts in respect of back-end fuel costs, pending
satisfaction of the restructuring conditions set out in the revised contracts.
Consequently, a contingent asset of GBP259m has been accumulated, but not
recognised, in the accounts for the period ended 31 December 2003 in respect of
the difference in amounts payable between the revised contracts and the historic
contracts. The components of the contingent asset are analysed below.
GBPm GBPm
Analysis of Contingent Asset:
Principal amounts due to BNFL at 31 March 2003 under the historic contracts 113
Amounts accrued for 9 months to 31 December 2003 under the historic contracts 185
Less: Amounts payable for 9 months to 31 December 2003 under the revised contracts
- Amounts paid in period (32)
- Amounts accrued at period end (16)
Benefit of the revised back-end contracts within the nine-month period which will be
recognised upon the Proposed Restructuring
137
Finance charges accrued on principal amounts stoodstill 9
Contingent asset recorded at 31 December 2003 (see Note 12 to the Financial Statements) 259
The contingent asset will be recognised upon the Proposed Restructuring together
with other restructuring related adjustments.
Materials and Services
Materials and services costs comprise the operating expenses of our power
stations and support functions excluding fuel costs, staff costs and
depreciation. The costs during the three-month period were GBP118m and in the
nine-month period were GBP380m excluding exceptional restructuring costs.
Included in materials and services is capital investment expenditure of GBP13m
in the three-month period and GBP60m in the nine-month period that would
previously have been capitalised as fixed assets but were expensed as operating
costs following the fixed asset impairment review carried out in the year ended
31 March 2003.
The rate of costs incurred in the three-month period reduced in comparison with
the six-month period. This reduction was due mainly to the phasing of
Eggborough outage and capital expenditure which was incurred primarily during
the six-month period.
Exceptional charges amounting to GBP3m and GBP40m were incurred in the quarter
and period respectively in relation to advisory and other costs associated with
the Company's Proposed Restructuring.
Staff Costs
Staff costs were GBP59m in the three-month period and GBP171m during the
nine-month period.
Depreciation
Depreciation charges were GBP11m in the three-month period and GBP36m during the
nine-month period. The charges for depreciation were significantly affected by
the GBP3,738m write down of fixed assets at 31 March 2003 (see Note 7(ii) of the
Financial Statements for the three and nine months ended 31 December 2003).
Energy Supply Costs
Energy supply costs, which mainly comprise the costs incurred for the use of the
distribution and transmission systems, recovered through turnover, were GBP57m
in the three-month period and were GBP160m in the nine-month period. This
increase reflects the growth in the Direct Supply Business since 31 March 2003
as discussed above.
Non-operational Assets
There was an exceptional credit against non-operational assets in the nine-month
period of GBP13m, all of which arose in the first six months of the year. This
credit relates to the mark to market value adjustment of the UK decommissioning
fund and fully reverses the write down made in the year ended 31 March 2003.
Operating Profit/(Loss)
The operating results are analysed below:
Three months Six Nine months
ended 31 ended 31
December months ended December
2003 30 September 2003
2003
GBPm GBPm GBPm
Operating profit/(loss) before exceptional items 15 (9) 6
Exceptional items:
Restructuring costs (3) (37) (40)
UK Decommissioning Fund - 13 13
Total 12 (33) (21)
Share of Operating (Loss)/Profit of Discontinued Joint Venture
The Group's share of the operating result of AmerGen to the date of disposal was
a loss of GBP21m in the three-month period and a profit of GBP22m in the
nine-month period. The operating loss for the three-month period was primarily
due to problems being encountered during a planned outage at the Three Mile
Island power station, beginning in October 2003, which meant that the station
did not return to service until the end of December. Output from the three
AmerGen power stations totalled 3.5 TWh in the three-month period and 14.1 TWh
in the nine-month period. The Company's 50% share in AmerGen was sold to Exelon
on 22 December 2003 as previously discussed above.
Financing Charges
Three months Six months Nine months
ended 31 ended 30 ended 31
December September December
2003 2003 2003
GBPm GBPm GBPm
Revalorisation of nuclear liabilities 47 116 163
Revalorisation of decommissioning fund (6) (16) (22)
Other revalorisation (1) (1) (2)
Total revalorisation 40 99 139
Net interest expense 29 25 54
Financing charges before exceptional items 69 124 193
Exceptional interest (2) (3) (5)
Exceptional revalorisation (29) (40) (69)
Total financing charges 38 81 119
Revalorisation arises because nuclear liabilities are stated in the balance
sheet at current price levels, discounted at 3% per year real from the eventual
payment dates. The revalorisation charge is the adjustment that results from
restating these liabilities to take into account the effect of inflation in the
year, and to remove the effect of pro rata discount. Similarly, a
revalorisation credit arises in respect of the decommissioning fund which is
calculated by applying an actuarial assessment of the long-term investment
growth rate to fund contributions in order to determine the asset value to be
recorded in the balance sheet. The growth rate used in the calculations is
based on 3.5% per annum real.
The net revalorisation charge excluding exceptional items was GBP40m in the
three-month period and GBP139m in the nine-month period. The weighted average UK
inflation rate was 0.5% in the three-month period and 2.0% in the nine-month
period.
In the three-month and nine-month period there were exceptional interest credits
of GBP2m and GBP5m respectively in respect of interest rate swaps. In the
respective periods there were exceptional credits of GBP29m and GBP69m in
respect of revaluation of the decommissioning fund receivables. These are
discussed more fully in Note 4 to the Financial Statements.
Taxation
There was no taxation charge on ordinary activities in either the three-month or
nine-month period ended 31 December 2003.
The tax credit for the three-month period was GBP7m in respect of a decrease in
the Group's liability for its share of AmerGen's taxable profits bringing the
total tax charge for the nine-month period to GBP1m.
No deferred tax asset has been recognised at 31 December 2003.
The tax paid in the nine-month period relates wholly to the Group's liabilities
for its share of AmerGen's taxable profits.
Loss on Ordinary Activities
As a result of the factors discussed above, there was a loss on ordinary
activities after taxation for the three-month period of GBP3m and GBP82m in the
nine-month period.
Loss per Share
There was a loss per share of 0.5p per share in the three-month period and a
loss per share of 13.6p per share in the nine-month period.
Capital Expenditure
During both the three-month period and the nine-month period, amounts that would
previously have been capitalised as fixed assets, totalling GBP13m and GBP60m
respectively, were expensed as operating costs following the fixed asset
impairment review carried out in the year ended 31 March 2003.
Research and Development
We support primarily scientific and engineering research activity directed
toward securing further improvements in the reliability, performance and safety
of our generating business and related activities. In the three-month and
nine-month periods our expenditure on research and development was GBP4m and
GBP10m respectively which are included within material and services costs.
LIQUIDITY AND CAPITAL RESOURCES
Restructuring Update
Following the sale of AmerGen, the Credit Facility was fully repaid and the
amount of the Credit Facility reduced back to GBP200m on 24 December 2003.
Further details of the Group's Proposed Restructuring are included in Note 1 to
the Financial Statements.
Cash Flow from Operating Activities
The table below sets out the key components of operating cash flow for the
nine-month period.
Nine months
ended 31
December 2003
GBPm
Operating loss including exceptional items (21)
Exceptional items 27
Operating profit excluding exceptional items 6
Depreciation 36
Non cash nuclear liabilities charged to operating costs 96
Nuclear liabilities discharged (45)
Movements in other provisions (2)
Exceptional items discharged (30)
Working capital excluding exceptional items (60)
Net cash flow from operating activities 1
The highlights in operating cash flow reflect the following:
- Payments to BNFL amounting to GBP32m (compared to GBP115m cash payments
in the nine months to 31 December 2002) based on the revised contracts discussed
above are included within the GBP45m movement. Also included in the movement are
payments to the UK decommissioning fund of GBP13m.
- The movement in working capital of GBP60m can be attributed to
movements in the balances at 31 December 2003 compared to 31 March 2003 as
follows:
Within debtors:
- trade debtors increased by GBP47m due to increased prices
and winter volume increases
- increase in prepayments of GBP34m mainly related to
movement in pension prepayment
- decrease in taxation and social security balance recorded
in debtors of GBP65m
- decrease in other debtors of GBP7m
Within creditors:
- increase in trade creditors of GBP10m mainly reflecting
increased energy purchases
- decrease in taxation and social security balance recorded
in creditors of GBP58m
- decrease in other creditors of GBP3m.
Returns on Investment and Servicing of Finance
The cash flow for returns on investment and servicing of finance comprises
interest paid and interest received and was an outflow of GBP55m in the
nine-month period due to the payment of interest on the loans and borrowings and
other amounts stoodstill under the Proposed Restructuring.
Disposals
Disposals yielded a cash inflow of GBP165m in the nine-month period. This
reflects the proceeds from the sale of AmerGen of approximately GBP154m, net of
costs associated with the transaction. In addition, the Group received GBP9m in
relation to pension related cash retentions in respect of the disposal of our
interests in Bruce Power and GBP2m for the sale of the investment in Offshore
Wind Power Limited.
Management of Liquid Resources
The net cash outflow due to movements in financial investments and increases in
term deposits was GBP92m in the nine-month period. This reflects balances on the
term deposit accounts holding the collateral amounts rising from GBP246m at 31
March 2003 to GBP338m at 31 December 2003.
Capital Resources
At 31 December 2003, total debt of GBP883m comprised:
- A project finance loan of GBP475m secured on the assets of
Eggborough Power Limited ('EPL'), a subsidiary company that operates the
Eggborough coal-fired power station. Amounts owed by EPL are not guaranteed by
British Energy but British Energy guarantees the payment of amounts by British
Energy Power and Energy Trading Limited ('BEPET') to EPL under the Capacity and
Tolling Agreement ('CTA') between BEPET and EPL. The contractual amounts
payable by BEPET under the CTA are calculated so as to cover EPL's borrowing
requirements and operating costs. British Energy also provides a subordinated
loan facility to EPL. The final instalment of loan principal will be repaid in
2011. The loan currently bears interest at LIBOR plus 1.3%. It is proposed
that these arrangements will be restructured as part of the Proposed
Restructuring of the Group. For further details of the Proposed Restructuring
see Note 1 to the Financial Statements. At 31 December 2003 the effect of the
Group's interest rate contracts is to classify the borrowings as fixed rate.
- An aggregate principal amount of GBP408m sterling denominated
bonds due between 2003 and 2016. The bonds bear interest at a rate of between
5.9% and 6.2%. An aggregate principal amount of GBP110m matured in March 2003
but payment has been stoodstill as part of the arrangements in our financial
restructuring.
There were no drawings under the Credit Facility at 31 December 2003 and the
conditions applying to the facility are more fully discussed in Note 1 to the
Financial Statements.
Future Liquidity
The Group had an available cash balance of GBP91m at 31 December 2003 along with
GBP338m of cash which had been deposited in collateral bank accounts for trading
purposes.
The Group's main source of liquidity is its operating businesses. Cash
generation by the operating businesses is dependent upon the reliability of the
Company's power stations to produce electricity, the selling price achieved for
electricity, operational risk and capital investment expenditure and maintenance
requirements.
The Group lost its investment grade rating in September 2002. British Energy
will seek a new credit rating upon the issuance of new bonds as part of the
Proposed Restructuring of the Group. The loss of investment grade rating has
meant that the Group now has to provide significant levels of collateral to
counter-parties in order to maintain trading arrangements, thereby substantially
reducing the levels of cash resources available to the Group. Given the
financial circumstances of the Group, certain contracts may be capable of being
terminated. Such termination may result in termination payments being payable
as well as having an adverse effect on our cash flows.
The Credit Facility was undrawn at 31 December 2003 and 24 February 2004, and is
available to the Company for working capital purposes. The Credit Facility will
mature on the earliest of the date required by the Commission, 30 September
2004, and the date on which the Proposed Restructuring becomes effective, as
more particularly described in Note 1 to the Financial Statements.
The Company faced short term pressures on liquidity during the quarter resulting
from the combined effect of seasonality, the unplanned outages at Sizewell B and
Heysham 1 and the increased levels of collateral and costs of unplanned outages
brought about by the increased level of volatility in electricity prices.
The Board remains of the opinion that the working capital available to the Group
is not sufficient for the present requirements of the Group. The Company is
taking steps with a view to improving this situation (further detail is provided
in Note 1 of the Financial Statements). The receipt of the proceeds from the
disposal of AmerGen significantly increased the Group's financial flexibility.
Over the longer term, the Board is exploring initiatives to reduce the demand
for trading collateral and to achieve sufficient liquid resources to implement
the Proposed Restructuring.
The Proposed Restructuring and, therefore, the working capital available to the
Group, remain subject to a large number of significant uncertainties and
important conditions. These include receipt by the Secretary of State of a
satisfactory notification from the Commission that, insofar as the proposals
involve the grant of State Aid by the UK Government, such aid is compatible with
the common market ('EC Approval'). The Secretary of State expects to receive
this notification by mid-2004. Furthermore, the Secretary of State is entitled
not to proceed with the Proposed Restructuring if, in her opinion, the Group
will not be viable in all reasonably foreseeable conditions without access to
additional financing beyond that which is committed and will continue to be
available when required.
If the conditions to the Proposed Restructuring are not fulfilled, or if the
Company's cash generating initiatives are not achieved, in each case, within the
time scales envisaged or required, or if there is a material deterioration in
the Group's cash flow position, performance or outlook, or if the Credit
Facility ceases to be available or if the standstill arrangements which the
Group has entered into with certain of its creditors are terminated, British
Energy may be unable to meet its financial obligations as they fall due and
consequently the Company may have to take appropriate insolvency proceedings, in
which case the distributions to unsecured creditors may represent only a small
fraction of their unsecured liabilities and there is unlikely to be any return
to shareholders.
POST BALANCE SHEET EVENTS
On 4 February 2004, the Company announced that it had settled a long-standing
dispute with Siemens relating to work done in 1996 by the former Parsons
business. Under the terms of the settlement, Siemens has agreed to pay the
Company GBP18.3m. The settlement includes a commitment by the Company and
Siemens to develop a mutually beneficial commercial relationship under a long
term supply agreement.
CONTINGENT LIABILITIES
On 12 February 2004 British Energy received a notice of warranty claims from the
consortium which purchased the Group's 82.4% interest in Bruce Power alleging
breach of certain warranties and representations relating to tax and to the
condition of certain plant at the Bruce power station.
The claim relating to the condition of the plant is based upon alleged erosion
of some of the steam generator support plates, through which boiler tubes pass,
which it is alleged resulted in an extended outage of one unit at the plant to
carry out repair works and loss of revenues and costs of approximately C$64.5m.
The consortium also claims that the alleged erosion may reduce the operating
life of the unit and/or result in further repairs involving further losses.
British Energy has received no supporting evidence and has insufficient
information to evaluate the claim fully. However, the Company expects to defend
the claim.
The principal tax claim relates to the treatment of expenditure at the Bruce
plant during the period of the Company's ownership which is currently being
considered by the Canadian tax authorities. The treatment proposed by British
Energy could result in a rebate of a material amount of tax to the Group which
has not been recognised in the Financial Statements of the period. The
consortium claims that allowance of the expenditure for that period would cause
it to lose future deductions. British Energy expects to defend the claim and,
on the basis of advice received, the Company is confident that the amount of the
claim should not, in any event, materially exceed the amount of the rebate, and
that the claim should have no material cash flow impact on the Group.
Under the agreement with the consortium C$20m is retained in trust to meet any
representation and warranty claims, and this may be retained pending agreement
or determination of the claims.
Further contingent liabilities of the Group are described in Note 13 to the
Financial Statements for the period.
DIVIDEND POLICY
The Board intends to distribute to shareholders as much of the Company's
available cash flow as prudently possible, consistent with the long-term
development of the business. However, under the terms of the Proposed
Restructuring, there are certain restrictions on the Board's ability to pay
dividends, as follows:
- British Energy is required to fund a cash reserve out of the
Company's post-debt service cash flow in order to support the Group's collateral
and liquidity requirements post-restructuring. The initial target amount for
the cash reserve is GBP490m plus the amount by which cash employed as collateral
exceeds GBP200m (the 'Target Amount'). It is expected that, when the Proposed
Restructuring is completed, the level of the cash reserves will be below the
Target Amount and therefore there will be no distributions to shareholders until
such times as the cash reserve is at the required level. As a result of the
requirements to fund the cash reserves, the Board does not expect to pay a
dividend in respect of the financial years ending 31 March 2004 and 2005;
- the terms of the Nuclear Liabilities Agreements to be entered
into as part of the Proposed Restructuring also require that once the cash
reserve is funded to the Target Amount, British Energy must make Cash Sweep
Payments to the Nuclear Liabilities Fund ('NLF'). The NLF Cash Sweep Payment is
initially defined as 65% of the movement in cash, cash equivalents and other
liquid assets during the year after adjusting for, among other things, certain
payments made to the NLF or dividends paid in the year. The requirement to make
the NLF Cash Sweep Payment will greatly reduce the amount of cash that would
otherwise be available for distribution to shareholders;
- the terms of the new bonds to be issued as part of the
Proposed Restructuring contain certain covenants, including a restriction that
allows British Energy to pay a dividend only if no event of default has
occurred; and
- the Company must have distributable reserves.
ITEM 2 : QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussions about the British Energy risk management activities
include 'forward-looking' statements that involve risk and uncertainties.
Actual results could differ materially from those projected in the
forward-looking statements.
The following discussion relates to the financial instruments, derivative
instruments and derivative commodity instruments held by British Energy at 31
December 2003, which are potentially sensitive to changes in interest rates,
foreign exchange rates, commodity prices and equity markets. The Group uses
derivative instruments to hedge the primary market exposures associated with the
underlying assets, liabilities and committed transactions. None of the
instruments entered into is leveraged or held for speculative purposes.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Overview
The main financial risks faced are trading risks in England and Wales in respect
of both price and volume output on the sale of our electricity. There is also
an exposure to risks associated with fluctuations in the equity markets through
the Decommissioning Fund and Pension Schemes. Policies have been instituted for
managing each of these risks, which have been approved by the Board of
Directors. Each of these risks is discussed in more detail below.
Electricity trading risks are managed by the Power and Energy Trading Division.
The Power and Energy Trading Division operate within policies and procedures
which are approved by the Board and monitored by a sub-committee of the
Executive Committee.
Non-trading risks (i.e. cash resources, debt finance and financial risks) are
managed by the central treasury function (the 'Treasury Department'). The
Treasury Department operates within policies and procedures approved by the
Board. The Treasury Department uses appropriate and available instruments,
within specified limits, to manage financial risk but is not permitted to take
speculative, open positions. Both the Treasury Department and the Power and
Energy Trading Division are subject to regular scrutiny from our internal
auditors.
Interest Rate Risk Management
The market value of debt varies with fluctuations in prevailing interest rates
in the United Kingdom.
Eggborough related derivative agreements (nominal amount of GBP398m as at 31
March 2003) have been amended post 31 March 2003 as part of the Proposed
Restructuring process. The effect has been to fix future interest payments under
the swaps from October 2004 onwards.
At 31 December 2003 the total of investments in liquid funds and cash at bank
amounted to GBP429m, and had maturity dates due within one year. Cash not
immediately required for business purposes is invested in fixed-rate term
deposits and money market funds. At 31 December 2003 the term deposits and money
market funds not used to fund collateral were due to mature or were available
within one day and earned interest at an average rate of 3.5%. Term deposits,
money market funds and bank balances at 31 December 2003 include GBP338m of cash
which has been deposited in collateral bank accounts and earned interest at an
average rate of 2.8%. Availability of this cash is, therefore, restricted over
the periods of the collateralised positions.
As the deposit terms are short term, the carrying value at 31 December 2003
approximates to the fair market value.
Foreign Exchange Risk Management
There are potential future foreign currency receivables in respect of amounts
outstanding from the sale of Bruce Power and AmerGen. When these cash flows
become more certain in the future the Group will evaluate currency hedging
opportunities, balancing the cost and availability of entering into such
transactions against the underlying currency risk.
At 31 December 2003 there were no foreign exchange contracts in place.
In addition, at 31 March 2003, there were deferred losses of GBP2m accounted for
as part of stock which arose on the rollover of maturing forward contracts used
for hedging the future purchase of nuclear fuel prior to and including the year
ended 31 March 2003. See Note 20 to our consolidated Financial Statements as at
31 March 2003.
Electricity Trading Risk Management
Trading activities relate principally to supporting our generation business.
The trading operations, therefore, act principally as wholesale marketers rather
than as pure financial traders, with the principal objective of increasing the
return on assets while hedging the market risk associated with the output of the
plants.
Under NETA in England and Wales any mismatch between actual metered generation
(or demand) and the notified contract position is settled through the balancing
mechanism at generally unfavourable prices. British Energy aims to sell all
planned nuclear output forward and to minimise exposure to the balancing
mechanism.
The risks in the wholesale market are managed through a contracting strategy
that builds a portfolio of forward contracts with a variety of terms.
Eggborough provides a flexible generation capability which fulfils three
purposes designed to enhance our profitability. Firstly, it provides a means
for compensating for unplanned lost output from nuclear units at short notice;
secondly it provides the capability to profile the generation shape to meet the
requirements of both wholesale and Direct Supply Business customers; and
thirdly, it provides a flexible capability that is offered to the system
operator via the balancing mechanism.
Output from the two stations in Scotland will continue to be sold under the
terms of the Nuclear Energy Agreement to Scottish Power and Scottish and
Southern Energy until April 2006, or the introduction of British Electricity
Transmission and Trading Arrangements, whichever is earlier.
Following a review of the management structure of BEPET, an independent Risk
Measurement and Controls Manager is to be appointed, reporting directly to the
Group Treasurer.
British Energy's policy is to manage credit exposure to trading and financial
counterparties within clearly defined limits. Electricity trading activities
are strictly monitored by a sub-committee of the Executive Committee and
controlled through delegated authorities and procedures, which include specific
criteria for the management of counterparty credit exposures.
Equity Risk Management
The UK decommissioning fund was established to provide for the eventual
decommissioning of the UK nuclear power stations. Cash contributions are made
on a quarterly basis to a payment profile set out in a contract between us and
the UK decommissioning fund and are invested by the trustees of the UK
decommissioning fund in UK marketable fixed income debt, equity securities and
property. British Energy is ultimately responsible for contributions to the UK
decommissioning fund. Therefore, the level of future contributions, which are
reviewed every five years in conjunction with the review of ultimate
decommissioning costs, depend partly on the estimated long-term investment
performance of the equity and debt instruments in which the contributions are
invested and returns on investments in property. Income from dividends and
other returns on the underlying investments are retained by the UK
decommissioning fund and then invested in debt and equity securities.
The UK decommissioning fund included debt and equity securities with market
values of GBP45m and GBP384m respectively at 31 December 2003.
The balance on the UK decommissioning fund was recorded in the balance sheet at
GBP429m at 31 December 2003 which approximates to its market value.
The Group reported a deficit of GBP352m on its employee pension schemes, on an
FRS17 basis, in its financial statements at 31 March 2003. At that date the
pension schemes' assets were valued at GBP1,525m of which GBP1,316m which was
held in equities and bonds. The level of employer contribution to the schemes
will be re-assessed at the next triennial actuarial valuation which will be
carried out as at 31 March 2004. The level of re-assessed contribution will
depend partly on the estimated long-term investment performance of the equity
and debt instruments in which the contributions are invested. At 31 December
2003 the pension schemes' assets were valued at GBP1,791m. The growth in the
value since 31 March 2003 will not necessarily have a corresponding impact on
the FRS17 deficit noted above as it is only one of the factors influencing the
pension scheme deficit calculation.
ITEM 3 : CONTROLS AND PROCEDURES
The management of British Energy, including the Chief Executive Officer and
Interim Finance Director, have evaluated the effectiveness of the Group's
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and concluded that, as of the end of the period covered by this
report, the disclosure controls and procedures are effective in ensuring that
all material information required to be filed in this report has been made known
to them in a timely fashion. The required information was effectively recorded,
processed, summarised and reported within the time period necessary to prepare
this report. British Energy's disclosure controls and procedures are effective
in ensuring that information required to be disclosed in British Energy's
reports under the Exchange Act are accumulated and communicated to management,
including the Chief Executive Officer and the Interim Finance Director, as
appropriate to allow timely decisions regarding required disclosure. There have
been no significant changes in British Energy's internal controls over financial
reporting during the period covered by this report that have materially
affected, or are reasonably likely to materially affect, British Energy's
internal controls over financial reporting.
BRITISH ENERGY PLC
RESULTS FOR THE THREE MONTHS AND NINE MONTHS TO 31 DECEMBER 2003
GROUP PROFIT AND LOSS ACCOUNT
FOR THE THREE MONTHS AND NINE MONTHS ENDED 31 DECEMBER 2003 (unaudited)
Total Group Results
3 months 9 months Year
ended ended ended
Notes 31 Dec 03 31 Dec 03 31 Mar 03
GBPm GBPm GBPm
Turnover:
Group and share of discontinued joint venture
turnover 395 1,190 2,074
Exceptional income 2 - - 41
Group and share of discontinued joint venture
turnover including exceptional income
395 1,190 2,115
Less: share of turnover in discontinued joint (26) (144) (212)
venture
Continuing activities 2 369 1,046 1,528
Discontinued activities 2 - - 375
Group Turnover 2 369 1,046 1,903
Operating costs before exceptional items 3 (354) (1,040) (1,758)
Exceptional operating items 3 (3) (27) (3,947)
Operating costs after exceptional items (357) (1,067) (5,705)
Operating profit/(loss):
Continuing activities 2 12 (21) (3,899)
Discontinued activities 2 - - 97
Operating profit/(loss) 2 12 (21) (3,802)
Share of operating (loss)/profit of discontinued
joint venture 7 (21) 22 43
Operating (loss)/profit: Group and share of
discontinued joint venture
(9) 1 (3,759)
Gain/(loss) on sale of joint venture and 7 37 37 (35)
businesses
Financing (charges)/credits:
Revalorisation and net interest 4 (69) (193) (277)
Exceptional financing credits/(charges) 4 2 5 (62)
Exceptional revalorisation credits/(charges) 4 29 69 (159)
Loss on ordinary activities before taxation (10) (81) (4,292)
Taxation on loss on ordinary activities 5 - - 378
Share of taxation for joint venture 5 7 (1) (10)
Loss on ordinary activities after taxation (3) (82) (3,924)
Minority interest - - (17)
Loss for the period attributable to shareholders (3) (82) (3,941)
Loss per share (p):
Basic 6 (0.5) (13.6) (654.7)
GROUP BALANCE SHEET
AS AT 31 DECEMBER 2003 (unaudited)
Notes 31 Dec 03 31 Mar 03
GBPm GBPm
Fixed assets
Tangible assets and investments 7 656 763
Current assets
Decommissioning fund 429 334
Stocks 361 360
Debtors 387 387
Investments - liquid funds 11 338 246
Cash at bank 91 87
1,606 1,414
Creditors: amounts falling due within one year 8 (1,368) (1,185)
Net current assets 238 229
Total assets less current liabilities 894 992
Creditors: amounts falling due after more than one year 8 (2,585) (2,640)
Provisions for liabilities and charges 8 (1,793) (1,735)
Net liabilities (3,484) (3,383)
Capital and reserves
Called up equity share capital 277 277
Share premium 76 76
Capital redemption reserve 350 350
Profit and loss account (4,280) (4,179)
Equity shareholders' deficit (3,577) (3,476)
Non-equity shareholders' funds 93 93
(3,484) (3,383)
GROUP CASH FLOW STATEMENT
FOR THE NINE MONTHS ENDED 31 DECEMBER 2003 (unaudited)
9 months Year
ended ended
Note 31 Dec 03 31 Mar 03
GBPm GBPm
Net cash inflow from operating activities 9 1 336
Returns on investment and servicing of finance (55) (84)
Taxation (paid)/received 5 (15) 3
Capital expenditure and financial investment - (282)
Disposals 7 165 262
Equity dividends paid - (31)
Management of liquid resources 10 (92) (37)
Financing - (80)
Increase in cash 10 4 87
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE NINE MONTHS ENDED 31 DECEMBER 2003 (unaudited)
9 months Year
ended Ended
31 Dec 03 31 Mar 03
GBPm GBPm
Loss for the period (82) (3,941)
Translation differences on foreign currency net investments (19) (25)
Total recognised losses since last report (101) (3,966)
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
(i) Introduction
These quarterly financial statements have been prepared on the basis of
accounting policies consistent with those set out in the Group financial
statements for the year ended 31 March 2003. This is the first set of quarterly
results to be published by British Energy and therefore no comparative
information is provided for the previous period. In accordance with the
requirements of the Listing Rules for Interim Financial Information, comparative
information will be included in the quarterly results from 30 September 2004 as
appropriate. In the following discussion British Energy plc is referred to as '
British Energy' or 'the Company' and 'the Group' refers to the Company and its
subsidiaries.
Fixed annual charges are apportioned to the quarterly period on the basis of
time elapsed. Other expenses are accrued in accordance with the same principles
used in the preparation of the annual accounts.
On 14 February 2003, the Group disposed of its stake in Bruce Power and Huron
Wind, therefore, their results up to the point of disposal have been classified
as discontinued operations within prior reporting periods. On 22 December 2003,
the Group disposed of its 50% interest in AmerGen Energy Company LLC ('
AmerGen'), therefore, its results up to the point of disposal have been
classified as discontinued joint venture operations within prior reporting
periods. All other activities of the Group have been shown as continuing
activities.
The financial statements for the three months and nine months ended 31 December
2003 are unaudited but have been formally reviewed by the auditors and their
report to the Company is set out below. The figures for the year ended 31 March
2003 have been extracted from the full financial statements for that year, which
have been delivered to the Registrar of Companies. The report of the auditors
on these accounts was unqualified and did not contain a statement under either
section 237(2) or section 237(3) of the Companies Act 1985. The auditors'
report included within the Report and Accounts of the Group for the year ended
31 March 2003 includes a reference to a fundamental uncertainty in respect of
the going concern basis of the Group. The quarterly financial statements were
approved by the Board of Directors on 25 February 2004.
(ii) Background to Proposed Restructuring
Having reviewed the longer-term prospects of the business, on 5 September 2002
the Directors of British Energy announced that they had no alternative but to
seek financial support from the UK Government. On 9 September 2002 the UK
Government granted the Company a credit facility of up to GBP410m (the 'Credit
Facility') to provide working capital for British Energy's immediate
requirements and to allow British Energy to stabilise its trading position in
the UK and North America. On 26 September 2002 British Energy announced that the
UK Government had agreed to extend a revised Credit Facility for up to GBP650m
until 29 November 2002 to give the Company sufficient opportunity to develop a
restructuring plan. The Credit Facility is cross-guaranteed by the principal
Group subsidiaries (excluding Eggborough Power (Holdings) Limited and Eggborough
Power Limited ('EPL')) and is secured by, among other things, fixed and floating
charges and/or share pledges granted by those subsidiaries. The Credit Facility
also contains a requirement to provide further security as required by the
Secretary of State for Trade and Industry (the 'Secretary of State') provided
that the creation of such security would not cause a material default under any
contract to which any member of the Group is a party or a breach of law.
On 28 November 2002 British Energy announced that the Credit Facility had been
further extended until 9 March 2003.
On 14 February 2003 British Energy and certain of its subsidiaries announced
that they had entered into binding standstill agreements, namely:
(a) the Standstill Agreement between British Energy and its
subsidiaries and the bank syndicate that provided financing for the Eggborough
coal fired power station (the 'Eggborough Banks'), The Royal Bank of Scotland
plc ('RBS') as provider of a letter of credit to the Eggborough Banks, our
significant trade creditors, Teesside Power Limited ('TPL'), TotalFinaElf Gas
and Power Limited (now Total Gas & Power Limited) ('Total') and Enron Capital &
Trade Europe Finance LLC ('Enron') (TPL, Total (which has subsequently
transferred its interest to Deutsche Bank) and Enron (which has also
subsequently transferred its interest to Deutsche Bank) being collectively
referred to as the 'Significant Creditors') and British Nuclear Fuels plc
('BNFL'); and
(b) the Bondholder Restructuring Agreement between British Energy,
British Energy Generation Limited ('BEG'), British Energy Generation (UK)
Limited ('BEGUK') and certain holders of British Energy bonds due in 2003, 2006
and 2016 (collectively the 'Bondholders').
On 7 March 2003 British Energy announced that the UK Government had agreed to
extend the Credit Facility in the reduced amount of GBP200m, such that it would
mature on the earliest of (1) 30 September 2004, (2) the date on which the
proposed restructuring, as outlined in (iii) below, (the 'Proposed
Restructuring') becomes effective and (3) any date notified by the Secretary of
State to British Energy on which repayment of amounts outstanding under the
Credit Facility are required as a result of a European Commission (the '
Commission') decision or an obligation under EC law (the 'Final Maturity Date').
In the meantime the Secretary of State may require repayment of the Credit
Facility if she concludes that the Proposed Restructuring cannot be completed in
the manner or time scales envisaged.
Completion of the Proposed Restructuring is subject to a number of initial
conditions including, amongst other things, the receipt by the Secretary of
State of a satisfactory notification from the Commission that insofar as the
proposals involve the grant of State Aid by the UK Government, such aid is
compatible with the common market ('EC Approval'). The Secretary of State
expects to receive this notification by mid 2004.
The Group's ability to provide alternative credit support to parent company
guarantees for our trading operations is, and may until receipt of EC Approval,
be subject to continued support pursuant to the Credit Facility. We have
retained a trading relationship with a high proportion of our existing
contracted counter-parties during the period since our announcement of 5
September 2002, although in most cases we have been required to provide
alternative credit support to a parent company guarantee. Given the financial
circumstances of the Group, certain contracts may be capable of being
terminated. Such termination may result in termination payments being payable
as well as having an adverse effect on our cash flows.
The Company agreed the proposed disposal of its 50% interest in AmerGen to
Exelon Generation Company LLC ('Exelon') in October 2003 for US$277m, subject to
various adjustments and conditions including a break fee of US$8.295m payable to
FPL Group Inc. The disposal was completed on 22 December 2003.
The Credit Facility was temporarily increased to GBP275m on 27 November 2003.
The additional GBP75m ceased to be available on the Group's receipt of the
proceeds from the sale of AmerGen on 23 December 2003.
On 19 December 2003 Bondholders approved amendments to the trust deed
constituting the bonds to facilitate the implementation of the Proposed
Restructuring and to amend the standstill arrangements under the trust deed on
terms consistent with the Creditor Restructuring Agreement (see below).
Following formal amendment of the trust deed, a new standstill agreement has
been entered into with creditors in accordance with the Creditor Restructuring
Agreement.
The Company faced short term pressures on liquidity during the quarter resulting
from the combined effect of seasonality, the unplanned outages at Sizewell B and
Heysham 1 and the increased levels of collateral and costs of unplanned outages
brought about by the increased level of volatility in electricity prices.
Over the longer term the Board is exploring initiatives to reduce the demand for
trading collateral and to achieve sufficient liquid resources to implement the
Proposed Restructuring, including investigating the availability of third party
financing.
(iii) Terms of the Proposed Restructuring
On 1 October 2003, the Company announced that it had agreed the terms of the
Proposed Restructuring of the Group with certain of the Group's creditors and
the Secretary of State. The restructuring proposals are set out in:
(a) the Creditor Restructuring Agreement dated as of 30 September 2003
and entered into by the Company, certain other Group companies, the Significant
Creditors, RBS, the members of the ad hoc committee of British Energy's
Bondholders and BNFL (as amended by a side letter entered into on 31 October
2003) (the 'Creditor Restructuring Agreement'); and
(b) the Government Restructuring Agreement dated as of 1 October 2003
entered into between the Company, BEGUK, BEG, British Energy Power and Energy
Trading Limited ('BEPET'), British Energy Investment Limited, District Energy
Limited, British Energy International Holdings Limited, British Energy US
Holdings Inc., British Energy L.P., Peel Park Funding Limited, the Secretary of
State, the Nuclear Generation Decommissioning Fund Limited (to be renamed the
Nuclear Liabilities Fund Limited ('NLF')) and the trustees of the Nuclear Trust
(the 'Government Restructuring Agreement').
The Creditor Restructuring Agreement required certain further creditor approvals
and sign ups. By 31 October 2003 all these requirements had been satisfied as
follows:
(a) bondholders representing in aggregate with RBS 88.8% of the
combined amount owing to the Bondholders and RBS had signed up to the Proposed
Restructuring;
(b) the terms of the Proposed Restructuring had been approved by
the credit committee of RBS; and
(c) all of the lenders and swap providers comprising the
Eggborough Banks had signed up to the Proposed Restructuring with full credit
committee approvals.
The Proposed Restructuring is based on the heads of terms signed on 14 February
2003.
The principal features of the Proposed Restructuring include:
- compromising the existing claims of Bondholders, RBS, Significant
Creditors and the Eggborough Banks in exchange for new bonds and new ordinary
shares and settling new arrangements for Eggborough;
- the amendment and extension of the BNFL contracts for front-end and
back-end related fuel services for the Group's AGR stations announced on 16 May
2003 and the implementation of a new trading strategy;
- establishing the NLF for uncontracted nuclear liabilities and
decommissioning costs to which British Energy would make initial and ongoing
contributions;
- the Government funding liabilities relating to historic spent fuel
and any shortfall in the NLF.
Creditor Restructuring Agreement
Completion of the Proposed Restructuring is subject to a number of initial
conditions including, amongst other things, the receipt by the Secretary of
State of notification of a satisfactory decision by the European Commission that
insofar as the proposals involve the grant of State Aid by the UK Government,
such as aid is compatible with the common market. The Secretary of State
expects to receive this notification by mid 2004.
In addition to receipt of the EC Approval discussed above, the Proposed
Restructuring is also conditional upon there being no material adverse change.
For the purposes of the Creditor Restructuring Agreement, a material adverse
change is defined as a material adverse change in the current or future business
or operations, the financial or trading position, profits or prospects of the
Group as a whole or of EPL or a change in the current or future business or
operations, the financial or trading position, profits or prospects of the Group
as a whole which is likely to have a material adverse effect on the value of the
new bonds, the new ordinary shares (to be issued as part of the Proposed
Restructuring), the CTA Global Bond to be held by EPL (the 'CTA Global Bond') or
the new Eggborough arrangements.
Under the terms of the Creditor Restructuring Agreement the creditors have
agreed (subject to certain conditions) to extinguish their existing claims
against the Group in exchange for GBP275m of new bonds, GBP150m of bond
equivalent payments by means of the CTA Global Bond and at least 97.5% of the
issued ordinary shares of the new parent company of the Group ('Newco 1').
In addition, the Eggborough Banks, as creditors with security over the assets
and shares in EPL, have agreed (subject to certain conditions) to replace their
existing secured claims with a right to payments under an Amended and Restated
Credit Agreement (the 'Amended Credit Agreement') having a payment profile
equivalent to GBP150m of new bonds secured over the assets and shares in EPL.
The Eggborough Banks will also have an option to acquire the Eggborough station
either through a share or asset purchase in 2010 upon payment of an approximate
GBP104m break fee and the extinguishment of the principal then outstanding under
the Amended Credit Agreement. This option may be accelerated in the event of a
default under the Amended Credit Agreement. The security over the assets and
shares in EPL under the Amended Credit Agreement will secure both the GBP150m
bond-equivalent payments and, through an indemnity for non-performance, the
option acceleration.
As part of the Proposed Restructuring, the Company proposes to cancel its
existing ordinary shares of 4428/43 pence each and A shares of 60 pence each
under a scheme of arrangement with shareholders (the 'Members' Scheme'), and
issue new ordinary shares in Newco 1 equal to 2.5% of the issued share capital
of Newco 1 to shareholders immediately following implementation of the Proposed
Restructuring as well as warrants to subscribe for a maximum of 5.0% of Newco
1's fully diluted share capital (excluding the impact of conversion of the NLF
Cash Sweep Payment (see section entitled 'Government Restructuring Agreement'
below)) immediately following implementation of the Proposed Restructuring. The
subscription price for the warrants is GBP28.95m in aggregate, equivalent to an
equity market capitalisation of the Group of GBP550m following implementation of
the Proposed Restructuring. This will result in a very significant dilution of
the holdings of the existing shareholders. If the shareholders do not approve
the Members' Scheme or for any other reason the Members' Scheme is not
implemented, but shareholders instead vote in favour of the Company selling all
its business and assets to a directly wholly-owned subsidiary of Newco 1 ('Newco
2'), they will receive only the warrants. If the shareholders do not vote in
favour of either proposal, they will receive no shares or warrants.
The Creditor Restructuring Agreement and ancillary agreements restrict the
Significant Creditors, the Eggborough Banks, RBS, each Bondholder who signs up
to the Creditor Restructuring Agreement (the 'Consenting Bondholders') and BNFL
(together the 'Consenting Creditors') from taking any steps to initiate
insolvency proceedings or demand or accelerate any amounts due and payable by
British Energy during the period of the standstill until the earliest of;
(a) 12 noon on the earlier of 31 January 2005 and the date falling 120
days after the satisfaction of the initial conditions to the Proposed
Restructuring (the 'Restructuring Longstop Date');
(b) termination of the Creditor Restructuring Agreement, the
standstill arrangements or the Bondholder Restructuring Agreement in accordance
with their terms; or
(c) the completion of the Proposed Restructuring (the 'Standstill
Period').
Under the standstill arrangements, RBS, the Eggborough Banks, Significant
Creditors and Bondholders are to be paid interest but not principal in respect
of any claims against the Group. Interest will continue to be paid to
Bondholders and the Eggborough Banks in accordance with existing arrangements.
The terms of the bonds were amended in March 2003 for interest to be paid on a
six monthly rather than an annual basis. In respect of the Significant
Creditors and RBS, interest was paid first on 25 March 2003 and is subsequently
payable on the last business day of every six month period thereafter based on
the agreed claim amounts (except in the case of RBS where interest payments will
be based on the present value of its claim amount as at 14 February 2003).
Commission will also continue to be paid to RBS under the facility agreement for
the letter of credit to the Eggborough Banks.
Any of the Consenting Creditors may terminate the standstill arrangements
following the occurrence of a termination event. The termination events
include, inter alia, certain insolvency events affecting the Company, BEG,
BEGUK, BEPET or EPL; acceleration of the Credit Facility; and any of the
Company, BEG, BEGUK, BEPET or EPL failing to discharge certain continuing
obligations. If the standstill arrangements terminate, the Creditor
Restructuring Agreement will also terminate and vice versa.
The Creditor Restructuring Agreement also contains certain covenants by British
Energy for the benefit of the Consenting Creditors that have signed it,
including certain limitations on acquisitions and disposals, a prohibition on
the payment of dividends and on the issuing of equity and a negative pledge.
Government Restructuring Agreement
The Government Restructuring Agreement provides for the circumstances in which
the Secretary of State will support the Proposed Restructuring, including
entering into the agreements with the Group and, in certain cases, the NLF,
which affect the proposals regarding the manner in which the decommissioning and
other uncontracted liabilities of the Group are to be funded and the agreements
relating to the funding of certain of the contracted nuclear liabilities of the
Group (the 'Nuclear Liabilities Agreements'). It also effects some further
amendments to the Credit Facility. As noted above the Credit Facility will
terminate (unless previously extended) on the Final Maturity Date.
Under the Government Restructuring Agreement, the obligations of the Secretary
of State to support the Proposed Restructuring (including as the holder of a
number of special shares), and of the parties to the Nuclear Liabilities
Agreements to enter into them are conditional on, inter alia:
- the Creditor Restructuring Agreement becoming unconditional in all
respects by the Restructuring Longstop Date;
- the Secretary of State not having determined and notified British
Energy in writing that, in her opinion, the Group (including Newco 1 and Newco
2) will not be viable in all reasonably foreseeable conditions without access to
additional financing (other than financing which the Secretary of State is
satisfied has been committed and will continue to be available when required);
- there being no continuing event of default under the Credit
Facility;
- receipt by the Secretary of State of copies of letters from the
Group's auditors and financial advisers giving the confirmations referred to in
the terms of Rule 2.18 of the UKLA Listing rules without qualification (whether
or not Newco 1 is to be listed on the Official List of the UKLA);
- the representations and warranties given by the members of the Group
in the Government Restructuring Agreement being true, accurate and not
misleading when given and if repeated at the effective date of the Proposed
Restructuring; and
- there being no breach of any undertaking given by any member of the
Group under the Government Restructuring Agreement which, in the opinion of the
Secretary of State, is or is likely to be material in the context of the
Proposed Restructuring.
If any of the conditions are not fulfilled or waived by the Secretary of State
by the time specified in the requisite conditions or if no such date is
specified, by the Restructuring Longstop Date, the Government Restructuring
Agreement will terminate. In addition if a material adverse change (as defined
in the Creditor Restructuring Agreement) occurs at any time before the order
sanctioning the scheme of arrangement to be proposed by the Company to RBS and
the Bondholders is filed with the Registrar of Companies in Scotland, the
Secretary of State may give written notice to British Energy to terminate the
Government Restructuring Agreement.
Under the Nuclear Liabilities Agreements to be entered into pursuant to the
Government Restructuring Agreement, the NLF will assume financial responsibility
for discharging certain of the Group's uncontracted nuclear liabilities and the
costs of decommissioning the Group's nuclear power stations, and the Secretary
of State will assume financial responsibility for certain of the Group's
contracted nuclear liabilities and any shortfall in the NLF. In consideration
for this assumption of financial responsibility, Newco 2 will issue GBP275m in
new bonds to the NLF. In addition, members of the Group will make the following
payments to the NLF; (i) fixed decommissioning contributions of GBP20m per annum
(indexed to RPI and tapering as stations are scheduled to close); (ii)
GBP150,000 (indexed to RPI) for every tonne of fuel loaded into the Sizewell B
reactor after completion of the Proposed Restructuring; and (iii) an annual
contribution equal to a percentage of the Group's adjusted cash flow (initially,
and not to exceed, 65% subject to adjustment) (the 'NLF Cash Sweep Payment').
The entitlement of the NLF to the NLF Cash Sweep Payment is convertible into an
equity shareholding in Newco 1 equal to the same percentage of the thereby
enlarged issued share capital. Although the NLF will receive convertible
ordinary shares equal to the then prevailing NLF Cash Sweep Payment percentage
(again subject to a maximum of 65%) the terms of the convertible ordinary shares
into which such entitlement will convert will limit the general voting rights
attaching to such shares to a maximum of 29.9% of the voting rights in the
Company. The convertible ordinary shares may be converted into ordinary shares
(with no restrictions on voting rights) at the election of the NLF, or
automatically on their transfer by the NLF.
In addition, under the Nuclear Liabilities Agreements British Energy is required
to establish and maintain cash reserves to provide collateral for trading and
operations, cover lost revenue and costs resulting from plant outages and to
meet other working capital requirements (the 'Cash Reserve'). The initial
target amount for the Cash Reserve is GBP490m plus the amount by which cash
employed as collateral exceeds GBP200m.
The above is a summary only and investors and others are strongly advised to
read the entire announcement which was issued by the Company on 1 October 2003,
which contains additional important information not included in this summary.
(iv) Principles Underlying Going Concern Assumption
Notwithstanding the statements within the 'Future Liquidity' section of the
Management's Discussion and Analysis, the financial statements have been
prepared on a going concern basis in accordance with FRS18, because British
Energy has not been liquidated nor is it ceasing to trade. The validity of this
assumption depends on the fulfilment of the conditions of the Proposed
Restructuring and achievement of the Group's cash generation initiatives, in
each case within the time-scales envisaged or required and the continuation of
the standstill arrangements with certain creditors and financial assistance from
the Secretary of State pursuant to the Credit Facility and there being no
material deterioration in the Group's cash flow position, performance or
outlook. This assumption is, therefore, subject to a large number of
significant uncertainties and important conditions.
If for any reason British Energy is unable to meet its financial obligations as
they fall due the Company may have to take appropriate insolvency proceedings
and cease to be a going concern, in which case adjustments may have to be made
to reduce the monetary values of assets to the recoverable amounts, to provide
for further liabilities that might arise and to reclassify the fixed assets and
long term liabilities as current assets and liabilities.
2. TURNOVER AND OPERATING PROFIT
3 months 9 months Year
ended ended ended
31 Dec 03 31 Dec 03 31 Mar 03
(a) Turnover and output TWh TWh TWh
Output
United Kingdom 17.3 52.7 69.5
Canada (discontinued) - - 19.2
17.3 52.7 88.7
Continuing activities: GBPm GBPm GBPm
United Kingdom
Wholesale generation sales 152 475 852
Direct supply sales 209 549 603
Turnover from continuing activities excluding
exceptional credits and miscellaneous income
361 1,024 1,455
Miscellaneous income 8 22 32
Exceptional income - - 41
Turnover from continuing activities 369 1,046 1,528
Discontinued activities: Canada - - 375
Total turnover 369 1,046 1,903
In the year ended 31 March 2003 the Company agreed revised terms for the Nuclear
Energy Agreement ('NEA') with Scottish Power and Scottish and Southern Energy
which resulted in the release of GBP41m in respect of cash previously received,
and was reported as an exceptional item in the 2002/03 results.
(b) Operating Profit/(Loss)
A geographical analysis of operating profit including exceptional operating
items is as follows.
3 months 9 months Year
ended ended Ended
31 Dec 03 31 Dec 03 31 Mar 03
GBPm GBPm GBPm
United Kingdom 12 (21) (3,899)
Canada - - 97
12 (21) (3,802)
3. OPERATING COSTS
3 months 9 months Year
ended ended Ended
31 Dec 03 31 Dec 03 31 Mar 03
GBPm GBPm GBPm
Continuing Activities
Fuel 109 293 371
Materials and services 118 380 425
Staff costs 59 171 227
Depreciation 11 36 273
297 880 1,296
Energy supply costs 57 160 184
354 1,040 1,480
Discontinued Activities
Fuel - - 17
Materials and services - - 143
Staff costs - - 111
Depreciation - - 7
- - 278
Total operating costs 354 1,040 1,758
Exceptional operating items
Materials and services 3 40 94
Depreciation - - 3,738
Amounts (credited)/written off non-operational assets - (13) 115
3 27 3,947
Analysis of exceptional items
Restructuring costs 3 40 35
Stock obsolescence - - 57
Onerous trading contracts - - 2
Fixed asset write down - - 3,738
Investments in own shares write down - - 102
UK decommissioning fund (credit)/write down - (13) 13
3 27 3,947
There were exceptional materials and services costs in respect of advisory fees
and other costs associated with restructuring the Group's activities. Costs of
GBP3m and GBP40m were incurred within the three months and nine months ended 31
December 2003 respectively.
At 31 December 2003 the market value of the UK decommissioning fund had
increased to GBP429m (31 March 2003: GBP334m), thereby necessitating exceptional
credits of GBP60m in the nine months ended 31 December 2003. The GBP60m included
a GBP13m exceptional credit to reverse the write down of non-operational assets
made in the year ended 31 March 2003. The remaining balance of the restatement
to market value of GBP47m has been dealt with as an exceptional financing credit
to reverse previously written down revalorisation amounts (see Note 4). The
remaining movements on the UK decommissioning fund relate to revalorisation of
GBP22m and regular contributions of GBP13m.
Exceptional operating costs amounting to GBP3,947m were reported for the year
ended 31 March 2003. These amounts are further explained as follows:
- Charges incurred on advisory fees and other costs associated with
the restructuring of the Group's activities of GBP35m in the year ended 31 March
2003.
- A charge of GBP57m in the year ended 31 March 2003 to provide for
obsolete stores and spares.
- A charge of GBP2m for the year to 31 March 2003 to provide for the
onerous pre-New Electricity Trading Arrangements ('NETA') contracts with TPL,
Total and Enron.
- Exceptional depreciation charge of GBP3,738m in the year ended 31
March 2003 in respect of a review of economic values and net realisable values
of fixed assets (see note 7(ii)).
- A write down of GBP102m in the year ended 31 March 2003 to reflect
permanent diminution in the value of own shares held in employee trusts.
- The investments held within the UK decommissioning fund were written
down to reflect a reduction in market value, resulting in a charge for the year
to 31 March 2003 of GBP13m.
4. FINANCING CHARGES/(CREDITS)
3 months 9 months Year
ended ended ended
31 Dec 03 31 Dec 03 31 Mar 03
GBPm GBPm GBPm
Revalorisation of nuclear liabilities
changes in price levels 17 74 117
release of discount for the period 30 89 111
47 163 228
Revalorisation of other provisions - - 10
Revalorisation of decommissioning fund (6) (22) (29)
Share of revalorisation of discontinued joint venture (1) (2) (4)
Revalorisation charge before exceptional items 40 139 205
Interest payable less receivable 29 54 72
Total financing charges prior to exceptional (credits)/
charges
69 193 277
Exceptional revalorisation (credits)/charges (29) (69) 159
40 124 436
Exceptional interest and other financing (credits)/charges (2) (5) 62
38 119 498
At 31 December 2003 the market value of the UK decommissioning fund had
increased to GBP429m (31 March 2003: GBP334m), thereby necessitating an
exceptional credit of GBP60m in the nine months ended 31 December 2003 to
reverse previously written-down amounts, GBP21m of which relates to the three
months ended 31 December 2003. The market value remains below the amount which
would have been calculated by revalorising on an actuarial basis the total
amounts which have been invested in the fund. As a result of the UK
decommissioning fund receivable being restated at market value, a GBP13m
exceptional credit has been recorded in operating costs to reverse a prior
write-down of non-operational assets, and exceptional credits of GBP21m and
GBP47m have been recorded in finance charges for the three months and the nine
months ended 31 December 2003 to reverse the prior write-down of previous
revalorisation.
The market value of the AmerGen decommissioning fund had also increased over the
period to 21 December 2003, and the British Energy share of the exceptional
credit was GBP8m in the three months ended 31 December 2003 and GBP22m in the
nine months ended 31 December 2003.
At 31 December 2003 the value of the interest rate swaps were marked to market
and the resultant valuation was lower than the book value. The resultant
exceptional credit is GBP2m for the three months ended 31 December 2003 and
GBP5m for the nine months ended 31 December 2003.
At 31 March 2003 the market value of the UK decommissioning fund was lower than
the value that would have been derived from revalorising the cost of the
investment. The difference was GBP124m of which GBP111m was recognised as an
exceptional financing charge with the remainder classified as write-offs of
non-operational assets. At 31 March 2003 the British Energy share of the
adjustment required to reduce the AmerGen decommissioning fund to market value
was a charge of GBP48m.
An exceptional charge of GBP56m was recognised for the year ended 31 March 2003
for interest rate swaps. In addition an exceptional charge of GBP6m was recorded
for the write off of borrowing costs which had been previously capitalised and
were being amortised over the expected duration of the loan financing the
acquisition of the Eggborough power station.
5. TAXATION
3 months 9 months Year
ended ended ended
31 Dec 03 31 Dec 03 31 Mar 03
GBPm GBPm GBPm
Tax on results excluding exceptional items 7 (1) (2)
Tax on exceptional items - - 370
7 (1) 368
The tax credit for the three months ended 31 December 2003 comprised an overseas
tax credit of GBP7m in respect of a decrease in the Group's liability for its
share of AmerGen's taxable profits.
The tax charge for the nine months ended 31 December 2003 comprised an overseas
tax charge of GBP1m in respect of the Group's liability for its share of
AmerGen's taxable profits.
The exceptional tax credit for the year ended 31 March 2003 of GBP370m relates
to a deferred taxation credit on exceptional items of GBP520m offset by the
de-recognition of the deferred taxation asset of GBP150m.
The tax paid of GBP15m in the period relates wholly to the Group's liability for
its share of AmerGen's taxable profits. In the year ended 31 March 2003 the net
tax refund of GBP3m comprised tax paid of GBP10m in respect of AmerGen and Bruce
Power offset by a UK tax refund of GBP13m.
6. LOSS PER SHARE
The loss per share for the period has been calculated by dividing the loss on
ordinary activities after taxation, minority interests and non-equity dividends
by the weighted average of ordinary shares in issue during the period, based on
the following information:
3 months 9 months Year
ended ended ended
31 Dec 03 31 Dec 03 31 Mar 03
Loss for the period (GBPmillion) 3 82 3,941
Basic weighted average share capital (number of shares,
million) 602 602 602
7. FIXED ASSETS
(i) Investment in Own Shares
Tangible assets and investments includes amounts in respect of own shares held
in trust to satisfy obligations under share options granted to Directors and
employees of the Company.
As at 31 December 2003 the British Energy Employee Share Trust held 21,734,839
ordinary shares at an average cost of GBP4.68 for a total consideration of
GBP101m. The Qualifying Employee Share Trust ('QUEST') held 5,292,103 ordinary
shares at a cost of GBP5.32 per share (GBP28m) and 19,165,471 'A' shares at a
cost of 60p per share (GBP11m).
The book value of the shares held by the employee trusts was written down to
their market value of GBP2m in the financial statements for the year ended 31
March 2003 based on share valuations of 3.75p per ordinary share and 3p per 'A'
share to recognise the diminution in value due to the deterioration of the
long-term prospects of the Company.
(ii) Carrying Value of Fixed Assets
The Directors reviewed the economic values and net realisable values of the
Group's fixed assets at 31 March 2003 and compared them to their book value. As
a result of this review the carrying value of fixed assets was written down by
GBP3,738m.
The carrying value of the nuclear stations was calculated by discounting the
expected future cash flows from continued use of the assets, having made
appropriate assumptions regarding future operating performance. The valuation
of Eggborough was based on an assessment of net realisable value.
The electricity price assumptions were a very significant component of the asset
value calculation. The Directors considered the market's views on future prices
of wholesale electricity and also the forecasts specifically commissioned for
the Company. In determining the price assumptions the Directors took a cautious
view on there being a significant recovery in prices. As market prices are
outside the Directors' control actual prices may differ from those forecast.
The Directors will review the economic assumptions underlying the calculation of
fixed asset carrying values at 31 March 2004 in line with the requirements of
FRS11, and make revisions as appropriate.
(iii) Sale of Investments
On 22 December 2003 the Group completed the sale of its 50% interest in AmerGen
to Exelon.
The Group received initial consideration of US$277m upon financial close on 22
December 2003 prior to adjustments relating to working capital levels, stocks of
unspent nuclear fuel, capital expenditures and low level waste disposal costs to
be determined at the time of closing. The gain on sale calculated below is a
provisional estimate pending receipt of financial statements drawn up as at the
date of financial close.
On 23 December 2003 the Group sold its 50% equity interest in Offshore Wind
Power Limited ('Offshore Wind') to GB Gas Holdings Limited, a wholly owned
subsidiary of Centrica plc, for an up front cash consideration of GBP2m and
deferred consideration of up to GBP750,000 has not been recognised in these
accounts (net book value GBPnil).
The cash receipt of GBP9m in relation to Bruce Power was accounted for in the
year ended 31 March 2003 as an adjusting post balance sheet event.
The profit arising from the disposal and cash consideration, which has been
recognised in these accounts are analysed as follows:
Bruce Offshore
Power
AmerGen Wind Total
GBPm GBPm GBPm GBPm
Net assets sold:
Net assets disposed - 112 - 112
Accounted for by:
Cash consideration net of transaction costs and break
fee - 147 2 149
Gain on sale of joint venture and businesses - 35 2 37
Net cash flow
Cash consideration net of transaction costs received
in the nine months ended 31 December 2003 9 154 2 165
8. CREDITORS AND PROVISIONS
Other
creditors
Nuclear and
Liabilities Debt provisions Total
GBPm GBPm GBPm GBPm
Creditors:
Amounts falling due within one year 514 197 657 1,368
Amounts falling due after more than one year 1,899 686 - 2,585
Provisions for liabilities and charges 1,753 - 40 1,793
As at 31 December 2003 4,166 883 697 5,746
As at 31 March 2003 3,937 883 740 5,560
Nuclear liabilities including accruals for AGR fuel services relating to spent
AGR fuel are based on the terms of contracts with BNFL (dated 30 March 1995 and
3 June 1997), most of which include fixed prices subject to indexation, or the
Group's estimates where no contracts exist. Provisions for services relating to
the disposal of nuclear waste and the storage and disposal of PWR spent fuel are
based on cost estimates derived from the latest technical assessments. The
costs of decommissioning the power stations have been estimated on the basis of
technical assessments of the processes and methods likely to be used for
decommissioning under the current regulatory regime. The estimates are designed
to reflect the costs of making the sites of the power stations available for
alternative use in accordance with the Group's decommissioning strategy.
Other creditors of GBP655m include GBP316m in respect of claims relating to
onerous trading contracts. These contracts are pre-NETA electricity trading
contracts with Enron, TPL and Total. The Enron and Total contracts were
terminated during the year ended March 2003, which gave rise to claims for
certain amounts which have become payable. Interest is payable and being paid on
standstill balances at a rate of 6%, other than for the bonds and the amounts
due to the Eggborough banks which continue under their original terms. These
accounts reflect the claim amounts which have been agreed in principle with
Enron, TPL and Total for the purposes of the Proposed Restructuring. Enron and
Total have subsequently transferred their claims to Deutsche Bank.
The analysis of the maturity of borrowings has been prepared based on the dates
when the borrowings mature under the existing contractual arrangements.
However, the standstill arrangements which have been put in place have the
effect of deferring the payments of certain amounts due until the Bonds and
Eggborough project finance loan are replaced as part of the Proposed
Restructuring or earlier termination of the standstill. The maturity profile of
borrowings will change upon completion of the Proposed Restructuring.
Included in the provisions total of GBP40m is an interest rate swaps provision
in respect of swap contracts which were put in place to hedge interest rate
risk. The Directors have reviewed the necessity for these swaps in the context
of the Proposed Restructuring and have concluded that the swaps are no longer
effective as hedges. A provision of GBP56m was created at 31 March 2003 and was
reduced to GBP36m at 31 December 2003 through utilisations of GBP13m, accruals
movement of GBP2m and revaluation of GBP5m.
9. RECONCILIATION OF OPERATING CASH FLOW
9 months
ended
31 Dec 03 Year ended 31 Mar 03
Dis-
Total Continued continued Total
GBPm GBPm GBPm GBPm
Operating (loss)/profit including exceptional items (21) (3,899) 97 (3,802)
Exceptional items 27 3,906 - 3,906
Operating profit excluding exceptional items 6 7 97 104
Depreciation 36 273 13 287
Nuclear liabilities charged to operating costs 96 106 - 105
Nuclear liabilities discharged (32) (115) - (115)
Movements in other provisions (2) (45) - (45)
Regular contributions to the decommissioning fund (13) (18) - (18)
(Increase)/decrease in working capital including
exceptional items discharged
(90) 36 (18) 18
Net cash (outflow)/inflow from operating activities 1 244 92 336
Payments to acquire tangible fixed assets - (112) (170) (282)
Net cash (outflow)/inflow from operating activities
net of capital expenditure
1 132 (78) 54
Operating cash flows for the nine months ended 31 December 2003 include an
outflow of GBP30m (31 March 2003: GBP30m) which relates to advisory fees and
other costs associated with restructuring the Group's activities.
On 14 February 2003 the Group disposed of its stake in Bruce Power and Huron
Wind, therefore their results up to the point of disposal have been classified
as discontinued.
10. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
GBPm
Increase in cash 4
Increase in liquid resources 92
Decrease in net debt 96
Net debt at 1 April 2003 (550)
Net debt at 31 December 2003 (454)
11. COLLATERAL
Investments in liquid funds at 31 December 2003 include GBP338m of cash which
has been deposited in collateral bank accounts. Availability of this cash is,
therefore, restricted over the periods of the collateralised positions.
12. CONTINGENT ASSETS
On 16 May 2003 the Company announced that it had exchanged the last of the suite
of contracts covering front-end and back-end fuel services required to give
effect to the non-binding heads of terms entered into with BNFL on 28 November
2002. The front-end contracts became effective on 1 April 2003 but may be
terminated if the Proposed Restructuring is not completed. The back-end
contracts are conditional on completion of the Proposed Restructuring but
payments are being made as if the new back-end contracts had become effective on
1 April 2003. The financial statements for the period to 31 December 2003 have
been drawn up on the basis of the historic BNFL contracts in respect of back end
fuel contracts, pending satisfaction of the restructuring conditions set out in
the new contracts, thereby creating a contingent asset of GBP259m (inclusive of
GBP113m principal amounts accrued at 31 March 2003) which will be recognised
upon completion of the Proposed Restructuring.
On 14 February 2003 the Company announced that it had completed the disposal of
its 82.4% interest in Bruce Power in Canada to a consortium of three parties.
In addition to the consideration payable by the consortium under the master
purchase agreement, up to a further C$100m was payable to British Energy
contingent upon the restart of two of the Bruce A units under a trust agreement
(the 'Trust Agreement') entered into on the same date. C$50m would have been
released to British Energy had the first unit restarted by 15 June 2003 and an
additional C$50m would have been released to British Energy had the second unit
restarted by 1 August 2003. C$5m is deducted from the C$50m payable in respect
of each unit for its failure to restart by the scheduled restart date or by the
first day of each successive calendar month following the scheduled restart
date. At 31 December 2003 the Group has not recognised any amount in respect of
cash retentions on its Balance Sheet at 31 December 2003 because of
uncertainties regarding their realisation. British Energy is seeking the
payment of additional consideration under the Trust Agreement on the basis that
Bruce A Unit 4 restarted in October 2003 and Unit 3 restarted in January 2004.
The Company is in discussion with the Ontario Provincial Government which has
indicated that it considers that the units may have restarted, for the purposes
of the Trust Agreement, at later dates. The amounts recoverable in respect of
the restarts will be substantially lower than the maximum C$100m but the amounts
and timing of the payments have still to be confirmed.
13. CONTINGENT LIABILITIES
These accounts are drawn up on a going concern basis, the basis of which is
explained more fully in Note 1 to these accounts. This note describes the
contingent liabilities which are applicable to the Group and the Company.
The Group has been provided with the Credit Facility by the Secretary of State.
As at 31 December 2003, the Group had no drawings under the Credit Facility.
Also at 31 December 2003, the Group had cash and liquid investments of GBP429m
of which GBP338m had been deposited as collateral to support trading and other
operations.
The following security has been granted for obligations under the Credit
Facility made available by the Secretary of State:
- an all monies debenture creating fixed security (by way of
assignment and/or fixed charge) over certain intra-group receivables and special
accounts and a floating charge between the Secretary of State and certain Group
companies;
- fixed charges in relation to the UK nuclear power stations; and
- pledge and mortgage of shares in certain Group subsidiaries in
favour of the Secretary of State.
Amounts owing by EPL to the Eggborough Banks are not guaranteed by the Company.
However, the Company guarantees the payment of amounts by BEPET to EPL,
calculated to cover EPL's borrowing and operating costs. In addition the
Company also provides a subordinated loan facility to EPL.
On 1 October 2003, the Company announced that it had entered into the Creditor
Restructuring Agreement with certain significant creditors (including the
Eggborough Banks) and BNFL relating to the standstill, recognition and
compromise of their claims. However, while the Directors believe that the
amounts of the agreed claims currently reflect the amounts legally claimable, in
the event of the Proposed Restructuring not being completed different amounts
may be calculated as being claimable.
On 25 September 2002 the Nuclear Generation Decommissioning Fund Limited (the
'NDF') served a default notice relating to the solvency of the Company, BEG and
BEGUK. Unless the default is cured to the satisfaction of the NDF, or waived,
the NDF has the right to require accelerated payment of all of the contributions
due to the NDF prior to the next quinquennial review in Autumn 2005. Annual
payments are in the region of GBP18m. The NDF has agreed not to take enforcement
action without further notice while the Group progresses satisfactorily towards
achieving the Proposed Restructuring. If the conditions to the Proposed
Restructuring are satisfied, the NDF and others will enter into a Deed of
Termination whereby the NDF agrees that it shall take no action to enforce its
rights pursuant to the default notice.
On 12 February 2004 British Energy received a notice of warranty claims from the
consortium which purchased the Group's 82.4% interest in Bruce Power alleging
breach of certain warranties and representations relating to tax and to the
condition of certain plant at the Bruce power station.
The claim relating to the condition of the plant is based upon alleged erosion
of some of the steam generator support plates, through which boiler tubes pass,
which it is alleged resulted in an extended outage of one unit at the plant to
carry out repair works and loss of revenues and costs of approximately C$64.5m.
The consortium also claims that the alleged erosion may reduce the operating
life of the unit and/or result in further repairs involving further losses.
British Energy has received no supporting evidence and has insufficient
information to evaluate the claim fully. However, the Company expects to defend
the claim.
The principal tax claim relates to the treatment of expenditure at the Bruce
plant during the period of the Company's ownership which is currently being
considered by the Canadian tax authorities. The treatment proposed by British
Energy could result in a rebate of a material amount of tax to the Group which
has not been recognised in the Financial Statements of the period. The
consortium claims that allowance of the expenditure for that period would cause
it to lose future deductions. British Energy expects to defend the claim and,
on the basis of advice received, the Company is confident that the amount of the
claim should not, in any event, materially exceed the amount of the rebate, and
that the claim should have no material cash flow impact on the Group.
Under the agreement with the consortium C$20m is retained in trust to meet any
representation and warranty claims, and this may be retained pending agreement
or determination of the claims.
The Group has given certain indemnities and guarantees in respect of the
disposal of its investment in AmerGen. The Group does not currently anticipate
any losses will arise in connection with them.
The Group is involved in a number of other claims and disputes arising in the
normal course of business which are not expected to have a material effect on
the Group's financial position.
The Company has given certain indemnities and guarantees in respect of its
subsidiary undertakings. No losses are anticipated to arise under these
indemnities and guarantees, provided relevant subsidiary undertakings continue
as going concerns.
14. NON-ADJUSTING POST BALANCE SHEET EVENTS
As at 24 February 2004 the Group had no drawings under the Credit Facility.
In October 2003 there were unplanned outages at Heysham 1 nuclear power station.
Both units at Heysham 1 commenced their return to service on 14 February 2004.
Investments in liquid funds at 24 February 2004 of GBP496m include GBP315m of
cash which has been deposited in collateral bank accounts for trading and
operating purposes. Availability of this cash is, therefore, restricted over the
periods of the collateralised positions.
The sale of the Group's 50% interest in AmerGen to Exelon detailed in Note 7
(iii) is subject to certain adjustments relating to working capital levels,
stocks of unspent nuclear fuel, capital expenditures and low level waste
disposal costs to be determined at the time of closing. Finalisation of these
adjustments is not expected to take place until Spring 2004 and any payments
will not be received until mid-2004.
The Company and Siemens Power Generation Limited ('Siemens') have settled
long-standing disputes relating to work done since 1996 by the former Parsons
business. Under the terms of the settlement Siemens has agreed to pay the
Company GBP18.3m. This settlement includes a commitment by the Company and
Siemens to develop a mutually beneficial commercial relationship under a long
term supply agreement.
INDEPENDENT REVIEW REPORT TO BRITISH ENERGY PLC
Introduction
We have been instructed by the Company to review the financial information,
contained in the quarterly report, which comprises the profit and loss account,
balance sheet, cash flow statement, statement of total recognised gains and
losses and related notes. We have read the other information contained in the
quarterly report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
Directors' Responsibilities
The quarterly report, including the financial information contained therein, is
the responsibility of, and has been approved by the Directors. The Listing
Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the quarterly figures should be consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review Work Performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of Group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and, therefore,
provides a lower level of assurance than an audit. Accordingly we do not
express an audit opinion on the financial information. This report, including
the conclusion, has been prepared for and only for the Company for the purpose
of the Listing Rules of the Financial Services Authority and for no other
purpose. We do not, in producing this report, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or in
to whose hands it may come save where expressly agreed by our prior consent in
writing.
Fundamental Uncertainty - Going Concern
In arriving at our review conclusion, we have considered the adequacy of the
disclosures made in Note 1 concerning the preparation of the quarterly financial
information on the going concern basis. The validity of this assumption depends
on the fulfilment of the conditions of the Proposed Restructuring and
achievement of the Group's cash generation initiatives, in each case within the
time-scales envisaged or required and the continuation of the standstill
arrangements with certain creditors and financial assistance from the Secretary
of State pursuant to the Credit Facility and there being no material
deterioration in the Group's cash flow position, performance or outlook. In
view of the significance of the uncertainty concerning these matters we consider
that they should be drawn to your attention but our conclusion is not qualified
in this respect.
Review Conclusion
On the basis of our review, we are not aware of any material modifications that
should be made to the financial information as presented for the three months
ended 31 December 2003 and for the nine months ended 31 December 2003.
PricewaterhouseCoopers LLP
Chartered Accountants
Edinburgh
25 February 2004
Notes:
(a) The maintenance and integrity of the British Energy plc website is
the responsibility of the Directors; the work carried out by the auditors does
not involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that may have occurred to the quarterly report
since it was initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
CERTIFICATION
I, Mike Alexander, Chief Executive Officer of British Energy plc (the
'registrant'), certify that:
1. I have reviewed this quarterly report for the nine-month
period ended 31 December 2003 (the 'report') of the registrant;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have;
(a) designed such disclosure controls and procedures, or caused
such disclosure controls or procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of the
period covered by this report based on such evaluation; and
(c) disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent function);
(a) all significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarise and report financial information; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal
controls over financial reporting.
Date: 25 February 2004 Name: Mike Alexander
Title: Chief Executive Officer
CERTIFICATION
I, Martin Gatto, Interim Finance Director of British Energy plc (the
'registrant'), certify that:
1. I have reviewed this quarterly report for the nine-month
period ended 31 December 2003 (the 'report') of the registrant;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have;
(a) designed such disclosure controls and procedures, or caused
such disclosure controls or procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of the
period covered by this report based on such evaluation; and
(c) disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent function);
(a) all significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarise and report financial information; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal
controls over financial reporting.
Date: 25 February 2004 Name Martin Gatto
Title: Interim Finance Director
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Mike Alexander, Chief Executive Officer, certify, pursuant to 18 U.S.C.
section 1350, that:
(1) The quarterly report for the period ended 31 December 2003 (the '
report') of British Energy plc (the 'registrant') fully complies with the
requirements of section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934; and
(2) The information contained in the report fairly presents, in all material
respects, the financial condition and results of the registrant.
Date 25 February 2004
Mike Alexander
Chief Executive Officer
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Martin Gatto, Interim Finance Director, certify, pursuant to 18 U.S.C.
section 1350, that:
(1) The quarterly report for the period ended 31 December 2003
(the 'report') of British Energy plc (the 'registrant') fully complies with the
requirements of section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934; and
(2) The information contained in the report fairly presents, in
all material respects, the financial condition and results of the registrant.
Date 25 February 2004 Martin Gatto
Interim Finance Director
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: February 26, 2004 BRITISH ENERGY PLC
By:____Paul Heward____
Name: Paul Heward
Title: Director - Investor Relations