The Scotsman Scrutineer: Temporary Loss of Power

By NO BYLINE

British Energy

537.0p -32.3p

BP

566.5p -1.5p

IT WAS a virtual given that British Energy’s shares would get an initial fillip yesterday because of the balmy backdrop the Livingston-based nuclear generator is operating against.

Strong energy prices and the government’s decision last week to build a new generation of nuclear power stations were seen as conducive to a City rerating of the shares.

But what the government giveth the government taketh away. And BE’s shares, which had put on 1.7 per cent soon after the results announcement, later slumped 5.7 per cent to 537p as the government announced it was selling down its 64 per cent stake in the company to 39 per cent.

The government was left with a majority stake in the company after BE’s near-collapse in 2002, and has long said it would eventually cut this back.

It obviously has its reason for the sell-down, worth more than GBP 2 billion at the current share price: namely to help fund the decommissioning of BE’s existing nuclear plants.

However, in the short term the move creates a major overhang of the company’s shares in the market, thereby depressing the price.

It is unfortunate for BE, where much is going right at present. It took some of the gloss off a 44 per cent uplift in underlying full-year earnings at the company, and a restoration of the dividend, to a healthy 13.6p a share, the first since the restructuring.

From a basket case not too many years back, the company now has a front-foot look about it again.

Bill Coley, BE’s American-born chief executive, said interest from potential partners in constructing the new plants when the schemes get off the drawing board was already more widespread than he had expected.

It is just the sort of reaction BE had hoped for, providing a good counterbalance in sentiment to the negative of the string of faults at its existing, ageing nuclear plants, including Hunterston and Torness in Scotland.

The City was trying to put names in the frame as far as potential construction partners were concerned yesterday.

Obvious ones were energy players with existing nuclear operations, such as RWE and E.ON of Germany, and those seen as keen to diversify into the nuclear sector. British Gas-owning Centrica is seen as top of the list in this category.

In recent times BE has been bailed out of its problems with “outages” at its plants by strong power prices.

But, in the medium term, the government’s commitment to new nuclear power will be a more durable support for the company. Even if Whitehall gave the share price a jolt yesterday.

HOW quickly a boardroom landscape changes. The sudden shifts can make a nonsense of the studied cohesion that businesses try to present to the outside world.

Just a few months back Lord Browne at BP was doing a gradual fade from the oil giant’s tableau, hurt by fatalities and disasters – from Texas to Alaska – but with enough in the historical tank to suggest his image might remain fragrant over time. Tony Hayward, the head of BP’s exploration division, and John Manzoni, head of refining and marketing, were the coming men.

Hayward got the top job early when Browne’s personal life and lying to a judge brought him low. Manzoni has now quit to become chief executive of the much smaller Talisman Energy in Alberta, having lost out in the succession stakes.

Major loser, major winner, and significant loser all within months at one of Britain’s biggest companies. Boardrooms are powerful, murky and fluid places.

IT ALMOST seems as if banking major HSBC, in terms of getting good publicity, could not hit a cow’s backside with a banjo at present.

Things going pear-shaped in the US trailer park lending operation, and senior executives going to spend more time with their families and share options as a result, is just the half of it.

Now its head of capital markets, Danny Palmer, a man who put the heavy into heavy hitter when snaffled up from Morgan Stanley three years ago, is out of the door with no word of why. If he was such a catch it is surprising there is not more of an explanation when he quits.

It is a bit like HSBC saying capital markets was a major growth area three years ago, but now its not. Let’s move on.

HSBC, it is thought, has no plans to replace Palmer, instead splitting his role between a couple of subordinates.

HSBC may be the world’s self-styled local bank, but at present it does not appear the most lucid one.

(c) 2007 Scotsman, The. Provided by ProQuest Information and Learning. All rights Reserved.