Nuclear Bet That Turned This Hired Gun into an Energy Hero ; PROFILE Bill Coley's Appointment as Chief Executive of Britain's Top Power Producer May Have Smacked of Desperation but He's Now Made It an Attractive Takeover Target

Article excerpt

BILL COLEY is an industrial hero. As City bankers and hedge fund managers count the cost of investments and exposures which they patently failed to comprehend, here is a man who has rebuilt Britain's biggest electricity producer.

In three years at the helm, Coley has turned round British Energy from being a basket case running the country's nuclear generating fleet into a company at the centre of the debate over the future of UK power and which, to boot, has been for the last month the hottest buy order in the FTSE 100.

It is tempting to see Bill Coley, a perfectly mannered 64-year- old southern gentleman from North Carolina, with a drawl as drawn- out as the Blue Ridge Mountains, as a kind of folksy sheriff, hired from America's Bible Belt by UK Government enforcers to shake up an unruly, godforsaken company.

It would also be wrong, for Coley is no Labour patsy. For as this gun-for-hire has cleaned up what was a real Dodge City of a stock, Coley has now turned his Colt 45 on the ministers and civil servants sitting nervously in Whitehall's Last-Chance Saloon, where they continue to nurse a decision on ordering new nuclear power stations to fill Britain's increasingly wide domestic energy gap.

Coley has spent his tenure as chief executive since March 2005 being told he had been dealt a hopeless hand with British Energy's fleet of ageing and hapless nuclear power stations, and that he and his poorly performing company should be chased out of town.

But all the time Coley has had an ace in the hole.

British Energy's current nuclear power stations may, in the main, be useless at producing as much electricity as they should, but they have one allredeeming feature. They sit on the land the only land on which, politically, new nuclear power stations can be built. And as soon as Coley decided to challenge the Government and insist that legal ownership of that land was with British Energy, all the chips were his.

To realise what a hero Coley may now be in the eyes of British Energy shareholders, many of them "Sids" who stayed in during the carnage of nearbankruptcy in 2002, one has to go back to the last Conservative administration, whose last major privatisation British Energy was.

What shareholders were sold in 1996 was a company with one state- of-the-art asset, Sizewell B, and seven other second-generation advanced gas-cooled reactors which were even then already nearing decommissioning.

The following years saw big profits, big dividends, big smiles. And then the generating market was deregulated, the Electricity Pool cartel was broken up, the price of power collapsed and, with it, power company profits.

Within a year of Labour's first big industrial disaster, the bankruptcy of Railtrack, came the electricity industry's version, complete with the same story that a complacent management had squandered the dowry and failed to invest in the now-ailing assets. British Energy was all but bust. However, New

Labour had learned its lesson. Instead of the messy quasi- nationalisation we saw on the railways, Industry Secretary Patricia Hewitt indulged in legally questionable state support, sending in the accountants to take British Energy's billions of pounds of nuclear clean-up liabilities and dump them into a Government agency.

After nearly two years in a state of legal limbo, a new British Energy emerged into a market of rising electricity prices. From this, despite months of shutdowns and outages at poorly performing plants, even it could not fail to make profits of Pounds 1 billion a year and regain its place in the FTSE 100 index. And it was at precisely this point that Coley surfaced, in frankly bizarre circumstances.

British Energy had had three chief executives in as many years, the first two tainted by the original failure but the third, Mike Alexander, hailed by the company's new chairman Adrian Montague yes, the same Labour placeman who had stewarded Railtrack into Network Rail as the right man for the job, having been poached from Centrica. …