Ministers plan nuclear renationalisation

Bondholders in British Energy were told yesterday that key information is slowly emerging from the company, as evidence came to light that the Government is preparing to renationalise the stricken business if creditors do not accept a restructuring deal.

Political sources confirmed the Government is drafting legislation that will allow it to participate in the restructuring of British Energy or take the company back into public hands if the deal is not approved. Amendments to the Electricity Act of 1989, which allowed for the privatisation of the industry, will be required. The threat of nationalisation or administration, and the news that officials at the Department of Trade and Industry are preparing for these outcomes, will add pressure on bondholders to accept a rescue deal. A restructuring would see bondholders get less than 30 per cent of their money, while equity investors would be wiped out. Under administration, the Government's claim on the company's assets would probably see other creditors get nothing. The Government has propped up British Energy with a £650m emergency loan.

In a conference call yesterday, a group of key bondholders were updated on progress by their financial advisers Close Brothers and lawyers Cadwalader Wickersham & Taft. Bondholders must accept the British Energy restructuring proposals by mid-February.

"We are at the start of a process," said a person close to the bondholders. "The financial and legal information required for us to assess the situation is beginning to flow from the company but a fuller picture will only become available next month."

Patricia Hewitt, the Secretary of State for Trade and Industry, told Parliament on 28 November that new legislation would be required to deal with British Energy, whatever the outcome.