Buy British Energy
argues Evil Knievil of www.t1ps.com

British Energy has paid for many a lunch over the past couple of years. I have been shorting it aggressively Convinced that it was going bust I regarded it as the quickest way of making money since Cherie Blair and her ghastly husband turned freeloading into an art form. But, while the liar-in-chief and the wicked witch continue will continue to carry on sponging forever, other things have changed and I am now aggressively long of British Energy to the tune of five million shares. I admit my timing was not perfect - I am only running at break-even at this stage but I am expecting to trouser it in a big way over the next six months. In putting together this bull case I am most indebted to the publication Utilities Week - a must read in every household and whose words I have cribbed liberally.

The Bail Out

British Energy runs nuclear power stations. As such it has high fixed costs and always has a potential liability for decommissioning its plants when they come to the end of their useful lives. Its problems started when a slump in electricity prices meant that it was not covering those fixed costs which exposed the fact that its borrowings were unsupportable. It was this that allowed me to profit so greatly on the short tack.

Then the Government stepped in with a "rescue" plan. Surprisingly for a body which shows an ability to waste taxpayers' cash of unmatched proportions this did not involve a huge bail out. Instead it involves the Government, bond-holders, BNFL, other creditors and an array of vastly overpaid parasites (i.e. advisors on a success only fee) reconstructing the business such that equity holders will be diluted to obliteration. This motley crew are determined that their proposed reconstruction goes ahead and the board seems happy to play ball but any such proposal must be agreed by shareholders and I think that the times they are a changin'.

If the reconstruction proceeds, existing shareholders will be diluted to 2.5% of the equity plus warrants to buy a further 5%. Since 65% of free cash flow will be diverted to the Nuclear Liabilities Fund (i.e. decommissioning), this 7.5% becomes an economic interest of just 2.6%. This is clearly not an attractive proposition and if it goes through the shares, at 7.65p may be overvalued. However, I think that even on the current reconstruction terms, 15p-25p will prove to be the eventual outturn.

In the interim results, announced in December, and again with the latest quarterlies British Energy warned shareholders that if they did not support the proposed reconstruction by approving either a scheme of arrangement or the disposal of the company, the shares would be de-listed and the reconstruction completed anyway. But if it can be shown that the company is a going concern without the reconstruction, Turkey's won't vote for Christmas and shareholders (who have to approve any deal) will block it.

The Upside from a No Vote

The disposal of British Energy's 50% interest in Amergen, netted 160 million pounds. This repaid the 94 million owed to the Government so removing its ability to force insolvency by calling in its loan. It leaves three groups of creditors to be satisfied from the remaining 66 million pounds, the 20 million pounds of other cash, any cash flow from trading since 12th December and any cash that can be released from the 359 million pounds tied up in trading collateral.

Group one are the bondholders, owed 408 million. The 2003 bonds have matured, but British Energy can probably pay the 110 million pounds owed to the holders from its cash. The 2006 and 2016 bonds may be in default even though their interest continues to be paid. They are very generously treated in the proposed reconstruction, as a result of which the bonds are trading well above par. They may have the right to put British Energy into receivership if the reconstruction is voted down, but it would not be in their interest to do so. In a liquidation, they would receive very little, whereas, if British Energy continues to trade, they will continue to receive interest and can be repaid in full on redemption.

The second group of creditors are the Banks who lent 475 million pounds to finance the purchase of the 2000 MW coal-fired Eggborough power station. They are being offered 150 million pounds in new bonds and 14% of the new shares being issued, worth some 150 million pounds at 5p each. The value of Eggborough has risen significantly in the last year. It is half the size of the Drax power station, and, like Drax, is being fitted with a Flue Gas Desulphurisation plant, due for completion this year. In December, Drax's creditors rejected an offer by International Power to buy up to 36% of its equity and 15% of its debt. Since then, the value of Drax's debt in the secondary market has continued to rise, and Drax is now valued in the market at about 1.25 billion pounds . This suggests that Eggborough is worth closer to 600 million pounds than the 300 million pounds it is valued at in the secondary debt market. If the reconstruction fails, the Eggborough banks will be significantly better off whether or not the power station is sold.

The third group of creditors are the three parties claiming 316 million pounds in relation to onerous trading contracts. Two of the contracts, accounting for half the total, were terminated in 2003, making their claims payable. The third contract, with Teeside Power, may be renegotiable. The sharp rise in electricity prices makes this contract to buy high-priced electricity no longer a financial liability, but 158 million pounds must still be found to satisfy the other two.



In the short term, British Energy would struggle to satisfy these creditors, but given time, the prospects look better. 75 million pounds was absorbed into working capital in the first half of 2003/4, which may be reversible. The Board is "exploring initiatives to reduce the demand for trading collateral," which should diminish as the forward sales run out. Halving the collateral would release 180 million pounds.

And Critically...

The strength of electricity prices means that British Energy will be highly cash-generative when it can take advantage of current prices, and only half of output for the year to 31st March 2005 has been sold forward at low prices. Implementation of the Emission Trading Scheme, due to start on January 1st, 2005, could add a further 10% to electricity prices, increasing profits and cash flow by 160 million pounds per annum. What British Energy's shareholders need is time.

Fortunately, the bureaucracy and delays of the European Union are working in our favour. The EU is not expected to reach a decision on the restructuring until the middle of 2004, delaying a shareholder vote until the Autumn. With luck, if it runs true to form the EU will take longer, postponing the vote until 2005. This gives more time for cash flow to build up and for the prospects to look more secure. It also gives larger shareholders time to prepare an alternative plan. This is necessary because British Energy is firmly committed to the restructuring. Shareholders cannot look to their Board to safeguard their interests and indeed should think about handing out P45s liberally to the top table.

While negotiating with the creditors is the short-term priority of such a plan, there are other considerations. If the reconstruction is voted down, it is quite possible that the government will force the reconstruction through by Act of Parliament, leaving shareholders with nothing. But does this sordid little Government really want to repeat its Railtrack fiasco with an election looming?

The key to this gamble - and I admit it is such - is that electricity prices are increasing which makes a big difference to cashflow. If shareholders are given time to work out an alternative plan, British Energy will still need to raise cash via a rights issue but it is not ludicrous to suggest that current investors will be left owning 65% of the company rather than 2.5%. In other words the shares would be worth 150p each and possibly rather more.

There are obvious risks. The board might steamroller shareholders into accepting a deal that is patently not in the interests of shareholders. Electricity prices might fall. Big shareholders might cave in cravenly. The EU might whizz through approval giving shareholders no time to organise. Okay, there is no risk of the EU being efficient that was my little joke. But there are risks. If I am wrong these shares could conceivably be overvalued but could even in this scenario head up towards 20p. But if I am right 150p here we come. On a risk reward basis that looks good to me.

Key Data

EPIC: BGY
NMS: 150,000
Market Cap: 47 million pounds
Market: Full
Spread: 7.6-7.7p

RNS Number:8698V
British Energy PLC
26 February 2004

British Energy

26 February 2004

RESULTS FOR THE QUARTER

ended 31 December 2003



Key Points



O Good progress on restructuring continued, with sale of AmerGen interest
(US$277m). Provisional gain on sale of #35m. The restructuring remains subject
to significant uncertainties

O Group operating profit, after exceptional items, of #12m in the quarter,
compared with loss of #21m in the nine month period

O Total UK output of 17.3 TWh in the quarter (down 4% year on year); 52.7
TWh for the nine month period (up 6% year on year)

O Operating cash inflow, after capex, was #1m in the nine month period

O Net debt was reduced by #167m to #454m in the quarter, primarily as a
result of the AmerGen net proceeds. The HMG Credit Facility has reverted to
#200m



Update since 31 December 2003



O Total UK output of 59.5 TWh up to 31 January 2004 (up 5% year on year)

O Revised UK nuclear output forecast for the year of around 65.5 TWh
confirmed (up 3% year on year), compared with 63.8 TWh in 2002/03

O Dispute with Siemens settled. Siemens to pay #18.3m to British Energy



O Nil drawings under HMG Credit Facility as at 24 February 2004



Key financials are shown below:
3 Months Ended 9 Months Ended

31 Dec 2003 31 Dec 2003

#m #m
Group turnover 369 1,046
Group operating profit/ (loss) 12 (21)
Loss before tax (10) (81)
Achieved price (excluding misc. income) #17.6/MWh #16.4/MWh
Total operating costs (excluding revalorisation) #17.2/MWh #16.7/MWh



Adrian Montague, Chairman, said:



"We continue to make good progress with the Company's restructuring, with the
sale of our interest in AmerGen for US$277m being the highlight of the period.
Whilst a decision by the European Commission on restructuring is pending, we are
focussing on improving British Energy's operational reliability and financial
capability."



Management will host a conference call for analysts and investors today - 26
February2004 - at 1600 UK time (1100 - Eastern Standard time).



The conference call can be accessed by dialling, UK dial in: 0845 113 0049,
International dial in: + 44 (0) 1452 542 303, US dial in: 1 866 389 9778. There
will be a replay facility for 14days, UK Dial in: 0845 245 5205, International
dial in: + 44 (0) 1452 55 00 00, Pin: 1032694#





For further information please contact:


Paul Heward British Energy 01355 262201
Andrew Dowler Financial Dynamics 020 7831 3113



Notes for editors



The information in this presentation is drawn from the unaudited third quarter
results of British Energy for the 3 months ended 31 December 2003. This press
release is a summary and reading it is not a substitute for reading the third
quarter results in their entirety.







ITEM 1 : MANAGEMENT'S DISCUSSION AND ANALYSIS - FINANCIAL CONDITION AND RESULTS
OF OPERATIONS



OVERVIEW



This report contains British Energy's first publication of quarterly results.



In the following discussion the 'three-month period' or the 'quarter' refer to
the three months ended 31 December 2003 and the 'nine-month period' or the '
period' refer to the nine months ended 31 December 2003 unless otherwise stated.
In this discussion reference to 'British Energy' or the 'Company' are to
British Energy plc. References to the 'Group' are to the Company and its
subsidiaries.



British Energy continues to make good progress with its proposed restructuring,
the terms of which were announced on 1 October 2003 (the 'Proposed
Restructuring'). The sale of the Company's 50% interest in AmerGen to Exelon,
the Group's joint venture partner, for consideration of US$277m, pending
finalisation of working capital and certain other closing adjustments, was
successfully completed on 22 December 2003. The sale was an important milestone
and approximately #94m of the proceeds were used to repay fully the amounts
outstanding under the revolving credit facility from the UK Government (the '
Credit Facility'). A provisional profit of #35m on the sale has been recognised
in these accounts. As at 31 December 2003 and 24 February 2004 there were no
drawings under the Credit Facility. Following its sale of AmerGen, British
Energy has interests in eight nuclear power stations and one coal-fired plant in
the United Kingdom.



As announced during the quarter, the Company's operating performance was
adversely affected by the unplanned outages of both reactors at Heysham 1 and an
extension to the statutory outage at Sizewell B. The resultant loss of output
in the full year is anticipated to amount to some 3.4 TWh, equivalent to some
#83m of lost profit contribution inclusive of imbalance costs (previously
estimated at a gross cost of #95m, before associated fuel savings). The output
lost in the three-month period was some 2.1 TWh which was equivalent to some
#50m of lost profit contribution inclusive of imbalance costs. Sizewell B
returned to service on 15 November 2003, and both units at Heysham 1 commenced
their return to service on 14 February. In December 2003 the Company announced
the reductionin its full year nuclear output forecast to around 65.5 TWh from
the previously forecast level of 67.0 TWh, taking account of the impact of these
outages, other unplanned outages in the year to date and existing allowances for
unplanned outages. The Company continues to expect that total UK nuclear output
will remain around 65.5 TWh for the year ended 31 March 2004. This compares
with 63.8 TWh achieved in the prior year.



On 17 December 2003, the Company announced that it was taking forward plans to
improve the operational performance and reliability of its nuclear plants. The
first implementation stage has now commenced, with the emphasis on leadership
and organisational effectiveness, and the Company will give a further update on
progress at the time of its next preliminary results.



By December 2003, the market price for annual forward baseload contracts had
increased by some 25% over those prevailing in March 2003. The Company did not
benefit to any great extent from these increases because of the high proportion
of fixed price contracts in place, which provide protection against falls in
market price and were executed to meet the objectives of the Proposed
Restructuring. However, the price increase has put pressure on liquidity as the
Company has been required to commit cash to fund collateral for trading
counterparties. Fixed price sales contracts are currently in place covering
over half of planned output in 2004/05 at an average price of #18.7/MWh.



As at 31 December 2003 and 24 February 2004 the Company had cash, including
amounts posted as collateral, amounting to #429m and #496m respectively, of
which #338m and #315m were deposited as collateral in support of trading
activities.



On 4 February 2004 the Company announced the settlement of a long-standing
dispute with Siemens Power Generation Limited ('Siemens') whereby Siemens agreed
to pay the Company #18.3m.



On 12 February 2004 British Energy received a notice of warranty claims from the
consortium which purchased the Group's 82.4% interest in Bruce Power alleging
breach of certain warranties and representations relating to tax and to the
condition of certain plant at the Bruce power station. Further details are
provided in the 'Contingent Liabilities' section below.



In accordance with the policy outlined and re-stated below no dividend has been
declared for the period.



The Proposed Restructuring remains subject to a large number of significant
uncertainties and important conditions, including receipt by the Secretary of
State for Trade and Industry (the 'Secretary of State') of a satisfactory
notification from the European Commission (the 'Commission') that in so far as
the proposals involve the grant of State Aid by the UK Government, such aid is
compatible with the common market. The Secretary of State expects to receive
this notification by mid 2004. Furthermore, the Secretary of State is entitled
not to proceed with the Proposed Restructuring if, in her opinion, the Group
will not be viable in all reasonably foreseeable conditions without access to
additional financing beyond that which is committed and will continue to be
available when required.



If for any reason British Energy is unable to implement the Proposed
Restructuring it may be unable to meet its financial obligations as they fall
due in which case it may have to take appropriate insolvency proceedings. If
British Energy were to commence insolvency proceedings, 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. Even if the Proposed Restructuring is completed, the return, if
any, for shareholders will represent a very significant dilution of their
existing interests.



Key Points on Results



* The Company generated an operating profit, after exceptional
operating items, of #12m in the three-month period and an operating loss, after
exceptional operating items, of #21m in the nine-month period. Included in the
operating results were exceptional operating items producing net charges of #3m
and #27m in the three-month period and the nine-month period respectively
(further detail is provided in Note 3 of the financial statements).



* Losses before tax of #10m and #81m were reported in the
three-month period and nine-month period respectively.



* Nuclear output was up by 5% to 48.0 TWh in the nine-month
period, compared with 45.9 TWh in the equivalent period last year. Nuclear
output performance in the three-month period was down by 6% to 14.7 TWh,
compared with 15.6 TWh in the equivalent period last year. The decline in the
quarter was primarily attributable to unplanned outages at Heysham 1 and
Sizewell B as discussed above.



* Achieved prices, excluding miscellaneous income, were #17.6/
MWh and #16.4/MWh for the three-month period and the nine-month period
respectively. The higher prices achieved in the quarter primarily reflect
market price seasonality.



* Total operating unit costs, excluding revalorisation (which
is calculated by dividing the total UK operating costs, net of exceptional items
and energy supply costs, by total output), were #17.2/MWh and #16.7/MWh for the
three-month period and nine-month period respectively. The higher unit costs in
the quarter were due to a high proportion of the costs being fixed in nature and
incurred during a period of unplanned outages.



* Operating cash inflow, after capital expenditure, was #1m for
the nine-month period. Net debt was reduced in the quarter by #167m to #454m,
primarily as a result of the net proceeds from the sale of AmerGen.



* A contingent asset of #259m has been accumulated but not
recognised in the financial statements for the period arising from the revised
BNFL contracts, inclusive of #137m of benefit for fuel consumed in the
nine-month period (of which #39m arose in the quarter).



EXPLANATORY NOTES



Certain statements in this document are 'forward-looking' statements (as defined
in Section 21E of the US Securities Exchange Act of 1934).



Such forward-looking statements include, amongst others:



* Statements concerning the Proposed Restructuring and its
effect on the Group's business and financial condition or results of operations.



* Other matters that are not historical facts concerning the
Group's business operations, financial condition and results of operations.



These forward-looking statements involveknown and unknown risks, uncertainties
and other factors which are, in some cases, beyond the Group's control and may
cause its actual results or performance to differ materially from those
expressed or implied by such forward-looking statements. Due to the
uncertainties and risks associated with these forward-looking statements, which
speak only as at the date hereof, the Company is claiming the benefit of the '
safe harbour' provision contained in Section 21E of the US Securities Exchange
Act of 1934.



This is the first set of quarterly results to be published by British Energy and
therefore no comparative quarterly information is provided for the equivalent
periods in the previous year.



The following discussion and analysis should be read in conjunction with the
Financial Statements for the three and nine months ended 31 December 2003 and
the Notes thereto which are included in this report. The full Financial
Statements for the year ended 31 March 2003 and the Notes thereto are not
included in this report but are available on the British Energy website
(www.british-energy.com).



British Energy's Financial Statements have been prepared in accordance with UK
GAAP. A detailed description of the differences between UK GAAP and US GAAP as
they relate to the Group are set out in Note 37 of the Form 20-F for the year
ended 31 March 2003 which is also available on the British Energy website.



KEY EVENTS IN THE PERIOD



Restructuring Developments



Sale of AmerGen



On 22 December 2003, British Energy completed the disposal to Exelon of its
entire 50% interest in AmerGen. At closing, British Energy received
consideration of US$277m subject to adjustments relating to working capital
levels, stocks of unspent nuclear fuel, capital expenditures and low-level waste
disposal costs. A provisional profit on the sale of #35m has been recognised in
these accounts pending finalisation of these amounts.



Approximately #94m of the AmerGen disposal proceeds were used to repay in full
the amounts outstanding under the Credit Facility. The remaining proceeds are
being used for general working capital purposes and to fund collateral.



Following the AmerGen sale, the temporary increase in the amount of the Credit
Facility to #275m, agreed with the Secretary of State on 27 November 2003, was
reduced back to the original amount of #200m. The temporary increase in the
amount of the Credit Facility was not utilised at any point during its period of
availability.



Agreement on Terms of Proposed Restructuring



On 1 October 2003 the Company announced that it had agreed the terms of the
Proposed Restructuring of the Group with certain of the Group's creditors and
the Secretary of State, subject to certain initial requirements for creditor
approvals and sign ups being obtained by 31 October 2003. On 31 October 2003,
the Company confirmed that these requirements had been satisfied.



Amendments to the Terms of the Company's Bonds and New Standstill Arrangements



On 19 December 2003 holders of each series of the Company's bonds approved
amendments to the trust deed constituting the bonds to facilitate the
implementation of the Proposed Restructuring and to amend the standstill
arrangements under the trust deed on terms consistent with the agreement reached
with other creditors on 1 October 2003 (the 'Creditors Restructuring
Agreement'). Following formal amendment of the trust deed, a new standstill
agreement has been entered into with creditors in accordance with the Creditor
Restructuring Agreement.



Business Developments



Major Outages



There have been unplanned outages at Heysham 1 when both reactors were shut down
on 28 October 2003. Both units commenced their return to service on 14
February. These outages were due to a cast iron pipework failure in the
seawater cooling system within the turbine hall. The Company carried out
inspections and decided it was necessary to replace a significant amount of cast
iron pipework at Heysham 1. Where similar deficiencies exist at other stations,
plans are being formulated for further cast iron pipework replacement. The
consequential remedial action is expectedto be undertaken in a planned manner
and the details will be reported at the time of the Company's preliminary
results.



The statutory outage at Sizewell B was extended by approximately twelve days due
to further inspections following the discovery of an unusual indication from
ultrasonic inspection of two welds in the turbine steam system. This issue was
resolved and the plant returned to service on 15 November 2003.



In aggregate, these recent outages resulted in lost generation of around 2.1 TWh
in the period which was equivalent to some #50m of lost profit contribution
inclusive of imbalance costs. Having taken account of these outages, other
unplanned outages in the year to date and remaining allowances for unplanned
outages, in December 2003 the Company announced the reduction in its full year
output forecast to around 65.5 TWh, from the previously forecast level of around
67.0 TWh.



Bruce Power Disposal



Under the terms of a trust agreement (the 'Trust Agreement') entered into on 14
February 2004 in connection with the disposal of the Company's 82.4% interest in
Bruce Power, additional consideration is payable to British Energy contingent
upon the restart of two of the four Bruce A units.



British Energy is seeking the payment of additional consideration under the
Trust Agreement on the basis that Bruce A Unit 4 was restarted in October 2003
and Unit 3 was restarted in January 2004. The Company is in discussion with the
Ontario Provincial Government which has indicated that it considers that the
units may have restarted, for the purposes of the Trust Agreement, at later
dates. None of the potential additional consideration has been recognised in
the financial statements of the quarter because there are remaining
uncertainties regarding its realisation and the amounts recoverable will be
significantly lower than the maximum C$100m. Note 12 to the Financial
Statements provides a fuller discussion.



On 12 February 2004 British Energy received a notice of warranty claims from the
consortium which purchased the Group's 82.4% interest in Bruce Power alleging
breach of certain warranties and representations relating to tax and to the
condition of certain plant at the Bruce power station. Further details are
provided in the 'Contingent Liabilities' section below.



Board Affairs



On 8 December 2003, the Company appointed Martin Gatto to the Board as Interim
Finance Director, as a temporary replacement for Keith Lough who resigned his
directorship on that date.



On 9 February 2004, the Company announced that John Delucca had been appointed
as an Independent Non-Executive Director of the Company with immediate effect.



The Board has undertaken an evaluation of its performance as recommended in the
Higgs Report and is working to be compliant with the revised Combined Code as
issued by the Financial Reporting Council.



Performance Improvements



On 22 August 2003 the Company announced that it had appointed a consortium of
partners led by Ove Arup and Partners International Limited. The role of the
consortium is to develop and assist with the rapid deployment of a number of
programmes to improve the operational reliability of the Group's nuclear plants.
Having considered the consortium's initial recommendations, the Company is now
focusing on finalising the scope of work and developing a detailed
implementation plan. The Company will give a further update on the progress of
these programmes at the time of our next Preliminary Results.



OTHER FACTORS AFFECTING RESULTS OF OPERATIONS



The results of operations are principally affected by changes in plant output,
electricity prices and operating costs. Each of these factors is discussed
below.



Plant Output



Nuclear output was 14.7 TWh (a 70% load factor) for the three-month period and
48.0 TWh (a 76% load factor) for the nine-month period. The nuclear output for
the equivalent periods in 2002 was 15.6 TWh (a 74% load factor) and 45.9 TWh (a
73% load factor) respectively.



Nuclear output for the three-month period and nine-month period was lower than
expected primarily due to the unplanned outages at Sizewell B and Heysham 1
which accounted for 2.1 TWh of lost output.



Output from the coal-fired power station at Eggborough was 2.6 TWh during the
three-month period and 4.7 TWh for the nine-month period. For the equivalent
periods in the previous year, the output was 2.4 TWh and 3.8 TWh respectively.
As Eggborough is operated primarily as a flexible mid-merit plant, its output
level is influenced by market prices, the Company's contracted trading position
and the extent to which it is operated as cover for unplanned outages.



Electricity Prices



By December 2003, the market price for annual forward baseload contracts had
increased by some 25% over those prevailing in March 2003, such that power for
delivery from April 2004 was trading at between #21/MWh and #22/MWh in December
2003. In the Company's view, the rise in price reflects, among other matters,
underlying increases in fossil fuel prices, a reduction in available plant
capacity in the UK market and the market's view of the likely impact of the
European Union's emission trading scheme which is due to commence on 1 January
2005. The increase in forward market prices referred to above has only been of
limited benefit to the Company because of its largely hedged contract portfolio.



British Energy's achieved selling price (which is calculated by dividing UK
turnover, net of energy supply costs and miscellaneous income, by total output
during the period) was #17.6/MWh for the three-month period and #16.4/MWh for
the nine-month period. The higher prices achieved in this quarter reflect
market price seasonality, as lower prices generally prevail in the Summer (April
- September) when demand is lower than in the Winter (October - March).



Operating Costs



Operating costs after exceptional items were #357m for the three-month period
and #1,067m for the nine-month period. These are discussed more fully later in
this report in the 'Results of Operations' section.



Exceptional Operating and Financing Items



The financial results of both the three-month period and the nine-month period
were affected by a number of exceptional operating and financing items. The
table below summarises the impact of exceptional operating and financing items
(before tax).


Three months Nine
ended 31
December 2003 months ended
31 December
2003
#m #m
Restructuring costs 3 40
UK decommissioning fund credit - (13)
Exceptional items included within operating costs 3 27

UK decommissioning fund credit (21) (47)
US decommissioning fund credit (8) (22)
Interest rate swaps provision credit (2) (5)
Exceptional items included within financing costs (31) (74)

Total net exceptional credits (28) (47)



Exceptional operating and financing items are discussed more fully in Notes 3
and 4 to the Financial Statements.



RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED 31 DECEMBER 2003 AND FOR THE
NINE MONTHS ENDED 31 DECEMBER 2003.



Group Performance



The operating results after exceptional operating items were an operating profit
of #12m for the three-month period and a loss of #21m for the nine-month period.



The loss on ordinary activities before taxation was #10m for the three-month
period and #81m for the nine-month period.



The discussion below will focus on the results of continuing activities for the
three-month period and the nine-month period. Certain comparative figures
extracted from the results of the six-month period ended 30 September 2003 (the
'six-month period') are also set out below to assist with discussion of
operating trends.



Turnover



Turnover was #369m in the three-month period and #1,046m in thenine-month
period, and is analysed as follows


Three months Six Nine
ended 31
December months months ended
2003 ended 30 31 December
September 2003
2003
#m #m #m
Direct supply sales 209 340 549
Wholesale generation sales 152 323 475
Miscellaneous income 8 14 22
369 677 1,046



The Direct supply sales includes energy supply costs recovered from customers.



Direct Supply Sales



At 31 December 2003, the Direct Supply Business had sales contracts in place,
which taken together with offtake volume achieved in the nine-month period were
expected to achieve an offtake volume of 29.3 TWh for the twelve-month period to
31 March 2004. Over the nine-month period the Company has increased the Direct
Supply Business sales, a consequence of which is to moderate the requirement for
collateral required to support wholesale generation sales. The business had
over 1,300 customers and served over 6,000 business sites. The 2003/04
contracted position at 31 December 2003 prospectively represents increases of
31% in volume over that achieved in the previous financial year. The Direct
Supply Business continues to be highly rated for its customer service, having
been ranked first for the eighteenth consecutive time in the quarterly survey of
industrial customers carried out by the Energy Information Centre.



Wholesale Generation Sales



The level of wholesale generation sales for the quarter reflects the changing
mix of sales being contracted by the Company. The #152m of wholesale generation
sales in the quarter represented 42% of turnover excluding miscellaneous income
compared to 49% in the six-month period.



Operating Costs



Total operating costs after exceptional items were #357m in the three-month
period and #1,067m in the nine-month period, and are further analysed as
follows:


Three months Six Nine
ended 31
December months ended months ended
2003 30 September 31 December
2003 2003
#m #m #m
Continuing activities excluding exceptional items:
Fuel 109 184 293
Material and services 118 262 380
Staff costs 59 112 171
Depreciation 11 25 36
Energy supply costs 57 103 160
354 686 1,040
Continuing activities - exceptional items:
Materials and services 3 37 40
Amounts credited to non-operational assets - (13) (13)
3 24 27
Continuing activities - total costs:
Fuel 109 184 293
Materials and services 121 299 420
Staff costs 59 112 171
Depreciation 11 25 36
Energy supply costs 57 103 160
Amounts credited to non-operational assets - (13) (13)
Total operating costs 357 710 1,067



Fuel



Total fuel costs amounted to #109m in the three-month period and #293m for the
nine-month period. Nuclear fuel costs were #78m for the three-month period and
#233m for the nine-month period. The costs of coal consumed were #31m and #60m
in the respective periods.



The costs of nuclear fuel in the quarter were proportionally higher when
compared to the six-month period, principally reflecting the impact of station
output mix and the effects of higher electricity prices on the BNFL front-end
fuel contracts.



On 16 May 2003, the Company announced that it had exchanged the last of the
suite of contracts covering front-end and back-end fuel services required to
give effect to the non-binding heads of terms entered into with BNFL. The
front-end contracts became effective on 1 April 2003 but may be terminated if
the Proposed Restructuring is not completed. The revised back-end contracts are
conditional on completion of the Proposed Restructuring but payments are being
made as if the revised back-end contracts had become effective on 1 April 2003.



The financial statements for the reporting period have been drawn up on the
basis of the historic BNFL contracts in respect of back-end fuel costs, pending
satisfaction of the restructuring conditions set out in the revised contracts.
Consequently, a contingent asset of #259m has been accumulated, but not
recognised, in the accounts for the period ended 31 December 2003 in respect of
the difference in amountspayable between the revised contracts and the historic
contracts. The components of the contingent asset are analysed below.


#m #m

Analysis of Contingent Asset:

Principal amounts due to BNFL at 31 March 2003 under the historic contracts 113
Amounts accrued for 9 months to 31 December 2003 under the historic contracts 185
Less: Amounts payable for 9 months to 31 December 2003 under the revised contracts
- Amounts paid in period (32)
- Amounts accrued at period end (16)
Benefit of the revised back-end contracts within the nine-month period which will be
recognised upon the Proposed Restructuring
137
Finance charges accrued on principal amounts stoodstill 9
Contingent asset recorded at 31 December 2003 (see Note 12 to the Financial Statements) 259



The contingent asset will be recognised upon the Proposed Restructuring together
with other restructuring related adjustments.



Materials and Services



Materials and services costs comprise the operating expenses of our power
stations and support functions excluding fuel costs, staff costs and
depreciation. The costs during the three-month period were #118m and in the
nine-month period were #380m excluding exceptional restructuring costs.



Included in materials and services is capital investment expenditure of #13m in
the three-month period and #60m in the nine-month period that would previously
have been capitalised as fixed assets but were expensed as operating costs
following the fixed asset impairment review carried out in the year ended 31
March 2003.



The rate of costs incurred in the three-month period reduced in comparison with
the six-month period. This reduction was due mainly to the phasing of
Eggborough outage and capital expenditure which was incurred primarily during
the six-month period.



Exceptional charges amounting to #3m and #40m were incurred in the quarter and
period respectively in relation to advisory and other costs associated with the
Company's Proposed Restructuring.



Staff Costs



Staff costs were #59m in the three-month period and #171m during the nine-month
period.



Depreciation



Depreciation charges were #11m in the three-month period and #36m during the
nine-month period. The charges for depreciation were significantly affected by
the #3,738m write down of fixed assets at 31 March 2003 (see Note 7(ii) of the
Financial Statements for the three and nine months ended 31 December 2003).



Energy Supply Costs



Energy supply costs, which mainly comprisethe costs incurred for the use of the
distribution and transmission systems, recovered through turnover, were #57m in
the three-month period and were #160m in the nine-month period. This increase
reflects the growth in the Direct Supply Business since 31 March 2003 as
discussed above.



Non-operational Assets



There was an exceptional credit against non-operational assets in the nine-month
period of #13m, all of which arose in the first six months of the year. This
credit relates to the mark to market value adjustment of the UK decommissioning
fund and fully reverses the write down made in the year ended 31 March 2003.



Operating Profit/(Loss)



The operating results are analysed below:


Three months Six Nine months
ended 31 ended 31
December months ended December
2003 30 September 2003
2003
#m #m #m
Operating profit/(loss) before exceptional items 15 (9) 6
Exceptional items:
Restructuring costs (3) (37) (40)
UK Decommissioning Fund - 13 13
Total 12 (33) (21)



Share of Operating (Loss)/Profit of Discontinued Joint Venture



The Group's share of the operating result of AmerGen to the date of disposal was
a loss of #21m in the three-month period and a profit of #22m in the nine-month
period. The operating loss for the three-month period was primarily due to
problems being encountered during a planned outage at the Three Mile Island
power station, beginning in October 2003, which meant that the station did not
return to service until the end of December. Output from the three AmerGen
power stations totalled 3.5 TWh in the three-month period and 14.1 TWh in the
nine-month period. The Company's 50% share in AmerGen was sold to Exelon on 22
December 2003 as previously discussed above.



Financing Charges


Three months Six months Nine months
ended 31 ended 30 ended 31
December September December
2003 2003 2003
#m #m #m
Revalorisation of nuclear liabilities 47 116 163
Revalorisation of decommissioning fund (6) (16) (22)
Other revalorisation (1) (1) (2)
Total revalorisation 40 99 139
Net interest expense 29 25 54
Financing charges before exceptional items 69124 193

Exceptional interest (2) (3) (5)
Exceptional revalorisation (29) (40) (69)
Total financing charges 38 81 119



Revalorisation arises because nuclear liabilities are stated in the balance
sheet at current price levels, discounted at 3% per year real from the eventual
payment dates. The revalorisation charge is the adjustment that results from
restating these liabilities to take into account the effect of inflation in the
year, and to remove the effect of pro rata discount. Similarly, a
revalorisation credit arises in respect of the decommissioning fund which is
calculated by applying an actuarial assessment of the long-term investment
growth rate to fund contributions in order to determine the asset value to be
recorded in the balance sheet. The growth rate used in the calculations is
based on 3.5% per annum real.



The net revalorisation charge excluding exceptional items was #40m in the
three-month period and #139m in the nine-month period. The weighted average UK
inflation rate was 0.5% in the three-month period and 2.0% in the nine-month
period.



In the three-month and nine-month period there were exceptional interest credits
of #2m and #5m respectively in respect of interest rate swaps. In the
respective periods there were exceptional credits of #29m and #69m in respect of
revaluation of the decommissioning fund receivables. These are discussed more
fully in Note 4 to the Financial Statements.



Taxation



There was no taxation charge onordinary activities in either the three-month or
nine-month period ended 31 December 2003.



The tax credit for the three-month period was #7m in respect of a decrease in
the Group's liability for its share of AmerGen's taxable profits bringing the
total tax charge for the nine-month period to #1m.



No deferred tax asset has been recognised at 31 December 2003.



The tax paid in the nine-month period relates wholly to the Group's liabilities
for its share of AmerGen's taxable profits.



Loss on Ordinary Activities



As a result of the factors discussed above, there was a loss on ordinary
activities after taxation for the three-month period of #3m and #82m in the
nine-month period.



Loss per Share



There was a loss per share of 0.5p per share in the three-month period and a
loss per share of 13.6p per share in the nine-month period.



Capital Expenditure



During both the three-month period and the nine-month period, amounts that would
previously have been capitalised as fixed assets, totalling #13m and #60m
respectively, were expensed as operating costs following the fixed asset
impairment review carried out in the year ended 31 March 2003.



Research and Development



We support primarily scientific and engineering research activity directed
toward securing further improvements in the reliability, performance and safety
of our generating business and related activities. In the three-month and
nine-month periods our expenditure on research and development was #4m and #10m
respectively which are included within material and services costs.



LIQUIDITY AND CAPITAL RESOURCES



Restructuring Update



Following the sale of AmerGen, the Credit Facility was fully repaid and the
amount of the Credit Facility reduced back to #200m on 24 December 2003.
Further details of the Group's Proposed Restructuring are included in Note 1 to
the Financial Statements.



Cash Flow from Operating Activities



Thetable below sets out the key components of operating cash flow for the
nine-month period.


Nine months
ended 31
December 2003
#m
Operating loss including exceptional items (21)
Exceptional items 27
Operating profit excluding exceptional items 6
Depreciation 36
Non cash nuclear liabilities charged to operating costs 96
Nuclear liabilities discharged (45)
Movements in other provisions (2)
Exceptional items discharged (30)
Working capital excluding exceptional items (60)
Net cash flow from operating activities 1



The highlights in operating cash flow reflect the following:



* Payments to BNFL amounting to #32m (compared to #115m cash
payments in the nine months to 31 December 2002) based on the revised contracts
discussed above are included within the #45m movement. Also included in the
movement are payments to the UK decommissioning fund of #13m.



* The movement in working capital of #60m can be attributed to
movements in the balances at 31 December 2003 compared to 31 March 2003 as
follows:

Within debtors:

- trade debtors increased by #47m due to increased prices
and winter volume increases

- increase in prepayments of #34m mainly related to
movement in pension prepayment

- decrease in taxation and social security balance recorded
in debtors of #65m

- decrease in other debtors of #7m

Within creditors:

- increase in trade creditors of #10m mainly reflecting
increased energy purchases

- decrease in taxation and social security balance recorded
in creditors of #58m

- decrease in other creditors of #3m.



Returns on Investment and Servicing of Finance



The cash flow for returns on investment and servicing of finance comprises
interest paid and interest received and was an outflow of #55m in the nine-month
period due to the payment of interest on the loans and borrowings and other
amounts stoodstill under the Proposed Restructuring.



Disposals



Disposals yielded a cash inflow of #165m in the nine-month period. This
reflects the proceeds from the sale of AmerGen of approximately #154m, net of
costsassociated with the transaction. In addition, the Group received #9m in
relation to pension related cash retentions in respect of the disposal of our
interests in Bruce Power and #2m for the sale of the investment in Offshore Wind
Power Limited.



Management of Liquid Resources



The net cash outflow due to movements in financial investments and increases in
term deposits was #92m in the nine-month period. This reflects balances on the
term deposit accounts holding the collateral amounts rising from #246m at 31
March 2003 to #338m at 31 December 2003.



Capital Resources



At 31 December 2003, total debt of #883m comprised:



* A project finance loan of #475m secured on the assets of
Eggborough Power Limited ('EPL'), a subsidiary company that operates the
Eggborough coal-fired power station. Amounts owed by EPL are not guaranteed by
British Energy but British Energy guarantees the payment of amounts by British
Energy Power and Energy Trading Limited ('BEPET') to EPL under the Capacity and
Tolling Agreement ('CTA') between BEPET and EPL. The contractual amounts
payable by BEPET under the CTA are calculated so as to cover EPL's borrowing
requirements and operating costs. British Energy also provides a subordinated
loan facility to EPL. The final instalment of loan principal will be repaid in
2011. The loan currently bears interest at LIBOR plus 1.3%. It is proposed
that these arrangements will be restructured as part of the Proposed
Restructuring of the Group. For further details of the Proposed Restructuring
see Note 1 to the Financial Statements. At 31 December 2003 the effect of the
Group's interest rate contracts is to classify the borrowings as fixed rate.



* An aggregate principal amount of #408m sterling denominated
bonds due between 2003 and 2016. The bonds bear interest at a rate of between
5.9% and 6.2%. An aggregate principal amount of #110m matured in March 2003 but
payment has been stoodstill as part of the arrangements in our financial
restructuring.



There were no drawings under the Credit Facility at 31 December 2003 and the
conditions applying to the facility are more fully discussed in Note 1 to the
Financial Statements.



Future Liquidity



The Group had an available cash balance of #91m at 31 December 2003 along with
#338m of cash which had been deposited in collateral bank accounts for trading
purposes.



The Group's main source of liquidity is its operating businesses. Cash
generation by the operating businesses is dependent upon the reliability of the
Company's power stations to produce electricity, the selling price achieved for
electricity, operational risk and capital investment expenditure and maintenance
requirements.



The Group lost its investment grade rating in September 2002. British Energy
will seek a new credit rating upon the issuance of new bonds as part of the
Proposed Restructuring of the Group. The loss of investment grade rating has
meant that the Group now has to provide significant levels of collateral to
counter-parties in order to maintain trading arrangements, thereby substantially
reducing the levels of cash resources available to the Group. Given the
financial circumstances of the Group, certain contracts may be capable of being
terminated. Such termination may result in termination payments being payable
as well as having an adverse effect on our cash flows.



The Credit Facility was undrawn at 31 December 2003 and 24 February 2004, and is
available to the Company for working capital purposes. The Credit Facility will
mature on the earliest of the date required by the Commission, 30 September
2004, and the date on which the Proposed Restructuring becomes effective, as
more particularly described in Note 1 to the Financial Statements.



The Company faced short term pressures on liquidity during the quarter resulting
from the combined effect of seasonality, the unplanned outages at Sizewell B and
Heysham 1 and the increased levels of collateral and costs of unplanned outages
brought about by the increased level of volatility in electricity prices.



The Board remains of the opinion that the working capital available to the Group
is not sufficient for the present requirements of the Group. The Company is
taking steps with a view to improving this situation (further detail is provided
in Note 1 of the Financial Statements). The receipt of the proceeds from the
disposal of AmerGen significantly increased the Group's financial flexibility.
Over the longer term, the Board is exploring initiatives to reduce the demand
for trading collateral and to achieve sufficient liquid resources to implement
the Proposed Restructuring.



The Proposed Restructuring and, therefore, the working capital available to the
Group, remain subject to a large number of significant uncertainties and
important conditions. These include receipt by the Secretary of Stateof a
satisfactory notification from the Commission that, insofar as the proposals
involve the grant of State Aid by the UK Government, such aid is compatible with
the common market ('EC Approval'). The Secretary of State expects to receive
this notification by mid-2004. Furthermore, the Secretary of State is entitled
not to proceed with the Proposed Restructuring if, in her opinion, the Group
will not be viable in all reasonably foreseeable conditions without access to
additional financing beyond that which is committed and will continue to be
available when required.



If the conditions to the Proposed Restructuring are not fulfilled, or if the
Company's cash generating initiatives are not achieved, in each case, within the
time scales envisaged or required, or if there is a material deterioration in
the Group's cash flow position, performance or outlook, or if the Credit
Facility ceases to be available or if the standstill arrangements which the
Group has entered into with certain of its creditors are terminated, British
Energy may be unable to meet its financial obligations as they fall due and
consequently the Company may have to take appropriate insolvency proceedings, in
which case the distributions to unsecured creditors may represent only a small
fraction of their unsecured liabilities and there is unlikely to be any return
to shareholders.



POST BALANCE SHEET EVENTS



On 4 February 2004, the Company announced that it had settled a long-standing
dispute with Siemens relating to work done in 1996 by the former Parsons
business. Under the terms of the settlement, Siemens has agreed to pay the
Company #18.3m. The settlement includes a commitment by the Company and Siemens
to develop a mutually beneficial commercial relationship under a long term
supply agreement.



CONTINGENT LIABILITIES



On 12 February 2004 British Energy received a notice of warranty claims from the
consortium which purchased the Group's 82.4% interest in BrucePower alleging
breach of certain warranties and representations relating to tax and to the
condition of certain plant at the Bruce power station.



The claim relating to the condition of the plant is based upon alleged erosion
of some of the steam generator support plates, through which boiler tubes pass,
which it is alleged resulted in an extended outage of one unit at the plant to
carry out repair works and loss of revenues and costs of approximately C$64.5m.
The consortium also claimsthat the alleged erosion may reduce the operating
life of the unit and/or result in further repairs involving further losses.
British Energy has received no supporting evidence and has insufficient
information to evaluate the claim fully. However, the Company expects to defend
the claim.



The principal tax claim relates to the treatment of expenditure at the Bruce
plant during the period of the Company's ownership which is currently being
considered by the Canadian tax authorities. The treatment proposed by British
Energy could result in a rebate of a material amount of tax to the Group which
has not been recognised in the Financial Statements of the period. The
consortium claims that allowance of the expenditure for that period would cause
it to lose future deductions. British Energy expects to defend the claim and,
on the basis of advice received, the Company is confident that the amount of the
claim should not, in any event, materially exceed the amount of the rebate, and
that the claim should have no material cash flow impact on the Group.



Under the agreement with the consortium C$20m is retained in trust to meet any
representation and warranty claims, and this may be retained pending agreement
or determination of the claims.



Further contingent liabilities of the Group are described in Note 13 to the
Financial Statements for the period.



DIVIDEND POLICY



The Board intends to distribute to shareholders as much of the Company's
available cash flow as prudently possible, consistent with the long-term
development of the business. However, under the terms of the Proposed
Restructuring, there are certain restrictions on the Board's ability to pay
dividends, as follows:



* British Energy is required to fund a cash reserve out of the
Company's post-debt service cash flow in order to support the Group's collateral
and liquidity requirements post-restructuring. The initial target amount for
the cash reserve is #490m plus the amount by which cash employed as collateral
exceeds #200m (the 'Target Amount'). It is expected that, when the Proposed
Restructuring is completed, the level of the cash reserves will be below the
Target Amount and therefore there willbe no distributions to shareholders until
such times as the cash reserve is at the required level. As a result of the
requirements to fund the cash reserves, the Board does not expect to pay a
dividend in respect of the financial years ending 31 March 2004 and 2005;



* the terms of the Nuclear Liabilities Agreements to be entered
into as part of the Proposed Restructuring also require that once the cash
reserve is funded to the Target Amount, British Energy must make CashSweep
Payments to the Nuclear Liabilities Fund ('NLF'). The NLF Cash Sweep Payment is
initially defined as 65% of the movement in cash, cash equivalents and other
liquid assets during the year after adjusting for, among other things, certain
payments made to the NLF or dividends paid in the year. The requirement to make
the NLF Cash Sweep Payment will greatly reduce the amount of cash that would
otherwise be available for distribution to shareholders;



* the terms of the new bonds to be issued as part of the
Proposed Restructuring contain certain covenants, including a restriction that
allows British Energy to pay a dividend only if no event of default has
occurred; and



* the Company must have distributable reserves.



ITEM 2 : QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



The following discussions about the British Energy risk management activities
include 'forward-looking' statements that involve risk and uncertainties.
Actual results could differ materially from those projected in the
forward-looking statements.



The following discussion relates to the financial instruments, derivative
instruments and derivative commodity instruments held by British Energy at 31
December 2003, which are potentially sensitive to changes in interest rates,
foreign exchange rates, commodity prices and equity markets. The Group uses
derivative instruments to hedge the primary market exposures associated with the
underlying assets, liabilities and committed transactions. None of the
instruments entered into is leveraged or held for speculative purposes.



FINANCIAL INSTRUMENTS AND RISK MANAGEMENT



Overview



The main financial risks faced are trading risks in England and Wales in respect
of both price and volume output on the sale of our electricity. There is also
an exposure to risks associated with fluctuations in the equity markets through
the Decommissioning Fund and Pension Schemes. Policies have been instituted for
managing each of these risks, which have been approved by the Board of
Directors. Each of these risks is discussed in more detail below.



Electricity trading risks are managed by the Power and Energy Trading Division.
The Power and Energy Trading Division operate within policies and procedures
which are approved by the Board and monitored by a sub-committee of the
Executive Committee.



Non-trading risks (i.e. cash resources, debt finance and financial risks) are
managed by the central treasury function (the 'Treasury Department'). The
Treasury Department operates within policies and procedures approved by the
Board. The Treasury Department uses appropriate and available instruments,
within specified limits, to manage financial risk but is not permitted to take
speculative, open positions. Both the Treasury Department and the Power and
Energy Trading Division are subject to regular scrutiny from our internal
auditors.



Interest Rate Risk Management



The market value of debt varies with fluctuations in prevailing interest rates
in the United Kingdom.



Eggborough related derivative agreements (nominal amount of #398m as at 31 March
2003) have been amended post 31 March 2003 as part of the Proposed Restructuring
process. The effect has been to fix future interest payments under the swaps
from October 2004 onwards.



At 31 December 2003 the total of investments in liquid funds and cash at bank
amounted to #429m, and had maturity dates due within one year. Cash not
immediately required for business purposes is invested in fixed-rate term
deposits and money market funds. At 31 December 2003 the term deposits and
money market funds not used to fund collateral were due to mature or were
available within one day and earned interest at an average rate of 3.5%. Term
deposits, money market funds and bank balances at 31 December 2003 include #338m
of cash which has been deposited in collateral bank accounts and earned interest
at an average rate of 2.8%. Availability of this cash is, therefore, restricted
over the periods of the collateralised positions.



As the deposit terms are short term, the carrying value at 31 December 2003
approximates to the fair market value.



Foreign Exchange Risk Management



There are potential future foreign currency receivables in respect of amounts
outstanding from the sale of Bruce Power and AmerGen. When these cash flows
become more certain in the future the Group will evaluate currency hedging
opportunities, balancing the cost and availability of entering into such
transactions against the underlying currency risk.



At 31 December 2003 there were no foreign exchange contracts in place.



In addition, at 31 March 2003, there were deferred losses of #2m accounted for
as part of stock which arose on the rollover of maturing forward contracts used
for hedging the future purchase of nuclear fuel prior to and including the year
ended 31 March 2003. See Note 20 to our consolidated Financial Statements as at
31 March 2003.



Electricity Trading Risk Management



Trading activities relate principally to supporting our generation business.
The trading operations, therefore, act principally as wholesale marketers rather
than as pure financial traders, with the principal objective of increasing the
return on assets while hedging the market risk associated with the output of the
plants.



Under NETA in England and Wales any mismatch between actual metered generation
(or demand) and the notified contract position is settled through the balancing
mechanism at generally unfavourable prices. British Energy aims to sell all
planned nuclear output forward and tominimise exposure to the balancing
mechanism.



The risks in the wholesale market are managed through a contracting strategy
that builds a portfolio of forward contracts with a variety of terms.



Eggborough provides a flexible generation capability which fulfils three
purposes designed to enhance our profitability. Firstly, it provides a means
for compensating for unplanned lost output from nuclear units at short notice;
secondly it provides the capability to profile the generation shape to meet the
requirements of both wholesale and Direct Supply Business customers; and
thirdly, it provides a flexible capability that is offered to the system
operator via the balancing mechanism.



Output from the two stations in Scotland will continue to be sold under the
terms of the Nuclear Energy Agreement to Scottish Power and Scottish and
Southern Energy until April 2006, or the introduction of British Electricity
Transmission and Trading Arrangements, whichever is earlier.



Following a review of the management structure of BEPET, an independent Risk
Measurement and Controls Manager is to be appointed, reporting directly to the
Group Treasurer.



British Energy's policy is to manage credit exposure to trading and financial
counterparties within clearly defined limits. Electricity trading activities
are strictly monitored by a sub-committee of the Executive Committee and
controlled through delegated authorities and procedures, which include specific
criteria for the management of counterparty credit exposures.



Equity Risk Management



The UK decommissioning fund was established to provide for the eventual
decommissioning of the UK nuclear power stations. Cash contributions are made
on a quarterly basis to a payment profile set out in a contract between us and
the UK decommissioning fund and are invested by the trustees of the UK
decommissioning fund in UK marketable fixed income debt, equity securities and
property. British Energy is ultimately responsible for contributions to the UK
decommissioning fund. Therefore, the level of future contributions, which are
reviewed every five years in conjunction with the review of ultimate
decommissioning costs, depend partly on the estimatedlong-term investment
performance of the equity and debt instruments in which the contributions are
invested and returns on investments in property. Income from dividends and
other returns on the underlying investments are retained by the UK
decommissioning fund and then invested in debt and equity securities.



The UK decommissioning fund included debt and equity securities with market
values of #45m and #384m respectively at 31 December 2003.



The balance on the UK decommissioning fund

LONDON (AFX) - British Energy PLC, the troubled nuclear power generator, has
admitted its restructuring proposals are still subject to "significant
uncertainties".
The plans remain contingent on European regulators confirming that a 275 mln
stg loan granted to the company by the UK government does not contravene State
Aid regulations. A decision is expected in the summer.
"Whilst a decision by the European Commission on restructuring is pending,
we are focusing on improving British Energy's operational reliability and
financial capability," said chairman Adrian Montague.
The group reported a third quarter pretax loss of 10 mln stg for the three
months to end December. However, it generated an operating profit of 12 mlnstg
over the same period.
For the nine month period, it reported a pretax loss of 81 mln stg and an
operating loss of 21 mln stg.
Total UK output was 17.3 terrawatt hours (TWh) in the quarter, down 4 pct,
and 52.7 TWh for the nine month period, up 6 pct.
Net debt was reduced by 167 mln stg to 454 mln stg in the quarter, primarily
as a result of the net proceeds from the 277 mln usd sale of the group's AmerGen
business.
The group confirmed it does not expect to pay a dividendin either 2004 or
2005.
The shares closed at 7.75 pence, down 0.25.
matt.scuffham@afxnews.com
mps/bam

RNS Number:8806V
British Energy PLC
26 February 2004

26 February 2004

British Energy plc
Third Quarter Results ended 31 December 2003

The results presentation for the third quarter results ended 31 December 2003
is now available at:

http://production.investis.com/britishenergyplc/bgy_presentations/q3_03.pdf
http://www.british-energy.com/investors/presentations/index.html or

For further information please contact:

Paul Heward British Energy 01355 262201
Andrew Dowler Financial Dynamics 020 7831 3113




This information is provided by RNS
The company news service from the London Stock Exchange
END

Positive Candidate (Short term) - Mar 1, 2004
Has risen 89% since the bottom on 17 Dec 2003 at 4.03. Is within a rising trend and continued advance within the current trend is indicated. On reactions back, there is support against the floor of the trend channel. The stock has support at p 6.20 and resistance at p 10.20. High risk with a difference between the lowest and the highest price of an average month of 132%.

Positive Candidate (Medium term) - Mar 1, 2004
Has fallen 92% since the peak on 9 Aug 2002 at 95.00. Is within an approximate horizontal trend, which indicates further development in the same direction. Has given positive signal from a rectangle formation by a break up through the resistance at 6.28. Further rise to 12.48 or more is signaled. The stock has marginally broken up through the resistance at p 7.00. An established break predicts a further rise. High risk with a difference between the lowest and the highest price of an average month of 132%.

Positive Candidate (Long term) - Mar 1, 2004
Has fallen 99% since the peak on 20 Jan 1999 at 730. Is within a falling trend and continued decline within the current trend is indicated. On reactions back, there is resistance against the ceiling of the trend channel. It, however, gave a positive signal from a rectangle formation at the break up through the resistance at 6.28. Further rise to 12.48 or more is signaled. The volume balance is positive and strengthens the stock further in the short term. The stock has support at p 3.50 and resistance at p 255. High risk with a difference between the lowest and the highest price of an average month of 132%.

In the top five most bought stock with Comdirect today:



Buys Sells
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British Energy Lloyds TSB Group
2nd March, 2004

Looking at the 5 yr chart I can see a 'cup' forming.

Having been told to dyor, as this one caught my eye I started to read.... and read ...then gave up! To much knowledge for a novice. Sorry but can you tell me what a 'cup' is and is this then a 'long term buy' or one to miss!

Hi, it's a short/medium term buy. The downside is these go back to 4-5 pence levels and the upside is that these could hit 1.50 pence or more.

(Just the header post on this thread should give you an idea of what is happening: it is Evil Knievil's update released today).


Hope Xmortal can elaborate what a cup is for us when he gets the opportunity.

Investtech Analysis:

Positive Candidate (Short term) - Mar 2, 2004
Has risen 99% since the bottom on 17 Dec 2003 at 4.03. Is within a rising trend, which indicates a continued growth. The stock has support at p 6.20 and resistance at p 10.20. High risk with a difference between the lowest and the highest price of an average month of 131%.

Positive Candidate (Medium term) - Mar 2, 2004
Has fallen 91% since the peak on 12 Aug 2002 at 89.75. Is within an approximate horizontal trend, which indicates further development in the same direction. Has given positive signal from a rectangle formation by a break up through the resistance at 6.28. Further rise to 12.48 or more is signaled. The stock has broken up through the resistance at p 7.00. This predicts a further rise. In case of negative reactions, there will now be support at p 7.00. High risk with a difference between the lowest and the highest price of an average month of 131%.

Positive Candidate (Long term) - Mar 2, 2004
Has fallen 99% since the peak on 20 Jan 1999 at 730. Is within a falling trend and continued decline within the current trend is indicated. On reactions back, there is resistance against the ceiling of the trend channel. It, however, gave a positive signal from a rectangle formation at the break up through the resistance at 6.28. Further rise to 12.48 or more is signaled. The volume balance is positive and strengthens the stock further in the short term. The stock has support at p 3.50 and resistance at p 255. The average difference between the lowest and highest price of a month is 131%. The risk is therefore high.

Doesn't Evil need lots of others to buy so he can close his shorts, or is it just me being cynical?

He closed his shorts long time ago and now he's long with 5 million shares.

The MACD signal is going to become positive today possibly as the blue line crosses the green line.

Some good buying thus far: Price 7.70-7.95 pence, tight spread.

200,000 Automatic Trade buy at 7.95 pence.

First AT trade today, need more AT buys to provide stimulus to the price.

Price 7.75-8.00 pence. More AT buys may be on the horizon at 8 pence.

The 2 trades for 1,500,000 each are a rollover which bodes very well for BGY as they obviously think it has a lot higher to climb.

A rollover trade is executed when someone has bought on, say, a T10 (10 working days credit) and then wants to extend that i.e. delay paying for the shares. To do that they arrange to "sell" and "buy back" the shares for a small premium and then they have another, say, 10 working days to cough up for them - it is done to extend the credit in the hope of being able to sell at a profit before the settlement date. You will note the small price differential between the two trades of 1.5 million of 0.04p which equates to a charge of 600 for the privelage of doing the rollover.