BE agrees £308m Canadian sell-off

British Energy, the beleaguered nuclear electricity generator, yesterday cleared an important hurdle in its battle for survival after agreeing to sell its Canadian operations for 770m Canadian dollars (£308m).

The sale of BE's 82 per cent stake in Bruce Power is one of the two key disposals the company must complete before mid-February or face having its £650m lifeline from the Government withdrawn, in which case it would be forced into insolvency.

The proceeds from the sale of Bruce to a Canadian consortium which includes BE's existing partner in the business, Cameco, will go towards repaying the government loan.

BE is also selling its 50 per cent stake in Amergen, the operator of the Three Mile Island plant in Pennsylvania. The front-runner to buy the stake, valued at £100m to £150m, is the Chicago-based Exelon, which owns the other half of Amergen. However, Exelon is likely to face competition from Entergy of New Orleans which has also expressed an interest in buying Amergen's three reactors. The sale of the Amergen stake must be completed by the end of next June or, again, BE will be pushed into insolvency.

Analysts said that the £308m raised from the Bruce deal was a reasonable outcome given that it was a firesale. BE is liable to pay a break fee of C$15m if it pulls out of the sale and finds another buyer.

Bruce Power is situated on the shores of Lake Huron and has eight reactors, four of which are in operation. A further two are due to re-enter service by next summer. Bruce made a profit of C$74m in the 10-month period up to this April.

Cameco is the world's biggest producer of uranium, the basic fuel for nuclear reactors. The other members of the consortium buying Bruce are the gas pipeline company TransCanada and a division of Ontario Municipal Employees Retirement Board, one of Canada's biggest pension funds.

BE was forced to ask the Government for a bailout in September after being overwhelmed by a combination of falling electricity prices and the high cost of reprocessing its spent fuel. Even if the Bruce and Amergen disposals are completed, there is no guarantee that it will escape insolvency. Bondholders also have to approve a restructuring under which they only get a third of their investment back.