Government sells £2bn stake in firm

Trade and Industry Secretary Alistair Darling said 400 million shares would be sold to institutional investors, cutting the Government's stake in the firm from 64% to 39%.

Proceeds from the sale will go to the Nuclear Liabilities Fund (NLF) to help meet the eventual cost of decommissioning British Energy's eight power stations. The move will raise over £2 billion at current share prices and is expected to be the Government's biggest stock sale for over a decade.

The Government acquired its holding in British Energy after rescuing the nuclear power generator from collapse in 2004. The company's shares have risen 40% from a 19-month low in February, and analysts said ministers had probably decided now was a good time to sell.

A further 50 million shares may also be sold but the Government said it did not intend to reduce its stake to less than 29.9%.

The eight nuclear power stations are Dungeness B in Kent, Hartlepool, Heysham 1 and 2 in Lancashire, Hinkley Point B in Somerset, Hunterston B in Ayrshire, Sizewell B in Suffolk and Torness in East Lothian. British Energy also owns a coal-fired power station at Eggborough, East Yorkshire.

Earlier, the company announced its financial results, which showed that underlying earnings increased to £1.22 billion from £846 million the previous year following higher power prices.

A spokesman welcomed the Government's announcement, adding: "This is equivalent to around 26% economic interest in the company and will increase the market capitalisation by some £2.3 billion. The sell down by the NLF and resulting reduction in cash sweep gives greater financial flexibility to the company.

"British Energy is the UK's single biggest electricity generator producing virtually carbon-free power through its eight nuclear stations. It provides many high skilled, well-paid jobs and makes an important contribution to the nation's economy. The news underpins the confidence that the government feels in British Energy's ability to run its stations, safely and reliably."

British Energy is the UK's largest producer of electricity, generating around one-sixth of the nation's needs, and employs about 6,000 workers. The firm received a boost last week when the Government backed the building of a new generation of nuclear power stations in a bid to cut carbon emissions and reduce reliance on imported fuels.