§ The Secretary of State for Trade and Industry (Ms Patricia Hewitt)In light of today's publication of British Energy's preliminary results for the financial year 2002–03, I am taking this opportunity to inform the House about two aspects of the restructuring plan: the value of the aid that Her Majesty's Government has agreed to give to the company based on BE's estimates of its liabilities; and the company's plan to dispose of its 50 per cent. stake in Amergen, its joint venture in the US.
VALUE OF THE AID
In my statement to the House on 28 November 2002, I said that the Government would contribute significantly to the company's £2.1 billion of historic nuclear fuel liabilities that are managed by BNFL and extend to 2086. In addition I said that the Government would underwrite the fund that will be used to pay for the costs of decommissioning BE's nuclear power stations. These costs, together with BE's uncontracted liabilities, were estimated in the company's statement to the Stock Exchange on 28 November at £1.6 billion. To the extent that BE's payments fall short of the fund's requirements, the Government will make up the difference. I stated that the cost to the Government of meeting these liabilities would average £150 million to £200 million a year for the next 10 years and would fall thereafter. DTI is currently considering how the value of its aid for BE should be reported in its annual accounts for 2002–03, and will be discussing this with the National Audit Office.
BE today has estimated the total value of the Government's indemnity as £3.6 billion (net present value) in its preliminary annual results for their financial year 2002–03. This figure is simply the difference between its estimate of the total liabilities underwritten by the Government and funds held by the Nuclear Liabilities Fund (NLF). It does not include an estimate of the future contributions by BE to the NLF to fund its own liabilities.
We expect the European Commission may shortly disclose, as part of the state aids process, a valuation of £3.3billion (net present value) for the aid. This figure was prepared according to EC requirements. It is calculated by discounting the estimated amount of aid that the Government might provide after taking into account an estimate of the amount that the company will contribute to fund its own liabilities.
This £3.3bn figure includes £0.9bn for the estimated value to BE of a tax disregard provided for in the Electricity (Miscellaneous Provisions) Act, the commitment to contribute significantly to the historic nuclear fuel liabilities, and an estimate of Government's contribution to decommissioning and uncontracted liabilities. The tax disregard will not result in any extra cost to the Government. It has been provided to avoid a 4WS large tax charge hitting BE as a result of the aid and thus the need for the aid to be correspondingly higher to achieve the same effect.
It is important to note that estimates of this kind are subject to a significant degree of uncertainty, particularly when different accounting treatments, assumptions, and discount rates are used in their calculation. The key points are that the Government's underlying commitment remains the same as it was last year and that our estimates of the cost to the Government (£150 million—£200 million a year on average for the next 10 years falling thereafter) is unchanged.
AMERGEN
British Energy has been taking steps to realise its 50 per cent. interest in Amergen, in accordance with the restructuring principles agreed with the Government on 28 November 2002.
The company had planned to be in a position to enter into a sale agreement by 30 June 2003. I understand from BE that although discussions with a number of interested parties are ongoing, this timetable will not now be achieved. British Energy, however, has reaffirmed its intention to dispose of its interest in Amergen as soon as practicable.
I have confirmed to British Energy that, in view of the progress made to date to sell British Energy's interest in Amergen, I can continue to support the restructuring. However, as I said in my statement to the House on 28 November, the Government remain prepared for administration in the event that, for whatever reason, the restructuring fails.