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
February 14, 2003
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: Restructuring Update
dated 14 February, 2003
Exhibit No. 1
14 February 2003
British Energy plc ("British Energy" or the "Company")
Restructuring update
Announcement of agreement on formal standstill and heads of terms with certain
creditors
The Board of British Energy (the "Board") announces that it has agreed with
certain of its creditors formal standstill agreements and that it has also
reached non-binding agreement in principle regarding the recognition, compromise
and allocation of certain claims under the terms of the restructuring proposals
announced on 28 November 2002.
Progress on restructuring:
- Formal standstill agreements reached, subject to various conditions,
with Significant Creditors and BNFL
- Significant Creditors have agreed in principle the amount of each of
their claims solely for the purpose of the restructuring. New bonds and new
equity will be allocated on the basis of these amounts
- Secured loan from HMG to be repaid from the proceeds of the disposal
of Bruce Power and stoodstill amounts. HMG likely to extend facility, subject
to certain conditions, after 9 March 2003 for limited working capital and
collateral purposes
- Eggborough Banks to enter into new Capacity and Tolling Agreement.
Payments will be made as if they had been issued with GBP150 million of new
bonds
- Issue of new bonds to be reduced from, previously announced GBP700
million, by GBP150 million to GBP550 million as a result of the CTA
- Proposals to issue warrants to existing shareholders are under
consideration. However, the return, if any, to existing shareholders will
represent a very significant dilution.
Adrian Montague, Chairman of British Energy, said:
"Today is a significant milestone in the restructuring of British Energy but is
just one step along a road which may take another eighteen months. The
Government, creditors and shareholders have shown a tremendous determination to
secure British Energy's future and long-term viability. For our part, we will
continue to focus on delivering a successful restructuring whilst re-building a
company which can compete in the UK energy market."
For further information: Andrew Dowler
Financial Dynamics
020 7831 3113
British Energy plc ("British Energy" or the "Company")
Restructuring update
Announcement of agreement on formal standstill and heads of terms with certain
creditors
Introduction
The Board of British Energy (the "Board") announces that it has agreed with
certain of its creditors formal standstill agreements and reached non-binding
agreement in principle regarding the recognition, compromise and allocation of
certain claims under the terms of the restructuring proposals announced on 28
November 2002 (the "Restructuring Proposals").
The creditors, with whom non-binding agreement in principle regarding the
recognition, compromise and allocation of certain claims has been reached, are
certain of the 2003, 2006 and 2016 sterling bondholders (collectively the
"Bondholders"), the steering committee for the Eggborough bank syndicate
("Eggborough Banks"), The Royal Bank of Scotland Plc ("RBS") as provider of a
letter of credit to the Eggborough Banks in respect of Eggborough Power Limited
("EPL"), Teesside Power Limited ("TPL"), TotalFinaElf Gas and Power Limited
("TFE") and Enron Capital & Trade Europe Finance LLC (an affiliate of Enron
Corp.) ("ECTEF") (collectively the "Significant Creditors").
The standstill agreements with Significant Creditors and British Nuclear Fuels
plc ("BNFL") and the heads of terms with Significant Creditors that have been
reached are subject to certain conditions (detailed below). In addition,
implementation of the proposed restructuring remains subject to material
conditions, including approval by the European Commission under State Aid rules
and the disposal of British Energy's North American operations Bruce Power and
AmerGen.
The Board continues to believe that the proposed restructuring is in the best
interests of the Company and is working closely in conjunction with its advisers
and creditors to implement a successful restructuring of British Energy in
accordance with the Restructuring Proposals accepted on 28 November 2002 by the
UK Government ("HMG"). However, if the requirements set out in the
Restructuring Proposals are not met and the restructuring is therefore not
implemented, the Company may have to seek insolvency proceedings, in which case
the distributions to unsecured creditors may represent only a small fraction of
their unsecured liabilities and it is highly unlikely that there would be any
return to shareholders.
Standstill agreements
The formal standstill agreements which British Energy has agreed with its
Significant Creditors and BNFL are subject to approval by the banking syndicates
of Eggborough and TPL, the credit committee of RBS and Enron board approvals and
court approvals. These approvals are required prior to 24 March 2003 (except
for Enron court approvals which are expected to follow in due course). The
definitive restructuring documentation itself is not expected to be formally
agreed by Significant Creditors until 30 September 2003. In addition, the
members of an ad hoc committee of Bondholders (the "Ad Hoc Committee") and
certain other Bondholders have also entered into a separate bondholder
standstill agreement which binds approximately 58% of the 2003 bondholders, 55%
of the 2006 bondholders and 75% of the 2016 bondholders. A notice has been
published today convening Extraordinary General Meetings on 10 March 2003 for
the holders of each series of bonds to formally approve the standstill
arrangements and a circular explaining these proposals will be issued to
Bondholders early next week. The Bondholders who have entered into the
bondholder standstill agreement have undertaken to vote in favour of the
proposed resolution and not to dispose of any interest in their bonds (otherwise
than among themselves or in connection with settlement of any credit derivative
transaction entered into before today) unless the transferee agrees to be bound
by the bondholder standstill agreement including the undertaking to vote in
favour of the proposed resolution.
During the period of the standstill, commencing on 14 February 2003 and ending
on the earliest of 30 September 2004 or a termination event or the completion of
the restructuring (the "Standstill Period"), Significant Creditors and BNFL have
agreed with British Energy that they will not take any steps to initiate
administration proceedings or demand or accelerate any amounts due and payable
by British Energy.
Under the standstill agreements, certain Significant Creditors will be paid
interest but not principal in respect of any claims against the British Energy
group. Interest will continue to be paid to Bondholders and the Eggborough
Banks in accordance with existing arrangements, except that following the
payment of the normal annual coupon to Bondholders on 25 March 2003, subsequent
interest payments will, subject to appropriate resolutions being passed by the
Bondholders, be made on a six-monthly rather than an annual basis. In respect
of TPL, TFE, ECTEF and RBS, interest will be paid first on 25 March 2003 and
then on the last business day of every six-month period thereafter based on the
agreed Claim Amounts (except in the case of RBS where interest payments will be
based on the present value of the Claim Amount).
As part of the standstill agreement British Energy will amend the existing power
purchase agreement with TPL so that during the Standstill Period, British Energy
will continue to purchase power from TPL at fixed prices set at levels based on
the current forward curve for electricity. On completion of the restructuring,
this power purchase arrangement with TPL will terminate.
The standstill agreements contain certain covenants for the benefit of the
Significant Creditors and BNFL (including the Bondholders who have signed the
bondholders standstill agreement). For example, during the Standstill Period,
British Energy has undertaken that it will not, without the unanimous consent of
the Significant Creditors and BNFL, inter alia, make any acquisition or disposal
greater than GBP5 million (except for the sale of Bruce Power and AmerGen) and
it will not issue equity or pay any dividends.
BNFL or any of the Significant Creditors may terminate the standstill agreement
following the occurrence of a termination event. The termination events include
certain insolvency events affecting the Company, British Energy Generation
Limited ("BEG"), British Energy Generation (UK) Limited ("BEGUK"), British
Energy Power & Energy Trading Limited ("BEPET") or EPL, acceleration of the
Facility, the required approvals under the standstill agreement not being
obtained within the timescales envisaged, any of the Company, BEGUK, BEG, BEPET
or EPL failing to discharge certain continuing obligations and definitive
documentation having not been executed by 30 September 2003.
Heads of Terms
The Significant Creditors have, subject to the approvals referred to in
connection with the standstill agreements, signed non-binding heads of terms in
respect of the recognition and settlement of their claims in the restructuring
of the British Energy group (the "Heads of Terms"). These Heads of Terms are in
accordance with the Restructuring Proposals.
Treatment of HMG Facility
The secured loan from HMG (the "Facility") provided in September 2002 to help
the Company through the restructuring period is expected to be repaid in full
from the proceeds of asset disposals and amounts stoodstill during the
Standstill Period. The Company believes that after 9 March 2003 it will
continue to require some limited ongoing working capital and collateral
facilities. HMG has indicated a willingness to extend the Facility at a reduced
level for a period after 9 March 2003.
Treatment of Eggborough Banks
The Eggborough Banks have security over the Eggborough generation plant and the
assets of EPL. Under the Heads of Terms the Company will enter into a revised
capacity and tolling agreement (the "CTA") with the Eggborough Banks lasting
until 2015 and the Eggborough Banks will receive GBP20 million of new bonds and
14.0% of the new equity to be issued to Significant Creditors. The Company will
make payments to EPL under the revised CTA equivalent to the payments which EPL
would have received if they had been issued with GBP150 million of new bonds. In
2015, economic ownership of the plant will revert to the Eggborough Banks. The
Eggborough Banks will have an option to break the CTA in March 2008 in return
for payment of a fee of GBP104 million. On exercise of the option, the Company
would cease to have any obligation to make further payments under the CTA
including payments in respect of the bond-equivalent amounts.
Treatment of other Significant Creditors
Each Significant Creditor, save for the Eggborough Banks, has agreed, subject to
successful completion of the Restructuring Proposals and receipt of any
requisite approvals, on the amount of their unsecured claim (the "Claim Amount")
in the restructuring, as follows:
Claim Amount
Bondholders GBP408 million
ECTEF GBP72 million
RBS GBP37.5 million
TFE GBP85 million
TPL GBP159 million
The amounts do not include accrued interest (if any) paid to each creditor
during the Standstill Period.
Allocation of new bonds and new equity
It was announced on 28 November 2002, that British Energy would issue GBP700
million of new bonds of which GBP275 million would be allocated to the newly
established nuclear liability fund and GBP425 million to the Significant
Creditors. However, as a result of the CTA proposal being offered to the
Eggborough Banks, the amount of new bonds being issued will be reduced by GBP150
million so that GBP275 million of new bonds will be issued to the Significant
Creditors. In addition, when the restructuring completes, the Company expects
to issue new ordinary shares to Significant Creditors.
The Heads of Terms set out how the new bonds and new equity will be allocated to
each of the Significant Creditors based on the agreed Claim Amounts. The table
below summarises the allocation of new bonds and new equity to the Significant
Creditors.
Proportion of the new
equity issued to
New bonds(1) Significant Creditors(2)
Bondholders GBP154.1 million 52.3%
Eggborough Banks GBP20.0 million 14.0%
ECTEF GBP20.0 million 6.8%
RBS GBP14.2 million 4.8%
TFE GBP23.3 million 7.7%
TPL GBP43.5 million 14.4%
Total GBP275 million 100%
(1) See attached appendix for summary of the terms of new bonds
(2) Excludes retained equity interest, if any, of existing shareholders
BNFL
Progress is being made with BNFL in agreeing contracts in relation to BNFL's
supply of fuel and related fuel services for future burn (front and back-end)
based on the non-binding heads of terms with BNFL announced on 28 November 2002.
HMG will meet the costs of British Energy's historic back-end fuel liabilities
with BNFL. The new contracts with BNFL will be conditional upon the
restructuring being implemented. In addition, the Company is discussing with
BNFL the sale of its enriched and natural uranium stocks and its ongoing supply
arrangements in connection with their procurement.
Existing shareholders
The Board is considering proposals under which holders of both the ordinary and
A shares would have both shares and warrants in the restructured group. Any
allocation of shares or warrants to existing shareholders in the restructured
group will need to be agreed with the Significant Creditors. If the
restructuring is implemented, the return, if any, to existing shareholders will
represent a very significant dilution of their existing interests.
Bruce
On 10 February 2003 British Energy announced that it had received shareholder
approval for the disposal of Bruce Power. In addition, certain important
conditions to the disposal have been satisfied (including receipt of certain of
the required favourable tax rulings), however the disposal remains subject to a
number of outstanding conditions.
Conditions for the restructuring
Entering into these agreements with Significant Creditors does not ensure the
success of the restructuring and the Restructuring Proposals remain conditional,
inter alia, on:
- Completion of a sale of British Energy's interest in Bruce Power
- A sale of British Energy's interest in AmerGen having been agreed by 30
June 2003 and completed by the completion of the restructuring
- Formal approvals by significant Creditors (as set out above) to the
standstill agreements and the non-binding Heads of Terms prior to 25 March
2003, and in the case of Enron court approval by a later date
- Formal agreement to the Restructuring Proposals having been entered into
by BNFL, the Eggborough Banks, RBS, TPL, TFE and ECTEF by no later than 30
September 2003
- The Restructuring Proposals having been approved by meetings of the
bondholders by 30 September 2003
- Receipt of State Aid approvals to the Restructuring Proposals by 30
September 2004 (or such later date as the Secretary of State or Significant
Creditors may agree)
- Admission of the new ordinary shares and new bonds to listing by the UKLA
- Shareholder approval, where required
- Receipt of all necessary regulatory approvals and tax clearances
Documentation to approve the restructuring is expected to be issued in the
summer of 2003. HMG expects to receive European Commission approval of the
State Aid application by mid-2004.
Other Considerations
The legal structure and the steps necessary to implement the proposed
restructuring, together with their accounting and tax consequences, have not
been finalised. Implementation of the proposed restructuring will require the
identification of a structure which permits the commercial and economic effects
outlined above to be achieved without material adverse taxation or accounting
consequences.
The detailed terms of the restructuring will also need to be discussed and
agreed with the Inland Revenue. No agreement has been reached in relation to
the price or terms of any sale of AmerGen. Furthermore, the European Commission
may not approve the restructuring or may impose conditions to such approval that
would affect the financial terms or even the viability of the restructuring.
In addition, the Secretary of State may not extend the Facility sufficiently and
in any event will be entitled to require immediate repayment of the Facility if
in the opinion of the Secretary of State the restructuring cannot be implemented
in the manner or timescale envisaged.
If such agreements cannot be reached or the required approvals are not
forthcoming or the assumptions underlying the proposal are not fulfilled or the
conditions to the Restructuring Proposal are not satisfied or waived within the
timescales envisaged or the standstill agreements terminate, then the Company
may be unable to meet its financial obligations as they fall due and therefore
the Company may have to take appropriate insolvency proceedings. The Board
considers that, in the event of insolvency, distributions, if any, to unsecured
creditors may represent only a small fraction of their unsecured liabilities and
it is highly unlikely that there would be any return to shareholders.
The Heads of Terms are not legally binding and do not create any legal
obligation on any person. Any reference to the amount due to any person or a
method of calculating such an amount does not preclude the Company or any
Significant Creditor subsequently taking the position, in circumstances where
the proposals set out in the Heads of Terms are not implemented, that a
different amount or that no amount is due or a different method of calculation
should be used.
Bondholder conference call
Close Brothers Corporate Finance Limited and Cadwalader, Wickersham & Taft who
have given financial and legal advice respectively to the Ad Hoc Committee in
connection with the proposed restructuring have arranged an unrestricted
conference call for Bondholders to be held at 2 p.m. on Tuesday 18 February
2003. Dial in details will be circulated to Bondholders who have identified
themselves to Close Brothers or Cadwalader. Other Bondholders who would like to
participate in this call should contact either Martin Gudgeon at Close Brothers
on +44 (0)20 7655 3100 or Andrew Wilkinson at Cadwalader on +44 (0)20 7170
8700.
APPENDIX
Summary Terms of the New Bonds
Issuer: British Energy plc or other Group company.
Guarantors: Expected to include British Energy
Generation (UK) Limited, British Energy
Generation Limited and British Energy Power &
Energy Trading Limited.
Principal Amount: GBP550 million.
Interest and Redemption: The New Bonds may be issued in several tranches,
carry a coupon of 7% per annum and amortise on an
annuity basis, until the final maturity dates
(not beyond 2023) of each respective tranche.
However, the New Bonds may, alternatively, take
the form of vanilla eurobonds with bullet
maturities.
Optional Redemption: The Issuer may elect to redeem some or all of the
New Bonds ahead of their scheduled redemption
date(s) at a price calculated according to a
Spens formula.
Redemption for Tax Reasons: If a withholding tax is imposed, the Issuer may
redeem the New Bonds at par (plus accrued
interest).
Put Option: Investors may put the New Bonds to the Issuer at
101 per cent. of their principal amount
outstanding plus accrued interest if the Group's
nuclear or generation licences are revoked and
this leads to a rating trigger or upon a change
of control.
Listing: London or another recognised stock exchange.
Ratings: Ratings will be sought from credit agencies in
due course. The Issuer will seek to obtain an
investment grade rating for the New Bonds.
The Issuer will investigate the availability of
security and credit insurance for some or all of
the New Bonds.
Covenants: The New Bonds will benefit from covenants on the
part of the Issuer and each of the Guarantors,
including, but not limited to:
- Limitations on additional indebtedness;
- Negative pledge.
Taxation: Customary gross-up, subject to Issuer's option to
redeem.
Events of Default: Customary.
Governing Law: English.
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: 14 February, 2003 BRITISH ENERGY PLC
By:____Paul Heward____
Name: Paul Heward
Title: Director - Investor Relations