British Energy plc: Flotation (Hansard, 13 June 1996)

§ Viscount Goschen
My Lords, the value of British Energy plc will be determined by the market on flotation on 15th July. As will be shown in the prospectus to be published on 26th June, the historic cost of the company's power stations is £9.3 billion.

§ Lord Dubs
My Lords, I thank the Minister for that interesting, although not totally informative, Answer. Does the Minister agree that the likely value of the company, as tested by the market, will be something in the region of £2 billion and that Sizewell B power station— one of the eight the company has— opened only two months ago and cost £3 billion to build? Is there not something the matter with the arithmetic? Further, are we not giving away a valuable asset in a desperate rush by the Government to privatise the industry before they lose office?

§ Viscount Goschen
No, my Lords, we are not giving it away. No, I shall not speculate on what might be raised by the flotation. No, the value of the assets is what the market is prepared to pay for them. They must be viewed in the light of the current electricity market. That is what the market will do.

§ The Earl of Lauderdale
My Lords, can my noble friend the Minister say whether the figure that he gave earlier includes provision for decommissioning?

§ Viscount Goschen
My Lords, the figure I gave was for the historic cost of the company's power stations. The figure for the liabilities, including decommissioning 1837 and the cost of dealing with the spent fuel, is £3.7 billion. British Energy will take those liabilities with it, so the liabilities will follow the assets.

Lord Bruce of Donington
My Lords, although the ultimate value will be determined by market forces in some form or other, will the Minister give the House an undertaking that proper accounts will be presented to Parliament, drawn up in accordance with the resource accounting measures already agreed by the Government, as per Commands 2626 and 2929 of July 1995 and 1996 respectively? Will the Minister also confirm that figures will be presented which show a true and fair view according to the basic tenets of resource accounting to which the Government are supposed to be adhering?

§ Viscount Goschen
My Lords, I cannot quibble with the noble Lord on his accountancy skills, or on Commands 2626 or 2929. The Government will use the proper accounting rules as appropriate. As we have always done with privatisations, we shall be as open as we possibly can.

Lord Bruce of Donington
My Lords, is the Minister aware that there is no scope for the Government to present those figures in accordance with what he considers to be appropriate rules? The Government themselves laid down the rules. I am asking that the Government keep to them as regards the presentation of figures. Can the noble Viscount give an undertaking that a true and fair view will be presented to Parliament?

§ Viscount Goschen
My Lords, I have already given the Government's position on the matter. There is no difference between the noble Lord and myself. He says that we cannot vary the appropriate rules; I am saying that we will follow the appropriate rules.

§ Earl Russell
My Lords, can the noble Viscount say whether the Government will undertake to study the report of the inquiry into the 1979 accident on Three Mile Island? Are the Government aware that the principal finding of that inquiry was that the accident happened because the plant opened before it was properly ready in order to secure a multi-million dollar tax rebate? Does the Minister agree that that illustrates that there can be safety risks inherent in the commercial operation of nuclear power?

§ Viscount Goschen
My Lords, the nuclear industry in this country has an excellent safety record. Privatisation will in no way change that. Indeed, it is a heavily regulated industry, and it is firmly in the commercial interests of the company to produce the best safety record that can possibly be achieved. The view of those who run the company is that if the power stations are not safe they will not run. That is also the view of the regulators.

§ Lord Peston
My Lords, I believe the Minister said that the historic cost of the stations is about £9 billion.
1838 I suppose that the replacement cost would be about twice that amount, say, about £18 billion on a rough estimate. As I understand it, the Government are not even remotely thinking they will receive anything like that sum of money from the privatisation. Does that not throw an appalling light on the whole nuclear power programme from the time that it started to the present day, having put in those vast assets? I am not being terribly critical of the Government; indeed, I was a supporter— and remain so to a considerable extent— of nuclear power. However, does the Minister not agree that we will have paid an enormous cost for our nuclear programme if the net value to be realised is only to be a few billion?

§ Viscount Goschen
My Lords, various different governments over the years have taken decisions about the funding of nuclear power stations. The fact is that we have a nuclear industry at present. The Government firmly believe that the power stations which are being floated with British Energy will be better off in the private sector and that it will be to the benefit of the economy and to the country as a whole. On a wider issue, there are the proceeds from the sale and also the sale of some £600 million worth of debt. Moreover, there is the consideration that some £3.7 billion of liabilities are following the assets. All those factors must be taken into consideration.

§ Lord Avebury
My Lords, as regards the £3.7 billion decommissioning costs which are to be loaded on to British Energy, can the Minister tell the House what margin of error that estimate is subject to? If, by any chance, the £3.7 billion proves to be grossly inadequate, can the noble Viscount guarantee that the Government will not pick up the difference?

§ Viscount Goschen
My Lords, we are fully confident that the £3.7 billion figure is an accurate and an appropriate one. Indeed, it has been generated using a conservative discount rate of some 3 per cent. It is widely accepted in the industry that £3.7 billion is a proper figure. Of course, there is also the segregated fund which has been set up.