British Energy gets $639m bailout

LONDON, England -- British Energy, the country's biggest electricity generator and provider of nuclear power, received emergency government funding on Monday, allowing the group to stay afloat while it seeks new financing.

The government will provide British Energy with £410 million ($639 million) of working capital for the next three weeks.

The group, which has been struggling after the energy sector was opened up to competition, said it could file for bankruptcy if new funding is not found by September 27.

"It is expected that discussions regarding longer term restructuring will commence shortly. The board has reasonable grounds for believing that these discussion will be successful, but there can be no certainty that this well preserve value for investors," British Energy said in a statement.

Sellafield is one of eight UK nuclear plants operated by British Energy

"If these discussions are not successful, 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."

British Energy (BGY) shares plunged 78 percent to 17.66 pence in midday London trading on Monday.

The group, which was privatised in 1996, has been losing money due to a drop in power prices caused by increased competition for customers. It has an estimated debt of £600 million.

British Energy has about 8,500 employees and operates eight nuclear plants in the UK. It also has a joint venture with energy group Exelon, which operates nuclear plants in the U.S.

The UK government's decision to provide emergency funding for British Energy is sure to raise questions about whether privatisation is a suitable vehicle for major infrastructure companies. It has already had to bail out two other companies -- the National Air Traffic Services and Railtrack.

The proposed privatisation of the London Underground is also a controversial issue.

But the UK is not alone. In France, there is speculation the government may consider re-nationalising the beleaguered France Telecom.

France Telecom, Europe's second-largest phone operator, has amassed debts of about 70 billion euros as it expanded during the telecom boom of the late 1990s.

Now there are calls for Chief Executive Michel Bon to be replaced and rumours the government could increase its 55 percent stake in the company to provide much need capital.