FORM 6-K
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
December 23, 2002
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: Sale of Bruce Power
dated 23 December 2002.
Exhibit No.1
23 December 2002
British Energy plc ("British Energy")
Proposed Disposal of Interest in Bruce Power Limited Partnership and Huron Wind
Limited Partnership
The Board of British Energy (the "Board") announces that British Energy and
certain of its subsidiaries have entered into binding Heads of Agreement to
dispose of British Energy's entire 82.4% interest in Bruce Power Limited
Partnership ("Bruce Power") as follows: 79.8% to a consortium made up of Cameco
Corporation ("Cameco"), BPC Generation Infrastructure Trust ("BPC") and
TransCanada PipeLines Limited ("TransCanada") (together, the "Consortium"); and
2.6% to the Power Workers' Union Trust No. 1 ("PWU") and The Society of Energy
Professionals Trust (the "Society") (together the "Unions"). The Consortium will
also acquire British Energy's 85% interest in Bruce Power Inc. ("BPI"), the
general partner of Bruce Power.
In addition, the Consortium will acquire the 50% interest that British Energy
holds in Huron Wind Limited Partnership ("Huron Wind") through its subsidiary
British Energy Canada Investments Inc. The disposal of British Energy's interest
in Bruce Power, BPI and Huron Wind will be effected through the sale of British
Energy (Canada) Ltd ("BECL").
Cameco already holds a 15% interest in Bruce Power and BPI through its
subsidiary Cameco Bruce Holdings Inc. and the Unions together hold a 2.6%
interest in Bruce Power. The Consortium members will each own a 31.6% interest
in Bruce Power and a 16.7% interest in Huron Wind as a result of the disposal.
PWU will own a 4% interest in Bruce Power and the Society will own a 1.2%
interest in Bruce Power as a result of the disposal. BPI will be entirely owned
by the Consortium as a result of the disposal.
British Energy's decision to sell BECL is a key element in the proposed
restructuring announced on 28 November 2002.
British Energy expects to receive a maximum aggregate consideration of C$770m,
subject to various contingencies and potential adjustments. Of this aggregate
consideration, British Energy will receive C$630m in cash at closing subject,
inter alia, to the pre-closing adjustments in respect of material adverse change
and early termination of trading contracts which are described below.
In addition, British Energy expects to receive up to:
- C$100m, contingent on the restart of the two Bruce A units as set out
below; plus
- C$20m, which will be retained for two months following closing against
a potential adjustment in respect of any pension fund deficit; plus
- C$20m, which will be retained to cover any successful claims in respect
of customary representations and warranties until any claims raised against
British Energy or certain of its subsidiaries within two years from the date
of closing are resolved.
In addition, C$80m will be retained to cover the estimated outstanding tax
liabilities of BECL and its subsidiaries.
Any balance of the retained sums not applied to cover the outstanding tax
liabilities of BECL and its subsidiaries, pension fund deficit or any successful
claim for breach of representations and warranties will be paid to British
Energy at the end of the relevant period for retention subject to confirmation
from the Consortium, based upon written input from their auditors, actuaries,
tax or legal advisors to the extent necessary, and in consultation with Ontario
Power Generation, Inc. ("OPG"), that such a release is appropriate. In the
event that sums due in respect of outstanding tax liabilities, any pension fund
deficit or claims under the representations and warranties exceeds the amount
held back for that purpose, British Energy would be required to pay the amount
of such excess to the Consortium.
The purchase price is subject to adjustment pre-closing if an event, change or
development in or affecting the business of Bruce Power which is materially
adverse to such business or, inter alia, the prospects or operation of the Bruce
facility (a "MAC") occurs prior to closing. In the event of a MAC with a value
of more than C$20m, there will be an adjustment to the purchase consideration
calculated by reference to the impact on the value of the interest in Bruce
Power acquired by the Consortium on a net present value basis. For a MAC with a
value of up to C$350m, the sole remedy for the Consortium shall be an adjustment
to the purchase price. If a MAC with a value of more than C$350m occurs, the
parties will not be obliged to complete the proposed transaction.
In addition, the purchase price may be adjusted pre-closing in the event that
contracts for the sale of electricity or the hedging of electricity prices (the
"Trading Contracts") are terminated early prior to closing. The principal
events of default under the Trading Contracts which could give rise to early
termination are non-payment or insolvency of either party to the agreement or
their guarantor. In the majority of Trading Contracts, the insolvency of
British Energy would be an event of default which could lead to early
termination. The purchase price will be reduced dollar for dollar if there is a
net loss to Bruce Power from the termination of a Trading Contract, and
increased dollar for dollar if there is a net gain. The amount of such net loss
or net gain shall be calculated at closing taking into account any replacement
contracts entered into by Bruce Power and any payments made in connection with
letters of credit associated with the relevant Trading Contract. A net loss
resulting from the early termination of a Trading Contract will not constitute a
MAC.
Of the C$100m receivable by British Energy contingent on the restart of two of
the Bruce A units, C$50m will be released to British Energy provided the first
unit is restarted by 15 June 2003 and an additional C$50m will be released to
British Energy if the second unit is restarted by 1 August 2003. Delays in the
restart of each unit would result in the payments reducing by 10% per month.
Any amounts forfeited by British Energy under this arrangement would be paid to
the Provincial Government of Ontario (the "Province").
In addition to the consideration referred to above, the Consortium will pay
C$100m to British Energy at closing to fund a one-off estimation allowance and
restructuring fee of C$100m to the Province in consideration of the Province
consenting to the transaction. Subject to adjustment, therefore, the total
consideration payable by the Consortium is expected to be C$950m.
Closing of the proposed transaction is subject to a number of conditions
precedent including, inter alia, receipt of certain confirmations from the
Canadian Nuclear Safety Commission ("CNSC"), receipt of favourable Canadian tax
rulings, consent of the Province to the proposed transaction, Canadian
Competition Act clearance and the approval of British Energy's shareholders.
The Secretary of State for Trade and Industry (the "DTI") has consented to the
proposed sale under the DTI credit facility (the "Facility") entered into on 26
September 2002 and amended on 28 November 2002, and the Province has agreed in
principle to give its consent. The Unions have consented to the transaction
under the Bruce Power limited partnership agreement in consideration of Bruce
Power Investments Inc, a subsidiary of British Energy, forgiving loans of
approximately C$14.6m made to the Unions to allow them to acquire their initial
2.6% interest in Bruce Power and fund subsequent capital calls, and the transfer
to the Unions of an additional 2.6% interest in Bruce Power immediately prior to
closing.
As detailed above, the parties will not be obliged to complete the transaction
if a MAC with an aggregate value of greater than C$350m occurs. In addition, the
Consortium may elect not to close the transaction if certain senior employees of
Bruce Power leave the employment of Bruce Power or announce their intention to
do so prior to closing and it is a further condition of closing that certain
senior employees enter into employment agreements with Bruce Power for at least
five years subject to death, disability, normal retirement arrangements and
dismissal for cause.
The DTI has agreed to provide certain credit support to Bruce Power under the
Facility in the period prior to closing, which it is anticipated will occur
prior to 14 February 2003 in accordance with the restructuring proposal
announced on 28 November 2002. If closing has not occurred by 14 February 2003
the parties are not obliged to complete the proposed transaction.
At closing, the Consortium will assume responsibility for all of British
Energy's obligations as credit support provider and/or guarantor under Bruce
Power's existing Trading Contracts. The Consortium will also take over British
Energy's financial assurance obligations to Bruce Power in respect of the CNSC
licence at closing. In addition, the Consortium will assume responsibility for
the C$175m guarantee granted by British Energy to OPG under the lease of the
Bruce facility and pay the C$225m of deferred rent payments due by Bruce Power
to OPG at closing. British Energy will have no further obligation to OPG in
respect of deferred rent payments.
The proceeds of the transaction will initially be paid into an account approved
by and charged in favour of the DTI as security for British Energy's obligations
to the DTI and are expected to be used to repay the sums made available to
British Energy under the Facility. The disposal will considerably reduce the
cash and collateral requirements of British Energy going forward under the
Facility.
A break fee of C$15m will be payable by British Energy in the event that the
transaction is not completed as a result of the Board accepting an unsolicited
offer for its entire interest in Bruce Power. The break fee shall also be
payable if the Board fails to recommend the transaction or varies its
recommendation to the shareholders and the shareholders do not approve the
transaction and, if as a result of failure to gain shareholder approval an
insolvency official is appointed, the insolvency official does not affirm and
agree to be bound by the heads of agreement within five days of his or her
appointment.
The parties have agreed to work expeditiously and in good faith to negotiate,
settle and execute a definitive agreement embodying the foregoing and further
provisions in terms satisfactory to the parties acting reasonably.
The net book value of the net assets (after adjustment for minorities and
financing and taking into account the nature of the lease of the Bruce facility
under UK GAAP) which are the subject of the proposed transaction was C$96m as at
31st March 2002. The profits (pre-tax and post-minorities) attributable to the
net assets which are the subject of the proposed transaction were C$74m for the
101/2 month period from 12 May 2001 to 31 March 2002.
British Energy's decision to sell BECL is a key element in the proposed
restructuring intended to achieve the long-term financial viability of the
British Energy group. As previously announced, the DTI has confirmed its
intention to support the proposed restructuring and has agreed to extend the
Facility until 9 March 2003 in order to provide financial stability and security
while British Energy seeks the support of certain significant creditors.
The Board believes that the restructuring of the group offers the best available
opportunity to achieve the long term financial viability of the British Energy
Group. However, the proposed restructuring requires British Energy to reach
formal agreement with a large number of creditors with respect to diverse
financial interests, as well as a successful disposal of British Energy's
interests in Bruce Power and AmerGen Energy Company, LLC.
If the transaction is not completed, such agreements with creditors cannot be
reached, the required approvals for the restructuring are not forthcoming, the
assumptions underlying the restructuring proposal are not fulfilled or the
conditions to the Facility or restructuring are not satisfied or waived within
the timescales envisaged, British Energy may be unable to meet its financial
obligations as they fall due and therefore, British Energy 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.
Notes to Editors:
Bruce Power is a subsidiary undertaking of British Energy which operates the
Bruce Power nuclear facility. The facility is located in a 2,300 acre site
which houses two power stations, plus supporting infrastructure, a training
centre, maintenance facility, emergency power facilities and a visitors' center.
The facility is situated on the shores of Lake Huron between the towns of
Kincardine and Saugeen Shores. Bruce Power leases eight reactors at the site.
The four operating reactors in Bruce B have a generating capacity of around
3,200 MW. The four reactors in Bruce A were removed from service between 1995
and 1998. Subject to CNSC approval, Unit 4 of Bruce A is expected to return to
service in April 2003 followed by Unit 3 of Bruce A before next summer's period
of peak demand. The environmental assessment hearing, which is a necessary
requirement of the Bruce A restart was held on December 12th 2002. The CNSC
staff recommended that the Commission accept the report presented to them and
allow the Bruce A restart to progress to the licensing stage. Further hearings
for additional steps in the restart process are scheduled for 16 January 2003
and 26 to 27 February 2003.
Huron Wind is a limited partnership between British Energy and OPG which owns a
wind farm comprising five 1.8 MW wind turbines with a capacity of 9.0MW. Each
party owns a 50% interest in Huron Wind and will share the power output equally.
The Huron Wind site, which is located adjacent to the Bruce Power Visitors
Centre, commenced commercial operation in mid-November 2002.
Cameco, with its head office in Saskatoon, Saskatchewan, is the world's largest
producer of uranium and the largest supplier of combined uranium and conversion
services. Cameco's uranium products are used to generate clean electricity in
nuclear power plants around the world including Ontario, where the company has
an interest in Bruce Power. The company also mines gold and explores for uranium
and gold in North America, Australia and Asia. Cameco's shares trade under the
symbol CCO on the Toronto stock exchange and CCJ on the New York stock exchange.
TransCanada is a leading North American energy company. It is focused on natural
gas transmission and power services. The company's network of approximately
38,000 kilometres of pipeline transports the majority of western Canada's
natural gas production to the fastest growing markets in Canada and the United
States. With today's announcement, TransCanada owns or has interests in,
controls, manages or is constructing facilities for approximately 4,150
megawatts of power, an amount of power that can meet the needs of about four
million average households. The company's common shares trade under the symbol
TRP on the Toronto and New York stock exchanges.
BPC Generation Infrastructure Trust, based in Toronto, Ontario, is established
by Ontario Municipal Employees Retirement Board ("OMERS"), one of Canada's
largest pension funds with C$34bn in assets under management. OMERS, which was
established in 1962, has grown into one of the most competitive and
cost-effective pension plans in Canada, providing guaranteed retirement
security, competitive benefits and efficient service to 312,000 members and
close to 1,000 employers across Ontario.
Cameco and TransCanada will be making announcements on the Toronto and New York
stock exchanges concurrent with this release.
Contacts
Paul Heward +44 1355 262 201 (British Energy, Investor Relations)
Andrew Dowler +44 20 7831 3113 (Financial Dynamics, Media)
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: December 23, 2002 BRITISH ENERGY PLC
By:____Paul Heward____
Name: Paul Heward
Title: Director - Investor Relations