20-F

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

¨ Annual report pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934 (Fee required)

or

x Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended March 31, 2005 (No Fee required)

or

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from N/A to N/A (No Fee required)

Commission file number 1-14990

BRITISH ENERGY GROUP PLC

(Exact Name of Registrant as Specified in Its Charter)

Scotland

(Jurisdiction of Incorporation or Organization)

Systems House, Alba Campus, Livingston EH54 7EG

(Address of Principal Executive Offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:  None

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Title of each class	Name of each exchange on which registered
Ordinary shares of 10p each (“ordinary shares”)	London Stock Exchange

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:  None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Ordinary shares of 10p each	561,315,459 shares
Warrants for Ordinary Shares of 10p each	28,999,342 warrants
Non-voting special rights redeemable preference share of £1	1 share

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

(1)  x    (2)  x

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17  ¨    Item 18  x

TABLE OF CONTENTS

Introduction		1
Exchange Rates		1
Technical Terms		1
Information Regarding Forward-Looking Statements		1
Non-GAAP Financial Measures		2
Item 3.	Key Information	3
Item 4.	Information On The Company	28
Item 5.	Operating And Financial Review And Prospects	77
Item 6.	Directors, Senior Managers And Employees	98
Item 7.	Major Shareholders And Related Party Transactions	115
Item 8.	Financial Information	117
Item 9.	The Offer And Listing	117
Item 10.	Additional Information	119
Item 11.	Quantitative And Qualitative Disclosures About Market Risk	197
Item 12.	Description of Securities Other Than Equity Securities	201
Item 13.	Defaults, Dividend Arrearages And Delinquencies	201
Item 14.	Material Modifications To The Rights Of Security Holders And Use Of Proceeds	201
Item 15.	Controls And Procedures	201
Item 16.	Reserved	201
Item 16a.	Audit Committee Financial Expert	201
Item 16b.	Code Of Ethics	202
Item 16c.	Principal Accountant Fees And Services	202
Item 17.	Financial Statements	202
Item 18.	Financial Statements	202
Item 19.	Exhibits	203

Introduction

In this annual report, except as otherwise specified, “British Energy”, the ““British Energy Group”, the “Company”, the “Group”, “we”, “us” or “our” refer to British Energy Group plc or, in the context of events prior to January 14, 2005 (the “Restructuring Effective Date”), British Energy plc (the former ultimate holding company of the Group now re-registered as a private limited company and re-named British Energy Limited) (“BE Ltd”) and its subsidiaries, and any of their respective predecessors in business, as the context may require. We were incorporated under the United Kingdom Companies Act 1985, as amended (the “Companies Act”) on July 2, 2004.

Our registered office is located at Systems House, Alba Campus, Livingston, EH54 7EG, Scotland, and our telephone number is 011 44 1506 408700. Our website address is www.british-energy.com. The information on our website is not a part of this annual report.

Exchange Rates

We publish our financial statements in pounds sterling. In this annual report, references to “pounds sterling”, “£”, “pence” or “p” are to UK currency, references to “US dollars”, “US$” or “$” are to US currency, references to “Canadian dollars”, or “C$” are to Canadian currency and references to “Euros” or “€” are to the currency of the European Union. Amounts in this annual report stated in US dollars, unless otherwise indicated, have been translated from pounds sterling solely for convenience and should not be construed as representations that the pound sterling actually represent such US dollar amounts or could be converted into US dollars at the rate indicated or any other rate. The Noon Buying Rate for pounds sterling on July 22, 2005 was £1.00 = $1.75. For certain information about exchange rates between pounds sterling and US dollars, see “Item 3. Key Information—Exchange Rates”.

Technical Terms

This annual report refers to certain technical terms used to measure output of electricity and the production of electricity over time. The basic unit for the measurement of electricity output is a kilowatt (“kW”). The basic unit for the measurement of electricity production is a kilowatt-hour (“kWh”); that is, one hour of electricity production at a constant output of one kilowatt. One thousand kilowatts are a megawatt (“MW”) or, in terms of production, a megawatt-hour (“MWh”). One thousand megawatts are a gigawatt (“GW”) or, in terms of production, a gigawatt-hour (“GWh”). One thousand gigawatts are a terawatt (“TW”) or, in terms of production, a terawatt-hour (“TWh”).

Unless stated otherwise, references to statutes, regulations, government or regulatory bodies or officers of government refer to the appropriate statutes, regulations, bodies or officers of the United Kingdom.

Special Note Regarding Forward-looking Statements

This annual report contains certain “forward-looking” statements as defined in Section 21E of the US Securities Exchange Act of 1934. Such forward-looking statements include, among others:

• the anticipated development of the UK electricity industry, the future development of regulation of the UK electricity industry, the effect of these developments on our business, financial condition or results of operations, and

• other matters that are not historical facts concerning our business operations, financial condition and results of operations.

• EBITDA does not reflect the cash flow associated with the Nuclear Liabilities Fund (“NLF”) cash sweep arrangements, (see Item 4—Information On The Company).

These forward-looking statements involve known and unknown risks, uncertainties and other factors which are in some cases beyond our control and may cause our actual results or performance to differ materially from those expressed or implied by such forward-looking statements. For a discussion of some of the risks associated with these forward-looking statements, see “Item 3. Key

1

Information—Risk Factors”. Due to the uncertainties and risks associated with these forward-looking statements, which speak only as of the date hereof, we are claiming the benefit of the safe harbor provision referred to in Section 21E of the US Securities Exchange Act of 1934.

Non-GAAP Financial Measures

EBITDA

EBITDA means earnings before interest, taxes, depreciation and amortization. EBITDA is a supplemental measures of our liquidity that is not required by, or presented in accordance with accounting principles generally accepted in the United States (“US GAAP”). EBITDA is not a measurement of our liquidity under US GAAP and should not be considered as an alternative to cash flow from operating activities as a measure of our liquidity.

Nevertheless, EBITDA has limitations as analytical tools, and you should not consider it in isolation from, or as a substitute for analysis of, our financial condition or results of operations, as reported under US GAAP. Some of these limitations are:

• EBITDA measure does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

• EBITDA measure does not reflect changes in, or cash requirements for, our working capital needs;

• EBITDA measure does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA measure does not reflect any cash requirements for such replacements;

• EBITDA measure does not reflect certain non-cash items;

• other companies in our industry may calculate these measures differently than we do, limiting their usefulness as a comparative measure.

Because of these limitations, EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our US GAAP results and using EBITDA only as supplemental measures.

Realized Price

We calculate our realized price for electricity by dividing UK turnover (net of energy supply costs and miscellaneous income) by total output. Realized price is not derived in accordance with US GAAP and should not be exclusively relied upon when evaluating our business. Realized price constitutes a non-GAAP financial measure because we eliminate energy supply costs (i.e., the cost of transmitting electricity to our customers) and other items from total turnover. We make these adjustments to turnover because we believe that they allow our management team and our investors to better understand the net price that consumers are paying for our electricity.

2

ITEM 3.    KEY INFORMATION

RISK FACTORS

OPERATING RISKS

If we do not find alternative sources of income as our power stations start to close we may not be able to recover our costs from our sales revenue.

Five of our Advanced Gas Cooled Reactor (“AGR”) power stations are, based on current scheduled accounting closure dates, due to close by 2014. This will reduce our current nuclear generating capacity by 61.5 per cent. There can be no assurance that plant life extensions will be achievable at any of our AGR power stations or at our Pressurized Water Reactor (“PWR”) power station. Our ability to find alternative sources of income is restricted by the compensatory measures we have agreed to undertake in connection with the European Commission’s approval of the State Aid elements of the Restructuring (as defined in Item 4—Information On The Company—Restructuring) and by certain other agreements entered into pursuant to the Restructuring. If our remaining assets do not generate income in line with our expectations (for example as a result of earlier than anticipated closure of a nuclear power station), our costs (including the costs of maturing pension schemes) may exceed our revenue and this may adversely affect our financial results and our ability to pay dividends and may require us to close the remainder of our AGR and/or PWR power stations earlier than anticipated.

Our future profitability is dependent upon several factors, some of which are outside our control.

Costs structure and variable electricity prices

The operation of our nuclear power stations is characterized by high fixed costs. Additionally, some of our costs are not borne by our non-nuclear competitors because they are unique to the nuclear power generation industry.

Our ability to generate sufficient turnover at sufficient margin to cover our fixed costs is dependent, in part, on favorable electricity prices, fuel costs (both of uranium used in the fabrication of fuel for our nuclear power stations, and the costs of coal in the case of our coal-fired power station at Eggborough in Yorkshire, England (the “Eggborough power station” or “Eggborough”)) and our sales and trading strategy. Electricity prices depend on a number of market factors, including, the impact of worldwide demand for fossil fuel, UK demand for power and environmental legislation. Because our costs are primarily fixed in nature, they cannot be reduced significantly in periods of low electricity prices. Therefore, in these circumstances it is possible that we may not produce sufficient revenue from our electricity sales and/or trading activities to cover our generation costs.

In addition, increasing vertical integration in the electricity sector is likely to affect the liquidity of the markets in which we trade and the volatility of those markets. This in turn may affect the revenue from our electricity sales or trading and may adversely impact our proposed trading going forward.

Unplanned outages

Unplanned outages at our AGR and/or PWR power stations and/or the Eggborough power station result in lost generation and, due to our contractual obligations to deliver electricity at pre-established prices and/or quantities, we may, therefore, be required to purchase replacement electricity volume in the open market which may be at unfavorable prices. Given the complexity of operating nuclear and fossil fuel power stations, we do not believe that we will be able to completely eliminate the risk of unplanned outages and we cannot predict the timing or impact of these outages with any certainty.

3

Therefore, there is no assurance that we will be profitable or generate sufficient cash to fund our operations. For further risks relating to unplanned outages see the risk described immediately below.

Unplanned outages at our nuclear power stations could adversely affect our revenues and profitability.

Historically, our nuclear output has been adversely affected by unplanned outages and unplanned reductions in output. We believe that the loss of output is indicative of a deterioration of the materiel condition of plant over time in part caused by inadequate investment over recent years which had resulted in an increase in our maintenance backlog and failure to carry out required maintenance on a timely basis.

Further, some of our unplanned outages flow from human errors in the operation and maintenance of our plant.

Plant unreliability can result in significant costs being incurred through the short-term electricity market and the balancing mechanism which is used by the transmission system operator to ensure that generation and demand are matched. If our stations fail to produce the amount of electricity that we have contracted to supply or have otherwise already traded in the wholesale market, we may have to enter into the short-term market or accept the prices prevailing in the balancing mechanism to meet any such shortfall in output. Prices in the short-term market and imbalance mechanism may be very high, particularly in periods of tight capacity margins for generating plant in the UK, and the unplanned outages of our stations may limit available supply and therefore raise prices in these markets.

The Performance Improvement Program (“PiP”) may be constrained by our cash resources and there is no assurance that the hoped for benefits of PiP will materalize. This may adversely affect our prospects in the long term.

Although we are attempting to improve our plant reliability through increased investment and the implementation of PiP, there is no guarantee that we will be able to identify and/or remedy the causes of plant unreliability. Even if we can identify the causes, there is no certainty that we will be able to implement cost effective solutions or PiP in such a way as to maximize the potential benefits that PiP may afford due to the requirements to maximize the output of our plants. The amount we are able to spend on PiP will be affected by the availability of our cash resources and, in the future in certain circumstances, may be restricted or prohibited by our arrangements with the Nuclear Liabilities Fund (“NLF”). Furthermore, our ability to undertake the proposed expenditure may be affected by requirements to undertake urgent remedial work at one (or more) of our nuclear power stations.

Our nuclear stations utilize sea water for condensing the steam from the turbines and for cooling the reactor pressure vessel and turbine-generator auxiliaries. These systems are essential to support generation and a failure of them could result in lost generation, adversely affecting our revenues and profitability.

In financial year 2003/04, the failure of a cast iron pipe carrying sea water at Heysham 1 resulted in unplanned losses of some 3.2 TWh. Hunterston B, Hartlepool and Hinkley Point B and to a much lesser extent Dungeness B, Heysham 2 and Torness nuclear power stations also use cast iron pipe work for carrying sea water.

We consider that this cast iron pipework has previously suffered as a result of insufficient maintenance and lack of investment. To address the problem, we have developed a strategy to

4

systematically replace the existing cast iron pipe work at these nuclear power stations with steel pipe work coated with a corrosion resistant barrier. The corrosive nature of sea water may affect other parts of our pipe work systems, although inspection and maintenance strategies are in place to mitigate this risk. This program of work started in 2004 and the work has been substantially completed at Hartlepool. It is planned to continue through 2005/06 and 2006/07 to complete work at the other stations. There can be no assurance that there will not be further unplanned losses if any failure occurs before the planned program of work is completed.

Problems of potentially damaged boiler closure unit pre-stressing tendons and bolts and subsequent inspection requirements at our Hartlepool and Heysham 1 nuclear power stations could negatively affect our profitability or revenues.

At our AGR stations, tendons (comprised of steel wires) are used to maintain the integrity of the pre-stressed concrete pressure vessel. During fiscal year 2004/05 we identified corrosion induced failure in a small number of individual tendon wires at Hartlepool. The access for inspection and repair to these tendons was straightforward, and hence repairs were considered to be undemanding.

However, steel pre-stressing wires are used to fulfil a similar safety functional requirement to assure the integrity of the boiler closure units (which are housed within the concrete pressure vessels) at our Hartlepool and Heysham 1 nuclear power stations. As a result of the discovery of corrosion induced failure of the tendon wires (as described above), the Nuclear Installations Inspectorate (“NII”) (the UK body which administers nuclear site licenses) concluded that boiler closure unit steel wires could also suffer from corrosion induced failure. Due to the belief that their failure was highly unlikely, the boiler closure unit wires, unlike the pressure vessel tendon wires, were not designed with an engineered facility for inspection and therefore are more difficult to inspect. To address the NII’s concerns with these wetted enclosures we completed a limited inspection of the boiler closure unit tendon top anchorages and limited sections of the tendon wires at three of our Hartlepool and Heysham 1 reactors and have demonstrated as far as can be determined, that the tendon wires are intact and free from corrosion. These three reactors returned to service in December 2004. None of our other reactors is affected by this issue.

However, we may wish, or be required by the NII, to make further more detailed inspections at these three reactors. Techniques are being developed for such inspections and preliminary trials were deployed successfully during an outage on one reactor at Heysham 1 earlier this year. The techniques are aimed at minimizing the level of intrusion and loss of output.

A further risk associated with boiler closure units was identified during an outage at Heysham 1 in May this year. This is the potential for stress corrosion cracking of the primary “holding down” bolts. There are forty-eight bolts per boiler closure unit and the risk of stress corrosion cracking is associated with the presence of water and carbon dioxide (“CO₂^”). Work programs are ongoing to develop our understanding of, and to address, this risk.

A significant engineering fault or a design flaw at one of our nuclear power stations, or one which is generic to a class of nuclear power stations, could decrease our revenues and increase our costs.

A major engineering fault at one of our nuclear power stations for example, affecting gas circulators, boiler closure units, reactor coolant pumps or pipework systems, could result in the closure of that station ahead of its expected closure date. Furthermore, engineering faults or safety risks arising from a design problem that is generic to a particular type of nuclear plant could result in the closure of all our nuclear power stations of the same nuclear plant design ahead of their expected

5

closure dates. The early closure of one nuclear power station or any one type of nuclear power station would result in a loss of planned future output and income and result in costs associated with the closure of the affected nuclear power station or stations.

To deal with the potential of a major engineering fault, we have extensive inspection and testing programs in place in order to evaluate the physical condition of our nuclear power stations. These programs periodically identify certain technical issues for resolution. However, there is no assurance that our inspection process will identify all significant problems and the identification of technical issues with respect to our nuclear power stations may require us to incur significant expenditure for repairs or replacement of parts or equipment. This may result in lost output and income due to the outages necessary to complete such repairs or replacements.

There is also a risk that we may, through our ongoing review of our safety cases (i.e. Periodic Safety Reviews (“PSRs”)) or our ongoing investigations and research activities, identify a significant shortfall. Such a shortfall may relate to a safety case argument or supporting analysis or revised material properties or other plant performance aspect, which undermines a critical element or elements within a safety case. The resolution of the issue may entail plant shutdown, reduced power operation or extensive plant modifications.

Problems of graphite core brick cracking and reduced boiler life could negatively affect our profitability and the lifetime of our AGR power stations.

Graphite core brick cracking and reduced boiler life could lead to prolonged outages for testing and, potentially, early station closures at certain of our AGR power stations. These risks are explained in greater detail below.

Graphite core brick cracking

The graphite cores in the AGRs are made up of a large number of graphite bricks arranged in layers. Over the course of the nuclear power generation process, the graphite bricks suffer from degradation.

Analysis has shown that this degradation can result in a significant number of the graphite bricks developing single or multiple cracks. We are not aware of any technique for eliminating the cracks. Such cracking could lead to the distortion of the core structure and the reduction of the AGRs’ operational capacity.

While our understanding of this issue continues to develop, there is uncertainty as to the level of tolerance of graphite bricks to multiple cracks that can be demonstrated and which may be acceptable to us or to the NII. As such, the development of a safety case supporting the continued operation of the reactor may not be possible. The potential impact of this risk is that the currently assumed station lifetime may not be achieved and any further extensions to station lifetime may not be possible.

We carry out periodic inspections on the AGR cores during statutory outages and continue to develop safety cases that demonstrate the tolerance of graphite core brick cracking. However, until we fully understand whether it is possible to devise ways to control or minimize the consequences of further graphite core brick cracking, our plants may require increased levels of, or more frequent, inspections to support our safety cases. This could result in prolonged statutory or unplanned outages, or a refusal by the NII to permit us to operate a particular reactor.

Additionally, graphite brick inspections at Hartlepool nuclear power station during 2004 revealed double, axial cracking in two graphite bricks in one of the reactors. This type of cracking had not been anticipated by our analytical models. A revised safety case was required to support the return to service of the Hartlepool and Heysham 1 nuclear power stations (which are of a very similar design) and this safety case placed increased emphasis on inspection and monitoring of the graphite core. We

6

have undertaken further inspections of graphite bricks at these power stations. The revised safety case could potentially require longer than anticipated statutory and refueling outages to enable further inspections of the graphite bricks in future years and this will adversely affect our profitability.

Boiler life

The boilers at our AGR power stations consist of multiple steel tubes over which the hot reactor gas flows in order to boil the water that flows through the tubes. Actual or potential failure or fouling of any of the boiler tubes could result in prolonged outages in order to complete inspection or repairs or lead to station closure. Outages may also arise as a result of inspections necessary to demonstrate the integrity of the boilers.

If a boiler tube were to fail, action would be taken to permanently seal-off the leaking tube from the incoming water supply. This may result in a permanent reduction in boiler performance and, consequently, our ability to generate electricity. If, ultimately, we are not able to repair the boiler tubes, it may not be possible for us to demonstrate a safety case for the continued operation of that reactor and the assumed station lifetimes at that time may not be achieved.

In addition to the general problem of boiler tube leaks at each of our AGR power stations, specific design issues at some of our stations could lead to further significant threats to boiler life. At Hartlepool and Heysham 1, the design adopted is unique in that a central cylindrical segment called a “spine” supports the boiler. The spine construction incorporates the main water inlet and is fabricated from different materials selected to suit the specific operating conditions. The various elements that make up the spine are welded together to form one fabricated section. A small number of these welds are susceptible to high temperature re-heat cracking. Failure of these welds could result in collapse of the boiler with consequential damage to the reactor pressure vessel and other reactor internal components. The boiler spine design and layout makes physical inspection or repair of the vulnerable welds difficult. The safety case for boiler operations is therefore extremely complex and has required us to develop novel methods of analysis to establish the safety justification. If further material analysis and remote inspection fails to strengthen the current safety case, this could shorten station life at some of our nuclear power stations.

Obsolescence of some of our equipment, component parts and computer systems (for example, our data processing systems) that are required to operate our power stations and monitor plant stability could result in higher operating costs, unplanned losses or the closure of our power stations.

The first of our nuclear power stations became operational in 1976 and the Eggborough power station became operational in 1968. As a result, it is becoming increasingly difficult to source replacement parts for some older equipment and to find engineers qualified to service certain equipment, in particular our aging computer and other information technology systems that were installed at or about the time the plants were constructed. We may not be able to maintain our older equipment on a cost effective basis or at all. The increasing obsolescence of some of our parts and systems and/or the inability to secure replacements could result in an increase in unplanned losses, longer planned outages, significantly higher repair costs and/or the closure of our stations.

The condition of some of the plant, equipment and components at our power stations is subject to gradual deterioration over time. This could result in higher operating costs, unplanned losses and/or the closure of our power stations.

The impact on the condition of some of the plant, equipment and components at our power stations of operations and natural processes such as erosion and corrosion tends to increase as such plant, equipment and components grow older. While we attempt to implement inspection and

7

maintenance practices such that we repair or replace such plant, equipment and components before they fail, there is no guarantee that we will be successful or that we will be able to identify all such relevant issues in advance and consequently we may experience unplanned losses which will adversely impact on our profitability.

In addition, the Group’s insurances contain standard exclusions and restrictions and the material damage and business interruption cover does not therefore provide cover for damage caused by, for example, losses due to erosion, corrosion, stress corrosion or cracking. Consequently, we may not be able to claim under our material damage and business interruption cover in such circumstances.

The failure of our AGR fuel could result in decreases in our output and revenues.

AGR fuel is contained inside a stainless steel fuel can which acts as the primary barrier for any fission products produced by the fuel during operation. If the steel fuel can cracks, then the fission products will leak into the CO₂ that is used to cool the reactor. As many of these fission products are radioactive, any major leakage into the CO₂ will potentially contaminate large parts of the reactor which in turn will lead to major operational difficulties. It is therefore important to minimize fuel failures.

We have experienced on average one fuel failure per year across our fleet of AGR stations in the period 1976 to 2000. From 2001 to date, we discovered 28 further AGR fuel failures. Seven of these arose in 2005. The risk posed to the operation of the AGR fleet by failed fuel has therefore increased over this period, noting that the risk is judged to be primarily to our ability to operate profitably although implications for nuclear safety also require to be managed. The most significant economic risk is currently at Dungeness B, where a failure type exists which has the potential to contaminate the reactor, threatening continued operation.

Depending on the cause of fuel failures, or in the event of a very high level of uncertainty of the root cause and/or the associated consequences of failure we may have to shut down one or more of our nuclear reactors. In order to do so, we are, in certain cases, reliant upon services provided to us by Nexia Solutions, part of the British Nuclear Fuels plc group (“BNFL”). BNFL is a company wholly owned by the UK Government (the “Government”). If they were unable or unwilling to provide such services, we may be unable to determine the cause of such failures. Any nuclear power station closure or prolonged outage could adversely affect our business and profitability.

Our business depends on equipment and service suppliers of a specialized nature. If they fail to provide necessary equipment and services on a timely basis, discontinue their products or services and/or seek to charge us prices that are not competitive, this could adversely affect our business and/or profitability.

We depend upon a small number of specialized suppliers for essential products and services which are unique or highly specialized to our industry. Consequently, if our suppliers are unable or unwilling to deliver products and services on a timely basis and at reasonable prices, or if their products are found to be faulty or outside specification, this may impact negatively on our ability to continue to operate our power stations economically (or at all), and would have an adverse effect on our financial condition and results of operations. In addition, as our plants age, the costs associated with the sourcing of spare parts are likely to increase.

Our AGR fuel is fabricated by BNFL, the only supplier of AGR fuel in the world. To protect against any short term disruptions in supply we maintain a stock of fuel elements at each of our AGR power station, (in addition to any stock held by BNFL). This, along with the fuel in our reactors, is sufficient to maintain normal operations for between three to six months. However, we cannot rule out a more extended disruption in fuel supply which could result in reductions in our output. The availability and quality of tie bars, CO₂ and other gasses is also important in maintaining output.

Our spent AGR fuel is delivered to BNFL which provides spent fuel management services at its Sellafield site in Cumbria, England (“Sellafield”). We are able to store approximately nine months’

8

arisings of spent fuel at each nuclear power station and, with the storage facilities usually holding approximately six months’ spent fuel, this leaves approximately three months’ additional capacity in the event of any short term interruptions in the movement of spent fuel to Sellafield. Typically storage facilities are therefore around two-thirds full at any time, although currently stocks of spent fuel are higher than this. If a nuclear power station’s spent fuel storage facilities became full, the station could theoretically continue to generate electricity but the volume of electricity produced would gradually reduce as the fuel in the reactor was consumed. It would not be possible to load additional fuel into the reactor until at least the equivalent quantity of stored spent fuel was despatched to Sellafield.

On April 21, 2005 British Nuclear Group Limited (“BNG”) a subsidiary of BNFL, reported that a pipe had failed in one of the heavily shielded cells, known as the feed clarification cell, in the thermal oxide reprocessing plant (“THORP”) at Sellafield. This resulted in a quantity of dissolved nuclear fuel being released into a sealed, contained area. THORP receives and reprocesses spent or used nuclear fuel from our AGRs and also from Light Water nuclear reactors. Reprocessing separates out the components of used fuel which comprises 96 per cent. Uranium, about 1 per cent. Plutonium and some 3 per cent. waste. Both the Uranium and Plutonium can be recycled into fresh fuel.

Since this event was reported, BNG have completed recovery of the escaped liquid back into primary containment. A Board of Inquiry was established by BNG and has reported. BNG have stated that they are confident that they have the capability of returning THORP to service.

BNG have assured us that the necessary steps will be taken to maintain continuity of AGR receipts at Sellafield, both during the current period of uncertainty regarding THORP and through to the end of life of our AGR stations. We understand that the Nuclear Decommissioning Authority (the body established to oversee and manage the clean up of the UK’s civil nuclear sites (“NDA”)) share similar views to BNG. There are no feasible alternative options to Sellafield for the long term management of our spent fuel which could be deployed on realistic timescales.

Our front end and back end contracts with BNFL provide that in the event it ceases to carry on business in the relevant services or notifies us that it is otherwise unwilling or permanently unable to provide the services it has contracted for, it will offer us assistance to seek to ensure continuity of supply. This assistance is dependent on the terms of the relevant contract. It can include provisions of access and rights to use relevant intellectual property and in certain contracts facilities.

In the case of certain of our contracts for the provision of services, the liability of the service provider is capped and consequential losses that may be suffered by us are excluded. While these are not unusual contractual provisions, the consequences to us of a breach or non-performance by a service provider may be severe (for example certain agreements are required to be in place to meet nuclear site license requirements and may be difficult to replace) and we would almost certainly not be able to recover the loss we may suffer as a result of breach or non-performance by these counterparties.

Our turbines, generators and certain other plant components are designed, manufactured and maintained by a small number of key suppliers. We are reliant upon certain of these suppliers for the supply of parts and for servicing and maintenance. If they fail to provide parts and/or perform servicing or maintenance to an appropriate quality, this could result in the shutdown or catastrophic failure of one or more of our turbines, generators or other plant components.

Certain of our office facilities are at risk from fire, flood and explosion which may lead to business interruption

Certain of our offices contain concentrated groupings of suitably qualified and experienced staff and computer systems that are necessary for the efficient operation of our business. If these facilities

9

were to be substantially damaged by fire, flood or explosion then we may experience difficulties in maintaining business continuity, for example in our trading operations and work management support, which could adversely affect our profitability and cash.

We employ a large number of agency staff at our power stations and in our support functions.

We depend on a large number of agency staff to support our power stations and other corporate functions. Consequently if we are unable to employ an adequate number of suitably experienced staff as required or the employment agencies used by us seek to charge us prices that are not competitive, this could adversely affect our business and/or profitability.

The unavailability of component parts could adversely affect our revenues and profitability.

The failure of certain components in use at our power stations could result in unplanned outages to effect repairs. The duration of the outages is influenced by, among other things, the lead-time required to manufacture and procure replacement components. Certain components (e.g. turbine rotors and transformers) are complex and may take several months to manufacture. To reduce the impact of the failure of such items we hold spare components at our power stations and in a central storage facility. We also participate in “spares clubs” where the cost of holding expensive replacement components is shared with other parties. Although we aim to optimize our spares holdings we cannot guarantee that we will always have ready access to the required component in the event of a failure and we may incur extended unplanned outages while we obtain the required component.

We continue to face liquidity risks associated with the seasonality of our business and the provision of collateral to our counterparties.

The UK electricity market is characterized by lower demand in the summer months and therefore comparatively lower market prices, which leads us, where possible, to plan statutory outages in this period. Accordingly, positive cash flow is reduced through the combined effect of lower prices and output. In addition, the historic high volatility of market prices increases the liquidity risk as a result of collateral calls due to increases in market prices. We may also receive requests to provide collateral (or increased collateral) from counterparties who do not currently require collateral (or who have not exercised their contractual right to have contractual obligations fully supported by collateral). While we closely monitor these risks and continue to adopt mitigation strategies through trading and procurement operations, it is possible that these strategies will not be as effective in minimizing these risks as planned.

We have entered into a trading strategy that seeks to reduce the price risk associated with the cost of our electricity generation. However, this may result in an increase in collateral requirements if market prices rise. In addition, should various other unforeseen events occur which place demands on cash flow, our financial resources may prove to be insufficient.

We have entered into short-term and medium-term trading contracts and other financial products with market counter parties and short-term and medium-term sales contracts with other industrial and commercial customers to hedge a significant proportion of our output against downward movements in market price. However, as a result of this, our cash flow benefits from market price increases are reduced while the level of collateral calls made by trading counterparties increases to cover their mark to market exposure.

Our trading strategy uses diverse routes to market and aims to maintain an appropriate balance between the importance to us of maintaining a high degree of certainty of our revenues and collateral requirements, as well as continuing to take steps to identify and manage cash flow risks and manage cash resources. However, we cannot be certain that the level of funding available to us will be sufficient to meet our needs to hedge the market risks we face.

10

Lack of liquidity in the wholesale market for electricity may adversely affect us or require us to alter our trading strategy.

Liquidity in the wholesale electricity market is dependent on there being a sufficient number of counterparties willing to trade actively in the market and with us. Changes to the market structure, and yet further consolidation of the existing generation and supply businesses, could result in a reduction in the number of active participants in the market with whom we are able to trade. This may affect our ability to sell all of our output.

This could also reduce the level of liquidity in the traded market to such an extent that we are no longer able to rely on wholesale market trading as a means of hedging our short-to-medium term exposure to wholesale electricity market prices and balancing our portfolio. We also rely on reported prices from a liquid traded market to deliver reliable reference prices which are used within a number of our indexed price contracts. Thus a lack of liquidity could result in us incurring higher hedging or balancing costs to achieve our trading objectives, if the reported price is not a fair reflection of the cost of electricity production.

We have also sought to increase the use of financial instruments such as options as a means of hedging our trading risks. Our ability to use such products may be limited by the availability of a liquid and transparent market in such instruments.

We may suffer financial loss as a result of parties to whom we supply under contracts defaulting due to bankruptcy or other financial hardship.

We are a net seller of electricity and receipts for electricity delivered are normally received about one month in arrears; consequently there is a risk of financial loss arising from the financial difficulties of our counterparties. In addition, movements in the market price from the time a particular sale (or purchase) contract for electricity or other energy-related commodities was agreed expose us to risks of loss in the event of default. Additional costs of having to replace these contracts at the prevailing market price will be incurred if market prices have fallen in the case of sales contracts (or risen in the case of purchase contracts).

Proposed arrangements governing the cost of electricity transmission in the UK could reduce our ability to trade profitably in the future.

On January 17, 2003, the United Kingdom’s Gas and Electricity Markets Authority (“GEMA”) directed that a modification should be implemented to the Balancing and Settlement Code (“BSC”) to introduce zonal marginal transmission losses, with effect from April 2004 in England and Wales. On January 30, 2003, the Government issued a consultation paper on whether these changes were appropriate for Great Britain as a whole, and concluded on June 27, 2003 that they were not minded to include zonal losses as part of the initial reforms to the BSC.

There is a risk that a proposal to introduce zonal charging for losses will be made following the implementation of the British Electricity Transmission and Trading Arrangements (“BETTA”) (which extended the market arrangements already applicable in England and Wales to Scotland) on April 1, 2005. Under such a proposal, some generators would pay for a proportion of transmission losses for which they were not previously responsible. The proposal would be unfavorable to generating plants located in the north of England and Scotland which make up a significant portion of our generating capacity. Therefore there is a risk that, given the geographical distribution of our power stations, we might be significantly adversely affected by such a proposal.

11

While our understanding of potential contaminated land liabilities at our power stations continues to grow, we have yet to fully implement risk management systems at all sites that will allow us to monitor liabilities at those sites and develop more informed assessments of any such liabilities. Consequently, we are currently unable to predict the likely cost of all our contaminated land liabilities.

With the exception of Dungeness B, where an extensive remedial operation in response to historic spillages of diesel to ground has now been completed, we currently have only limited data from physical site investigations to support our assessments of contaminated land liability at our power stations. However, an independent expert review was recently carried out to review the potential for any significant contaminated land at our nuclear power stations. This expert review, completed in January 2002, suggested that there were no obviously significant problems but it did highlight areas of vulnerability to contamination at a number of our sites and the need to establish groundwater monitoring networks and allied procedures at each.

Work is now underway to establish these networks and once complete they should further facilitate both our assessment of any such potential liability and any necessary review of local management procedures.

A ground contamination risk assessment carried out at the Eggborough power station has concluded that the site has significant potential to affect local groundwater quality and is vulnerable to contamination migrating from neighboring landfill sites. Although no significant contamination problems have been observed at the Eggborough power station to date, we cannot be certain that none will occur in the future and therefore cannot exclude the risk of significant unforeseen clean-up costs.

Certain types of nuclear liabilities arising at our power stations are not covered by the scope of the Nuclear Liabilities Funding Agreement (“NLFA”) or the Historic Liabilities Funding Agreement (“HLFA”) entered into in connection with our Restructuring

These include those liabilities which are adjudged to have arisen as a result of our compliance standards (including our safety or environment standards) falling below those of the minimum performance standard or minimum contracting standard agreed under the NLFA or HLFA respectively, or by the implementation of operational changes made by us other than to meet current or reasonably anticipated legal or regulatory requirements or to comply with practices and procedures both considered by, and acceptable to, the relevant regulators and will thus remain for our account. While the definitions of minimum performance standard or minimum contracting standard may be known it is not currently certain how such minimum performance standards would be interpreted or applied. It may also be difficult to be certain whether the implementation of operational changes would be considered to meet reasonably anticipated legal or regulatory requirements or to comply with practices and procedures both considered by, and acceptable to, the relevant regulators. Consequently, the nature or quantum of these liabilities is uncertain.

The potential hazards of nuclear operations (including nuclear operations carried out by other operators in the UK and elsewhere in the world) could expose us to the risk of, amongst others, material liabilities, lost revenues and increased expenses

Our operations use and generate radioactive and hazardous substances that have the potential to seriously impact human health and the environment. There are particular risks associated with the operation of nuclear power stations. These include accidents, the breakdown or failure of equipment or processes or human performance, including our safety controls, and other catastrophic events such as earthquakes, fire and flood that could result in the dispersal of radioactive material over large areas, thereby causing injury or loss of life and extensive property or environmental damage. Certain of these events, including those arising as a result of third party acts, such as acts of terrorism or war, are not

12

within our control. Liabilities we may incur, and interruptions in the operation of a nuclear power station caused by these events or associated with any of the radioactive or hazardous materials involved, could significantly reduce our revenues and increase our expenses. Insurance proceeds may not be adequate to cover all liabilities incurred, lost revenue or increased expenses. Analogous incidents occurring at other nuclear power stations elsewhere in the world may result in similar losses regardless of our having no control or influence over such incidents.

The continued operation of the Eggborough power station is subject to a number of factors which could increase our costs and decrease our revenues. In particular, introduction of the EU Emissions Trading Scheme (“ETS”) and Large Combustion Plant Directive (“LCPD”) are major environmental initiatives which will have an important impact on the Eggborough power station as they seek to reduce carbon dioxide and other emissions.

Eggborough power station was constructed in the 1960s and is approaching the end of its originally anticipated operating life. It has been, and will continue to be, operated as a flexible mid merit plant and this will increase the wear and tear on component parts and has the potential to accelerate the end of its economic life. Eggborough has also been, and will continue to be, subject to routine and other maintenance and repair. In order to continue its economic operation, and to comply with environmental and other regulations, it has also been, and may in future be, necessary to make modifications to Eggborough. We believe that we are likely to be required to make further repairs and/or modifications to Eggborough as its age increases and, insofar as such requirements are currently understood, such requirements are already in our plans.

We cannot guarantee that we will be able to make any required repairs or modifications to Eggborough power station either economically or at all including pursuant to our legal obligations under the documentation entered into in connection with our Restructuring. Similarly, we cannot be certain that any such repairs or modifications will successfully rectify any problems and/or allow the continued operation of the Eggborough power station without interruption or at all. This may result in lost output and could adversely affect our revenues and profitability.

The ETS commenced on January 1, 2005 and its effect is to impose a cost on the emissions of carbon dioxide from power stations and other industrial processes. The LCPD is due to become effective on January 1, 2008 and, in replacing the previous Large Combustion Plant Directive, will further restrict the limits of permitted emissions by Eggborough. Certain issues relating to the application of this legislation in the UK are not yet resolved and therefore we cannot be certain of: (i) the impact on output; (ii) the likely costs associated with any required engineering or structural changes to the Eggborough power station which may be required to ensure compliance; or (iii) how the legislation will affect the electricity generation market and, in particular, the price of electricity in the medium-to-long term.

Our business is subject to extensive and unique regulations.

As an owner and operator of nuclear and coal-fired power stations, we are subject to extensive governmental regulations. We are subject to, among others, nuclear safety, electricity market, security and environmental regulations of the UK, the EU and other governmental authorities. Unexpected or adverse changes in these regulatory regimes could adversely impact our business and profitability. Changes in regulations governing, and/or the personnel regulating, nuclear safety in the UK may result in the modification, suspension or revocation of our licenses to operate nuclear power stations, or require us to incur substantial additional cost for capital expenditure and/or services and labor.

A feature of the nuclear licensing regime is that we must conduct PSRs at each of our nuclear power stations every 10 years which may affect how, and for how long, we operate our stations and may result in significant additional costs. We must also obtain the approval of the NII to restart a

13

nuclear power station after a statutory outage and after an unplanned outage to address an emergent issue that has affected the reactor’s safety case. In granting permission to re-start, the NII take comfort from the level of British Energy’s knowledge and understanding of reactor performance. Consequently, wherever outage inspections indicate potential issues outside of the predicted norm, there is a heightened risk that delays to re-start may occur as a result of the regulator’s intervention. The refusal of the NII to approve, or any delay in gaining approval from the NII, to continue or restart the operation of any of our nuclear power stations, would adversely affect future revenues and reduce our ability to trade profitably.

We are revising certain aspects of the safety cases at our AGR power stations in the light of developing regulatory standards. Whilst we are dedicating significant resources to resolving these outstanding safety case points, there can be no assurance that one of these issues may not lead the NII to refuse consent to restart one of our reactors following a statutory or unplanned outage or require it to communicate to us that it would oppose our restarting a reactor on its return from a refueling outage. If the NII takes such action, this, too, would affect future revenues and reduce our ability to trade profitably.

Our operations are regulated and subject to audit by the Office for Civil Nuclear Security (“OCNS”). The OCNS annual report published in July 2005 (entitled: The State of Security in the Civil Nuclear Industry and Effectiveness of Security Regulation April 2004 - March 2005) outlines the changes in the strategy for securing the safety of the UK’s nuclear power stations. We are working with the OCNS, along with other nuclear operating companies, to introduce, where necessary, enhancements to our security arrangements which has resulted and will result in increased security costs. The OCNS annual report for the year ended March 2005 was published on July 25, 2005.

A failure to comply with, or the incurrence of liabilities under, environmental, health and safety economic and competition laws and regulations to which we are subject, or a failure to obtain or maintain required environmental, health and safety regulatory approvals, could adversely affect our business or our ability to trade profitably.

We are subject to various environmental and health and safety, economic and competition laws and regulations governing, amongst other things: (i) the generation, storage, handling, release, use, disposal and transportation of hazardous and radioactive materials; (ii) the emission and discharge of hazardous materials into the ground, air or water; and (iii) decommissioning and decontamination of our facilities and the health and safety of the public and our employees. Regulators in the UK, including the NII, Environment Agency (the “EA”) and the Scottish Environment Protection Agency (“SEPA”), the Office of Gas and Electricity Markets (“OFGEM”), the Financial Services Authority and the Office of Fair Trading (“OFT”) administer these laws and regulations. Additionally, the European Community (“EC”) administers European laws and regulations.

We are also required to obtain environmental and safety permits from various governmental authorities for our operations. Certain permits require periodic renewal or review of their conditions and we cannot predict whether we will be able to renew such permits or whether material changes in permit conditions will be imposed. Therefore, we may not have been, or may not at all times in the future be, in complete compliance with such laws, regulations and permits. In this regard, following a number of minor incidents in 2003, the EA have indicated that there will be increased scrutiny by them over us. The cost of complying with such laws, regulations and permits may also increase. Violations of these laws, regulations or permits could result in plant shutdowns, fines and/or litigation being commenced against us or other sanctions. Other liabilities under environmental laws, including clean-up of radioactive or hazardous substances, can be costly to discharge. Environmental liabilities or failure to comply with environmental laws could also lead to negative publicity and significant damage to our reputation.

14

While we cannot predict with any certainty the nature of developments in environmental regulation and control, we anticipate that the direction of future changes will be towards stricter controls. In view of the age and history of many sites we own or operate, we may incur liability in respect of sites that are found to be contaminated, together with increased costs of managing or cleaning up such sites. Site values could be affected and potential liabilities and clean-up costs may make disposal of potentially contaminated sites more difficult. It is possible that any clean-up costs would have an adverse effect on our business or our financial condition or results of operations.

Environmental and health and safety laws are complex, change frequently and have tended to become more stringent over time. Whilst we have budgeted for future capital and operating expenditures to comply with current environmental and health and safety laws, it is possible that any of these laws will change or become more stringent in the future. Therefore, our costs of complying with current and future environmental and health and safety laws, and our liabilities arising from past or future releases of, or exposure to, radioactive or hazardous substances, could adversely affect our business or our operating or financial performance.

Violations of economic or competition laws or regulations could result in the imposition of fines, the revocation of licenses to operate within the UK electricity market or the voiding of agreements.

The proximity of certain of our nuclear power stations to Magnox stations could result in potentially harmful materials in the ground migrating across the boundary onto our own sites. UK law currently provides that, unless we can provide adequate evidence to the contrary, any liability associated with such material under our sites would belong to us even though its initial occurrence there is beyond our control. Radiological contamination from neighboring Magnox plant may render one or more of our sites radioactive and could prevent its operation.

Each of Hunterston B, Dungeness B, Hinkley Point B and Sizewell B is located close to Magnox nuclear power stations owned by the NDA. Groundwater monitoring networks are now in place at Hunterston B, Dungeness B and Sizewell B that should allow the migration of potentially contaminating material from the neighboring sites to be identified. Although the need has been identified, an equivalent network has yet to be established at Hinkley Point B.

The statutory regime governing contaminated land in the UK provides, broadly, that if the person who is alleged to have caused a contaminated land liability cannot be identified, the land owner/occupier will be held liable for the costs of remedying the problem. Therefore, we cannot be certain that the costs of complying with this regime will not adversely affect our business or our operating or financial performance, as it may not always be possible to identify another operator as a responsible party.

We are involved in a dispute that if resolved or determined against our interests could adversely affect our profitability and our available cash.

On February 12, 2004, the consortium that purchased our 82.4 per cent. interest in Bruce Power LP and its 50 per cent. share in Huron Wind Limited Partnership (collectively “Bruce”) served a notice on us alleging a breach of certain warranties and representations relating to tax and to the condition of plant at the Bruce power station.

The tax claim relates to the treatment of expenditures at the Bruce plant during the period of our ownership which is currently under review by the Canadian tax authorities. While we have proposed a treatment that could result in a material tax rebate, the consortium claims that the allowance of the expenditures for that period would cause it to lose future deductions.

15

The claim relating to the condition of the plant is based upon alleged erosion of certain parts of the steam generators including support plates through which boiler tubes pass. It is alleged that this erosion resulted in an extended outage at one unit at the plant in order to carry out repair works and loss of revenues and costs of approximately C$64.5 million. The consortium also claims that the alleged erosion may reduce the operating life of the unit and/or or result in expenditures for further repairs. We have rejected the foregoing claims and intend to defend them if they are pursued further. In accordance with accounting standards, no provision has been made in the financial statements at March 31, 2005 for either claim.

If the Bruce plant claim is resolved against us, it could have an adverse effect on our results of operation and our available cash.

We do not currently own the rights of support for the land under the Eggborough Power Station.

Eggborough does not enjoy a protected right of support. As a result, there is presently no restriction on coal mining taking place in circumstances whereby the stability of the Eggborough power station could be affected. We have tried, without success, to negotiate an acceptable pillar of support agreement with UK Coal Mining Limited (“UKC”) (the holders of a license from the Coal Authority to mine coal).

If UKC were to mine under or in proximity to the Eggborough power station in circumstances affecting its stability, then extensive liabilities would fall on UKC pursuant to the Coal Mining Subsidence Act 1991. Under this Act, the coal operator is required to carry out remedial works and/or make payments for the consequences of the mining damage.

We submitted an application to the Secretary of State for Trade and Industry (“Secretary of State”) pursuant to the Mines (Working Facilities and Support) Act 1966 for restrictions to be imposed on the working of minerals under part of land affecting Eggborough, and land adjacent to it as may be necessary to secure sufficient support. Our application was not successful. As a consequence, the stability of Eggborough may be adversely affected if UKC were to mine under or in proximity to it. If this were to occur, it may not be possible to continue the operation of Eggborough power station, or substantial repairs could be required, adversely affecting our financial condition.

Our right to use certain ash and water pipelines which benefit Gale Common ash disposal site near Eggborough and the Eggborough power station is not registered with the Land Registry and is based solely on statutory declarations. In the event that our right to use any part of these pipelines is successfully challenged, we would be unable to continue to benefit from them and the operation of Gale Common and Eggborough power station would be adversely affected.

Title to the use of much of the ash pipeline at Eggborough power station, the water pipeline from Gale Common to the River Aire and sections of the Eggborough cooling water pipes is not granted by deed nor referred to on the relevant registers at the Land Registry and is based solely on statutory declarations for a period from 1974 (in relation to the water pipelines) and from 1983 (in relation to the ash pipelines and cooling water pipes). The evidence contained in the statutory declarations will only be an effective step towards establishing title by long use provided that no contrary evidence comes to light which cannot be satisfactorily explained and no arguments are upheld based on lack of relevant knowledge of the existence of the pipelines by landowners. We cannot guarantee that we will be able to establish title by long use and therefore that if the pipelines were disconnected due to successful objections to their use by one or more of the affected landowners, the consequent interruption of the use of the pipelines, the need to obtain new rights and the work required to relocate them would not be detrimental to the operation of Eggborough power station.

16

In addition, title to the use of the remainder of the ash pipeline and of the cooling water pipes is based on the grant of licenses, many of which are terminable on notice of various lengths but frequently of six months or less. If they were terminated and the pipelines disconnected, the consequent interruption of the use of the pipelines, the need to obtain new rights and the work required to relocate them could be detrimental to the operation of Eggborough power station.

The cost of providing pensions benefits to employees is subject to changes in pension fund values, changing demographics and changes to pension legislation, and might have a material adverse effect on our financial results.

We operate two pension schemes that provide defined benefits to eligible members and beneficiaries. The actuarial valuations of the two pension schemes as at March 31, 2004 disclose funding deficiencies (on the actuarial bases used in the valuations) in the two schemes at that date of £375,800,000 and £8,800,000 respectively. The investment performance of our pension fund assets may have an adverse effect on our business. The cost of providing pension benefits could increase as a result of changes in pension fund asset values and changing demographics, including longer life expectancy of the schemes’ beneficiaries. We may be required to recognize a charge to our profit and loss account to the extent that the pension fund values are less than the total anticipated liability under the plan. In addition, we are required to contribute additional amounts to our pension funds to address any difference between pension fund values and accrued liabilities. We cannot assure you that such charges or payments will not have an adverse effect on our financial condition.

We have also granted the Secretary of State an option (the “Option Agreement”) to acquire our nuclear power stations in order to decommission them or extend their operating lives. The Option Agreement provides for, amongst other things, arrangements in respect of pensions of employees following the exercise of the option. This is a matter that is to be addressed at a date closer to the relevant nuclear power station’s scheduled closure date. It is not possible to say what, if any, effect the arrangements, when agreed, will have on our financial position.

A high proportion of our pension schemes’ investments are held in equities. One consequence of this investment policy, and the methodology and assumptions used for determining our pension schemes’ liabilities under FASB Standard No. 87, Employers’ Accounting for Pensions (“SFAS 87”), is that the difference between the market value of the fund’s assets and their SFAS 87 liabilities is expected to be volatile, resulting in potentially significant movements in the balance sheet position and the statement of total recognized gains or losses. The values of our pension schemes’ assets and liabilities are likely to be high in relation to our market capitalization and any UK GAAP adjustment equivalent to SFAS 87 could have a material impact on the level of distributable reserves under UK GAAP and therefore our ability to pay dividends.

Our inability to attract and retain senior management and employees who are highly qualified nuclear specialists could adversely affect our business

The success of our operations depends largely on our ability to attract and retain senior management and employees who are highly skilled in nuclear sciences, operating nuclear and fossil power plants and also individuals with a proven accounting background and strong commercial skills in trading within our sector. In addition, our internal restructuring and the implementation of PiP may require us to hire further additional staff. It should be noted that there is a limited pool of candidates with these credentials and competition amongst employers is intense. Some of the candidates may come from the international market, where total compensation payable to senior executives may be significantly higher than in the domestic market. We may not always be successful in hiring or retaining the best candidate. Inability to attract or retain the relevant people could have a significant impact on our ability to operate and could adversely affect our business.

17

We have a complex relationship with the Government documented by a number of detailed and structurally intricate agreements. These agreements may inhibit the way we operate our business. If this is the case, our financial results and performance may be adversely affected.

The arrangements we have entered into relating to the Restructuring, are complex and intricate, including the way in which we are classified by the Government and, in many cases, have yet to be tested. If these arrangements prove to be onerous in practice this may inhibit our ability to operate our plant effectively and/or to maximize opportunities for revenue generation and/or output enhancement. The complexity of the arrangements and the possibility that they may prove to be cumbersome may also affect the morale of our employees and their willingness or ability to develop innovative solutions.

Furthermore, the NLF cash sweep may inhibit us from pursuing opportunities to enhance the value of our asset base, for example, by undertaking technical evaluations and improvements in relation to lifetime extensions (for additional information on the NLF cash sweep see Item 4—Restructuring—The Nuclear Liabilities Fund).

Our business is affected by a number of restrictions which restrict our ability to develop new sources of income.

As a result of the compensatory measures undertaken in relation to the State Aid Approval (See Item 4—Restructuring—Approval of State Aid Approval) we undertook not to increase our existing operational nuclear generating capacity or fossil fuel generation capacity in the European Economic Area (“EEA”) and, not to acquire large scale registered hydro-electric generating capacity in the UK, prior to September 23, 2010. Furthermore, the arrangements we have entered into with the Government, details of which are described in the risk factor with the heading beginning: “The decision of the European Commission, that, so far as the Restructuring involves the grant of State Aid by the Government” prohibit us from making expenditure in certain circumstances without its consent. In addition, the restrictive covenants under the bonds issued in connection with the Restructuring (the “New Bonds”) and the receivables facility agreed with Barclays Bank plc on August 25, 2004 as subsequently amended and restated (the “Receivables Facility”) prohibit us from making, amongst other things, material acquisitions. These restrictions significantly limit our ability to develop new sources of income. See also the Risk Factor above: “If we do not find alternative sources of income as our power stations start to close we may not be able to recover our costs from sales revenue”.

Further information on the restrictions affecting the Eggborough power station is set out below in Risk Factor beginning: “As part of the Restructuring we entered into new agreements in relation to the Eggborough power station”.

Our levels of debt could adversely affect our financial condition or results of operations and prevent us from fulfilling our obligations under the New Bonds

Our total consolidated gross debt as of March 31, 2005 was £676 million which is to be repaid by 2022. This level of debt could have important consequences, for example, it could:

• require us to dedicate a substantial portion of our cash flows from operations to payments on our debt, which will reduce our cash flow available to fund capital expenditures, working capital, research and development and other general corporate purposes;

• place us at a competitive disadvantage compared to our competitors who may have less debt than we do;

• limit our flexibility in planning for, or reacting to, changes to our industry;

• increase our vulnerability, and reduce our flexibility to respond to general and industry-specific adverse economic conditions; and

• affect our ability to borrow additional funds, increase the cost of any such borrowing and/or limit our ability to raise equity funding.

18

We require a significant amount of cash to make payments on the New Bonds and to service our debt. Our ability to generate sufficient cash depends on a number of factors, many of which are beyond our control.

Our ability to make payments on, and to refinance, our debt depends on our future operating performance and ability to generate sufficient cash subject to the collateral requirements under our trading arrangements. We are therefore dependent, to some extent, on general economic, financial, competitive, market, legislative, regulatory and other factors, many of which are beyond our control, as well as the other factors discussed in these Risk Factors.

Historically, we have serviced our debt and met our other cash requirements with cash flows from operations and the refinancing of debt. Although we believe that our expected cash flows from operating activities, together with cash in hand and available borrowings, will be adequate to meet our anticipated liquidity and debt service needs, we cannot be sure that our business will generate sufficient cash flows from operating activities, or that future debt and equity financing will be available to us in an amount sufficient to enable us to pay our debts when due, including the New Bonds, or to fund our other liquidity needs.

If our future cash flows from operations and other capital resources are insufficient to pay our obligations as they mature or to fund our liquidity needs, we may be forced to:

• reduce or delay our business activities, capital expenditures and research and development;

• sell assets;

• obtain additional debt or equity capital; or

• restructure or refinance all or a portion of our debt, including the New Bonds, on or before maturity.

We may not be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all. In addition, the terms governing the New Bonds and certain agreements governing our decommissioning and other arrangements with the NLF (the “Nuclear Liabilities Agreements”), will limit our ability to pursue any of these alternatives. If we obtain additional debt financing, the related risks we now face will increase.

We are subject to restrictive covenants

The terms governing certain of our financing arrangements, in particular the New Bonds, the Receivables Facility and the Nuclear Liabilities Agreements contain certain provisions that restrict our ability and the ability of our subsidiaries to do, amongst other things, any of the following:

Make dividends, distributions, investments, and other restricted payments;

Enter into asset sales; and

Incur indebtedness, give guarantees or enter into lease-back transactions.

These limitations are subject to exceptions and qualifications that may be important. These restrictive covenants could adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our best interests.

In addition to limiting our flexibility in operating our business, a breach of these covenants could cause a default under the terms of other financing agreements we may enter into or have entered into causing all the debt under those agreements to be accelerated. If this were to happen, it would adversely affect our financial condition and our ability to continue operating as a going concern.

19

The amount of insurance cover we are mandatorily required to maintain in relation to nuclear liabilities by virtue of the Nuclear Installations Act 1965 (the “NIA”) will increase significantly and there is no assurance that cover for nuclear liability for acts of terrorism will be available from the British Nuclear Pool of insurers (the “Nuclear Pool”) in future.

In early 2004 the Government signed an international treaty amending the existing international conventions dealing with third party liability in the field of nuclear energy with the effect that, amongst other things, the liability of nuclear operators for events involving nuclear material or ionizing radiation which cause damage or personal injury is likely to be increased to €700 million. Furthermore, the definition of nuclear damage is likely to be expanded to include, amongst other things, economic loss. It is likely that the NIA will be amended to increase the level of insurance cover we are required to maintain from the existing £140 million to €700 million. Whilst the Directors believe the insurance market will have sufficient capacity to offer cover for these increased limits, there is no assurance that such cover will be available when required nor that the cost of the insurance will increase in line with the increases in liability limit on a straight-line basis. Our insurers may also seek exclusions and/or higher levels of retention which may affect the ability to make a claim if required to do so.

Cover for nuclear liability by act of terrorism has been obtained for the year ended March 30, 2006 from the Nuclear Risk Insurers Limited. The limit for this cover and the right of recovery by insurers mirrors that under the NIA in respect of nuclear liability. In the period since the terrorist attacks in the World Trade Center in New York in 2001, insurers have remained cautious about offering terrorism cover for UK risks. As a result of this, Nuclear Risk Insurers Limited indicated that it would not provide cover for nuclear liability by act of terrorism without agreement from the Government that the Government would provide reinsurance cover. This arrangement is subject to annual review and has been forthcoming for the last three years. There is no assurance that the Government will be able to do so in the future.

As part of the Restructuring we entered into new agreements in relation to the Eggborough power station. These agreements place certain constraints on the funding of Eggborough and grant the bank syndicate which provided the project finance for Eggborough (the ”Eggborough Banks”) certain rights.

The Restructuring imposed certain constraints on the funding of Eggborough power station by the Group in the period from the Restructuring Effective Date until March 31, 2010 including: (i) specifying the operating and maintenance costs that may be met; and (ii) imposing an approximately £70 million cap (subject to certain de minimis exceptions) on capital investment (the “Relevant Cap”).

In the event that: (i) an operating and/or maintenance cost is not specified; or (ii) capital investment work over and above the Relevant Cap is required, such costs and/or investment will be treated as Restricted Payments (as defined in the terms and conditions of the New Bonds) under the New Bonds (as such costs and investment work would have to be funded by British Energy Power and Energy Trading Limited (“BEPET”) (one of our subsidiaries), which is a Restricted Subsidiary for the purposes of the New Bonds) unless the limitation on Restricted Payments in the New Bonds has been suspended (by reason of the New Bonds attaining an investment grade rating from Moody’s Investor Services and at least one other rating agency at the relevant time).

Post March 31, 2010, under the New Bonds any funding of Eggborough Power Limited (our subsidiary which owns Eggborough power station) (“EPL”) by the British Energy Group is limited to amounts: (i) required for EPL to operate and maintain Eggborough in accordance with the standards of a reasonable and prudent operator and comply with its obligations under an amended Credit Agreement (“the Amended Credit Agreement”) (and associated documentation) agreed with the Eggborough Banks and (ii) to fund capital expenditure, the primary purpose of which is the maintenance (including non-recurring maintenance) and/or repair of a capital nature at Eggborough.

20

Any additional funding in this period will be treated as Restricted Payments under the New Bonds unless the limitation on Restricted Payments in the New Bonds has been suspended (by reason of the New Bonds attaining an investment grade rating from Moody’s Investor Services and at least one other rating agency at the relevant time).

In addition, under an agreement relating to contributions made to the NLF by the British Energy Group (the “Contribution Agreement”) capital expenditure at Eggborough power station is limited to amounts the primary purpose of which is maintenance or repair or is otherwise required to enable output to continue at a level consistent with historical performance levels (unless our cash exceeds the thresholds set out in the Contribution Agreement).

Inability to meet operating and/or maintenance costs and/or to fund capital investment at Eggborough as a result of the restrictions described above may result in loss of output and could adversely affect our revenues and profitability.

As part of the Restructuring, certain options (the “Eggborough Options”) were granted to the Eggborough Banks. In addition, the Eggborough Banks will benefit from the security granted over the Eggborough power station (the “Eggborough Security”). As a result, the New British Energy Group may cease to own the shares in, or assets of EPL on: (A) where the Eggborough Options are enforced (i) March 31, 2010; or (ii) at any time prior to August 31, 2009, on or after the occurrence of an event of default that is continuing under the Amended Credit Agreement and/or (B) where the Eggborough Security is enforced, on or at any time after the occurrence of an event of default that is continuing under the Amended Credit Agreement.

The New Bonds, New Shares and Warrants are subject to restrictions on transfer.

Although our securities are listed on the United Kingdom Official List and traded on the London Stock Exchange, the securities are subject to certain restrictions on transfer in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933 (the “Securities Act”). New ordinary shares issued pursuant to the Creditors’ Scheme and new ordinary shares and warrants to subscribe for new ordinary shares within five years of the Restructuring issued pursuant to the Members’ Scheme (respectively “New Shares” and “Warrants”) were issued pursuant to an exemption from the registration requirements of the Securities Act pursuant to Section 3(a)(10) of the Securities Act. (For further information on the New Shares and Warrants the Creditors’ Scheme and the Members’ Scheme, see Item 4—Information on the Company—Restructuring—Principal Terms of the Restructuring). The New Shares issued upon exercise of the Warrants constitute “restricted securities” in the US and were not issued in the US. Furthermore, to the extent that a person receiving New Shares is deemed to be an affiliate (within the meaning of Rule 144 under the Securities Act) of the Company or British Energy, the New Shares they hold will be “restricted securities” and may be transferred in the United States only in accordance with the provisions of Rule 144, Rule 145 and Section 4(2) of the Securities Act or outside the United States pursuant to Regulation S under the Securities Act or another applicable exemption from the registration requirements of the Securities Act. The New Bonds are also “restricted securities” and may be transferred in the United States only in accordance with the provisions of Rule 144, Rule 144A and Section 4(2) or outside the United States pursuant to Regulation S under the Securities Act or another applicable exemption from the registration requirements of the Securities Act and in accordance with the transfer restrictions of the New Bonds. It is the obligation of holders of the securities to ensure that sales of securities within the United States or other countries comply with applicable securities laws. The foregoing transfer restrictions could impact on the selling price of the securities and the ability of the holders of the securities to sell the securities.

The decision of the European Commission that, as far as the Restructuring involves the grant of State Aid by the Government, such aid is compatible with the Common Market and the objectives of the Euratom Treaty (the “State Aid Approval”) may be appealed against by certain

21

interested third parties to the Courts of the European Union (the “EC Court”). If such an appeal is successful, it may result in the annulment of the whole or part of the State Aid Approval or the possible imposition of further conditions on the Group. Interested third parties may also seek an order from the EC Court for an order that the arrangements whereby the Government provides aid to the Group be suspended, provided that they can establish they have an interest in the case and that the suspension is urgent. Interested third parties may also complain to the European Commission or bring actions in the courts in England or Scotland that the Group or the Government are not complying with one or more of the conditions to the State Aid Approval. Any of these events could adversely affect our business or profitability.

The State Aid Approval may be appealed to the Court of First Instance of the European Communities (the “CFI”) by any interested third party provided that it can show that it is directly and individually concerned by the State Aid Approval. A party will be directly and individually concerned by the State Aid Approval, where it can show, for example, that its competitive position in the market was or may be adversely affected by it. An interested third party whose competitive position is not adversely affected by the State Aid Approval may also be able to show in other ways it is directly and individually concerned by the State Aid Approval. The government of another Member State may also appeal against the State Aid Approval to the CFI. In each case the application for the appeal must be filed within two months and ten days from either: (i) the date when the interested third party or the government of the Member State receives a full copy of the non-confidential version of the State Aid Approval from the European Commission; or (ii) from the date of the publication of the non-confidential version of the State Aid Approval in the Official Journal of the European Union, where the interested third party has not already received a copy of State Aid Approval directly from the European Commission. The deadline for an appeal under (i) has now expired. The non-confidential version of the decision was published on June 6, 2005 and therefore the deadline for any appeal under (ii) expires on August 16, 2005. An appeal to the CFI may result in the State Aid Approval being annulled in whole or in part on grounds of procedural or substantive issues. Any such appeal will be defended by the European Commission. The Government and we may intervene to support the European Commission in defending the State Aid Approval. The arguments raised by us and/or the Government must support the European Commission’s conclusions. The process that led to the State Aid Approval was conducted almost exclusively between the Government and the European Commission; we were not directly involved in it except to a limited extent. Nevertheless, we believe that the State Aid Approval should not be annulled in whole or part on appeal, but we cannot give an assurance that that is the case.

The applicant may also request the CFI to suspend in whole or in part the State Aid Approval or apply for other interim measures pending the outcome of the appeal. The CFI may make such orders with or without conditions attached, where the applicant can show that: (i) it has an interest in the State Aid Approval and, when the point is raised, that its application for the annulment of the State Aid Approval is not manifestly inadmissible; (ii) there is urgency to suspend the State Aid Approval so as to prevent the applicant suffering serious and irreparable damage (the applicant needing to show that the damage is foreseeable with a sufficient degree of probability and cannot ultimately be financially compensated); (iii) it has a prima facie case for the annulment of the State Aid Approval; and (iv) the balancing of the interests of the different parties calls for the State Aid Approval to be suspended or other measures to be imposed. In light of the above, we do not believe that any interested third party would succeed in suspending, or obtaining any other interim measures against the State Aid Approval.

A decision of the CFI can be appealed to the European Court of Justice (the “ECJ”) but only on points of law. In the event of an appeal against the State Aid Approval in the CFI or the ECJ being successful and the State Aid Approval being annulled in whole or in part, the European Commission would have to issue a new decision taking into account the judgment(s). The effect of a successful appeal, the details of any subsequent decision and the impact that it might have on our business’s profitability or financial position is impossible to predict.

22

An interested third party may also complain at any time to the European Commission that either the Government or we are in breach of any of the conditions imposed by the State Aid Approval. There can be no assurance that the European Commission may not, as a result of any investigation it makes into the complaint, order the recovery of any aid which has been unlawfully given as a result of a breach and/or modify the conditions of the State Aid Approval or impose additional ones.

An interested third party which can show sufficient interest (under English law) or both title and interest to sue (under Scottish law) can also bring an action in a court in the appropriate jurisdiction alleging that either the Government or we are in breach of any of the conditions imposed by the State Aid Approval. The court could decide to consult with the European Commission or to refer questions to the ECJ insofar as it considers them to be necessary to interpret or apply the provisions of the State Aid Approval that may be in dispute. There can be no assurance that the court would not order that the arrangements whereby the Government provides aid to the Group be suspended pending compliance with the State Aid Approval and the court could order any aid given in breach of the State Aid Approval to be recovered from the Group by the Government. However, we consider this to be unlikely in view of the fact that the court would have to consider the balance of convenience to the parties in the case as a whole and must have regard to the wider public interest which in this case would, in our view, be in favor of us.

Any such appeals or other procedures may have an adverse effect on the Group and our shareholders.

The State Aid Approval may restrict the amounts the Government may be permitted to pay to us in respect of our liabilities under certain historic spent fuel contracts and assumed by it under the Historic Liabilities Funding Agreement. This may, in the longer term, adversely affect our financial position.

The State Aid Approval provides that the Government is permitted to fund the payment of: (a) liabilities related to the cost of management of spent fuel loaded into our AGRs up until the Restructuring Effective Date (historic spent fuel), up to £2,185 million (which is calculated in real terms as at March 2003 in December 2002 money values); (b) the costs of certain other liabilities set out in the HLFA which are not however taken into account to calculate the £2,185 million cap; and (c) any shortfall of the NLF as regards the payment of liabilities related to our nuclear assets decommissioning and uncontracted liabilities. The State Aid Approval states that as soon as expenditure corresponding to: (i) the nuclear decommissioning and uncontracted liabilities referred to above; and (ii) the costs of the certain other liabilities set out in the HLFA referred to under (b) above, exceed £1,629 million (in December 2002 money values), the Government shall submit enhanced additional reports (on an annual basis) to the European Commission demonstrating that the Government payments are restricted to meeting these liabilities, and that proper steps have been taken to limit expenditure to the minimum necessary to meet those liabilities.

Article 4 of the State Aid Approval provides that for the purposes of computing the £2,185 million cap and the £1,629 million threshold in December 2002 money values, the Government shall use the reference and discount rate published by the European Commission for the UK updating this rate every five years.

The historic spent fuel contracts between BNFL and British Energy provided for contractual payments to be subject to adjustment based on the UK retail prices index (“RPI”). The Government therefore proposed to the European Commission that RPI, together with a fixed discount rate, be applied in calculating whether payments under the HLFA reach the £2,185 million cap in (December 2002 money values). The European Commission’s position, reflected in its decision, is that the reference and discount rate it sets for the UK from time to time should be used in calculating whether

23

the cap is reached. There is a risk that applying the European Commission’s reference rate to payments made under the HLFA may result in a greater figure than the method proposed to the European Commission by the Government. If this were to occur, the Government’s obligation to pay amounts under the HLFA would be limited by the cap unless and until the State Aid Approval was modified.

Our trading contracts and certain of our other contracts may be subject to credit support obligations, such as the posting of collateral. We may have to post additional amounts of cash as collateral to support our trading activities, which could reduce the amount of cash available for other purposes or exceed our available cash resources.

In part because of our credit status, we need to maintain credit support arrangements in respect of our obligations under certain trading contracts by posting collateral to support our obligations under these agreements. In the case of a significant proportion of our contracts, the financial obligations to be covered by the alternative credit support are generally related to the prevailing wholesale price of electricity. During a period of rising market prices, the amount of collateral that we are required to post will generally increase. In periods of rising market prices, the increase in the level of collateral that we could be required to post may result in us having to reduce expenditures in other areas, including capital expenditures and could exceed our available cash resources.

Selected Financial Data

The following table sets forth selected consolidated financial and other data. We refer to the periods prior to Restructuring Effective Date as Predecessor Company and to the periods subsequent to that date as Successor Company. The balance sheet data as of March 31, 2001, 2002, 2003, 2004, as of January 14, 2005 and the statement of operations for the years ended March 31, 2001, 2002, 2003, 2004 and for the period from April 1, 2004 to January 14, 2005 for the Predecessor Company, and the balance sheet data as of March 31, 2005 and the statement of operations data for the period from January 15 to March 31, 2005 for the Successor Company are derived from our audited consolidated financial statements.

As a result of the completion of the Restructuring on January 14, 2005, our financial statements after than date are not comparable to our financial statement for prior periods because of the differences in the bases of accounting and the capital structure for the Predecessor Company and the Successor Company. Operating results for the period from April 1, 2004 to January 14, 2005 for the Predecessor Company and for the period from January 15 to March 31, 2005 for the Successor Company are not necessarily indicative of the results for the year ended March 31, 2005.

In February 2003 we disposed of our interest in Bruce and in December 2003 we sold our 50 per cent. interest in AmerGen Energy Company, a joint venture with Exelon Generation Company LLC (“Exelon”) which operated three nuclear power stations in the United States (“AmerGen”).

Loss and earnings per share (basic and diluted) and weighted average number of shares of the Predecessor Company reflect share amounts of our old ordinary shares. Following completion of the Restructuring a new capital structure is in place with effect from Restructuring Effective Date.

24

	Successor		Predecessor
	January 15, 2005 through March 31, 2005		April 1, 2004 through January 14, 2005		Year Ended March 31,
					2004		2003		2002(6)		2001(6)
									(Unaudited)		(Unaudited)
	(in £ millions, except earnings per share and per ADR(7) and weighted average number of ordinary shares)
Statement of Operations Data:
Operating revenues	482		1,222		1,516		1,528		1,701		2,124
Operating losses	(160	)	(187	)	(190	)	(7,624	)	N/A		N/A
(Loss)/income from continuing operations	(122	)	(227	)	(78	)	(7,853	)	(274	)	(124	)
Net (loss)/income	(122	)	(226	)	7,562		(7,800	)	(343	)	(124	)
Pro forma net (loss)/income as if SFAS 143 has been applied effective April 1, 2001(1)	—		—		(4,660	)	112		—		—
Basic and diluted (loss)/earnings per ordinary share
From continuing operations	(22	)p	(38	)p	(13	)p	(1,305	)p	(46	)p	(21	)p
From discontinued operations(2)	—		—		—		9	p	3	p	—
Cumulative effect of change in accounting principle	—		—		1,269	p	—		(14	)p	—
Net (loss)/income	(22	)p	(38	)p	1,256	p	(1,296	)p	(57	)p	(21	)p
Basic and diluted (loss)/earnings per ADR(2)
From continuing operations	—		(28,281	)p	(975	)p	(97,836	)p	(3,432	)p	(1,575	)p
From discontinued operations(3)	—		—				660	p	210	p	—
Cumulative effect of change in accounting principle	—		—		95,175	p	—		(1,080	)p	—
Net (loss)/income	—		(28,281	)p	94,200	p	(97,176	)p	(4,302	)p	(1,575	)p
Weighted average number of ordinary shares (millions)	561		602		602		602		598		597
Balance Sheet Data (at end of period):
Property, plant and equipment	3,923		1,158		1,128		997		8,259		8,082
Total assets	7,876		2,588		2,560		2,175		10,250		9,766
Other liabilities and long-term debt	(5,574	)	(2,685	)	(2,517	)	(10,122	)	(10,367	)	(9,756	)
Net assets (liabilities)	1,417		(1,739	)	(1,469	)	(9,230	)	(1,145	)	(736	)
Shareholder’s equity (deficit)	1,417		(1,739	)	(1,469	)	(9,230	)	(1,145	)	(736	)
Capital stock	56		370		370		370		370		370
Cash Flow Information:
Cash flow from operating activities	111		(98	)	158		273		349		176
Cash flow from investing activities	31		(65	)	(6	)	(247	)	(334	)	52
Cash flow from financing activities	(25	)	—		(7	)	(165	)	22		(39	)
Other Financial Information:
Operating loss	(160	)	(187	)	(190	)	(7,624	)	N/A		N/A
Depreciation and amortization	73		87		101		300		N/A		N/A
EBITDA(4)(5)	(87	)	(100	)	(89	)	(7,324	)	N/A		N/A

⁽¹⁾ We have calculated the proforma net (loss)/income as if SFAS 143 had been applied from April 1, 2001. We have not calculated the pro forma impact for any prior periods.

⁽²⁾ Calculated based on a ratio of 75 ordinary shares for one ADR. On March 18, 2003, we increased the ratio of four ordinary shares for one ADR to the current ratio of 75 ordinary shares for one ADR. Our ADRs were suspended in September 2004 and delisted in December 2004.

⁽³⁾ Revenue for discontinued operations which related to Bruce Power (our interest in which was sold on February 14, 2003) are set out on a 100 per cent. holding basis. Our share in Bruce Power was 82.4 per cent. prior to the disposal.

⁽⁴⁾ In the year ended March 31, 2003, we incurred an impairment charge of £6,680 million in connection with property plant and equipment.

⁽⁵⁾ EBITDA represents earnings before interest, taxes, depreciation, and amortization and is not a GAAP measure in the United States and should not be considered in isolation or as a substitute for, or as an alternative to, net income, operating income, cash flow from operations, other cash flow data or any other performance measures prepared in accordance with US GAAP. The following table provides a reconciliation of EBITDA to cashflows from operating activities.

25

	Successor		Predecessor
	January 15, 2005 through March 31, 2005		April 1, 2004 through January 14, 2005		Year Ended March 31,
					2004		2003		2002(6)	2001(6)
	(in £ millions)								(Unaudited)
EBITDA	(87	)	(100	)	(89	)	(7,324	)	N/A	N/A
Share of profit on joint venture and business disposals	—		1		(149	)	78		N/A	N/A
Other non cash movements	187		(38	)	208		6,798		N/A	N/A
Other income/expense adjustments to operating cash flows	46		(9	)	111		(292	)	N/A	N/A
Movements in provisions for liabilities and charges	26		232		136		245		N/A	N/A
Working capital	(61	)	(184	)	(59	)	768		N/A	N/A
Cash flow from operating activities	111		(98	)	158		273		N/A	N/A

For additional information regarding the use of EBITDA, see “Presentation of Financial and Other Data—Non-GAAP Financial Measures—EBITDA.”

⁽⁶⁾ In the years ended March 31, 2002 and 2001, we prepared our accounts on a UK GAAP basis and only reconciled Net Income/Loss and Shareholders’ Equity to US GAAP. As such, certain information is not available on a US GAAP basis and has been denoted with “N/A”.

⁽⁷⁾ American Depositary Receipt of BE Ltd.

Dividends

The Board of Directors of BE Ltd did not declare any dividends for the years ended March 31, 2003, 2004 or 2005. In prior fiscal years, we paid interim and final dividends in January and July respectively. We do not anticipate declaring dividends in respect of the financial year ending March 31, 2006. (See “Item 4. Information about the Company—Restructuring”). The following table sets out the dividends paid on ordinary shares and ADRs in respect of the past five fiscal years, excluding any associated UK tax credit in respect of such dividends.

	Year ended March 31,
	2005	2004	2003	2002	2001
	(in pence)
Pence per ordinary share(1)
Interim	—	—	—	2.7	2.7
Final	—	—	—	5.3	5.3
Total	—	—	—	8.0	8.0
	Year ended March 31,
	2005	2004	2003	2002	2001
	(in dollars)
US dollar per ADR:(1)(2)(3)(4)
Interim	—	—	—	3.00	3.00
Final	—	—	—	5.63	5.63
Total	—	—	—	8.63	8.63

⁽¹⁾ References to ordinary shares in this table are to ordinary shares in BE Ltd. For more information see Item 4—Information On The Company—Restructuring. Dividends per share and per ADR exclude any associated UK tax credit available to certain holders of ordinary shares and ADRs. Dividends paid by the Depositary in respect of ADRs are paid in US dollars based on a market rate of exchange that differs from the Noon Buying Rate.

⁽²⁾ Calculated on a ratio of 75 ordinary shares for one ADR.

26

⁽³⁾ Dividends have been translated from pounds sterling into US dollars, solely for the convenience of the reader at the Noon Buying Rate in effect at the date of payment.

⁽⁴⁾ BE Ltd’s ADRs were suspended from trading on the New York Stock Exchange (“NYSE”) on September 28, 2004 and were subsequently permanently delisted in December 2004.

Exchange Rates

Dividends have been paid in pounds sterling. Exchange rate fluctuations have affected the US dollar amounts received by owners of the ADRs on conversion by the Depositary of such cash dividends. In addition, fluctuations in the exchange rate between pounds sterling and US dollars affected the US equivalent of the quoted pounds sterling price of ordinary shares on the Daily Official List of the London Stock Exchange.

The following table sets forth, for the periods and dates indicated, the noon buying rate in The City of New York as certified for customs purposes by the Federal Reserve Bank of New York, which we refer to as the Noon Buying Rate, for cable transfers in British pounds sterling, expressed in US dollars per British pound sterling. We provide these rates for your convenience only, and they are not the rates of exchange we used to prepare our consolidated financial statements included elsewhere in this annual report. We are not representing that British pounds sterling amounts have been or could be converted into US dollars at any of the exchange rates indicated.

Year ended December 31,	High		Low		Average(1)		Period
2000	$	1.68	$	1.55	$	1.62	$	1.60
2001	$	1.65	$	1.40	$	1.50	$	1.50
2002	$	1.50	$	1.37	$	1.44	$	1.45
2003	$	1.78	$	1.55	$	1.64	$	1.78
2004	$	1.95	$	1.75	$	1.84	$	1.92

Month 2005	High		Low
January	$	1.91	$	1.86
February	$	1.86	$	1.92
March	$	1.93	$	1.87
April	$	1.92	$	1.87
May	$	1.90	$	1.82
June	$	1.80	$	1.84
July (through July 22, 2005)	$	1.78	$	1.73

⁽¹⁾ The average of the Noon Buying Rates on the last business day of each month during the relevant period

Except as we specify otherwise, we converted exchange rate translations in this annual report at the rates in effect on March 31, 2005, which correspond to the rates we used to prepare our consolidated financial statements.

27

ITEM 4.    INFORMATION ON THE COMPANY

OVERVIEW

We are a company incorporated in Scotland under the Companies Act. Our date of incorporation was July 2, 2004.

Our principal activities are the generation, sale and trading of electricity all of which we consider as one reporting segment. We are the UK’s largest generator of electricity, producing around one fifth of the UK’s electricity requirement and employing approximately 5,400 staff. We own and operate eight nuclear power stations and one coal-fired power station in the UK. Of our nuclear power stations, seven are AGR power stations (Dungeness B, Hartlepool, Heysham 1, Heysham 2, Hunterston B, Hinkley Point B and Torness) and the eighth (Sizewell B) is our sole PWR power station. Our nuclear power stations have a combined capacity of approximately 9,600 MW. Eggborough, our coal-fired power station in Yorkshire has capacity of approximately 2,000 MW. During the year ended March 31, 2005, our power stations produced total output of 67.4 TWh, which was comprised of output of 59.8 TWh from our nuclear power stations and 7.6 TWh from Eggborough power station. British Energy Power and Energy Trading Limited (“BEPET”), one of our subsidiaries arranges the balancing of our electricity generation and supply. Our direct supply business is one of the largest suppliers of electricity to the UK’s industrial and commercial sector.

We generated revenue of £482 million during the period from January 15 to March 31, 2005 and £1,222 million for the period from April 1, 2004 to January 14, 2005 resulting in operating losses of £160 million and £187 million, respectively. During the year ended March 31, 2004, we generated revenue of £1,516 million, resulting in an operating loss of £190 million. For the year ended March 31, 2003, we generated revenue of £1,528 million and an operating loss of £7,624 million which includes impairment charges of £6,680 million.

We use a variety of routes to market in the UK, including direct sales to industrial and commercial customers contracting in the wholesale market, together with sales of balancing and ancillary services to the National Grid Company (“National Grid”). For a description of our sales activities see the paragraph below headed “Electricity Sales”. Our business is subject to a high degree of regulation in a number of areas, including nuclear and industrial safety, electricity generation, trading and supply, and the environment. For a description of our regulatory environment, see the paragraph below headed “Regulation”.

For discussion of significant customers, refer to Note 17 of our consolidated financial statements.

For information and discussion on significant divestments, see Item 5—“Operating and Financial Review and Prospects”.

HISTORICAL EVENTS

BE Ltd was privatized by the UK Government in July 1996. As well as operating our nuclear power stations in the UK it subsequently acquired Eggborough power station in England in 2000, and, through AmerGen, an interest in three US nuclear plants. Through Bruce Power LP, in which we held a 82.4 per cent. interest, we also leased the Bruce A and B nuclear power stations in Ontario, Canada. Following BE Ltd’s announcement of September 5, 2002 we implemented a financial restructuring—see below under the heading “Restructuring”.

28

ORGANISATIONAL STRUCTURE

The diagram below illustrates our organizational structure.

RESTRUCTURING

The financial restructuring (the “Restructuring”), as further described below was completed on January 14, 2005, (sometimes also referred to as the “Restructuring Effective Date”) and our shares commenced trading on the London Stock Exchange on January 17, 2005 (“Admission”). The background to, and implementation of the Restructuring is described below.

Background to the Restructuring

On September 5, 2002, we announced that we had initiated discussions with the Government with a view to seeking immediate financial support and to implement a longer-term financial restructuring in the face of:

• the failure of our negotiations with BNFL which had been initiated by us to link prices paid under our fuel contracts with BNFL to wholesale electricity prices, with the aim of reducing the proportion of our costs which were fixed; and

• our Board’s review of the longer term prospects of the Group.

These discussions with the Government resulted in the Government providing the Group with a credit facility intended to provide working capital to meet the Group’s immediate requirements and to allow us to stabilize our trading position. This facility ceased to be available for drawings following the issue of State Aid approval on September 22, 2004.

On November 28, 2002 when we announced that we had agreed certain restructuring principles with Government, we highlighted some of the commercial and structural factors which had caused or compounded our financial difficulties, some of which the Restructuring has sought to address. These are set out below:

• our nuclear fleet in the UK had high fixed costs of production when compared with other generators of electricity (including the costs of supplies and services under our contracts with

29

BNFL); as a merchant generator with no retail supply business we were (and remain) heavily exposed to declines in wholesale electricity prices. Significant contracts for direct sales to industrial and commercial customers were closely linked to the wholesale electricity price which meant the business was unable to withstand the significant reduction in wholesale electricity prices which fell by over 35 per cent. over the two years to September 2002. The exposure to declines in electricity prices is now partially hedged within certain parameters by the contracts described below under the paragraph headed: New BNFL Contracts (although at current wholesale electricity price levels we are now making additional payments to BNFL as provided for in the New BNFL Contracts);

• our wholesale electricity price exposure at the time was exacerbated by a power purchase agreement and two contracts for differences which magnified our exposure to baseload electricity prices. The claims of the counterparties to these arrangements were compromised pursuant to the Restructuring in exchange for New Shares and New Bonds;

• we have an obligation under our nuclear site licenses to decommission our nuclear power stations at the end of their useful lives. These liabilities were estimated to have a net present value (“NPV”) of £1.3 billion as at March 31, 2005. Certain of the decommissioning liabilities were covered by the Nuclear Generation Decommissioning Fund Limited (“NDF”) to which we contributed. However, there was no certainty that this fund, at the level of contributions we were making, would be sufficient to cover all of the liabilities to which it related. This uncertainty has been substantially mitigated by the new arrangements with the Secretary of State described below under the paragraph headed: The Nuclear Liabilities Fund which became effective upon the Restructuring Effective Date;

• our operations generate liabilities in respect of nuclear fuel and waste estimated at £2.3 billion for discounted contracted liabilities and £0.8 billion for discounted uncontracted liabilities (in each case as at March 31, 2005). Some of these liabilities were covered by long term contracts with BNFL, with the balance remaining uncontracted. These uncontracted liabilities were long term in nature and therefore subject to uncertainty. There was no guarantee that our business would generate sufficient funds to cover these contracted and uncontracted liabilities. This uncertainty has been substantially mitigated by the New BNFL Contracts and the new arrangements with the Secretary of State described below in the paragraphs headed: New BNFL Contracts and The Nuclear Liabilities Fund;

• Eggborough power station, which we acquired out of Group funds in March 2000, also suffered from the reduction in wholesale electricity prices through 2001 and 2002 and the narrowing differential between winter and summer prices. The acquisition was refinanced with a project finance loan on July 13, 2000 and it was difficult for us to fund the repayments required. The debt owed to the providers of the project finance loan was compromised under the terms of the Restructuring in exchange for, amongst other things: (i) New Shares; (ii) New Bonds; (iii) payments under an amended and restated version of the project finance loan made on substantially the same terms as the New Bonds (such that the proportion of our debt secured on the Eggborough power station will represent a significantly smaller part of our overall indebtedness); and (iv) options to purchase the shares in, or assets of, EPL on March 31, 2010 or, prior to August 31, 2009, at any time on or after the occurrence of an event of default under the amended and restated project finance loan that is continuing (the lenders have the right to assign and/ or transfer all (but not part) of their rights under those options, subject to a pre-emption right in favor of the Group);

• we had investments in the US and Canada but these had not yet generated dividends and, in the case of Canada, required significant investment. As a result, they had stretched our financial resources. These assets have been disposed of; and

• as at September 30, 2002, the Group had indebtedness of £1,050 million (including £490 million in connection with the Eggborough power station and approximately £408 million of

30

unsecured existing bonds) with significant debt repayment obligations to be made in cash and, as a result of the loss of our investment grade rating in September 2002, our cash requirements increased significantly to meet the collateral requirements of trading counterparties.

The restructuring principles agreed with the Government in November 2002 formed the basis for the Restructuring and required, amongst other things, that we enter into a binding restructuring agreement with our creditors by September 30, 2003. Accordingly, on October 1, 2003, we announced that we had entered into binding agreements setting out the terms of the proposed Restructuring with certain key creditors (the “Creditor Restructuring Agreement”), and the Secretary of State (the “Government Restructuring Agreement”). These agreements set out the principal terms of the Restructuring and the circumstances in which the Secretary of State would support the Restructuring.

Principal terms of the Restructuring

The Creditor Restructuring Agreement dated as of September 30, 2003 was entered into by BE Ltd, certain other British Energy Group companies, Enron Capital & Trade Europe Finance LLC (“ECTEF”), Teesside Power Limited (“TPL”), Total Gas & Power Limited (“Total”), (Total, TPL and ECTEF collectively, the “Significant Creditors”), The Royal Bank of Scotland plc (“RBS”), the members of the ad hoc committee of holders of our then outstanding guaranteed bonds (the “Old Bonds”, “Bondholders” and the “ad hoc committee” respectively) and BNFL. By October 31, 2003, Bondholders, representing, in aggregate with RBS, 88.8 per cent. of the combined amount owing to Bondholders and RBS, had also entered into the Creditor Restructuring Agreement, along with all the lenders and swap providers in the syndicate of Eggborough Banks (each an “Eggborough Bank”).

The Government Restructuring Agreement was entered into by BE Ltd, certain other British Energy Group companies, the Secretary of State, the NDF (subsequently enlarged into and renamed the Nuclear Liabilities Fund Limited or NLF) and the Trustees of the Nuclear Trust on October 1, 2003. This Agreement set out the circumstances in which the Secretary of State would support the Restructuring and the agreements to be entered into with the British Energy Group and, in certain cases, the NLF, which gave effect to the proposals for the funding of certain of the Group’s qualifying uncontracted nuclear liabilities and qualifying decommissioning costs and certain contracted liabilities for historic spent fuel (namely, spent fuel arising from fuel loaded into our AGRs prior to the “Effective Date” (being the date immediately following the day on which the conditions to the effectiveness of the New BNFL Contracts were satisfied or waived)) described under the paragraph headed: The Nuclear Liabilities Fund.

The Restructuring involved the Bondholders, the Eggborough Banks, RBS and the Significant Creditors compromising their claims against the British Energy Group in exchange for, amongst other things, the issue to those creditors of New Bonds of British Energy Holdings plc (“Holdings plc”) and New Shares of the Company. As a part of the implementation of the Restructuring, the Bondholders and RBS compromised their claims through a Court-approved scheme of arrangement under section 425 of the Companies Act (the “Creditors’ Scheme”). The Significant Creditors extinguished all, and the Eggborough Banks extinguished part, of their claims against the British Energy Group pursuant to the various arrangements under the Creditor Restructuring Agreement and related documents.

In order to implement the Restructuring, BE Ltd cancelled its ordinary shares and A shares, and became a wholly-owned subsidiary of Holdings plc by means of a Court-approved scheme of arrangement under section 425 of the Companies Act (the “Members’ Scheme”) which required the approval of BE Ltd shareholders. BE Ltd obtained the approval of its ordinary and A share shareholders at an extraordinary general meeting held on December 22, 2004, and the sanction of the Court on January 14, 2005.

As a result of the approval of the Members’ Scheme, and subject to certain restrictions relating to non-United Kingdom shareholders, shareholders in BE Ltd were entitled to receive New Shares and

31

Warrants. Shareholders who completed and returned the relevant form(s) of Election (“Shareholder Election”) were entitled to receive:

for every 50 Ordinary Shares	1.0 New Share and 2.1 Warrants
for every 50 A Shares	1.0 New Share and 2.1 Warrants

in respect of BE Ltd shares held at 6.00 pm (Greenwich Mean Time) on January 13, 2005.

If a shareholder did not make a valid shareholder election, the relevant New Shares and Warrants were sold in the market at the best price reasonably obtainable in the market and the net proceeds were remitted to the relevant shareholder. The average price for the New Shares and Warrants sold in this way was £2.55 for New Shares and £1.62 for the Warrants.

The New Shares are ordinary shares in the Company having the rights attaching to them which are set out in the summary of the articles of association of the Company in Item 10—Additional Information.

For the purposes of the allocation of the New Bonds and New Shares among creditors pursuant to the terms of the Restructuring, it was agreed that creditor claims, or, in the case of the Eggborough Banks, their unsecured claims, would be treated as having the following values:

Creditors as at October 1, 2003	Claim amount (approx.)
	(£m)
Bondholders	£	407.9
RBS	£	37.5
Eggborough Banks	£	210.0
TPL	£	159.0
Total	£	85.0
ECTEF	£	72.0

BE Ltd and the other parties to the Creditor Restructuring Agreement agreed the allocation of the New Bonds and New Shares to be issued pursuant to the Restructuring in respect of unsecured claims based upon the claim amounts set out above, and taking into account a number of factors, including the identity of the relevant debtor and the amounts owed between British Energy and its principal subsidiaries. The allocation of New Bonds and New Shares to creditors and BE Ltd shareholders was as follows.

Name of Shareholder in British Energy Group plc

(including Creditors and their respective allocations at Restructuring)⁽¹⁾

	New Shares		New Bonds (to Creditors only)(2) (£ in m, approx.)
	No. of Shares (in m, approx.)	% of issued share capital(4)
Bondholders	286.1	51.0	154.0
RBS	26.2	4.7	14.2
TPL	78.8	14.0	43.5
Total	42.1	7.5	23.3
ECTEF	37.2	6.6	20.0
Eggborough Banks	76.6	13.7	20.0	(3)
BE Ltd Shareholders	14.0	2.5	0.0
TOTAL	561.0	100.0	275.0

32

⁽¹⁾ TPL, Total and ECTEF later assigned certain of their respective interests under the Creditor Restructuring Agreement and their respective claims against the British Energy Group to Deutsche Bank AG London (“Deutsche Bank”) which, consequently, became a Significant Creditor. We are aware that a proportion of these interests may subsequently have been sub-participated to third parties. Furthermore, RBS subsequently assigned its interest as a creditor under the Creditors’ Scheme to Deutsche Bank.

⁽²⁾ In addition, the NLF received £275 million of New Bonds and a right to receive the NLF Cash Sweep Payment together with further amounts payable under the Contribution Agreement (see Item 4—Restructuring—The Nuclear Liabilities Fund).

⁽³⁾ Excludes £150 million bond-equivalent payments through the Amended Credit Agreement (see item 4—Restructuring—Eggborough Arrangements).

⁽⁴⁾ Percentage of issued share capital immediately following Admission excluding the impact of the NLF Cash Sweep Payment, the Warrants and Employee Options. Citigroup Global Markets Limited acted as sponsor and financial adviser for the listing of our New Shares and New Bonds.

The further principal elements of the Restructuring were as follows:

Eggborough Arrangements

• The Eggborough Banks, as creditors with the benefit of a letter of credit issued by RBS (the “RBS Letter of Credit”) and security over, amongst other things, the shares in, and assets of, EPL were repaid approximately £37.5 million pursuant to the RBS Letter of Credit and replaced the balance of their existing secured and unsecured claims with a right to receive £150 million under the Amended Credit Agreement on substantially the same payment terms as the New Bonds, together with £20 million of New Bonds issued by Holdings plc, and 13.7 per cent. of the New Shares in the Company.

• In addition, the Eggborough Banks were granted: (i) options exercisable at any time prior to August 31, 2009 under which they may acquire the shares in, or assets of, EPL on March 31, 2010 in consideration for, amongst other things, £104 million (subject to certain adjustments depending on the condition of the Eggborough power station on March 31, 2010) and the cancellation of the outstanding payments under the Amended Credit Agreement at such time; and (ii) options under which they may acquire the shares in, or assets of, EPL at any time prior to August 31, 2009, on or after the occurrence of an event of default under the Amended Credit Agreement that is continuing in consideration for a fee (which varies depending on the type of event of default) and the cancellation of the outstanding payments under the Amended Credit Agreement at such time (each an “Eggborough Option”). The Eggborough Banks are entitled to assign and/or transfer all (but not part only) of their rights under the Eggborough Options to a third party, subject to a pre-emption right in favor of the British Energy Group under which a member of the British Energy Group may purchase such rights at 105 per cent. of the price offered by the relevant third party. The Eggborough Banks continue to benefit from the security they previously held and certain new security which secures, amongst other things, the Eggborough Banks’ rights under the Amended Credit Agreement and the Eggborough Options. As a result, on and at any time after the occurrence of an event of default under the Amended Credit Agreement that is continuing, the Eggborough Banks shall have the right to:

(i) prior to August 31, 2009, exercise an Eggborough Option or enforce their security referred to above; or

(ii) on or post August 31, 2009, enforce their security.

EPL’s payments under the Amended Credit Agreement are funded by the British Energy Group and consequently the recovery of the Eggborough Banks on enforcement of their security should effectively equal the outstandings under the Amended Credit Agreement at the relevant time even in circumstances where the shares in, or assets of, EPL are worth less than such outstandings.

If the Eggborough Banks were to give notice of their intention to exercise an Eggborough Option, we would seek alternative ways of performing the services that the Eggborough power station

33

provides, either through entering into contracts with third parties or by purchasing an equivalent power station. We would also seek to mitigate our trading risks by adopting a revised trading strategy.

The Nuclear Liabilities Fund

Under arrangements with the Secretary of State entered into on January 14, 2005, the former NDF was enlarged into and renamed the NLF which will fund, subject to certain exceptions, the British Energy Group’s qualifying uncontracted nuclear liabilities and qualifying decommissioning costs. The Secretary of State has agreed to fund: (i) qualifying uncontracted nuclear liabilities and qualifying decommissioning costs to the extent they exceed the assets of the NLF; and (ii) subject to certain exceptions, contracted liabilities for historic spent fuel. As at March 31, 2005, the market value of the NLF was £782 million. To the extent there is any surplus in the NLF, this amount will be paid to the Secretary of State. The British Energy Group is responsible for funding certain excluded or disqualified liabilities and will, in certain circumstances, be required to compensate or indemnify the NLF and the Secretary of State in relation to such liabilities. Our obligations under these arrangements with the Secretary of State are guaranteed by certain members of the British Energy Group.

In consideration for the assumption of these liabilities by the Secretary of State and the NLF, Holdings plc issued £275 million in New Bonds to the NLF. The British Energy Group will make various ongoing payments to the NLF including an annual contribution initially equal to 65 per cent. of the British Energy Group’s adjusted net cash flow (calculated on the basis set out in the summary of the Contribution Agreement in Item 10—Additional Information—Material Contracts (the “NLF Cash Sweep Payment”)). This percentage may be adjusted for certain corporate actions but may never exceed 65 per cent. The British Energy Group also make the following payments to the NLF: (i) fixed decommissioning contributions equal to £20 million per annum (stated in March 2003 money values and indexed to RPI but tapering off as the nuclear power stations are currently scheduled to close); and (ii) £150,000 (stated in March 2003 money values and indexed to RPI) for every tonne of uranium in PWR fuel loaded into the Sizewell B reactor after the Restructuring Effective Date.

The NLF has the right from time to time to convert all or part of the NLF Cash Sweep Payment into Convertible Shares (the NLF Conversion Right). On a full conversion, the NLF would hold up to 65 per cent. of the thereby enlarged equity share capital of the Company. However, the terms of the Convertible Shares include a limit on the voting rights attaching to such shares equal to the maximum amount which can be held by the NLF without triggering a mandatory offer under the United Kingdom Takeover Panel’s City Code on Takeovers and Mergers, being currently 29.9 per cent. of the voting rights of the Company (and, for this purpose, taking into account the voting rights attributable to any other ordinary shares of the Company held or acquired by any person acting in concert with the NLF). This voting restriction applies for so long as the Convertible Shares are held by the NLF. The Convertible Shares will convert automatically into ordinary shares in the Company on transfer to a third party but are not convertible at the election of the NLF prior to such transfer.

There are restrictions under the terms of the Contribution Agreement on the manner in which the NLF may exercise the NLF Conversion Right or dispose of any of the shares arising on such exercise.

In November 2004, the Secretary of State confirmed that she had no intention to direct the NLF to exercise the NLF Conversion Right but reserved the right to do so. We understand that the Secretary of State intends to ensure that prior to the giving of any direction to the NLF to exercise the NLF Conversion Right or to dispose of the shares issued pursuant to such exercise, the Secretary of State (and/or the NLF at his direction) would take financial advice and would take such advice as to the market impact of the conversion or disposal (including the desirability of avoiding multiple sales of small amounts of shares). The Secretary of State also (a) agreed for a period of six months following Restructuring not to direct the NLF to exercise the NLF Conversion Right or to dispose of any shares in

34

the Company and (b) confirmed there was no current intention to direct the NLF to exercise the NLF Conversion Right following the expiry of that six month period. This period expired on July 14, 2005 and the Government keeps all aspects of its financial interest in British Energy under regular review.

The Secretary of State has an option to acquire for £1 each nuclear power station and related station assets (subject to certain exclusions) for the purpose of decommissioning or continuing the operation of those nuclear power stations beyond the date of closure of those stations assumed by the Group (which date will include any changes to such dates in our financial statements following the extension of current station lifetimes). An option to continue to operate a nuclear power station may (unless the British Energy Group has given notice that it will close the station early) only be exercised at any time up to and including the date which is two years before the scheduled closure date of the station but transfer of the station pursuant to the exercise of the option cannot complete until the scheduled closure date of the station, at the earliest. The Secretary of State also had an option to acquire the Group’s interests in United Kingdom Nirex Limited (“Nirex”) which it did not exercise, but acquired Nirex from all its shareholders, including our interest, on April 1, 2005 under different arrangements.

New BNFL Contracts

On March 31, 2003 and May 16, 2003 respectively, we exchanged contracts with BNFL covering front end (i.e. fuel preparation before it enters the reactor) and back end (i.e. handling, storage and ultimate disposal of spent fuel) AGR fuel services required to give effect to the Restructuring. The amendments (set out in deeds of amendment agreed in March 2003 (the “March 2003 Deeds of Amendment”) to the front end contracts (the “Existing AGR Fuel Supply Agreements”) became effective on April 1, 2003 but, with the exception of the new arrangements for the supply of uranics to British Energy Generation Limited (“BEG”) (our licensed nuclear generating subsidiary), could have been terminated if the Restructuring had not been completed. The new front end post 2006 contracts (the “Post 2006 AGR Fuel Supply Agreements”) were conditional upon completion of the Restructuring. The amendments to the previous back end fuel services arrangements (the “BNFL Historic Contracts”) and the new back end fuel services arrangements (in respect of fuel loaded into our AGRs after the Restructuring Effective Date (“New Spent Fuel”), (“New Spent Fuel Agreements”) were also conditional upon completion of the Restructuring and became effective on the Restructuring Effective Date.

The principal payment terms of the Existing AGR Fuel Supply Agreements (as amended by the March 2003 Deeds of Amendment) and the Post 2006 AGR Fuel Supply Agreements are as follows:

(i) a payment of £28.5 million fixed per annum until March 31, 2006, but discounted on a linear basis in accordance with the market baseload price of electricity to a minimum payment of £13.5 million per annum at a market price of £15.0 per MWh. The fixed starting price falls to £25.5 million thereafter and is also subject to the discounting mechanism; and

(ii) a payment of £191,000 per tonne of uranium in AGR fuel delivered.

With respect to the New Spent Fuel Agreements we are required to pay:

(i) a payment of £150,000 per tonne of uranium in AGR fuel, payable on loading of such New Spent Fuel into one of our AGRs;

(ii) a rebate/surcharge against the payment mentioned in (i) above equivalent to 50 per cent. of the difference between the market baseload price of electricity in a year and £16.0 per MWh multiplied by the MWh produced by the AGR fleet in that year. The market baseload price of electricity used in the calculation will not be less than £14.8 and not more than £19.0 per MWh; and

35

(iii) if the market baseload price of electricity exceeds £19.0 per MWh, a surcharge against that payment equivalent to 25 per cent. of the difference between the market base load price of electricity in a year and £19.0 per MWh multiplied by the MWh produced by the AGR fleet in that year. The market baseload price of electricity used in that calculation will not be less than £19.0 and not more than £21.0 per MWh.

Unlike under our previous arrangements with BNFL, whereby we retain title to and therefore remain responsible for the ultimate disposal of our spent fuel, and which will still apply to the Historic Fuel Agreements (under which BNFL provide spent fuel management services although the costs of disposal will be covered under the provisions of the Nuclear Liabilities Agreements), BNFL will assume title to New Spent Fuel on delivery to BNFL from our AGR power stations.

All of the above monetary amounts (for AGR fuel supply and the New Spent Fuel Agreements) are stated in July 2002 and 2002/2003 money values and are indexed to RPI.

The pricing provisions in the New BNFL Contracts highlighted above are intended to enable us to reduce the proportion of our fuel costs which are fixed by providing for a discount when the market baseload price of electricity is below a specified amount and a surcharge when above this amount. As electricity prices have risen substantially since October 2003, we are now making additional payments to BNFL under the new arrangements for spent fuel management in the form of the surcharge referred to above. This will continue for so long as electricity prices remain above £16.0 per MWh (in 2002/2003 money values and indexed to RPI).

Sale of our interests in Bruce Power and AmerGen.

On February 14, 2003 we announced that we had completed the disposal of our 82.4 per cent. interest in Bruce Power LP to a consortium for C$627 million, subject to a possible additional sum contingent on the restart of two of the reactor units sold. In this regard we have received a payment of C$30 million and may be entitled to additional sums. On February 12, 2004, we received a notice of claim under the master purchase agreement alleging breach of certain warranties and representations relating to tax and the condition of plant. Further information on this claim is set out in Item 4—Legal Proceedings.

In addition to the consideration payable by the consortium under the master purchase agreement, up to a further C$100 million was payable to British Energy contingent upon the restart of two of the Bruce A units under a trust agreement (the “Trust Agreement”) entered into on the same date. Had the first unit restarted by June 15, 2003, C$50 million would have been released to British Energy and an additional C$50 million would have been released to British Energy had the second unit restarted by August 1, 2003. An amount of C$5 million was to be deducted from the C$50 million payable in respect of each unit for its failure to restart by the scheduled restart date or by the first day of each successive calendar month following the scheduled restart date. The Group received C$20 million on March 22, 2004 and C$10 million on May 25, 2004 in partial consideration under the Trust Agreement. British Energy commenced arbitration proceedings in Ontario against the Ontario Provincial Government (“the Province”) in December 2004 seeking the payment of additional consideration under the Trust Agreement on the basis that Bruce A Units 3 and 4 restarted earlier than the dates claimed by the Province. No additional amounts appear on our balance sheet at March 31, 2005 because of uncertainties regarding their realization. The amounts recoverable (if any) in respect of the restarted units will be substantially lower than the maximum C$100 million but the amounts and timing of the payments have still to be confirmed.

On December 23, 2003 we completed the disposal of our 50 per cent. interest in AmerGen to Exelon for US$277 million, subject to adjustment. These adjustments resulted in an agreed settlement of working capital adjustments primarily relating to the value of nuclear fuel and tax, with $9.5 million being payable to Exelon in two equal installments in February and September 2005.

36

Conditions to the implementation of the Restructuring

The implementation of the Restructuring was subject to three stages of conditionality, namely:

• conditions which needed to be satisfied prior to the proposal of the Creditors’ Scheme and the Members’ Scheme to the trustees of the Old Bonds (the “Old Bond Trustees”) and RBS and BE Ltd shareholders, respectively (the “Initial Conditions”);

• subsequent to the satisfaction of the Initial Conditions, conditions which needed to be satisfied before the Creditors’ Order and, following the approval of the Members’ Scheme, the Members’ Order, were filed with the relevant authority for registration (the “Filing Conditions”); and

• finally, the Creditors’ Scheme and the Members’ Scheme becoming Effective (the “Restructuring Condition”).

On September 24, 2004, the Secretary of State received the State Aid Approval. On October 12, 2004, we announced that the other Initial Conditions to the implementation of the Restructuring had been satisfied. In relation to the Filing Conditions, the Restructuring was conditional on, amongst other things, the Secretary of State not having determined and notified British Energy in writing that, in her opinion, the British Energy Group (including for this purpose the Company and Holdings plc) would not be viable in all reasonably foreseeable conditions without access to additional financing (other than financing which the Secretary of State was satisfied had been committed and would continue to be available when required). The Filing Conditions and the Restructuring Condition were both satisfied on January 14, 2005.

State Aid Restrictions on our ability to operate

The European Commission has confirmed that the giving of State Aid in connection with the Restructuring is compatible with the Common Market. As part of the State Aid Approval, we have been required to agree to certain measures and conditions with the Government which will govern our business (“Compensatory Measures”).

The key Compensatory Measures are:

• not, until September 23, 2010, to own or acquire any rights of control over:

(i) additional operational nuclear generating capacity in the EEA, (which would not include contracts to operate and maintain nuclear plants where we have no interest in the electricity output), without the prior approval of the European Commission; or

(ii) registered, operational, fossil-fuelled generating capacity in the EEA or large hydro- electric generating capacity in the UK, which in aggregate exceeds a capacity of 2,020 MW (although some relaxation of this restriction has been agreed to provide for a transitional period in cases where the Eggborough power station ceases to be available to us);

• to establish and maintain our existing nuclear generation activities, electricity direct supply business (“DSB”) and electricity trading business in separate subsidiaries by April 1, 2005;

• not to allow our existing nuclear generation business to provide a cross-subsidy to our non-nuclear generation activities or any other business of the Group; and

• not, for a period of six years, to price the energy element of our DSB contracts below the prevailing wholesale price, save for in exceptional market circumstances (to be determined by an independent expert).

The State Aid Approval requires the Government to ensure that the restructuring plan as communicated to the European Commission is fully implemented.

37

The Directors expect, on the basis of how we currently conduct our operations and discussions with relevant authorities and regulatory bodies, that the obligation not to allow our nuclear generation business to cross subsidize our non-nuclear or other businesses, will not have a material adverse effect on the financial results of our business. We have no current intention to sell any of our output at below the wholesale price and therefore do not consider that the requirement that we do not price the energy element of our DSB contracts below the prevailing market price will have any effect on our business. For further detail on the impact of the other restrictions referred to above, see Item 3—Risk Factors—“Our business is affected by a number of restrictions which restrict our ability to develop new sources of income”.

The State Aid Approval provides that the Government is permitted to fund the payment of: (a) liabilities related to the cost of management of spent fuel loaded into our AGR power stations prior to the Restructuring Effective Date (“historic spent fuel”) up to a specified level; (b) the costs of certain other liabilities set out in the HLFA (these costs, however, are not taken into account in calculating the above specified level); and (c) any shortfall of the NLF as regards the payment of liabilities related to our nuclear assets decommissioning, and uncontracted liabilities. The State Aid Approval states that as soon as expenditure corresponding to (i) the nuclear assets, decommissioning and uncontracted liabilities referred to above and (ii) the costs of the certain other liabilities set out in the HLFA referred to above exceed a specified threshold, the Government shall submit enhanced additional reports (on an annual basis) to the European Commission demonstrating that the Government payments are restricted to meeting these liabilities, and that proper steps have been taken to limit expenditure to the minimum necessary to meet those liabilities. In these circumstances, we are required to provide additional information and assistance to the Government (including payment of auditors’ costs and expenses).

We have agreed with the Secretary of State to implement the Compensatory Measures pursuant to a deed of undertaking (the “Deed of Undertaking”). The separation of our DSB and electricity trading businesses into separate subsidiaries was completed by the April 1, 2005 deadline. In relation to the requirement to consolidate our nuclear generation activities in a single subsidiary by April 1, 2005, we were unable to obtain all the necessary consents by that date. The consolidation took place on July 1, 2005 and until that date, specific alternative arrangements which had a similar effect and which were agreed with the UK Government under the Deed of Undertaking were in place. Under the Deed of Undertaking, we have also undertaken not to dispose of all or part of our nuclear generation business or our DSB, or carry out any corporate restructuring of the British Energy Group, without the Secretary of State’s prior approval (such approval not to be unreasonably withheld), if such disposal or restructuring may cause the Secretary of State to be in breach of his obligations under the State Aid Approval.

Pursuant to the terms of our various agreements with the Secretary of State and Government controlled entities, we are subject to the following key restrictions on our operations:

• not to announce or pay any dividend or distribution or make any acquisition unless our cash exceeds the amount specified in the Contribution Agreement at the end of the financial period preceding the dividend, distribution or acquisition and would or would be likely to exceed the specified amount at the end of the financial period in which such dividend, distribution or acquisition is to be made;

• not to incur any expenditure other than expenditure:

(i) in relation to Agreed Collateral Purposes (as defined in the summary of the Contribution Agreement in Item 10—Material Contracts), outage costs, working capital requirements, debt servicing and operating costs; or

(ii) the primary purpose of which is the maintenance (including non-recurring maintenance) of, or capital repairs to, our nuclear power stations and/or the Eggborough power station, or is intended to enable aggregate annual output of our

38

nuclear power stations at a level which is around the highest output of the nuclear power stations in any of the preceding five financial periods (subject to a minimum of 68.0 TWh) adjusted as nuclear power stations close (provided that the permission to incur expenditure to enable aggregate nuclear output at this level does not permit capital investment in excess of £20 million per annum, without the approval of the Secretary of State, where the principal purpose of such expenditure is to enable the extension of scheduled closure dates of any of our nuclear power stations); and/or to enable output at the Eggborough power station at a level consistent with historical performance levels,

unless: (a) our cash exceeds the amount specified in the Contribution Agreement at the end of the financial period preceding the expenditure and would or would be likely to exceed the same at the end of the financial period in which such expenditure is to be made; or (b) it consists of specified expenditure for which the required funds have previously been allocated to a notional reserve in accordance with the terms of the Contribution Agreement;

• if we achieve an investment grade rating, although we may reduce the Target Amount of the Cash Reserves (that is, initially, £490 million plus the amount by which cash employed as collateral exceeds £200 million), we may not pay any distribution or make any acquisition of any undertaking if we know or have reasonable grounds to believe that doing so would or would be likely to result in the loss of such investment grade rating, save to the extent that such distribution or acquisition would not reduce the aggregate amount of our cash and any committed facilities (which are available for, and intended and expected by the Board to be used for the same purposes for which our cash may be applied) below the amount specified in the Contribution Agreement;

• at an operational level, not to make any operational change at our nuclear power stations which might increase the net present value of the Costs of Discharging Liabilities (as defined in the NLFA) by in excess of £1 million (in March 2003 money values and indexed to RPI) without notifying the NDA under the NLFA;

• we are required in certain circumstances to obtain the approval of the NDA under the NLFA before implementing certain operational changes at any of our nuclear power stations, for example those which might increase the NPV of the Costs of Discharging Liabilities by in excess of £10 million (in March 2003 money values and indexed to RPI);

• we are required, in certain circumstances to obtain the approval of the NDA under the NLFA to, amongst other things, extensions to the scheduled closure dates of our nuclear power stations (and consent must be given where the economic benefits accruing to the NLF or the Secretary of State are reasonably likely to exceed the incremental nuclear liabilities arising as a consequence), our decommissioning plans, our contracting strategy (and certain large contracts) for decommissioning our nuclear power stations and discharging uncontracted liabilities;

• we are required to seek the prior approval of the Secretary of State to exercise certain strategic rights under the BNFL Historic Contracts or to make amendments to any of our agreements with BNFL if these impact on the level of historic liabilities;

• we may not enter into material transactions with affiliates unless on arm’s length terms (subject to similar exceptions as are contained in the terms and conditions of the New Bonds) and we are (until a certain date but no later than March 31, 2014) subject to a negative pledge not to create security interests (subject to similar exceptions as are contained in a negative pledge covenant of the New Bonds) without the prior written consent of the NLF and the Secretary of State unless at the same time equal security is granted to the NLF and the Secretary of State to secure amounts that are or may become payable under the NLFA, HLFA, Contribution Agreement and certain other agreements.

39

• we must comply with certain conduct of business obligations during the periods in which the options can be exercised under the Government Option Agreement, including, amongst others: (i) operating our nuclear power stations in the ordinary and usual course and, in the period immediately prior to the scheduled closure date of those nuclear power stations, restricting certain actions which may affect the Secretary of State’s ability to exercise the options to decommission or continue operation of those stations; (ii) not to enter into certain contracts or commitments for capital expenditure (except where approved under the Contribution Agreement or the NLFA); or (iii) not to grant security over our nuclear power stations without the consent of the Secretary of State.

In addition, the terms of the Special Share held by each of the Secretary of State and the Secretary of State for Scotland restrict us from disposing of our shares in BEG and British Energy Generation (UK) Limited (our subsidiary which was, until July 1, 2005, the nuclear licensee for our nuclear power stations in Scotland (“BEG (UK)”), and restrict BEG from disposing of any of its nuclear power stations, without the prior consent of the holder of the relevant Special Share (such consent only to be withheld, if, in the holder’s opinion, the disposal would be contrary to the interests of national security).

Further, we are subject to restrictive covenants as set out in the terms and conditions of the New Bonds, including, amongst others, the following:

• we are prohibited from incurring financial indebtedness (other than certain permitted financial indebtedness) and from issuing guarantees of financial indebtedness unless the consolidated fixed charge coverage ratio (as defined in the New Bonds) is in accordance with the ratio set out therein. Permitted financial indebtedness includes up to £75 million of additional debt, of which £60 million may be secured;

• we may not pay dividends unless the Target Amount is met and no event of default or potential event has occurred and is continuing. In addition, we may not make certain other restricted payments unless the consolidated fixed charge coverage ratio referred to above is met and the amount of the payment does not exceed 50 per cent. of consolidated net income for the relevant period;

• there are limitations on the ability to repurchase our own shares and on investments, asset sales and sale and leaseback transactions;

• there are also restrictions on transactions with affiliates, but transactions with BNFL, EPL and the NLF are permitted provided that they comply with certain requirements as set out in the terms and conditions of the New Bonds;

• we are subject to a negative pledge, subject to customary exceptions;

• there are also certain restrictions on the conduct of our business. The intention is to allow us the flexibility to continue our existing business of generating and selling electricity and we are also permitted to trade electricity within Europe and to decommission our nuclear power stations (or those previously owned by us); and

• if the Target Amount is reduced as permitted by the Contribution Agreement, or if we otherwise have surplus cash as a result of asset sales or if the “Eggborough Break Option” (as defined in the terms and conditions of the New Bonds) is exercised, then we are obliged to apply this excess cash (once the surplus exceeds £10 million) in redeeming the New Bonds.

If the New Bonds attain an investment-grade rating from at least two rating agencies (one of which must be Moody’s Investor Service) and provided that no event of default or potential event of default is subsisting, then most of the restrictive covenants described above will be suspended, although they will be reinstated if the investment-grade rating from such agencies is withdrawn.

40

Finally, a receivables financing facility agreement between BEG and Barclays Bank PLC dated August 25, 2004 (as subsequently amended and restated) (the “Receivables Facility Agreement”) contains detailed covenants for the benefit of the facility provider, which mirror those under the New Bonds. British Energy Direct Limited (“BEDL”) replaced BEG in the Receivables Facility Agreement (and BEG became a guarantor) on April 1, 2005 when the direct supply business was transferred from BEG to BEDL. In addition to detailed covenants mirroring the New Bond terms, the Receivables Facility Agreement also contains a financial interest coverage covenant (assessed on a consolidated group-wide basis) and covenants relating to the conduct of the electricity supply business customary for a receivables facility.

We do not believe that the restrictions on our expenditure under these agreements, in particular the restrictions in the Contribution Agreement, prohibit spending on PiP (as currently envisaged) at the levels previously announced.

Requisitioned EGM and Delisting of BE Ltd’s Ordinary Shares, A Shares and American Depository Receipts

On September 3, 2004 two groups of shareholders, together holding 10.22 per cent. of BE Ltd’s ordinary shares, requisitioned an Extraordinary General Meeting of BE Ltd (the “Requisitioned EGM”). Those groups of shareholders were Polygon Investment Partners LLP (“Polygon”) and Brandes Investment Partners LLC (“Brandes”) and their respective associates. We were, as a result, obliged under the Companies Act to call the Requisitioned EGM. One of the resolutions proposed by Polygon and Brandes would have had the effect, if passed, of requiring BE Ltd to seek shareholder approval prior to applying for the cancellation of its listings in London and New York. If we had subsequently been required, under the terms of the Creditor Restructuring Agreement, to take steps to cancel the London listings of BE Ltd’s shares, but could not have done so as a result of a failure to achieve such shareholder approval, we believe, having taken legal advice, that we would have been likely to have been in breach of the Creditor Restructuring Agreement.

We announced on September 23, 2004 that the Requisitioned EGM would be held on October 22, 2004 and that as a result of this attempt to frustrate the Restructuring, we would be applying to the UKLA to cancel the listings of BE Ltd’s ordinary and A shares. As a consequence, and as announced on September 23, 2004, the NYSE suspended trading in our ADRs prior to the opening of trading on September 28, 2004. At that time, the NYSE also instituted delisting proceedings. We appealed unsuccessfully against the NYSE’s decision, and on December 6, 2005 the NYSE affirmed the decision to delist BE Ltd’s ADRs. The delisting from the NYSE does not affect our status as a SEC registrant under the US Securities Exchange Act 1934, or our periodic reporting obligations.

On September 24, 2004 we announced (i) the unanimous recommendation of the Board to shareholders to vote against the resolutions proposed by Polygon and Brandes at the Requisitioned EGM, (ii) that we intended to seek an extension to the Creditor Restructuring Agreement long stop date of January 31, 2005 for the Restructuring and (iii) that, in accordance with the Creditor Restructuring Agreement, we would execute a business transfer agreement whereby the Company’s assets would, conditional on the Restructuring becoming effective, be transferred to a new intermediate holding company of the restructured British Energy Group.

On September 30, 2004 Polygon announced that it would withdraw its support for the Requisitioned EGM. Polygon stated that, having considered our circulars on the matter, they believed there was no commercial logic for it supporting the resolutions to be considered at the Requisitioned EGM and consequently confirmed that they would vote against the resolutions and not further oppose the Restructuring. The Requisitioned EGM took take place on October 22, 2004 and all of the resolutions were defeated.

41

Since neither BE Ltd nor the Company were able to satisfy the relevant listing criteria for the NYSE on Admission, no new ADRs were issued on Admission. Holders of ADRs received the New Shares and/or Warrants to which they were entitled.

Rating of Bonds

We held discussions with Fitch Ratings, Moody’s Investor Services and Standard & Poor’s Rating Services (together “the Rating Agencies”) with regard to obtaining credit ratings for the £550 million of New Bonds issued to certain of our creditors and to the NLF upon completion of the Restructuring pursuant to the terms announced on October 1, 2003.

Preliminary discussions were held with the Rating Agencies in advance of agreement on the terms of the Restructuring and it was stated in our announcement made on October 1, 2003 that one rating agency had provided an indicative rating for the New Bonds of investment grade and two rating agencies had provided indicative ratings at non-investment grade.

On September 23, 2004, we announced that the Rating Agencies had updated their analysis and that all three agencies had now provided indicative non-investment grade ratings for the Company. Upon Restructuring, the Rating Agencies issued new ratings for the New Bonds as follows.

	Rating
Moody’s Investor Services	Ba3
Standard & Poor’s	BB
Fitch Ratings	BB-

These ratings do not apply to the additional £150 million of bond-equivalent payments that were issued to certain lenders to EPL through the Amended Credit Agreement, which will not be rated. We maintain a close dialogue with the Rating Agencies, including twice yearly meetings and attendance at investor presentations.

Relationship with Government

In a statement to the United Kingdom Parliament on November 28, 2002 the Secretary of State set out the limits of the support which the Government was prepared to provide to the Restructuring in order to support its overriding objectives of securing the safety of British Energy’s nuclear power stations and the security of electricity supply in the United Kingdom.

As a result of these objectives, the Government, both directly and through the NLF, availed itself of a number of rights granted to it under the Government Restructuring Agreement (pursuant to those provisions of the Nuclear Liabilities Agreements which had effect prior to the Restructuring Effective Date) to protect its significant financial interest in the Group. However, the Restructuring was implemented on the basis that the Board will manage the business of the Group going forward, albeit within these constraints.

During the period prior to the Restructuring Effective Date, we kept the Secretary of State closely informed of, amongst other things, our financial and trading prospects. We also provided the Secretary of State with reports and other information as required under the Government Restructuring Agreement and the Creditor Restructuring Agreement. Post-Restructuring, we are required to continue to supply certain information to the Secretary of State and the NLF. We are also required under the terms of the Nuclear Liabilities Agreements, amongst other things, to provide the Secretary of State with all the information he would reasonably need to monitor the financial health of the Group (including monthly

42

cashflow information covering the period 18 months ahead) and to only adopt trading policies which are prudent in light of the Group’s on-going financial resources and obligations and to comply with such trading policies. As a result of these requirements, the Company has agreed to provide the Secretary of State and DTI with, amongst other things, periodic reports on its business performance and strategic and business plans and for there to be regular meetings and communication between the Secretary of State and senior executives and the Board on a range of topics. Over time, the frequency and content of the reporting may be reviewed.

Office of National Statistic Classification and the National Audit Office Conclusion

On September 24, 2004, the Office of National Statistics (“ONS”) announced its provisional classification decision that, for the purposes of production of the United Kingdom National Accounts (“National Accounts”), British Energy had been classified as in the public sector. As explained in the announcement, the National Accounts are produced to describe activities in a national economy, including transactions taking place between sectors of that economy. The ONS is responsible for the National Accounts which are compiled in accordance with international standards. In assessing the status of British Energy as a public sector body, the ONS stated that it took into account (amongst other things) the powers to be conferred on the Government as a result of the Restructuring.

The National Audit Office (“NAO”) has independently concluded, on the basis of the circumstances extant as at September 21, 2004, that British Energy should be accounted for following the Restructuring Effective Date as a quasi-subsidiary of the DTI.

The Company is a public limited company owned by its shareholders and operates within an extensive contractual framework established as part of the Restructuring. The most significant contract, in terms of the limitations it places on our business, is the Contribution Agreement between the Secretary of State and the Company. Within this contractual framework the Company is managed independently by the Board which continues to direct the finances and operating policies of the group and is subject to the normal private sector disciplines, fiduciary duties and Companies Act requirements.

In the light of the level and type of interaction we have with the Government we have concluded that for the purposes of FAS57 the Government constitutes a related party. For further information, see our Consolidated Financial Statements and the related notes beginning on page F-1.

Business Strategy

Our business strategy is constrained by, amongst other things, the terms of the Contribution Agreement, the New Bonds, the Receivables Facility Agreement and the compensatory measures we have agreed to in connection with the State Aid Approval. Therefore, we expect to execute the following strategy:

• Achieve World Class Nuclear Performance.    Our principal business objective is to improve operational performance the reliability and output of our nuclear fleet and to reduce the level of unplanned nuclear losses. Implementation of PiP is the key factor in achieving this aim.

• Improve our Financial Stability.    Our ability to take advantage of market conditions is impacted by the requirement to post collateral. We expect this to improve as cash balances increase through time. However, in the short term, we aim to improve financial stability through improved trading risk management and greater use of financial products to minimize the impact of collateral requirements. An improvement in our credit rating is not expected in the near term and will require us to demonstrate, amongst other things, sustained improvements in the reliability of our power stations over time.

• Pursue life extensions.    We continue to pursue life extensions for our stations. The first of these decisions is with respect to Dungeness B. The technical and commercial work required is progressing well and a decision is expected to be made this fall. Progress on improving the

43

materiel condition of our nuclear power stations and other specific plant investments, and on developing the required safety cases may allow us to support the extension of station operating lives. (See Item 4—Our Business—Station Lifetimes).

Overall we are aiming to raise our standing in the worldwide nuclear community by demonstrating increasing capability to the World Association of Nuclear Operators (“WANO”) and the Institute of Nuclear Power Operations (“INPO”) as a basis of establishing our credentials as an operator and manager of choice.

As our nuclear power stations close, our ability to invest in new business development opportunities may be further restricted due to a lack of sufficient cash resources and this issue may be exacerbated should some of our nuclear power stations be required to close earlier than the estimated closure date used in our financial statements.

RECENT DEVELOPMENTS

We reported an accident at Eggborough power station in July of this year, where one of our contractors lost his life. We are taking this matter extremely seriously and are undertaking an inquiry into the accident, as are the Health and Safety Executive (“HSE”). Safety standdowns are being carried out across the fleet to ensure that the issues related to the incident are fully addressed.

We continue to pursue life extensions for our stations. The first of these decisions is with respect to Dungeness B. The technical and commercial work required is progressing well and a decision is expected to be made this fall.

We announced our UK preliminary results for the year ended March 31, 2005 on July 27, 2005. A copy of the announcement is available on our website—www.british-energy.com.

After full and careful consideration of the benefits and disadvantages of reporting under UK IFRS, our registration with the SEC and the publishing of US GAAP results (including the demand for this information and the substantial costs and commitment of management time of doing so) the Board has concluded that we should seek the agreement of the bondholders to dispense with future US GAAP reporting and that if this is agreed de-registration from the SEC is in our best interests. We will be seeking the necessary approvals although there can be no assurance that we will be able to obtain these.

In addition, we will be seeking at our Annual General Meeting certain amendments to the Long Term Deferred Bonus Plan which we believe are necessary to make it consistent with our current business plans. The changes include a modification to the output targets for the financial year ending March 31, 2006. Theses changes do not affect our expected average annual nuclear output over the next two years which remains at 63 TWh. For further details of the Long Term Deferred Bonus Plan, see Item 6—Directors, Senior Managers and Employees.

OUR BUSINESS

Our nuclear power stations

We own and operate two types of nuclear reactor namely, the AGR and the PWR. They differ in many respects including, amongst other things, in the types of fuels used and in the design of the reactor. Each of our seven AGR nuclear power stations, Dungeness B, Hartlepool, Heysham 1, Heysham 2, Hinkley Point B, Hunterston B and Torness, is powered by two AGRs. Sizewell B is powered by a single PWR. Whereas the AGR design is unique to the UK, the PWR design is the most common reactor type in the world.

As well as being unique to the UK, our AGR stations were constructed to varying specifications by different engineering consortia which we consider makes demonstrating safety cases for different

44

reactors less straightforward and can mean that implementation of remedial action to make good a defect at one station cannot always be replicated with ease at other differently designed stations. For further information on safety cases see the paragraph below headed “Station lifetimes”.

An AGR has a graphite moderator (which helps to control the reaction) which is comprised of large graphite bricks with channels for the fuel rods, control rods and pressurized carbon dioxide coolant. The reactor is encased in a steel-lined pre-stressed concrete pressure vessel several meters thick which also acts as a biological shield. The boilers in which the water is heated are situated inside the pressure vessel. The AGR uses enriched uranium for its fuel.

A PWR is contained inside a steel pressure vessel filled with pressurized water which acts as the coolant and moderator. Pressurized water is pumped around the reactor and through the boilers. The pressure vessel, boilers and connecting pipework are contained within a steel-lined pre-stressed concrete containment building, which acts as one of the multiple designed-in barriers to the release of radioactivity in the event of an accident. The fuel used is enriched uranium dioxide and is contained in zirconium alloy tubes.

SEASONALITY

Electricity demand in the UK is seasonal, in that demands and prices have been generally lower in summer than in winter. As a result, we (and other generators) schedule a significant proportion of planned outages for summer months. This seasonality in both prices and output has a direct effect on financial performance and cash flows. See also Item 3—Risk Factors—“We continue to face liquidity risks associated with the seasonality of our business and the provision of collateral to our counterparties”.

Operating regime

Capacity and output

The electrical output of a station depends on a combination of its overall generating capacity, the output level at which the station actually operates and its availability. The capacity of each station is reviewed and amended from time to time to reflect the long-term capability of the plant. The table below sets out the capacity values for each of our nuclear stations, the output of each of our nuclear stations for each of the last five fiscal years and the percentage of the fleet’s load capacity that was achieved in each year (“Annual Load Factor”).

Station	Capacity (MW)(1)	Output(3) (TWh)/Year ended March 31,
		2005		2004		2003		2002		2001
Dungeness B	1,110	6.47		6.66		5.18		5.25		3.66
Hartlepool	1,210	5.04		8.28		9.34		8.83		9.09
Heysham 1	1,150	5.11		6.28		7.85		8.11		8.92
Heysham 2	1,250	8.21		9.81		9.30		9.03		10.05
Hinkley Point B	1,220	9.27		8.11		8.26		8.98		8.23
Hunterston B	1,190	8.26		8.77		8.93		9.85		6.43
Sizewell B	1,188	9.12		8.90		9.20		9.22		8.43
Torness	1,250	8.30		8.15		5.70		8.30		7.71
Total	9,568	59.78		64.96		63.76		67.57		62.53
Annual Load Factor(2)		71	%	77	%	76	%	81	%	75	%

⁽¹⁾ Capacities are stated net of all power consumed for the stations’ own use, including power imported from the National Grid.

⁽²⁾ Annual load factors are obtained by dividing the actual output by the output that would have been achieved had each station operated at its stated full load capacity in that year for the entire period.

⁽³⁾ Output in each year reflects any statutory, refueling and unplanned outages as discussed below.

45

The output levels which stations can achieve relative to their stated capacities are affected by a number of factors, including plant operating conditions and operating strategies, which can result in a station being operated at below its maximum capacity level. Station availability is principally affected by the number and duration of planned and unplanned outages and load reductions, such as those required to carry out refueling (as described below). Taking into consideration the impact of statutory outages and refueling (but excluding planned repair outages), the maximum annual load factor which could be achieved across our portfolio of stations is approximately 90 per cent. This is less than the annual load factor which could be achieved at a PWR power station.

During the year we identified issues related to potential corrosion of steel tendons used to maintain the integrity of the pre-stressed concrete pressure vessels and boiler closure units at Heysham 1 and Hartlepool during planned outages. We completed a limited inspection of boiler closure unit tendon wires and demonstrated that the tendon wires were intact and free from corrosion. Techniques have been developed and deployed successfully to continue inspections at both plants. During the statutory outage inspections at Heysham 1 in May this year a further issue was identified relating to the potential for stress corrosion cracking of primary “holding down” bolts. There are forty-eight bolts per boiler closure unit and the risk of stress corrosion cracking is associated with the presence of water and CO₂. Work programs are ongoing to develop our understanding of, and to address, this risk. These will include non-invasive inspections. We expect these programmes to be completed by the end of July. As a consequence the return to service date of the relevant unit at Heysham 1 is expected to be delayed for about a month. One unit at Hartlepool (which is of similar design) is currently shut down for repair work to the generator transformer and the return to service of this unit is expected to be delayed for a month for similar work to be carried out. We intend to inspect the integrity of the studs at the other two units at Heysham 1 and Hartlepool later this year.

Additional graphite brick inspections at Hartlepool during 2004 revealed a small number of bricks had cracked in a manner not predicted by our analytical models. We have increased the frequency of our inspections of the graphite cores affected and are required to develop further safety cases in conjunction with the NII. For further information on these issues, see Item 3—Key Information—Risk Factors—“Problems of potentially damaged boiler closure unit pre-stressing tendons and subsequent inspection requirements at our Hartlepool and Heysham 1 nuclear power stations could negatively affect our profitability or revenues”.

Statutory outages

Periodically, our reactors need to be shut down to allow for regulatory inspection and routine maintenance. We refer to these as statutory outages. The interval between the statutory outages is determined by the plant safety case which includes the requirements for inspection, maintenance and testing, and the arrangements in place to control this interval are approved by the “NII”. Currently, each of our AGRs must initiate a statutory outage once every three years and our PWR once every 18 months.

After a statutory outage, the NII’s consent is required for a reactor’s return to service and this consent is dependent upon us demonstrating the continuance of an adequate safety case in respect of that reactor. For more information on safety cases see the paragraph below headed “Station lifetimes”. We seek to reduce the impact of statutory outages on revenue by timing such outages to occur during periods of lower demand for electricity when prices are lower (generally between March and October). We also seek to reduce the duration of any statutory outages by improving the efficiency with which we conduct the required program of work. AGR statutory outages completed during the year ended March 31, 2005 had an average duration of 47 days, compared to 53 days in 2004 and 56 days in 2003. Statutory outages are limited to one reactor within each AGR station at any one time.

46

During the year ended March 31, 2005 we carried out four statutory outages (with a further statutory outage commencing at Sizewell B in March 2005) resulting in a loss of output of 2.9 TWh. Sizewell B returned to service in mid May 2005.

Refueling operations

Reactor output is also affected by planned outages including load reductions required to carry out refueling. During the year ended March 31, 2005 output losses of 3.0 TWh were attributable to refueling, 0.5 TWh less than expected due to lower overall output. We conduct on-load refueling (i.e., refueling, while the reactor’s power is reduced to between 20 per cent. and 40 per cent. of full power) at Hinkley Point B, Heysham 2, Hunterston B and Torness to help reduce the amount of output lost due to refueling. We refuel these reactors one at a time at each station. On-load refueling operations typically take a few days to complete and are repeated approximately every six weeks for each reactor.

At Heysham 1, Hartlepool and Dungeness B we refuel the reactors whilst they are off-load, which typically takes approximately one week. We also refuel these reactors one at a time at each station. This process typically occurs every five months for each reactor.

Improvements in fuel utilization have reduced the amount of refueling required at each reactor. In particular, we have developed more efficient fuel management techniques, such as increasing fuel enrichment and radial shuffling (the movement of partially burnt fuel assemblies from the edge of the reactor to the center so that more of the energy can be extracted from the fuel over a longer period) to increase the output extracted per tonne of fuel loaded. Radial shuffling is carried out routinely at Hinkley Point B and Hunterston B. It was also carried out routinely at Hartlepool and Heysham 1 but was suspended in 2002 because of fuel failures. Limited shuffling has recommenced this year at Hartlepool and the position regarding routine shuffling will be reviewed following further examination of discharged fuel. Some shuffling has been carried out at Dungeness B but it was suspended in 2002 as a precautionary measure and routine shuffling will not recommence until a revised safety case has been presented.

Radial shuffling is not carried out at Torness or Heysham 2 because we believe that to do so would disproportionately increase the time taken to complete refueling and therefore would be uneconomical.

We are presently in discussions with BNFL regarding possible further increases in fuel enrichment and changes to the fuel design that will further improve its utilization and also make it less susceptible to failure. For further details on fuel failures, see Item 3. Risk Factors “The failure of our AGR fuel could result in decreases in our output and revenues”.

PWRs are not designed to refuel on-load and must be shut down for refueling. Accordingly, we seek to time statutory outages at Sizewell B to coincide with refueling outages. Although Sizewell B has only one reactor, that reactor has a performance capacity comparable to the combined reactor capacity of both reactors at an AGR station and the impact of an outage for the same period is therefore substantially greater than that associated with a single AGR reactor. Sizewell B currently operates for a period of up to 18 months between statutory/refueling outages, the average length of which is 47 days. During refueling, approximately one third of the fuel is replaced.

Unplanned losses

Our level of unplanned losses in recent years has significantly affected the results of our operations. To date these unplanned losses have been caused by a variety of factors, amongst the

47

most significant of which are problems with our refueling equipment and processes, turbine-generators, tendons, boilers, gas circulators (which are used to pump carbon dioxide coolant gas around the reactor core) and pipe work (which is used to carry sea water for cooling). We believe that these losses are indicative of a deterioration in the material condition of our plant over time caused by: (i) a shortfall in investment when compared with international benchmarks for spending at nuclear power stations; (ii) a failure to perform required maintenance on a timely basis; and (iii) human errors in the operation and maintenance of plant. The table below sets forth the total unplanned losses (expressed in terawatt hours) for the past five years.

Total unplanned losses (TWh)/Year to March 31,
2005	2004	2003	2002	2001
17.3TWh	10.7TWh	10.6TWh	9.1TWh	12.8TWh

The substantial increase in total unplanned losses for the year ending March 31, 2005, was primarily due to the significant impact of prolonged outages at Heysham 1 and Hartlepool nuclear power stations.

A requirement for significant additional work was identified during the statutory outages on one reactor at each of Heysham 1 and Hartlepool. The subsequent planned shutdown of the second reactor at Hartlepool and the unplanned shutdown of Heysham 1’s second reactor resulted in extended outages at all four of these reactors. This was necessary to undertake not only planned cast iron pipework replacement works but also the inspection of boiler closure units, additional graphite core inspections and to address emergent fire and flood safety case requirements. The requirement to replace cast iron pipework resulted from the unplanned outage at Heysham 1 in the previous financial year following the failure of certain pipework. The issue relating to boiler closure units emerged during the statutory outage at Hartlepool and concerned the integrity of the pre-stressing tendons used to secure the concrete pressure vessel of the reactor units and the potential impact on the boiler closure units. The increased graphite core inspections arose from the findings made during the Hartlepool outage which were not within the expectations of the safety case. All four units returned to service at the end of December 2004, although a subsequent turbine blade failure at Heysham 1 at the end of January resulted in that unit being shutdown until early April while repairs were carried out. The resultant loss of output from these outages was 7.4 TWh.

In addition to these output losses and the losses resulting from statutory outages and refueling, there were further losses of potential generation from unplanned outages of 9.9 TWh. Of these, some 6.5 TWh were due to outages of 14 days or less.

Performance Improvement Program

During the year we continued to implement PiP with the aim of improving the reliability of our nuclear fleet and reducing the level of unplanned nuclear losses. The program has six main areas: foundation (organization, people, leadership and culture change), training, human performance, equipment reliability, management of work and operational focus. The focus for the past year has been on improvements relating to people and process in each of these areas.

To support the implementation of PiP we have sought advice from experienced consultants and called upon significant support from WANO in order to supplement our in-house teams with additional experienced nuclear professionals.

Over the year we have developed and implemented a new organizational structure for the Company. We have also created assessment and development centers for senior staff and introduced new station organization structures. Development of leaders has continued through the provision of

48

on-site coaching support and the use of action learning groups. In addition we have recruited 415 staff (a net increase of 181) into the organization to enhance areas such as maintenance and training to increase the operational knowledge throughout the organization. Improvements in training are a key part of PiP and training has been strengthened as a result.

Human performance has been one of the main areas of focus at our nuclear power stations this year. We have educated leaders on how to encourage positive behavior, reinforce standards and expectations and promote the use of error reduction tools in order to ensure the best possible performance from our staff. To re-inforce this message, leaders are expected to spend time “in the field” every week observing and coaching staff. This has had a positive effect on many of our performance indicators including lost time accidents, nuclear reportable events and unplanned automatic reactor trips.

To address equipment reliability issues we have formed an Asset Planning and Investment Group (“APIG”). The APIG and associated processes will enable more effective investment in our plant. To further address this issue we are also creating a new System Health Department at each station.

We have also completed the roll out of a comprehensive corrective action program (“CAP”) across the nuclear fleet. This program enables identification and rectification of issues concerning people, plant and processes and is identified by many US nuclear plant operators as being a key factor in driving performance improvement.

We have had significant success in establishing and embedding a consistent set of processes relating to management of work in our nuclear power stations across the company. We have seen a significant reduction in our non-outage plant defect backlog, beyond our stretch target for the year.

We have now started an effectiveness review process across all areas of PiP, to ensure that the improvements introduced are effective and sustainable. The focus for the program over the coming year is to integrate the processes into the line organization. In recognition of the work carried out on change management, the Company was short-listed for a Manufacturing Excellence Award by the Institute of Mechanical Engineers.

Station lifetimes

The primary factor in determining the operating life of a nuclear power station is the technical and economic practicability of supporting an agreed safety case for that station in accordance with its nuclear site licenses. The safety case is the totality of documented information and arguments which substantiates the safety of the plant, providing a written demonstration that relevant standards have been met and risks reduced as low as reasonably practicable. It is a “live” document subject to review, change and amendment over time, reflecting changes in the plant, its mode of operation, understanding of safety-related issues, and accumulation of operating experience.

The adequacy of the safety case for each power station is justified at each statutory outage for the following period by undertaking appropriate inspection, maintenance and testing of the plant and reviews of its operating performance. The results are reported to the NII, which must give its formal consent under the nuclear site license before the reactor concerned may be restarted. The NII’s consent to restart is a matter determined by the NII in its sole discretion. Its decisions are made by reference to its satisfaction with the safety case at the reactor in question. From time to time such consent to restart is not received from the NII until further work has been undertaken. Under this regime a reactor may only be operated following restart for the period determined by the safety case. This period is currently three years for all our AGR power stations and two years for Sizewell B’s PWR.

49

In addition, every ten years we have to undertake a Periodic Safety Review (“PSR”) for each nuclear power station. This involves a systematic review and reassessment of its safety case against current standards and practices, in the light of operating experience and knowledge of aging mechanisms. It evaluates factors that could limit safe operation and reasonably practicable improvements in the period until the next PSR. PSRs, too, require NII acceptance in order for us to secure continued operation. Following the first PSRs at our AGR stations, the NII gave its acceptance for a further ten years of operation for each station based on an agreed program of plant modifications to ensure adequate safety cases. The first PSR for Sizewell B has been submitted to the NII and responses have been received and are currently being addressed. For further information on PSRs, see the heading below entitled “Periodic Safety Reviews”.

A key factor for operating life is the ability to demonstrate the continuing integrity of reactor components which are required to support the safety case, but may be uneconomic to replace. For the AGRs such components include the graphite moderator core and the boilers; for the PWR they include the reactor pressure vessel. In such cases the lifetime is dependent on the NII’s perception of the key technical issues such as the onset of graphite core brick cracking and boiler tube failures (which are discussed in greater detail in Item 3. Risk Factors—“Problems of graphite core brick cracking and reduced boiler life could negatively affect our profitability and the lifetime of our AGR stations”).

The assessed potential lifetime of our stations used in our financial statements is termed the “accounting life”. This is derived from our judgement of our technical and economic ability to make a secure safety case at each statutory outage and at any relevant PSR, and to maintain the operability of the station as a whole up to the end of that life. These judgements are reviewed from time to time in the light of operating experience. For six power stations, this has led to an increase in accounting life of 5 or 10 years over the initial accounting life of 25 years. The current accounting lives and corresponding estimated closure dates are set out in the following table.

Station	Accounting Lifetime	Estimated Closure Date	Date next PSR is submitted to NII	Date of expected response from NII
Dungeness B	30	2013	December 2006	January 2008
Hinkley Point B	35	2011	March 2006	January 2007
Hunterston B	35	2011	March 2006	January 2007
Heysham 1	30	2014	December 2007	January 2009
Hartlepool	30	2014	December 2007	January 2009
Torness	35	2023	December 2008	January 2010
Heysham 2	35	2023	December 2008	January 2010
Sizewell B	40	2035	December 2013	January 2015

The exact closure date of each reactor at each of our AGR stations will depend on the timing of the reactors’ statutory outages. We will aim to close one of the pair of reactors at each station ahead of the other in order to allow defueling, which is the preliminary to decommissioning, to take place with optimal fuel utilization and generated output.

Further extension of accounting lifetimes

We recognize that extending the lifetimes of our stations has the potential to enhance the value of our asset base, and we plan to carry out the evaluations to see if further extension of station lives is technically and economically feasible. Following the completion of the Restructuring any extension to the declared closure dates of our stations is also subject to NDA consent. This work is currently underway for Dungeness B and we expect to make a decision in the fall. Such assessment takes account of the likely performance of the power station, the value of the output it generates, and the cost incurred to secure this performance while maintaining the safety case and compliance with other

50

regulatory requirements. We will undertake the technical and commercial evaluations for life extensions at the remainder of the nuclear fleet at the appropriate time having regard to improving shareholder value.

We carried out a fair value exercise as at the Restructuring Effective Date and concluded that the process of reviewing the station life extension at Dungeness B was sufficiently progressed at that time, that a willing buyer and willing seller would have increased the accounting life of Dungeness B from 25 years to 30 years. We are progressing with the technical and commercial work for Dungeness B life extension in line with our plans.

There can be no assurance that lifetime extensions will be attainable at any of our AGR power stations nor that the existing operating lifetimes used in our financial statements will be capable of being achieved. For further information see Item 3—Risk Factors—“Problems of graphite core brick cracking and reduced boiler life could negatively affect our profitability and the lifetime of our AGR power stations.” If our AGR power stations are to operate until the end of the current operating life used in our financial statements, we will also need to continue to be able to source new AGR fuel from, and dispose of spent fuel to, BNFL, the sole supplier of AGR fuel. See Item 3—“Risk Factors”. Our business depends on equipment and service suppliers of a specialized nature.

Nuclear fuel cycle

There are several clearly identifiable stages in the life of nuclear fuel, known as the fuel cycle. The stages of fuel preparation before it enters the reactor, namely, uranium supply, conversion, enrichment and fabrication, are known as the front end fuel cycle. The handling, storage, reprocessing and ultimate disposal of spent fuel and associated waste products are known as the back end fuel cycle. The various stages of the fuel cycle and the relevant fuel cycle contracts are described in more detail below.

The front end fuel cycle

Uranium supply, conversion and enrichment

New uranium production is supplied from mines in the form of uranium ore concentrate, and is available on the competitive world market. It is first converted into uranium hexafluoride (natural UF₆). There are four major suppliers of conversion services and there is a competitive world market.

Once the uranium has been converted to natural UF₆, it is enriched by increasing the proportion of Uranium U₂₃₅ to make it suitable for use in certain types of commercial nuclear reactor (enriched UF₆). There are four major suppliers in a competitive world market for enrichment services. Uranium in the forms of ore concentrate, UF₆ and enriched UF₆ are collectively termed uranics. Over the last 15 years a substantial proportion of the world’s uranics needs have been met from ex-military and civil stockpiles.

Fabrication

Up to the fabrication stage, fuel cycle processes are identical for both AGRs and PWRs. At the fabrication stage, enriched UF₆ is converted into either AGR or PWR ceramic fuel pellets and assembled to produce fuel elements/assemblies which are subsequently loaded into the reactors. See Item 3—Risk Factors—the risk starting “Our business depends on equipment and service suppliers of a specialized nature”.

The sole supplier of AGR fuel fabrication services is BNFL. A competitive world market exists for PWR fuel fabrication services.

51

Front end fuel cycle contracts

Uranium procurement, conversion and enrichment

Under arrangements agreed as part of the Restructuring, BNFL is now responsible for purchasing all the uranics we require to be manufactured into fuel for our AGR power stations. Previously BNFL purchased uranics on behalf of BEG (UK) stations only. BNFL is also responsible for purchasing enriched uranium for on-supply to our PWR fuel fabricator. These arrangements are set out in the AGR fuel fabrication and supply agreements between our companies and BNFL.

Existing contracts for the supply of uranics and BEG’s existing stocks of uranics both transferred to BNFL as part of the revised purchasing arrangements and are sufficient to fully meet our requirements for our AGRs and PWR until at least the end of calendar year 2006.

AGR fuel fabrication

We are dependent on BNFL as the sole supplier of AGR fuel fabrication services for the operating life of our AGRs. The AGR Fuel Supply Agreements agreed as part of Restructuring will expire when no further AGR fuel is required to be loaded into our AGR stations.

We maintain stocks of fuel at our AGR power stations which, together with the capability of the AGRs to continue to generate power without the need for new fuel to be loaded, would be sufficient for approximately three to four months’ continuous generation in the event of supply disruption.

PWR fuel fabrication

Fuel fabrication services for Sizewell B are currently provided by Framatome ANP (“Framatome”) utilizing enriched uranium supplied to us by BNFL under the AGR Fuel Supply Agreements referred to above. The agreement with Framatome provides for a mix of fixed commitments for PWR fuel fabrication and options for us to call for additional PWR fuel fabrication, and is capable of meeting Sizewell B’s requirements until around 2015.

As PWR fuel fabrication is readily available in a competitive world market, we believe that it would be possible to secure replacement supplies in the event of supply disruption from Framatome, subject to fuel compatibility and licensing requirements.

The back end fuel cycle

Spent fuel

Spent fuel is fuel which is removed from a reactor because it can no longer support the required level of power generation. Following a three to six month period of storage and cooling in water-filled ponds at the AGR station sites, the spent AGR fuel is loaded into specially designed flasks and transported to BNFL’s plant at Sellafield, England for reprocessing or long-term storage. Our spent PWR fuel is stored on-site in cooling ponds pending construction of a longer term storage facility. Spent AGR and PWR fuel is stored for long periods prior to final disposal, or, after a period of at least three years for AGR spent fuel or five years for PWR spent fuel, it can be reprocessed.

Spent Fuel Reprocessing

Reprocessing of spent AGR fuel separates uranium and plutonium from highly radioactive nuclear waste products and is followed by storage of the resulting materials. We use BNFL’s THORP reprocessing facilities at Sellafield. Reprocessed uranium can be recycled once it has been converted, enriched and fabricated into new AGR or PWR fuel. Reprocessed uranium is not currently used in the UK and a safety case has not been developed for its future use.

52

Nuclear waste

Nuclear waste products are categorized by their radioactivity levels into low level radioactive waste (“LLW”), intermediate level radioactive waste (“ILW”) and high level radioactive waste (“HLW”).

LLW comprises potentially contaminated and slightly radioactive materials, such as used protective clothing and tools. In the UK, LLW represents approximately 86 per cent. by conditioned volume of radioactive waste. Most LLW can be handled by workers wearing simple protective clothing and gloves and without any requirement for radiation shielding.

ILW is more radioactive than LLW and includes the sludges and resins from the cleaning of cooling pond water and certain wastes arising from the reprocessing of spent fuel. In the UK, approximately 14 per cent. by conditioned volume of radioactive waste is classified as ILW.

HLW comprises spent fuel which is not reprocessed and certain nuclear waste products separated out from uranium and plutonium during the reprocessing of spent fuel. These categories of waste are characterized by the fact that their temperature may rise significantly as a result of their radioactivity and as such this factor has to be taken into account in the design of storage or disposal facilities. In the UK, HLW represents approximately 0.1 per cent. by conditioned volume of radioactive waste although this contains approximately 95 per cent. of the total radioactivity in all nuclear waste (excluding uranium and plutonium recovered from reprocessing).

The Government policy on HLW from reprocessing is that it should be stored for at least 50 years to allow the radioactivity to decay and heat generation to reduce. Once the waste has been allowed to cool the favored option is for underground disposal. Spent fuel which is not reprocessed should similarly be allowed to cool. Once the HLW has cooled, it will continue to be stored pending a decision on final disposal. There is currently no disposal route available in the UK for either ILW or HLW. However the Committee on Radioactive Waste Management is due to report to Government on this issue by July 2006.

Management and disposal of nuclear waste

We are responsible for the management and disposal of all operational nuclear waste arising from our operations in conformity with relevant law and regulations and having regard to Government policy.

Solid LLW is often incinerated on site and the resulting ash and other LLW that has not been incinerated is, if appropriate, compacted and sent to BNFL for disposal at their facility at Drigg, England. We have a contract with BNFL for the disposal of LLW which expires on March 31, 2006.

At present our ILW is stored on-site in purpose-built facilities and, in most cases, these facilities are designed to accommodate all of the ILW that we expect to be created during the current station lifetime. In anticipation of the fact that the capacity of our untreated ILW Resin storage tanks at Sizewell B will be exhausted ahead of plan, we are presently engaged in modifying the station’s on-site encapsulation plant to enable it to encapsulate ILW. Once the ILW has been cement encapsulated in metal drums, the waste can be stored in Sizewell B’s conditioned waste storage building. We intend to complete the encapsulation plant modifications before ILW resin storage tank exhaustion.

Pipe failure at THORP

On April 21, 2005 BNG reported that a pipe had failed in one of the heavily shielded cells, known as the feed clarification cell, in THORP at Sellafield. This resulted in a quantity of dissolved nuclear fuel being released into a sealed, contained area. THORP reprocesses spent or used nuclear fuel from our AGRs and also from Light Water nuclear reactors. Reprocessing separates out the components of used fuel which comprises 96 per cent. Uranium, about 1 per cent. Plutonium and some 3 per cent. waste. Both the Uranium and Plutonium can be recycled into fresh fuel.

53

Since this event was reported, BNG have completed recovery of the escaped liquid back into primary containment. A Board of Inquiry was established by BNG and has reported. BNG have stated that they are confident that they have the capability of returning THORP to service.

BNG have assured us that the necessary steps will be taken to maintain continuity of AGR receipts at Sellafield, both during the current period of uncertainty regarding Thorp and through to the end of life of our AGR stations. We understand that the Nuclear Decommissioning Authority share similar views to BNG. See also Item 3—Risk Factors, the risk starting “Our business depends on equipment and service suppliers at a specialized nature”.

Back end fuel cycle contracts

Reprocessing and long-term management of spent fuel

AGR fuel

Each individual AGR power station’s storage capacity varies but overall capacity is approximately equivalent to nine months’ of spent fuel storage and with the storage facilities usually holding approximately six months’ spent fuel, this leaves approximately three months’ additional capacity in case of any short term interruptions in the movement of spent fuel to BNFL’s Sellafield site. Typically storage facilities are around two-thirds full at any time, although currently stocks of spent fuel are higher than this. If a station’s spent fuel storage facilities became full, the station could theoretically continue to generate, but the volume of electricity produced would gradually reduce as the fuel in the reactor was consumed. It would not be possible to load additional fuel into the reactor until the equivalent quantity of spent fuel within the station’s storage facilities was dispatched to Sellafield.

We have contracts with BNFL (the only available supplier of reprocessing and long term storage services in respect of spent AGR fuel) for the long term management of spent fuel covering the fuel loaded into the AGR power stations prior to Restructuring (the “BNFL Historic Contracts”) and for all the fuel loaded into the reactors after the Restructuring Effective Date through to the end of their operating lives (the “New Spent Fuel Agreements”).

Under the BNFL Historic Contracts, BNFL provides spent fuel management services for defined periods for all spent fuel arising from fuel which was loaded into our AGR power stations prior to completion of the Restructuring (“historic spent fuel”). We retain ultimate responsibility for these materials after the date on which BNFL is no longer obliged to perform the services. The Government has agreed to meet our liabilities to BNFL (subject to certain exceptions) under the BNFL Historic Contracts (pursuant to the provisions of the “HLFA”). Under the HLFA, the Government also have an option to acquire title to any of our historic spent fuel and materials deriving from spent fuel management at Sellafield.

Under the NLFA the Government (subject to certain exceptions) fund the management and disposal of uncontracted liabilities arising from the spent fuel management services (and for which BEG retains responsibility). Schedule 3 of the NLFA defines the uncontracted liabilities. The Government fund the uncontracted liabilities to the extent that these and other defined liabilities cannot be met from the NLF. Under the BNFL Historic Contracts, BNFL is responsible for the storage of the uranium, plutonium and, pending disposal, HLW and ILW arising from historic spent fuel reprocessing and for the storage of historic spent fuel which is not reprocessed until an agreed date.

BNFL is obliged to treat, package and store ILW resulting from fuel contracted for reprocessing under the Historic Fuel Agreements. If BEG requires it, BNFL will store our ILW waste until an agreed date. BNFL also take title to and all liabilities for certain pond equipment (LLW and/or ILW) which is used to store fuel on behalf of BEG. The contracts with BNFL also provide for the possibility of extending these periods of storage, subject to obtaining necessary regulatory and planning consents, and taking into account the need for storage beyond this date.

54

Under the New Spent Fuel Agreements BNFL take title to, and all liability for, the management and ultimate disposal of all AGR spent fuel arising from fuel loaded into the reactors on or after Restructuring.

PWR fuel

We intend that spent PWR fuel from Sizewell B will be stored on the Sizewell B site pending final direct disposal of the fuel. PWR fuel is not currently expected to be reprocessed although this option has not been discounted.

The spent fuel storage pond at Sizewell B was designed to accommodate 18 years of spent fuel arisings and will be reconfigured to accommodate approximately 30 years’ spent fuel arisings, subject to obtaining appropriate consents including from the NDA. The reconfiguration work requires completion by 2009/10 to allow the continued operation of Sizewell B. At this time, it is our judgement that these works will be completed before or during 2009/10. We will consider and finalize, in due course, arrangements for the remainder of lifetime arisings for spent PWR fuel in the light of the prevailing commercial and regulatory environment. The current planning assumption is that a Spent Fuel Dry Storage facility to accommodate the remainder of Sizewell B’s spent fuel for the remainder of its lifetime and to facilitate the station’s decommissioning will be constructed on the Sizewell B site. The spent fuel will be stored until a suitable spent fuel and/or HLW disposal facility becomes available.

The qualifying costs of waste management and the disposal of spent Sizewell B fuel will be met by the NLF (described in greater detail in Item 4—Restructuring—The Nuclear Liabilities Fund, and the paragraph below headed: Liability for decommissioning).

Nuclear decommissioning

The decommissioning process

Decommissioning of a nuclear power station is the process whereby it is shut down at the end of its economic life and eventually dismantled. Throughout the world, over 90 nuclear reactors have been shut down and a large number of decommissioning projects are in progress. Decommissioning usually takes place over several decades and the majority of these projects are at an early stage. However, there is a growing volume of experience of the early decommissioning activities and pre-closure planning and preparation requirements of large scale nuclear power station decommissioning.

Our objectives for decommissioning are to: ensure the continued safety of the public, the workforce and the environment; minimize the environmental impact of the decommissioning of our stations as far as reasonably practicable; release sites for other use as appropriate; and, consistent with all of the foregoing, minimize the expenditure of resources on decommissioning.

We have adopted the Early Safestore Decommissioning Strategy (“ESS”) for decommissioning our AGR power stations.

ESS was also previously the decommissioning technical planning basis for Sizewell B’s PWR. However, the prudent provisioning planning assumption for Sizewell B was that a prompt dismantling/decommissioning strategy would be pursued. Hence, the technical planning basis for Sizewell B is now being revised to reflect the prudent provisioning planning basis. The works to revise the Sizewell B Decommissioning strategy will be completed by October 2005.

The principal stages of decommissioning as defined by IAEA are:

• Stage 1:    pre-closure preparatory work; defueling; decommissioning engineering preparatory work; and management of potentially mobile operational wastes;

55

• Stage 2:    dismantling redundant ancillary buildings; safestore development; site surveillance, care and maintenance; and

• Stage 3:    preparation for reactor building dismantling and clearance; retrieval and management of stored radioactive waste; reactor dismantling and reactor building dismantling and clearance; and site clearance and release for re-use.

For the ESS strategy for our AGR stations BEG have adopted an eleven activity strategy which aligns with the three IAEA stages.

For our Sizewell B PWR prompt dismantling decommissioning strategy a similar approach is proposed (however, with no period of safestore/deferral prior to reactor dismantling).

We anticipate that after defueling the reactors, dismantling them will be deferred for at least 85 years (for AGRs) and up to 50 years (for PWRs) after closure of the relevant nuclear power stations. It should be noted that work is currently ongoing to refine and revise the technical and provisioning/costing basis for BEG power station decommissioning (both AGR and PWR). These works will be completed in October 2005.

Liability for decommissioning

We have an obligation under our nuclear site licenses to decommission our stations at the end of their useful life. The estimated undiscounted costs of decommissioning our AGR and PWR stations are £5.6 billion. For further details, see Note 8 of our audited consolidated financial statements. Prior to the Restructuring certain of the decommissioning liabilities were covered by arrangements with the NDF to which we made contributions pursuant to the terms of the Nuclear Decommissioning Agreement which was entered into on March 29, 1996.

Following the Restructuring the Nuclear Decommissioning Agreement has terminated, the Nuclear Liabilities Funding Agreement and Contribution Agreement have become fully effective and the NDF has been enlarged into and renamed the NLF.

Nuclear Liabilities Fund

Under the terms of the Restructuring, the NLF will, subject to certain exceptions, fund certain of our qualifying uncontracted nuclear liabilities (i.e. all those nuclear liabilities for which there is currently no contract in place) and the costs of decommissioning our nuclear power stations. The NLF is funded by contributions from us and the Government has agreed to fund the qualifying decommissioning costs and qualifying uncontracted liabilities to the extent that they exceed the assets of the NLF. To the extent that there are any surplus funds in the NLF, this amount will be paid to the Government. In addition to the issue of £275 million of New Bonds to the NLF, we make the following contributions to the NLF:

• fixed decommissioning contributions of £20 million per annum (indexed to RPI but tapering off as our nuclear power stations are currently scheduled to close);

• £150,000 (indexed to the RPI) for every tonne of uranium in the fuel loaded into Sizewell B from the Effective Date of the Restructuring; and

• The NLF Cash Sweep.

The trustees of the NLF will have the right from time to time to convert all or part of the NLF Cash Sweep into our convertible ordinary shares. On a full conversion the NLF would hold up to 65 per cent. of the thereby enlarged share capital of the Company. These shares will be subject to certain voting restrictions, so that, for so long as the shares are held by NLF, they will be non voting to the extent

56

they would otherwise carry more than 29.9 per cent. of our voting rights. The convertible ordinary shares will convert into New Shares automatically on transfer by the NLF to a third party but will not otherwise be convertible at the option of the NLF. There are certain restrictions on the manner in which the NLF may convert its NLF Cash Sweep Payment or dispose of any of its shares. For further information see Item 4—The Restructuring—The Nuclear Liabilities Fund.

COAL FIRED GENERATION

Eggborough Power Station’s operating regime

We acquired EPL, the owner of the Eggborough power station, from National Power (now RWEnpower) in March 2000. This purchase was re-financed by a project finance loan of £550 million entered into on July 13, 2000 pursuant to which the Eggborough Banks were granted security. As part of the Restructuring, the Eggborough Banks continue to have security over, among other things, the shares in EPL and the Eggborough power station and have an option to acquire Eggborough power station either through a share or asset purchase in 2010 (or earlier if there is an event of default).

Eggborough power stations continues to be operated by our subsidiary EPL. Output from Eggborough was 2.5 TWh for the period after the Restructuring Effective Date and 5.1 TWh for the period prior to it, a total of 7.6 TWh, for the year ending March 31, 2005 compared with 7.6 TWh and 5.7 TWh for the respective preceding years. The Eggborough power station’s output level is influenced by a number of factors including the market price of coal, carbon, electricity and our contracted trading position, and by relevant environmental legislation (the influence of relevant environmental legislation will significantly increase over time).

Being coal-fired, Eggborough power station produces emissions containing CO₂, sulfur dioxide (“SO₂”) and nitrogen oxides (“NOx”), and therefore its future output will be affected by the impact of two important environmental initiatives which seek to limit these emissions namely, the ETS and the LCPD, which are discussed in the paragraph below headed “Legislation affecting the Eggborough Station’s output”.

Eggborough power station consists of four generating units with a nominal capacity of 500 MW per unit and is operated at various levels, rather than at constant levels in the manner of our nuclear stations. Decisions over when to operate the units at Eggborough depend primarily on the revenue that can be earned from electricity sales and the cost of operation. The main variable cost is the market price of coal.

In recent outages evidence of turbine blade cracking was found in inspections of two units. With minor repairs to one unit, and modification of the second during the current outages, these units should be returned to service shortly at slightly reduced output. The inspection of a remaining similar turbine on a third unit should also be completed shortly.

Coal for the Eggborough Station is procured from a variety of suppliers. The aim is to secure the majority of anticipated requirements up to a year ahead. Exposure to movements in coal market prices is hedged through using a mixture of fixed and floating price contracts and other financial instruments related to coal price. A mixture of both UK and imported coal is used and the coal is generally delivered by rail freight directly to Eggborough.

The capability has been developed at Eggborough for co-firing coal with various forms of organic material (“biomass”) which qualify for co-fired Renewable Obligation Certificates (“ROCs”).

We own an ash disposal site at Gale Common, close to Eggborough power station, which is used for the disposal of ash produced by the Eggborough Station and the nearby Ferrybridge power station, which is owned by a subsidiary of Scottish and Southern Energy plc. For further information relating to

57

Gale Common, see Item 3—Risk Factors, the risk beginning “Our right to title to certain ash and water pipelines which benefit Gale Common ash disposal site near Eggborough power station is not registered with the Land Registry”.

Investment in the Eggborough Station

In response to recent developments in relation to the regulation of emissions, details of which are set out in the paragraph below headed “Legislation affecting Eggborough Power Station’s output”, we have fitted two of the four generating units with flue gas desulfurisation (“FGD”) equipment. Remedial works have now been completed to address a performance problem which emerged during commissioning tests in 2004, and further testing of the plant is in progress. This equipment is designed to reduce emissions of SO₂ to the atmosphere from the units which have been fitted with FGD by approximately 90 per cent.

As part of the Restructuring, there are limits on the funding of Eggborough power station. Any investment outside these limits requires the approval of the holders of the New Bonds. We are also contractually committed to certain capital investments to improve the Eggborough power station’s performance and reliability.

Applications for Restrictions on Mining

Eggborough power station does not enjoy a protected right of support. As a result, there is presently no restriction on coal mining taking place in circumstances whereby the stability of Eggborough power station could be affected. We have tried, unsuccessfully, to negotiate an acceptable pillar of support agreement with UKC who hold a license from the Coal Authority to mine coal and undertake mining operations in the vicinity of the station.

If UKC were to mine under or in proximity to Eggborough power station in circumstances affecting its stability, then extensive liabilities would fall on UKC pursuant to the Coal Mining Subsidence Act 1991. Under this Act, the coal operator is required to carry out remedial works and/or make payments for the consequences of the mining damage.

An application submitted by us to the Secretary of State pursuant to the Mines (Working Facilities and Support) Act 1966 for restrictions to be imposed on the working of minerals under part of land affecting Eggborough power station, and land adjacent to it was unsuccessful.

As a consequence, the stability of Eggborough power station may be adversely affected if UKC were to mine under or in proximity to it. If this were to occur, it may not be possible to continue the operation of Eggborough, or substantial repairs could be required. For additional information, see “Item 3—Risk Factors—we do not currently own the rights of support for the land under the Eggborough Power Station”.

Legislation affecting Eggborough Power Station’s output

The ETS and the revised LCPD are major environmental initiatives which will have an important impact on the Eggborough Station as they seek to reduce CO₂, and SO₂, NOx and particulates. The ETS commenced on January 1, 2005. The main provisions of the revised LCPD which limit emissions are due to become effective on January 1, 2008 and will restrict further the limits of permitted emissions.

ETS

Combustion installations with a rated thermal output in excess of 20 megawatts (excluding hazardous or municipal waste installations) require a Greenhouse Gas Emissions Permit (an

58

“Emissions Permit”). Under an Emissions Permit, a combustion installation is allocated CO₂ emissions allowances (“ETS Allowances”). From January 1, 2005 onwards, each combustion installation must begin monitoring CO₂ emissions and must submit ETS Allowances equal in amount to its actual annual reportable emissions of CO₂ by the date falling four months from the end of the year in which such emissions arose. In any year, a combustion installation’s emissions of CO₂ may not exceed its ETS Allowances for such year unless it has purchased additional ETS Allowances to cover such excess emissions (in principle, ETS Allowances should be tradable across all EU member states, enabling those operators with a surplus of allowances to sell to those with a shortfall).

Eggborough power station has an Emissions Permit and was allocated ETS Allowances equating to 4.54 million tonnes of CO₂ emissions in each of the calendar years 2005, 2006 and 2007 according to the final National Allocation Plan (“NAP”) published by the Government and approved by the European Commission. This is equivalent to the level of emissions associated with electrical output of approximately 5.4 TWh in each such year. Additional allowances will need to be acquired if the Eggborough power station is to continue to generate electricity at 2004/05 levels.

The basis for the allocation of ETS Allowances in the second phase of the ETS (this relates to the period from 2008 to 2012) has yet to be determined by the Government.

LCPD

The LCPD seeks to reduce the emissions of certain pollutants (namely NOx, SO₂ and particulates) into the air from large combustion plants. By January 1, 2008, EU member states must achieve significant emissions reductions in one of two ways:

• ensuring that all permits for the operation of existing plants contain conditions securing compliance with the Emission Limit Values (“ELVs”) established for new plants; or

• ensuring that existing plants are subject to a National Emission Reduction Plan (“NERP”).

The ELV approach involves setting emission rate limits for individual plants, for SO₂, oxides of nitrogen and particulates for a given period which cannot be exceeded without breaching their permit. In comparison NERP involves the reduction of total emissions of SO₂, oxides of nitrogen and particulates for the EU member state concerned, referenced to the levels that would have been achieved by applying the same rate limits as under ELVs to existing plants in operation in the year 2000, on the basis of each plant’s actual annual operating time, fuel used and thermal output averaged over the last five years of operation up to and including 2000. Provided that the total amount allocated to an EU member state is not breached, an EU member state has some flexibility in how it introduces NERP. For example, while each plant may be subject to limits under NERP, it may allow its plants to trade their allocation amongst other plants in that same EU member state. However, a member state’s flexibility under NERP will always be limited by the limits set under the pollution, prevention and control regime, the fact that the LCPD provides that the closure of plants included in the NERP shall not result in an increase in the total annual emissions from the remaining plants covered by the plan, and the fact that the requirements of the LCPD under a national plan approach need to be met on a calendar basis (this therefore, removes the possibility of banking or trading allowances across the years).

The Government has sought clarification from the European Commission on a number of matters and has delayed its decision on how the LCPD will be implemented. These matters are firstly, whether a plant will be treated as being a whole station, or an individual generating unit, in which case Eggborough power station’s four units would be treated as separate plants. Secondly, the Government has proposed implementing a hybrid NERP/ELV solution where large power stations, such as Eggborough, would be subject to rate limits for future emissions. As at the date of execution of this report, the Government has not provided any further guidance on application of the LCPD in the UK.

59

Plant owners have the option to “opt-out” of the LCPD in which case they will be permitted to run plants for a total of 20,000 hours between January 1, 2008 and January 31, 2015, subject to additional regulations imposed by the EA. Given the uncertainty on the key issues, the Government has provided further instruction that plant that is opted out by June 30, 2004 can be opted back in prior to December 31, 2005. British Energy has therefore chosen to conditionally opt-out its two non-FGD units, the conditionality relating to i) the choice to opt back in prior to the December 31, 2005 deadline and ii) whether a plant is treated as being a whole station, or an individual generating unit (if the former is the case the two-unit opt-out would be deemed invalid and those two units would be opted back-in again (subject to the consent of the Eggborough Banks holding 66 ²/3per cent. of the debt under the Amended Credit Agreement (such consent not to be unreasonably withheld or delayed)).

The final details of the implementation of the LCPD may affect the level of generation from the Eggborough power station and other fossil fuel plants in the future.

Other legislation

Limits on the emissions of pollutants may also be imposed in permits issued by the EA and it is possible that stricter limits could be imposed than under the LCPD and ETS. This is because the EA are required to implement the LCPD and ensure that in doing so the National Emissions Ceiling Directive is not compromised. In addition, the EA has to take into account the requirements of the Integrated Pollution, Prevention Control Directive in 2006 and also the National Emissions Ceiling Directive, the Habitats Directive and the Water Framework Directive requirements in setting permit conditions going forward.

ELECTRICITY SALES

Role of trading

We have continued to follow a prudent trading strategy, in line with commitments made in November 2004, to reduce the Group’s exposure to potential falls in the market price of electricity. Our routes to market include direct sales to industrial and commercial customers, contracting in the wholesale market, together with sales of balancing and ancillary services to National Grid Transco (the operator of the electricity transmission network) (“National Grid Company”). We also sell forward in order to manage the risks of short to medium price volatility in wholesale market prices and because there is insufficient liquidity in the short term markets alone for us to be sure that we would be able to sell our generation at an acceptable price. This approach does however reduce in the medium term the benefit we receive from wholesale electricity prices rising.

As at March 31, 2005, fixed price contracts were in place for approximately two-thirds of planned output for the fiscal year 2005/06 at an average contracted price of £26.4/MWh. As at June 30, 2005, fixed price contracts were in place for approximately three-quarters of planned output for the fiscal year 2005/06, at an average contracted price of £29.8/MWh. We intend to progressively close our exposure to market prices for 2005/06 and to build our hedge position for 2006/07 subject to the limits on trading collateral.

Market Conditions

Electricity prices in the UK wholesale market reached all time highs during 2004/05, driven up by high oil and gas prices and concerns in the market over the ability of gas supplies to meet demand at peak times. Both spot and forward electricity prices have also been very volatile throughout the year.

60

Gas prices continue to be a key influence on the electricity market, and electricity prices have mirrored movements in gas prices through the year. In fall 2004, the National Grid Company highlighted a risk that there might be insufficient gas to meet power station demand in the event of a cold winter. This contributed to a sharp rise in gas and power prices for winter 2004/05 and winter 2005/06. Although temperatures in winter 2004/05 were above the long term averages, and it was the warmest January since 1990, relatively cold weather at the end of February, coupled with reduced gas supply, triggered exceptionally high spot prices for both gas and power. Worldwide demand for coal has remained strong, keeping coal prices in the range $60-80/tonne for delivery to European ports.

The forward price for annual baseload electricity for 2005/06 delivery rose from around £24.5/MWh in March 2004 to over £35.0/MWh by the end of March 2005, an increase of over 40 per cent. As mentioned above, concerns over a potential shortfall in winter peak gas supply contributed to a rise in the price for delivery for the year from October 2005 to over £37.0/MWh in early October 2004. As of June 30, 2005, the annual prices for delivery from October 2005 had subsequently risen to over £49.0/MWh.

On January 1, 2005, the ETS came into effect. From that date, all installations covered by the scheme must have a permit to emit greenhouse gases and will be required to submit allowances on an annual basis to cover their emissions of carbon dioxide. The initial allowances have been allocated by the Government according to a National Allocation Plan which has been approved by the European Commission. The market price of allowances has risen since the beginning of 2005, and reached over €15/tonne of carbon dioxide at April 30, 2005 and €25/tonne at June 30, 2005, increasing the cost of marginal coal and gas generation.

The wholesale market

We are active in the over-the-counter market as well as negotiating structured contracts on fixed or indexed price terms. Over-the-counter transactions include both futures and options on electricity as a hedge against adverse market price movements in the short to medium term. Trading in products which may be regarded as regulated investments is carried out by our trading subsidiary, British Energy Trading Services Limited (“BETS”) as agent and arranger for BEPET. BETS is regulated by the Financial Services Authority in respect of these activities.

Short term trading is carried out via the Amsterdam Power Exchange (UK) Limited (“APX”) which provides an anonymous electronic trading platform and clearing and notification service for electricity futures and spot trades for individual half-hour periods. We primarily use APX as a means of balancing our within-day physical position by either buying or selling to compensate for differences between our notified contractual position and planned generation and forecast supply.

Our ability to utilize the wholesale market as a route to market is affected by the strength and depth of the market, see risk Item 3—Risk Factors: “Lack of liquidity in the wholesale market may adversely affect or require us to alter our trading strategy”.

Trading Development Program

Following a comprehensive review of our trading capabilities, we have now completed our Trading Development Plan. As a result of the program we have strengthened key skills by the recruitment of experienced staff, in particular in the areas of trading finance and risk management. We have developed sophisticated plant performance and reliability models to assist in decisions over the optimum running of our plant and improved risk monitoring policies and procedures. We have also made major changes to develop communications and interface arrangements between our generation, trading and direct supply activities to enhance business performance.

61

Direct supply business

Volume equivalent to almost half of our generation was sold directly to industrial and commercial customers in 2004/05. Total direct sales were 31.4 TWh, up 7 per cent. from 29.1 TWh in 2003/04. We now have over 2,000 customers and are supplying over 15,000 sites across Great Britain. We have continued to hold number one ranking in the quarterly customer satisfaction survey of industrial and commercial customers carried out by the Energy Information Center, a position we have now held for over five years. We have also regained top ranking for customer satisfaction in Datamonitor’s six-monthly survey, reported in March 2005, against strong competition from other suppliers. The direct sales business was transferred to a new subsidiary company, BEDL, on April 1, 2005. BEDL is licensed to supply non-domestic customers throughout Great Britain.

Arrangements in Scotland

Until April 1, 2005 there was no wholesale market in Scotland. Prior to that date we sold all the output from our Scottish nuclear power stations to Scottish Power and Scottish and Southern Energy under the terms of the Nuclear Energy Agreement (“NEA”), which was originally entered into in 1990 and subsequently amended, most recently, on July 15, 2002. Under the revised terms of the NEA, Scottish Power and Scottish and Southern Energy purchased the electricity generated by our Scottish power stations from us at a price linked to market prices and terms for the supply of base load energy in England and Wales.

On April 1, 2005, the British Electricity Trading and Transmission Arrangements (or “BETTA”) were brought in to extend the existing market arrangements for England and Wales to include Scotland. Under BETTA, the National Grid Company has responsibility for operating and balancing the transmission system across Great Britain. Revised charging arrangements for access to the transmission network were also introduced at the same time. The NEA came to an end when BETTA was implemented.

Collateral

Our electricity contracts give rise to the need for us to provide credit support in the form of cash collateral. In respect of trades in the wholesale market, this is requested by counter-parties to ensure that, should the contracts terminate early for whatever reason, there are sufficient funds available to reimburse the costs they may incur in replacing the terminated transactions in the open market. Credit support is also required to ensure that there are sufficient funds available to cover balancing, transmission, distribution and other similar costs and charges.

Our industrial and commercial customers do not require us to provide collateral. However, collateral is required by transmission and distribution network operators in order to cover liability for their charges.

REGULATION

Introduction

Our participation in the electricity industry in Great Britain (being England, Scotland and Wales, but excluding Northern Ireland), through a variety of routes, and the nature of the bulk of our electricity generation being by nuclear power reactors means that we are a highly regulated business. In addition to the safety, competition, health and environment legislation which typically applies to a conventional power generation business, we are also subject to extensive safety, health and environmental constraints which apply solely to the operators of nuclear power plant, for example, the Nuclear Installations Act 1965 and the Radioactive Substances Act 1993. These regulatory regimes are described below in the paragraph below headed “Regulation of the UK nuclear generation industry”.

62

Regulation of the electricity industry

Key legislation

The framework for the economic regulation of the electricity industry in Great Britain is set out in the Electricity Act 1989 (“Electricity Act”) which was amended by the Utilities Act 2000 (“Utilities Act”) and the Energy Act 2004 (“Energy Act”).

GEMA was established by the Utilities Act. GEMA’s functions under the Electricity Act which are largely carried out by OFGEM include granting licenses to generate, transmit, distribute or supply electricity; enforcing compliance with license conditions; administering funds generated by the English and Scottish Renewables Obligation Certificates (described in the paragraph below headed “Renewables Obligations”); and setting standards of performance for electricity licensees. The Electricity Act requires GEMA and the Government to exercise their functions under the Act in the manner which they consider is best calculated to protect the interests of consumers present and future, wherever appropriate by promoting effective competition.

Regulatory developments

On July 22, 2004, the Energy Act received Royal Assent. It provides the framework for the establishment of the NDA launched on April 1, 2005 to manage the decommissioning of the United Kingdom’s nuclear legacy as well as the development of offshore wind and other marine renewable energy sources outside territorial waters. The Energy Act further provides for the implementation of BETTA which was brought into effect on April 1, 2005 and had the effect of extending the market arrangements already applicable in England and Wales to Scotland and creating a single wholesale electricity market for Great Britain. These new arrangements have created a much larger market for our Scottish generation due to the ending of the NEA, under which all of our Scottish generation was sold to Scottish Power and Scottish and Southern Energy. However, the termination of the NEA also means a loss of the guaranteed market for the output of our Scottish stations and other routes to market for this output are now being used.

Licenses

Electricity generation licenses

Unless covered by exemption, all electricity generators operating a power station in the UK are required by the Electricity Act to have a generation license. Generation licenses in Great Britain are granted by GEMA and impose certain conditions on licensees. The majority of these are set out in standard license conditions and apply to all generation license holders. The conditions attached to a generation license require the license holder, amongst other things, to comply with the Balancing and Settlement Code (“BSC”), the Grid Code and the Connection and Use of System Code (“CUSC”). BEG was granted a generation license by the Director General of Electricity Supply (GEMA’s predecessor) which came into effect on April 1, 1996. This license was then amended and restated by a licensing scheme made by the Secretary of State on September 28, 2001. Subject to provisions within the Electricity Act, GEMA may modify the standard conditions of any license type. Failure to comply with any of the generation license conditions may subject the licensee to a variety of sanctions, including enforcement orders by GEMA, the imposition of monetary penalties or license revocation if an enforcement order or payment of a monetary penalty is not complied with.

Electricity supply licenses

Subject to minor exceptions, all electricity consumers in the UK must be supplied by a licensed supplier as provided for by the Electricity Act. Licensed suppliers purchase electricity and make use of

63

the transmission and distribution networks to achieve delivery to customers’ premises. Licenses impose certain obligations on licensees. The majority of these obligations are set out in Standard Licence Conditions (“SLCs”).

SLCs are split into four distinct parts not all of which are applicable to all supply license holders. The license deals with general obligations and requires the holder, amongst other things, to comply with the BSC, CUSC, Grid Code and Master Registration Agreement (the agreement to which all licensed suppliers and distribution businesses are parties and which is concerned with retail customers changing their suppliers).

We currently hold one supply license through which we supply our large industrial and commercial customers in connection with our direct supply business. We are not licensed to supply to domestic customers.

Approval of State Aid

On September 22, 2004, the European Commission advised the Government that insofar as the restructuring plan notified by the Government on March 7, 2003 under Article 87(3) of the EU Treaty involved the grant of State Aid, such State Aid was compatible with the common market. The European Commission’s decision was subject to certain conditions. These conditions included, amongst others, a requirement that we separate our direct supply business from other generation and trading businesses by April 1, 2005. This has been completed, and the transfer of our direct supply business from BEG to BEDL, was effected by April 1, 2005. A further requirement of the conditions to the grant of State Aid was to consolidate our nuclear generation activities into a single subsidiary. This was effected by July 1, 2005. For additional information see Item 4—Recent Developments.

Renewables Obligation

One of the ways in which the Government is seeking to increase the proportion of electricity generated from renewable sources is by the introduction of the Renewables Obligation (the “Renewables Obligation”). The Renewables Obligation on licensed electricity suppliers to source a proportion of their total electricity requirements from eligible renewable sources or to contribute through a buy-out payment came into force in April 2002. The amount of the Renewables Obligation increases from 3 per cent. in March 2003 to 10.4 per cent. in March 2011. As we are a licensed electricity supplier, we are subject to the Renewables Obligation in respect of sales through our direct supply business.

Each MWh of “electricity” produced by an accredited renewable generator earns a ROC or, in Scotland, a Scottish Renewables Obligation Certificate (“SROC”). These certificates can be sold or purchased independently from the electricity to which they relate and a supplier can meet its renewables obligations by submitting equivalent ROCs/SROCs for the prescribed percentage of electricity supply or by making a buy-out payment to GEMA (for 2004/05 set at £31.39/MWh and adjusted annually to reflect changes in the RPI) or a combination of both.

The Renewables Obligation is designed to incentivize electricity suppliers to acquire a sufficient number of certificates to meet their total requirements, rather than making buy-out payments which are then distributed by GEMA (with interest accrued) to suppliers who have submitted ROC/SROCs in compliance with the Renewables Obligation.

In 2003/2004, the Renewables Obligation in respect of our direct supply sales business was 1,078,225 MWh (at the time of publication, OFGEM have not published a comparable figure for 2004/05). This was met through a combination of ROCs, SROCs, and contributing to the buy-out fund.

64

The cost of meeting the Renewables Obligation is recovered from customers through their bills. For 2004/5 the amount of the obligation was 4.9 per cent. and the buy-out payment was £31.39/MWh.

Climate change levy

The Climate Change Levy (“CCL”), introduced in April 2001, aims to encourage the efficient use of energy and to reduce CO₂ by around 5 million tonnes a year from 2001 levels by 2010. The CCL benefits qualifying renewables generators because energy acquired from renewable sources is exempted from the levy.

Our nuclear stations and the Eggborough power station do not qualify as renewable or Combined Heat and Power generators for the purposes of CCL. All suppliers are required to collect the CCL from their business customers and to pass this to HM Revenue and Customs every quarter.

Regulation of the Eggborough Power Station and Gale Common

Key legislation

We are subject to numerous environmental regulations with respect to our ownership and operation of the Eggborough power station and the Gale Common ash disposal facility (the “Gale Common Facility”) located not far from Eggborough power station.

A system of Integrated Pollution Control (“IPC”) for power stations was introduced under the Environmental Protection Act 1990 for which the EA has responsibility for enforcement. The EA’s IPC authorizations require power stations to use ‘Best Available Techniques Not Entailing Excessive Cost’ to prevent or, where that is not possible, to minimize their emission of certain pollutants.

The Pollution Prevention and Control Directive was implemented in the UK on May 1, 2004 by the Pollution Prevention and Control Regulations and will modify the IPC regime, in relation to noise, waste minimization and energy efficiency, amongst other areas. Applications for authorization under the new Pollution Prevention and Control Regulations must be submitted to the EA by March 31, 2006 for the Eggborough power station and by March 31, 2007, for the Gale Common Facility.

Disposal of ash to the Gale Common Facility is governed by the Landfill (England and Wales) Regulations 2002, the Pollution Prevention and Control Regulations and hold two waste management licenses which are regulated by the EA.

More generally, we are also subject to the Water Resources Act 1991 which governs water pollution and requires persons who have knowingly permitted water pollution to carry out remediable works and the EU Environmental Liability Directive which is aimed at the prevention and remedy of environmental damage to water, land and bio-diversity, and is based on the principle that the polluter should bear the cost of damages caused to the environment or of measures to prevent imminent threat of damage.

Environmental management

We have a comprehensive environmental management system in place for Eggborough power station which is accredited by Lloyds Register Quality Assurance to international standard ISO 14001, a standard which demonstrates our continued commitment to the prevention of pollution and recognizes our environmental performance.

EPL is also a member of the Joint Environmental Program, a research initiative funded by eight of the major fossil fuel power station operators in the UK, whose objective is to increase our knowledge of the impact that the production of electricity from fossil fuels has on the environment.

65

In 1994, we carried out a comprehensive Environmental Effects Evaluation covering emissions to air, land and water from our nuclear stations. Since this time, we have periodically updated the evaluation as part of our efforts to develop an effective environmental management system.

Regulation of the UK nuclear generation industry

Key legislation

The principal areas of nuclear safety and security regulation in the UK (except for Northern Ireland) cover the construction, operation and decommissioning of nuclear installations and the protection of workers and the public against ionizing radiations. The principal regulating provisions are the NIA, the Ionizing Radiations Regulations 1999 (“IRRs”) and the Anti-Terrorism Crime and Security Act 2001 (“ATCSA”).

Environmental regulation of the nuclear industry covers the disposal of radioactive waste including discharges to the environment under the Radioactive Substances Act 1993 (“RSA”). Regulation of the transport of radioactive material is the subject of the Radioactive Material (Road Transport) Act 1991, (“RMRTA”).

The nuclear generation industry is also subject to the same regulations as other generators as regards non-nuclear aspects of health and safety and environmental protection, in particular under the Health and Safety at Work Act 1974 (“HSWA”), the Environmental Protection Act 1990 (“EPA”), the Water Resources Act 1991, the Pollution Prevention and Control Act 1999 and in Scotland, the Control of Pollution Act 1974.

Nuclear site licenses

Under UK law, and in particular the HSWA, employers are responsible for ensuring the safety of their workers and the public. This responsibility is reinforced for nuclear installations by the NIA which establishes a nuclear licensing regime controlled by the HSE. The licensing function is administered on HSE’s behalf by the NII. Operation of a nuclear plant is governed by the nuclear site license and the license conditions which are attached to it and apply to the whole plant through its life cycle, up to and including decommissioning.

Before a nuclear site license is granted, the NII must be satisfied as to the safety of the operation and eventual decommissioning of an installation, and the ability of the applicant to understand and meet its obligations. Prospective licensees will be assessed under three broad areas: organization of applicant and measures to discharge license obligations; location and security of site; safety of the site’s design, its manufacture, installation, commercial operation and maintenance. The safety of the installation is demonstrated through a written safety case and the applicant also documents the arrangements for the management of safety which the NII assesses prior to granting a license. Modifications to the original safety case are managed through arrangements which ensure that significant changes cannot be made if the NII objects. All of our nuclear power stations hold nuclear site licenses. The conditions to the licences are contained within the schedules to the license and are standard to all licenses.

The NII’s regulatory approach to safety involves defining levels of tolerable risk. Activities above the level of tolerability are not normally permitted. Tolerable risks must be reduced to a level which is as low as reasonably practicable (“ALARP”). The ALARP principle has been embodied in a set of safety assessment principles which the NII uses as a basis for assessing safety cases.

The NII scrutinizes the activities of the licensee directly on site, and of the licensee’s central support organization, through the assessment of the licensee’s written submissions. An NII inspector is

66

allocated to each nuclear power station and is typically present on site one week per month to hold meetings with the station staff and to check for compliance with the license conditions and safety case requirements. An inspection team may also visit the station to assess a particular part of the plant, or aspect of the safety case, and may also visit the licensee’s central support organization to assess its part in ensuring safety on the licensed sites. As discussed in greater detail in the paragraph below headed “Safety management”, each license also requires the establishment of a Nuclear Safety Committee (“NSC”) for each licensed site, to provide independent advice to the licensee on significant nuclear safety issues.

There are nuclear site license conditions requiring the licensee periodically to shut down the reactor to carry out inspections and maintenance (statutory outages), particularly in respect of the reactor core and other plant that cannot be accessed whilst operating, and to review and reassess the safety case for the plant. Statutory outages take place at intervals of up to three years for an AGR and up to eighteen months for a PWR. Before consenting to the reactor restarting, the NII has to be satisfied that, based on the previous operating experience and the condition of the plant, there is an adequate safety case for the operation of the plant for the next period. This may require enhancement of the safety case to justify continued operation.

Nuclear site licenses require adequate arrangements to be made for the decommissioning of any plant. To ensure that a licensee’s decommissioning strategies remain sound as circumstances change, they are reviewed every five years by the NII, which also consults the relevant environmental regulatory bodies. Applicants justify their chosen decommissioning strategy to the NII and demonstrate that there will be adequate funds to carry out the work.

The NII on behalf of the HSE regulates conventional and nuclear safety. Its enforcement powers include the service of improvement notices, prohibition notices and prosecutions. The NII regulates under the nuclear site licenses through the use of directions, specifications, notifications, consents, approvals and agreements. In addition to the ability to prevent a reactor restarting following a planned outage, the NII may also direct a licensee to shut down a nuclear reactor.

Under our nuclear site licenses, we are also required to carry out a PSR to review the safety case for each of our stations once every ten years to demonstrate that it is safe to operate the relevant reactors for the next ten years, taking into account current safety standards, the operational history and the effects of plant aging. Further details of the PSR are set out below in the paragraph below headed “Periodic Safety Reviews”. Nuclear site licenses for each of our nuclear power stations are held by BEG.

Safety management

In accordance with its site license, each nuclear power station has established a NSC to provide independent advice to the licensee on significant nuclear safety issues. The NSC consists of senior company personnel with knowledge of, and responsibility for, nuclear safety and the relevant station director and external appointees who have significant experience in the nuclear industry. The NII approves the terms of reference of each NSC, which determines the matters to be referred to it, and has a power of veto on any appointment to a NSC.

License condition on organizational change

In March 2000, the NII added a new condition to the standard nuclear site license, thereby bringing changes to organizational structure and resource directly within the licensing regime so far as they affect nuclear safety. We have site license compliance arrangements in place to address the new license condition and to manage organizational changes which may affect nuclear safety, such as the creation of new station posts, reductions in manpower or outsourcing of functions.

67

Nuclear liability under the Nuclear Installations Act

The NIA provides that the licensee of a nuclear site has a duty to ensure that no occurrence involving either nuclear material or ionizing radiations causes personal injury or damage to property other than property of the licensee, or other property which is on the site and is used in connection with the operation of the nuclear installation. The licensee is liable for a breach of this duty irrespective of fault and we currently maintain insurance in relation to this risk.

Under the NIA, our liability to pay compensation for a breach of this duty is currently limited to £140 million per occurrence (excluding interest or costs). The NIA requires the licensee to make provision, by insurance or such other means as the Government may approve, for sufficient funds to be available at all times to ensure that duly established claims are satisfied up to £140 million per site in respect of each of the periods of the licensee’s responsibility specified in the NIA. The NIA also requires that the Government will make available such sums (in addition to insurance or other funds which may be available from the licensee) as may be required to ensure that all duly established claims (excluding interest or costs) in respect of any occurrence are satisfied, up to 300 million special drawing rights (equivalent to approximately £240 million). A claim for compensation which is not satisfied out of this sum may, under the NIA, be satisfied by the Government to such extent as it may determine. The Secretary of State may direct the licensee to begin a new period of responsibility in the light of previous occurrences or claims thereby requiring the licensee to re-instate any provision that may have been reduced as a result of claims following an occurrence.

It is likely that these thresholds will increase in the near future. On February 12, 2004, the Government signed a Protocol to amend the Paris Convention on Third Party Liability in the Field of Nuclear Energy, 1960 and the Supplementary Brussels Convention, 1963 which together increase the limit of liability of nuclear operators to a minimum of €700 million; the liability of the Government to €500 million ; and the liability of the pool of funds contributed to by contracting parties to the Brussels Convention to €300 million. The Government has indicated its intention to ratify the relevant amendments by the end of 2006. Total compensation available under the revised regime will be a minimum of €1.5 billion, a four-fold increase. In addition, the definition of nuclear damage will be expanded to allow a broader range of damage to be compensated, including economic loss and the costs of preventive measures. Following ratification of the Protocol, the NIA will be amended. The Directors believe that the insurance market will have sufficient capacity to offer cover for these liabilities (and are aware that the costs of insurance will increase in line with the increases in liability resulting from the intended amendments to the NIA described above) arising to a nuclear operator and intend to maintain such insurance following implementation of the Restructuring. See Item 3—Risk Factors, the risk beginning “The amount of insurance cover we are mandatorily required to maintain”.

Health and safety

Operators of nuclear power stations must comply with the strict limits set out in the IRRs which lay down basic safety standards for the protection of the health of workers and the general public against the dangers arising from ionizing radiations.

Periodic Safety Reviews

The adequacy of the safety case for each power station is confirmed at each statutory outage, at which point the NII reviews the operating performance of the station and the examination, maintenance, inspection and testing that we have carried out on the plant. Prior to consenting to the nuclear reactor restarting, the NII must be satisfied that there is an adequate safety case for the operation of the plant.

In addition to the ongoing monitoring, pursuant to a condition of our nuclear site licenses, a PSR is required at each nuclear power station, at intervals of not more than ten years, to review the safety

68

case for continued operation for the next ten years taking into account operational history, plant aging and current safety standards. The nuclear power station’s commercial viability may be significantly eroded if we fail to convince the NII of the adequacy of the safety case. The scope and timing of the PSR is agreed between the NII and the licensee.

Once the timing of the PSR is agreed the licensee carries out the review and submits its findings to the NII. The NII’s expectation from a PSR is that it will receive confirmation that safety structures, systems and components remain fit for purpose insofar as they are able to perform according to original design intent and that modern standards are achieved as far as reasonably practicable. The NII may require additional work to be carried out to demonstrate the adequacy of the safety case for continued operation and the progress of any such work will usually be monitored by the NII on an ongoing basis.

The first PSR has been completed for each of our AGRs. Sizewell B, the last station to complete a PSR, provided its submission to the NII in December 2003. The NII is expected to complete its assessment of that submission in September 2005 (although generally the NII takes approximately thirteen months to assess our PSRs). For details of the PSR dates for all our stations see the paragraph above headed “Station lifetimes”.

The next PSR of Hunterston B and Hinkley Point B is planned to be submitted to the NII in March 2006 at which time we will be required to confirm that all the recommendations arising from the previous PSRs of Hunterston B and Hinkley Point B have been implemented. The NII’s decision whether to agree continued operation of each nuclear power station is expected a year or so after these submission dates.

Public safety

Transport

The transport of all radioactive material, both waste and fuel, off-site must comply with the Department of Transport requirements under RMRTA and the HSE’s requirements under HSWA and ATCSA. The RMRTA regulates the transport by road of radioactive material. Under these Acts, the Government may regulate the packaging, labeling, consignment, handling, transport, storage and delivery of radioactive packages. The current regulations require certain consignments to be specifically approved by the Secretary of State for Transport.

Security

We operate in a world where we must be vigilant to security threats of all sorts in particular as a result of increased levels of terrorist activity internationally. Our operations are regulated and subject to audit by the OCNS which, in 2002, published its initial report after the terrorist attacks on the World Trade Center in New York on September 11, 2001, and must comply with the Nuclear Industries Security Regulations 2003 (the “NIS Regulations”) which are made under ATCSA and all directions made under that legislation. The NIS Regulations make provision for the protection of nuclear material, both on sites and in transit, against the risks of theft or sabotage, and for the protection of sensitive nuclear information, such as site security arrangements. The OCNS published its latest annual report (“The State of Security in the Civil Nuclear Industry and Effectiveness of Security Regulation April 2004-March 2005”) on July 25, 2005. The 2005 report contained recommendations and changes, some of which we will be developing with the OCNS over the coming months, along with other nuclear operating companies to consider the impact of the revised strategy on our security arrangements but it is likely to result in increased security costs.

In August 2004 the Uranium Enrichment Technology (Prohibition on Disclosure) Regulations 2004 came into force. These Regulations make it an offence to make an unauthorized disclosure of uranium

69

enrichment technology. This technology is used in the civil nuclear industry and can also be used in to develop nuclear weapons. An Explanatory Memorandum, Regulatory Impact Assessment and Guidance for the regulations have been prepared by OCNS.

Through the Standing Committee on Police Establishments, OCNS reviews police numbers and deployment at licensed nuclear sites policed by the Civil Nuclear Constabulary (“CNC”) such as British Energy’s nuclear power stations.

The OCNS announced in summer 2004 that all the UK’s nuclear generating stations will benefit from an enhanced layer of security when armed response units are deployed during 2005/6. Powers to deploy these officers had been included in ATCSA. Until permanent deployment at each station armed tactical response units are on hand to familiarize staff and where required to respond to operational requirements. We believe that these new measures will add a prudent enhancement to the security measures already in place.

Our security arrangements are independently reviewed, and we remain confident that our security regime and processes are of a high standard. We are further enhancing our security arrangements to meet the increasing UK regulatory requirements and conform with Government guidelines. The reviews cover protective security-related compliance issues as well as compliance with legal requirements. Our security policy and our security risk management audit process are documented and subject to regular internal review and we consider we have effective systems in place to address security issues across a range of areas including personnel recruitment, information technology, physical security and health and safety. We make every effort to ensure that robust security management is achieved.

The needs of security have to take account of the need for information to be available for use, so in June 2004 OCNS published Guidance entitled “Finding a Balance”. Issue No.2 of this guidance was published in April 2005. It made no substantive changes to the previous Guidance, but it updated on the creation of the CNC (previously the United Kingdom Atomic Energy Authority Constabulary).

Emergency arrangements

Emergency arrangements have been established and demonstrated to the satisfaction of the relevant regulators. Each power station has an emergency plan which is approved by the NII and lodged with local emergency services, public libraries and others. Information on emergency arrangements is discussed at local consultative meetings and information is provided to local residents. Each power station has an emergency control center on-site, as well as off-site arrangements for co-ordination with the police, the local authorities, other emergency services and other government agencies. No nuclear emergencies have occurred at any of our sites which have resulted in a release of radioactivity above the authorized level.

Safety performance

Under the terms of our nuclear site licenses, all incidents are required to be recorded and investigated and those of significance must be notified to the NII within defined time scales.

To aid public understanding of the safety significance of events at nuclear installations and their consequences, the International Atomic Energy Agency and the Nuclear Energy Agency of the Organization for Economic Co-operation and Development have developed the International Nuclear Event Scale which sets out various levels of incident increasing in seriousness from “1” (i.e. an anomaly beyond the authorized operating regime) to “7” (i.e. major accident with widespread health and environmental effects) and the criteria relating to each level.

70

Only events at level 4 and above involve a significant release of radioactivity off-site. There has never been an event at any of our power stations resulting in an exposure to radiation of a person on or off the site above the statutory exposure limits, or the need to consider countermeasures to protect the public off-site. No event has been rated higher than level 2 at any of our power stations (i.e. an incident with a significant failure in safety provisions but with sufficient defense in depth remaining to cope with additional failures or an event resulting in a radiation dose to a worker in excess of the statutory annual dose limit and/or an event which leads to the presence of significant quantities of radioactivity in the installation in areas not expected by design and which require corrective action).

There has been a reduction in the collective radiation exposure to our workers from 0.09 man Sv/reactor in 2003/2004 to 0.03 man Sv/reactor in 2004/2005. This figure represents approximately one twenty-fifth of the worldwide median of the operators contributing to information collated by the WANO and places the Company within the top 10 per cent. of performers in this respect.

We maintain an open culture that promotes the reporting of all accidents, including those where no injury actually resulted. In the year to March 31, 2005, our accident frequency rate was 0.22 lost-time accidents per 200,000 man-hours of operation, a decrease from 0.53 in the prior year.

The Royal Society for the Prevention of Accidents (“ROSPA”) has recognized our safety performance by awarding all of our eight nuclear stations (together with Eggborough power stations’s FGD project) with Gold Awards for achieving very high standards of safety in 2004/05. Gold Medal Awards were presented to two of our power stations for achieving continued safety performance over the last five years and six of our power stations were awarded the President’s Award for achieving Gold Awards for the last ten consecutive years.

NII safety management audit

In 1998, the Board announced its decision to reorganize the Group and, in particular, our two licensed subsidiaries, BEG and BEG (UK), to bring all eight UK nuclear power stations under one licensee, namely BEG. Following this decision, in April and May 1999, the NII carried out a major audit of the safety management arrangements in the central functions that support safety at the licensed sites. The report from this audit was published by the NII in January 2000, and included 103 recommendations to be addressed by both licensees. The NII expressed concern about the ability of BEG and BEG (UK) to maintain adequate levels of technical support in the future, the extended working time of technical staff, the levels of contractor support being used and the adequacy of the management of change arrangements. The NII confirmed that it was not concerned about the immediate safety of the power stations, but wished to ensure that BEG and BEG (UK) remained adequate nuclear licensees in the future. On July 1, 2005 our nuclear generation facilities were consolidated into BEG. See Item 4—“Information on the Company. The Restructuring—State Aid Restrictions on our ability to operate”.

As well as dealing with recommendations on an individual basis, four main processes were developed to deal with the NII’s main areas of concern. The processes covered; Management of Skills and Resources, Management of Work, Management of Contractors and Management of Change.

Since publication of the NII audit report in January 2000, we have worked to develop processes to address the NII’s concerns. Of the 103 recommendations, 84 have been fully cleared and require no further action, and the remainder, most of which are related to the main processes outlined above, are being monitored to confirm that the agreed resolution has been fully carried out. The majority of the remaining recommendations have now been passed to the NII for full ‘post-monitoring’ closure. The NII has been using the BEG and BEG UK management of the relocation of technical staff from Scotland to Barnwood as a test of whether the processes put in place to address the audit findings are working.

71

WANO

We are a member of WANO which is an international non-governmental organization comprising operators from more than 420 nuclear power plants in over 30 countries. WANO aims to maximize the safety and reliability of its members’ nuclear power plants. WANO undertakes a program of site evaluations with the intent of reviewing operations at each of our nuclear power stations every two years.

WANO also carries out corporate evaluations where ‘corporate’ means any part of the power plant organization which does not report directly to the station director. These evaluations provide an opportunity for members to be informed of how other members of WANO perform in relation to the question of corporate organization and how the member in question is performing against benchmarks called Performance Objectives and Criteria (“POs & Cs”) for operational nuclear power plant which WANO has developed over the years, which set the expectations of how the best performing utilities should perform. A subset of the POs & Cs has been developed as the basis for corporate reviews. At our request, WANO carried out a corporate review of BEG and BEG (UK) in July 2001, which was the first such review outside of North America.

Sizewell B hosted a WANO follow-up review in June 2005 when the WANO team leader indicated the long-standing trend in declining performance levels at the plant had been stopped and noted signs of visible improvement in most areas of previous concern.

Compliance with nuclear regulations

We place great emphasis on the importance of maintaining and continuing to develop a “safety first” culture in addition to complying with regulatory requirements. Our overall organizational structures and policies and our safety management arrangements are designed to ensure that legislative requirements and developments are recognized, implemented and monitored through appropriate procedures and practices and that continuous improvements in safety culture and performance are promoted.

Environmental regulation

Our operations are subject to numerous international, environmental and health and safety laws and regulations governing, amongst other things, the construction, operation and decommissioning of nuclear and coal-fired power stations; discharges to the air, water and land; the use, handling, transport and disposal of radioactive and hazardous substances and wastes; soil and groundwater contamination, and public and employee health and safety.

All investigations of the British Energy nuclear power station sites to date suggest that with the historical exception of one site where a diesel spill has been the subject of extensive remediation, now complete, there are no significant bodies of contaminated land present as defined under UK law. In some instances limited amounts of radiological or non-radiological contamination have been found in underlying groundwater: in these instances expert assessments have suggested no need for remediation but have identified the need for long term surveillance. Networks of groundwater monitoring wells are currently being established at each of the nuclear power station sites in order to provide comfort on current conditions and against the possibility of future losses or migration from adjacent sites. These networks, now in place at five out of the eight sites, are expected to be complete by the end of 2006. Routine sampling will be maintained on such groundwater monitoring networks with data arising being reviewed against appropriate risk-based criteria prompting further expert review, investigation or intervention where appropriate.

Waste, emissions and discharges

The Radioactive Substances Act 1993 (“RSA”) governs the disposal of radioactive waste including radioactive discharges. Radioactive gaseous, liquid or solid waste may only be disposed of or moved

72

off the site in accordance with authorizations granted under the RSA. To enable the re-licensing to BEG of the two nuclear stations in Scotland (previously licensed to BEG (UK) under the NIA), it was also necessary for the RSA authorizations in respect of the two Scottish stations to be transferred to BEG. This took place with effect from July 1, 2005.

In England and Wales, the EA regulates nuclear power stations and grants discharge authorizations under the RSA. In Scotland, SEPA regulates under the RSA. We have obtained all necessary consents and authorizations from the EA and SEPA for the disposal of radioactive waste and for discharges from our stations.

The EA is undertaking a review of BEG’s authorizations to discharge radioactive substances to the environment, regulated under the RSA. The revised authorizations, expected at the end of 2006, will lead to a reduction of many of the existing discharge limits and a range of new requirements including operational, maintenance and procedural refinements. The new limits and arrangements are not expected to affect the operational requirements of any of the power stations. We are in the process of preparing submissions to the EA to assist in the review process and have begun to prepare for the implementation of the new requirements. SEPA have already received submissions regarding the two Scottish power stations and are expected to complete their review on a similar timescale to the EA. The outcomes of the SEPA review are expected to be very similar to those of the EA.

The EPA provides for a waste management licensing regime and imposes certain obligations and duties on companies that produce, handle and dispose of non-radioactive waste. Separately, the IPC environmental authorization regime introduced in 1991 under the EPA provides an authorization regime for emissions which requires that a power station use the best available techniques (not entailing excessive cost) to minimize the emission of certain pollutants. The IPC is under a staggered process of repeal, to be replaced by a new Integrated Pollution Prevention and Control (“IPPC”) regime. The IPPC regime will combine the waste management and emission regimes and will impose progressively stricter requirements on power stations. It is expected to be fully implemented by 2007. The regulatory bodies under the new IPPC regime will remain the EA and SEPA.

Consumer information

In order to comply with one of the requirements of EU Directive 2003/54/EC, all electricity suppliers are required to provide information on the types of fuel that have been used to produce the electricity, to assist consumers in making informed choices about the environmental impact of the electricity they buy. This requirement is imposed by way of a new license condition which entered into force on March 18, 2005 although we have been disclosing fuel mix and other environmental information to customers since 2003.

Environmental performance

Our AGR and PWR Stations

The Center for Environment, Fisheries and Agriculture Science produces a “Radioactivity in Food and the Environment” report on behalf of the EA, SEPA and the Food Standards Agency which contains radiological monitoring data. The report shows that in 2002 radiation doses to the public resulting from our radioactive discharges to the environment were well below the national and international limits in all parts of the UK.

Both in England and Wales and in Scotland, compliance with radioactive discharge authorizations is assessed through returns made to the relevant regulator and a regular program of site inspections by the regulator.

73

None of our stations has ever been prosecuted for exceeding any of its authorized discharge limits for the disposal of radioactive waste. However, in 2003 BEG (UK) was prosecuted relating to the discharge of an Active Effluent Discharge Tank in October 2001 at Torness and was fined £15,000. On September 23, 2002 the EA issued an enforcement notice against BEG and Sizewell B for failing to maintain and keep in good repair the systems for managing relevant radioactive waste. This relates to alleged discharges of solid waste from two liquid radioactive waste systems. We cannot rule out further action being taken by the EA over this matter.

We have been served with a number of Enforcement Notices from the environmental regulatory authorities requiring improvements to plant and/or processes associated with environmental performance. In October 2003, the EA wrote to us highlighting a number of events that, in its view, indicated a serious shortfall in our compliance with, and understanding of, our environmental permits and environmental legislation. In December 2003, we responded to the EA setting out the actions that we intended to take to resolve the issues raised in their October 2003 letter. These included enhancing the level of station resource dedicated to environmental compliance. We continue to meet with the EA to review our environmental performance.

Eggborough Power Station and Gale Common

Every year we set environmental objectives and targets for Eggborough power station and the Gale Common facility. For 2003/04, we set twenty targets related to the key environmental policies as an integral part of the station’s business plan process and to ensure compliance with the requirements of ISO14001.

Along with other power station operators in the Aire Valley (the area in which the Eggborough power station is located), we monitor ambient air quality as part of a process agreed with the EA in order to meet the requirements of our IPC authorization. Results from this monitoring have all compared very favorably with the National Air Quality Standards which came into effect in April 2005 and UK Objective for the protection of human health.

We continue to play our part in creating and maintaining bio-diversity at the Eggborough power station and Gale Common through integrated Land Management Plans which we have developed with ADAS (a consultancy and research organization to land-based industries in the UK and abroad and formerly part of the Ministry of Agriculture, Fisheries and Food). The purpose of these plans is to protect and enhance the wildlife in, and conserve the local landscape and historical heritage of, the area in which we conduct our business.

74

PROPERTY, PLANT AND EQUIPMENT

Our properties consist of power stations and associated land and administrative offices, and various other properties (a small number of which are held pending disposal). We own the freehold (in England and Wales)/feuhold (in Scotland) to each of our eight UK nuclear power stations and one coal-fired power station as well as our corporate offices at Barnwood near Gloucester in England. We also lease our corporate headquarters at Livingston, together with offices at East Kilbride and Renfrew (all in Scotland) and London, England. During the year we sold our former headquarters building at Peel Park, East Kilbride (later renamed Orbital House) although we retained office space there under a lease back arrangement to accommodate certain administrative functions (see below for further details). Details of our power stations and offices are set out below:

Type	Type	Capacity (MW)	Location	Size (square feet) (approximate)
				(Principal Offices only)
Nuclear Power Stations:
Dungeness B	AGR	1,110	England
Hartlepool	AGR	1,210	England
Heysham 1	AGR	1,150	England
Heysham 2	AGR	1,250	England
Hinkley Point B	AGR	1,220	England
Hunterston B	AGR	1,190	Scotland
Sizewell B	PWR	1,188	England
Torness	AGR	1,250	Scotland
Coal-fired Power Station:
Eggborough	—	1,960	England
Principal Offices:
Systems House, Livingston	—	—	Scotland	24,150
Barnwood, Gloucester	—	—	England	307,341
Sheldon Square, London	—	—	England	6,043
Orbital House, East Kilbride	—	—	Scotland	11,489
Innovation House, Renfrew	—	—	Scotland	24,976

During the year we completed the sale of our Head Office at Peel Park in East Kilbride and our Head Office was transferred to its new location at Livingston, Scotland. A small number of staff remained at Peel Park under a ten year leaseback arrangement of part of the building and some self contained engineering support teams moved to an office in Renfrew. Power stations central support functions are being consolidated at our Barnwood office in Gloucestershire in order to improve their efficiency and focus on these support functions.

Following the sale of Peel Park, we have taken a 15 year lease of two floors of the office in Livingston with a ten year break option. We have also agreed to take a 12-24 month lease of one wing of the office in Renfrew and a long lease of a second wing until 2013 with a break option in 2009.

In connection with its privatization in July 1996, BE Ltd entered into a Property Clawback Deed with the Secretary of State. BE Ltd’s obligations under the Property Clawback Deed were assumed by us upon the Restructuring Effective Date. The Property Clawback Deed provides that in the event of the disposal (or a deemed disposal) of any property in which we had an interest as at March 31, 1996 (other than our power stations), the Government is entitled to 50 per cent. of any capital gain realized on the disposal in excess of £400,000 increased in accordance with RPI since April 1, 1996. Although the assessment has not been completed, we believe that no gain susceptible to the Property Clawback Deed was realized upon our sale of our office building at Peel Park. The Property Clawback Deed will cease to have effect from March 31, 2006.

75

Certain of our subsidiaries have granted security over their assets in order to secure the decommissioning default payments and related costs and expenses under the Contribution Agreement. For a discussion of the environmental aspects of our operations, see Item 4—Regulation.

Competition

Our generation competes in the wholesale market for electricity with other power stations, including other nuclear power stations, and a number of coal-, oil- and gas-fired power stations. Our major competitors in generation are E.ON UK, RWEnpower, EDF Energy, Drax Power, Scottish Power, Scottish and Southern Energy and BNFL. In addition, there are a large number of companies that own single power plants. Compared to nuclear power stations, coal-, oil- and gas-fired power stations are able to more easily adjust their output to take advantage of changes in market price, which in some situations may put us at a competitive disadvantage.

There has been some consolidation of supply businesses in recent years. Excluding British Energy, there are only six major suppliers in Great Britain: E.ON UK, RWEnpower, EDF Energy, Scottish Power, Scottish and Southern Energy and Centrica (British Gas). While we operate exclusively in the industrial and commercial sector, the other major suppliers also compete in the domestic retail sector. Gaz de France also competes in the industrial and commercial sectors.

On June 13, 2005 the European Commission announced an inquiry into competition in gas and electricity markets in response to concerns raised by consumers. The inquiry will focus on the functioning of wholesale markets and how prices are set. On June 14, 2005 the European Commission issued a request for information to electricity generators, traders and suppliers. British Energy has been asked to respond to this request. The European Commission intends to issue an interim report on the inquiry by the end of 2005, and the main results will be published in 2006.

Legal Proceedings

On February 12, 2004 we received a notice of warranty claims from the consortium which purchased our 82.4 per cent. 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.

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 net revenues and costs of approximately C$64.5million. The consortium also claims that the alleged erosion may reduce the operating life of the unit and/or result in further repairs involving further losses. We have rejected the claim and if pursued, we expect to defend it.

The principal tax claim relates to the treatment of expenditures at the Bruce plant during the period of our ownership that is currently being considered by the Canadian tax authorities. The treatment proposed by us could result in a material tax rebate that has not been recognized in our financial statements. The consortium claims that allowance of the expenditure for that period would cause it to lose future deductions. We have rejected the tax claim and expect to defend it if it is pursued further. We do not believe that the amount of the tax claim should materially exceed the amount of the rebate, and therefore the tax claim should not have a material impact on our cash flow. See Item 3. Risk Factors—“We are involved in a dispute that if resolved or determined against our interests could adversely affect our available cash.”

Under the Bruce Power sale agreement with the consortium, C$20 million was retained in trust to meet any representation and warranty claims. This amount may be retained pending resolution of the claims.

76

In addition to the consideration payable by the consortium under the master purchase agreement, up to a further C$100 million was payable to us contingent upon the restart of two of the Bruce A units under a trust agreement (the “Trust Agreement”) entered into on the same date. Had the first unit restarted by June 15, 2003, C$50 million would have been released to British Energy and an additional C$50 million would have been released to British Energy had the second unit restarted by August 1, 2003. An amount of C$5 million was deducted from the C$50 million payable in respect of each unit for its failure to restart by the scheduled restart date or by the first day of each successive calendar month following the scheduled restart date. The Group received C$20 million on March 22, 2004 and C$10 million on May 25, 2004 in partial consideration under the Trust Agreement. British Energy commenced arbitration proceedings in Ontario against the Ontario Provincial Government (“the Province”) in December 2004 in accordance with the procedures set out in the Safety and Power Pool Performance Trust Agreement between British Energy and the Province seeking the payment of additional consideration under the Trust Agreement on the basis that Bruce A Units 3 and 4 restarted earlier than the Province claims. No additional amounts appear on its balance sheet at March 31, 2005 because of uncertainties regarding their realization. The amounts recoverable in respect of the restarts will be substantially lower than the maximum C$100m but the amounts and timing of the payments have still to be confirmed.

We have agreed settlement of working capital adjustments primarily relating to the value of nuclear fuel and taxation matters, to the purchase price for the sale of AmerGen, and have agreed to pay to Exelon an adjustment of $9.5 million, of which half was paid in February 2005 and the remaining half is due at the end of September 2005.

We are in discussions with FLS Miljø a/s, the main contractor for the FGD plant at Eggborough power station about completion of the work. Although certain matters are disputed by both parties, we are endeavoring to resolve these, and to complete the project, without referring the matter to formal dispute resolution under the contract.

ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion in conjunction with “Selected Consolidated Financial and Other Data”, “Risk Factors” and our consolidated financial statements and the related notes included herein beginning on page F-1. Some of the statements in the following discussion are forward-looking statements. See “Special Note Regarding Forward-Looking Statements”. Some of the following discussion involves reference to non-GAAP financial measures—see “Non-GAAP Financial Measures”.

Overview of the Company

Our principal activity is the generation, sale and trading of electricity all of which we consider as one reporting segment. We are the UK’s largest generator of electricity, producing around one fifth of the UK’s electricity and employing approximately 5,400 staff. We own and operate eight nuclear power stations and one coal-fired power station in the UK. Of our nuclear power stations, seven are AGR power stations (Dungeness B, Hartlepool, Heysham 1, Heysham 2, Hunterston B, Hinkley Point B and Torness) and the eighth (Sizewell B) is our sole PWR power station. Our nuclear power stations have a combined capacity of approximately 9,600 MW. Eggborough, our coal-fired power station in Yorkshire, has a capacity of approximately 2,000 MW. During the year ended March 31, 2005 (a year covering both the pre and post-Restructuring periods), our power stations produced total output of 67.4 TWh, which was comprised of output of 59.8 TWh from our nuclear power stations and 7.6 TWh from Eggborough power station. BEPET, one of our subsidiaries, arranges the balancing of our electricity generation and supply. Our direct supply business is one of the largest suppliers of electricity to the UK’s industrial and commercial sector.

77

The Restructuring

We completed our Restructuring on January 14, 2005. The commercial and structural factors which contributed to our financial difficulties can be primarily attributed to:

• high fixed production cost, and, as a merchant generator, significant exposure to fluctuations in the wholesale electricity prices which declined approximately 35 per cent. over the two years to September 2002;

• contractual agreements which exacerbated our exposure to electricity prices;

• significant nuclear fuel and site decommissioning liabilities without certainty that these liabilities would be sufficiently covered by our contributions to the NDF; and

• increasing indebtedness and constraints on the ability to repay these obligations, exacerbated by the downgrade in our investment rating in September 2002.

We reviewed our business and assessed the Company’s longer term prospects which resulted in us initiating discussions with the Government to seek immediate financial support and to implement a longer term financial restructuring.

In October 2003, we announced that we had agreed to the terms of the Restructuring which was subsequently completed on January 14, 2005. The completion of the Restructuring resulted in our Creditors compromising debt and other obligations in exchange for £425 million of New Bonds and Project Finance Loan, plus the receipt of New Shares. In addition, an option to acquire the Eggborough power station in 2010 for a one time payment of £104 million and cancellation of the Project Finance loan outstanding at that time was granted to certain Creditors.

We also entered into the Government Restructuring Agreement in connection with the Restructuring to satisfy our nuclear liabilities and decommissioning obligations. The new arrangements with the Secretary of State required the existing NDF to be further funded, enlarged and renamed the NLF. Upon Restructuring, the NLF was issued with £275 million of New Bonds and will receive various annual payments from the Company to fund qualifying uncontracted nuclear liabilities and the qualifying costs of decommissioning of our nuclear power stations. In exchange, the Secretary of State will fund certain historic nuclear liabilities and qualifying uncontracted nuclear liabilities and qualifying decommissioning costs to the extent that they exceed the assets of the NLF.

As a result of the Restructuring we have put into place measures to address many of the factors which led to the requirements to restructure, including:

• new BNFL contracts which link the cost of our nuclear fuel to the market price of electricity, thus hedging our exposure to fluctuations in electricity prices;

• implementing mitigating factors to the uncertainty of the nuclear fuel and decommissioning liabilities; and

• agreeing a plan with our creditors which resulted in the extinguishment of certain indebtedness and created a new capital structure.

Our past performance is not indicative of our future prospects. Whilst there are various factors affecting our business which are outside our control, we believe that through these changes we will be better able to adapt to future fluctuations in wholesale electricity prices.

The Restructuring resulted in the issuance of 561.0 million New Shares with warrants to purchase an additional 29.5 million New Shares at £0.98 per share to creditors and shareholders. In addition, the NLF may, at its option, convert the certain required payments from the Company into Convertible Shares of the Company (“Convertible Shares”). The terms of the Convertible Shares will

78

limit the general voting rights attaching to such shares, while held by the NLF, to the maximum amount which can be held by the NLF (and its concert parties) without triggering a mandatory offer under the UKLA Takeover Code, being currently 29.9 per cent.

For further information about the Restructuring, the NLF and the related agreements see “Item 4. Information on the Company—Restructuring.”

Disposals

We made two significant divestitures during the periods under review. In February 2003 we disposed of our 82.4 per cent. interest in Bruce and in December 2003 we sold our 50 per cent. interest in AmerGen. The sale of Bruce resulted in total proceeds of C$728 million and a total loss on disposal of £2 million. The sale of our joint venture investment in AmerGen resulted in proceeds of US$277 million and a loss on disposal of £110 million. See Note 15 of the consolidated financial statements for further discussion of disposals.

The Bruce disposal is reported as discontinued operations and the consolidated financial statements for all prior periods have been adjusted to reflect this presentation, while the disposal of AmerGen was treated as a sale of an investment.

Factors Affecting our Business

The primary factors affecting our business include plant output, achieved electricity prices, operating costs and capital investment expenditures. The Restructuring did not impact the general operations of our business, except where specifically identified. The operational performance measures for the year ended March 31, 2005 have been illustrated as pre-Restructuring and post-Restructuring and in total. These key factors are discussed below.

Nuclear and coal output

The electrical output that our eight nuclear stations and one coal fired station can achieve is affected by a number of factors, including plant operating conditions and strategy and the frequency and duration of outages. The table set forth below shows our nuclear and coal output from continuing operations for the periods under review:

	Year ended March 31, 2005	The period from January 15 to March 31, 2005	The period from April 1, 2004 to January 14, 2005	Year ended March 31,		Variance
				2004	2003	2005-2004		2004-2003
	TWh	TWh	TWh	TWh	TWh	%		%
Nuclear output	59.8	14.3	45.5	65.0	63.8	(8	)	2
Coal output	7.6	2.5	5.1	7.6	5.7	0		33
Total Output	67.4	16.8	50.6	72.6	69.5	(7	)	4

Nuclear output.    The principal factor affecting our nuclear output for any given period is the number and duration of outages. The nuclear regulatory regime in the UK requires each nuclear power station to be shut down periodically for maintenance and inspection as a condition of that power station’s nuclear site license. We refer to such a shut down as a “statutory outage”. Certain of our nuclear power stations must also be reduced in load or shut down to allow for refueling. Nuclear power stations must also be reduced in load or shut down for maintenance and testing or to address an unplanned technical malfunction or engineering failure, which we refer to as “unplanned outages”.

79

The table set forth below shows the aggregate loss of output, in terawatt-hours, associated with our statutory, refueling, unplanned and other outages.

	Year ended March 31, 2005			Year ended March 31		Variance(1)
		The period from January 15 to March 31,	The period from April 1, 2004 to January 14,
	Total			2004	2003	2005-2004		2004-2003
	TWh	TWh	TWh	TWh	TWh	%		%
Statutory outages	2.9	0.1	2.8	4.9	5.9	(41	)	(17	)
Refueling	3.0	0.6	2.4	2.9	3.0	3		(3	)
Unplanned losses	17.3	2.4	14.9	10.7	10.6	62		1
Total	23.2	3.1	20.1	18.5	19.5	25		(5	)

⁽¹⁾ Variances that indicate a decrease from one year to the next and designated by “(        )” are a positive indicator for the Company. Similarly, variances that indicate an increase from one year to the next are a negative indicator.

Our level of unplanned outages in recent years has significantly affected our operating and financial performance. Since 2003, unplanned losses arising from incidents other than major plant failures has gradually increased during the periods under review. To date these unplanned outages have been caused by a variety of technical issues. We believe that the loss of output arising from these outages is indicative of a materiel deterioration in the condition of our plants over time.

We have taken steps to improve the performance of our plants. We continue to implement PiP which is expected to improve the reliability of our nuclear plants, thereby reducing unplanned outages. And the completion of the Trading Development Program will assist us in decisions over the optimal running of our plant and improving risk monitoring activities. With the necessary measures in place, we expect our nuclear output to average 63.0 TWh over the next two financial years.

We have sought to reduce the impact of refueling outages through the introduction of low power on-load refueling (that is, refueling while the reactor is still on) at four of our seven AGR stations as well as scheduling refueling outages to coincide with statutory outages. PWRs are not designed to refuel on-load and must be shut down for refueling. We have reached an agreement with the NII which has allowed us to extend the period between statutory outages at all of our AGR stations to three years. The period between statutory outages is 18 months in the case of our PWR power station. We seek to reduce the impact of statutory outages on revenue by timing such outages to occur during periods of lower demand for electricity when prices are lower (generally between March and October). We also seek to reduce the duration of any statutory outages by improving the efficiency with which we conduct the required program of work. We carried out four statutory outages during the year and have six planned outages for the year ending March 31, 2006.

Coal output.    The Eggborough power station is operated at various output levels rather than at constant levels in the manner of our nuclear stations. Eggborough is operated primarily as a flexible mid-merit plant and its output level is influenced by a number of factors including the market prices of coal, carbon and electricity. As such, prevailing market prices of electricity and coal, carbon dioxide emissions, our contracted trading position and unplanned outages at our nuclear plants are the primary factors driving our total output for each of the periods under review. Output levels at Eggborough for the year ended March 31, 2005 were 7.6TWh, the same level as for the year ended March 31, 2004.

Electricity Prices

Our realized price for electricity, which is calculated by dividing total electricity revenue (net of energy supply costs and miscellaneous income) by total output during the period, is critical to our profitability. We consider the average forward price for baseload power to represent a “market price” for wholesale electricity sales.

80

The table set forth below illustrates our realized price as compared to market price:

	Year ended March 31,
	2005		2004		2003
Realized Price(1)	£	20.2/MWh	£	16.9/MWh	£	18.3/MWh
Market Price(2)	£	20.4/MWh	£	16.7/MWh	£	18.6/MWh

⁽¹⁾ Our realized price for the year ended March 31, 2003 reflects the effect of several changes to the manner in which we account for revenue and certain operating costs as a result of the introduction of new trading arrangements brought about by the commencement of NETA. This puts 2003 realized price on a comparable basis with 2005 and 2004.

⁽²⁾ The Market Price quoted is the average of the mid-point of the closing prices for annual baseload contracts during the year prior to delivery as reported on European Daily Electricity Markets, published by Heren Energy.

As at June 30, 2005 fixed price contracts were in place for approximately three quarters of planned output for the year ending March 31, 2006 at an average contracted price of £29.8/MWh. This price excludes the impact of higher prices that might have been achieved as a result of running Eggborough to take advantage of the differential between plan and baseload prices. This price also excludes Balancing Services Use of System and other electricity market participation charges of around £0.7/MWh and market costs incurred through output variation and unreliability expected to be around £1.0/MWh and the impact of capped price arrangements of approximately 5 TWh at around £30/MWh. We intend to progressively close out our exposure to market prices for 2005/06 and to build our contract position for 2006/07 subject to limits on trading collateral.

Electricity prices in the UK wholesale market reached an all time high during the year, driven up by high oil and gas prices and concerns in the market over the ability of gas supplies to meet demand at peak times. Both spot and forward power prices have also been very volatile throughout the year.

Gas prices continue to be a key influence on the electricity market. In fall 2004, National Grid Transco highlighted a risk that there might be insufficient gas to meet power station demand in the event of a cold winter. This contributed to a sharp rise in gas and power prices for winter 2005 and 2006. Although temperatures in winter 2004 were above long term averages, relatively cold weather at the end of February, coupled with reduced gas supply, triggered exceptionally high spot prices for both gas and power. Worldwide demand for coal has remained strong, keeping coal prices in the range $60-$80/tonne for delivery to European ports.

The forward price for annual baseload electricity for 2005/06 delivery rose from around £24.5/MWh in March 2004 to over £35.0/MWh by the end of March 2005, an increase of over 40 per cent. Concerns over a potential shortfall in winter peak gas supply contributed to a rise in the price for delivery for the year from October 2005 to over £37.0/MWh in early October 2004. As at June 30, 2005, the price for delivery from October 2005 had subsequently risen to over £49.0/MWh.

Operating costs

In general, the operation of nuclear power stations is characterized by high fixed costs, such as maintenance and the cost of decommissioning our power stations. Fuel costs represent our most significant operating cost and reflect not only the amount of fuel burnt during the period (based on total output) and the efficiency of our fuel utilization (the percentage of nuclear fuel used before it is removed from the reactor) but also include the cost of reprocessing and storage of spent fuel and storage and disposal of nuclear waste, collectively referred to as back-end fuel costs.

The cost of coal has remained high, in the range of $60-80/tonne for delivery to European ports. Fossil fuel costs are expected to increase with the introduction of ETS from January 1, 2005. The Company will be required to purchase additional allowances from the market to cover the shortfall in

81

allocated allowances to cover emissions of carbon dioxide. The market price of allowances has risen since the beginning of 2005 and was in excess of €15/tonne of carbon dioxide on March 31, 2005 and €25/tonne at June 30, 2005.

On March 31, 2003 and May 16, 2003, we exchanged contracts with BNFL covering front end and back end AGR fuel services respectively, which became fully effective on completion of the Restructuring.

The new arrangements provide an important partial hedge against electricity market price movements on approximately 50 per cent. of the Group’s total nuclear output. The pricing provisions in the contracts are intended to enable us to reduce a proportion of our fuel costs which are fixed by providing for a discount when the market baseload price of electricity is below a specified amount and a surcharge when above this amount. As electricity prices have risen substantially since October 2003, we are now making additional payments to BNFL under the new arrangements for spent fuel management in the form of the surcharge referred to above. This will continue as long as electricity prices remain above £16.00 per MWh but capped at £21.0 per MWh (in 2002/2003 monetary values and indexed to the RPI).

Whilst we do not operate in, or have exposure to, hyperinflationary economies, our cost base is subject to normal inflationary factors with certain costs specifically impacted by movements in the RPI.

Investment expenditures

Significant investment expenditures are required to properly maintain the condition of the power stations and to minimize unplanned plant outages. We expect that our investment in plant projects, strategic spares, including costs associated with PiP will be in the range of £230 million to £250 million for the year ending March 31, 2006.

Results of Operations

The period from January 15 to March 31, 2005, the period from April 1, 2004 to January 14, 2005 and the year ended March 31, 2004.

On January 14, 2005 our Restructuring was formally approved by the Scottish Courts and was effective immediately. As a result of the Restructuring, our results of operations after that date are not comparable to results reported in prior periods because of differences in the bases of accounting and the capital structure. The periods presented prior to and including January 14, 2005 have been designated “Predecessor” and the periods subsequent to January 14, 2005 have been designated “Successor”. Refer to Note 2 to the consolidated financial statements for additional information on the completion of Restructuring.

Revenue

Revenues for the periods from January 15 to March 31, 2005 and April 1, 2004 to January 14, 2005 were primarily affected by levels of output experienced in the twelve months to March 31, 2005, together with movements in electricity prices and levels of energy supply costs being recharged to customers.

82

Revenue is analyzed as follows:

	Successor		Predecessor
	The period from January 15 to March 31, 2005		The period from April 1, 2004 to January 14, 2005		Year ended March 31, 2004
	(In £ millions)
Wholesale generation sales	233		458		703
Direct supply sales	170		512		522
	403		970		1,225
Energy supply costs recharged to customers	73		229		260
Miscellaneous income	6		23		31
Revenue	482		1,222		1,516
Per cent. Split
Wholesale generation	58	%	47	%	57	%
Direct supply	42	%	53	%	43	%

Revenue was £482 million for the period from January 15 to March 31, 2005, and was £1,222 million for the period from April 1, 2004 to January 14, 2005. For the year ended March 31, 2004 revenues amounted to £1,516 million.

For the period from January 15 to March 31, 2005 and the period from April 1, 2004 to January 14, 2005, realized electricity prices were £23.5 per MWh and £19.1 per MWh, respectively, as compared to £16.9 per MWh for the year ended March 31, 2004. Additionally, nuclear output for the same periods was 14.3 TWh, 45.5 TWh and 65.0 TWh, respectively. Output was impacted by unplanned outages including significant outages at Heysham 1 and Hartlepool. These two outages resulted in lost output of approximately 7.4 TWh for the period from April 1, 2004 to January 14, 2005. In the twelve months to March 31, 2005, there were further unplanned outages resulting in a loss of 9.9 TWh of which 6.5 TWh was due to outages of 14 days or less. Total output for the twelve months ended ended March 31, 2005 was 67.4 TWh compared with 72.6 TWh for the year ended March 31, 2004. As noted previously, coal output included in these totals was constant at 7.6 TWh.

Growth in direct supply sales has continued in the year. This is in line with the Company’s strategy to target industrial and commercial customers. As at March 31, 2005, we had contracts in place to supply over 2,000 customers and were supplying over 15,000 sites across Great Britain. As at March 31, 2004, we had contracts in place to supply 1,350 direct supply customers at 7,500 sites. Volume to our direct supply customers was 6.8 TWh for the period January 15 to March 31, 2005 and 24.6 TWh for the period April 1, 2004 to January 14, 2005 and 29.0 TWh for the year ended March 31, 2004.

83

Operating expenses

Total operating expenses were £642 million for the period from January 15 to March 31, 2005 and £1,409 million for the period from April 1, 2004 to January 14, 2005, compared with £1,706 million for the year ended March 31, 2004. Operating expenses are further analyzed as follows:

	Successor	Predecessor
	The period from January 15 to March 31, 2005	The period from April 1, 2004 to January 14, 2005		Year ended March 31, 2004
	(In £ millions)
Fuel costs	127	507		532
Staff costs	81	233		272
Operating and maintenance expense	101	390		451
Depreciation and amortization	73	87		101
Energy supply costs	73	229		260
(Gain)/loss from movements in derivative contracts	171	(37	)	90
Other operating expense	16	—		—
Total operating expenses	642	1,409		1,706

Fuel Costs.    Total fuel costs amounted to £127 million for the period from January 15 to March 31, 2005, of which £71 million was nuclear fuel costs and £56 million was coal costs. Coal costs include costs of £10 million attributable to carbon costs as well as other fuel costs for Eggborough. For the period from April 1, 2004 to January 14, 2005, total fuel costs were £507 million, comprising £416 million in respect of nuclear fuel costs and £91 million for coal costs. Total fuel costs were £532 million for the year ended March 31, 2004, of which nuclear fuel costs were £437 million and coal costs were £95 million.

The financial results for the Predecessor have been prepared on the basis of the historic BNFL contracts in respect of back end fuel costs. The Successor results have been prepared on the basis of the revised BNFL contracts in respect of back end fuel costs which become effective on completion of the Restructuring.

Coal prices have continued to increase on their 2004 levels. ETS costs have been a component of the cost of operating Eggborough since the ETS scheme came into effect on January 1, 2005. To the extent that carbon dioxide emissions exceed the amount of allowances that have been granted to us, we recognize costs based on the market price of ETS allowances at that point in time.

Staff costs.    Staff costs were £81 million for the period from January 15 to March 31, 2005, including a charge of £19 million for severance. For the period from April 1, 2004 to January 14, 2005, staff costs amounted to £233 million, which included £12 million with respect to severance charges. Excluding the effect of severance costs, staff costs have increased due to a combination of salary inflation, increased headcount and increased overtime payments incurred as part of the unplanned outages. In the year ended March 31, 2004 staff costs amounted to £272 million.

Operating and maintenance expense.    Operating and maintenance expense comprises the operating expenses of our power stations and support functions, excluding those costs which are discussed separately in this section. Operating and maintenance expense during the period from January 15 to March 31, 2005 was £101 million, including £3 million of expenditure on research and development. For the period from April 1, 2004 to January 14, 2005, operating and maintenance expense was £390 million, including £56 million relating to the Restructuring and £11 million of expenditure on research and development. Total operating and maintenance expense for the year ended March 31, 2004 amounted to £451 million, including £43 million relating to the Restructuring and £14 million of expenditure on research and development.

84

Depreciation and amortization.    As part of the purchase accounting exercise at Restructuring, the carrying value of property, plant and equipment was increased significantly, resulting in a proportionately higher depreciation charge for the period from January 15, to March 31, 2005 and is expected to result in higher ongoing depreciation charges in the future. Depreciation and amortization was £73 million for the period from January 15 to March 31, 2005, compared with depreciation and amortization of £87 million for the period from April 1, 2004 to January 14, 2005. For the year ended March 31, 2004 depreciation and amortization charges amounted to £101 million.

Energy supply costs.    Energy supply costs mainly comprise the costs incurred for the use of distribution and transmission systems and are fully recovered through revenue. Energy supply costs also include costs related to meeting costs of compliance with the Renewables Obligation as part of the regulations governing climate change. Renewables Obligation costs are also fully recovered through revenue. Total energy supply costs were £73 million for period from January 15 to March 31, 2005, and were £229 million for the period from April 1, 2004 to January 14, 2005. For the year ended March 31, 2004 energy supply costs were £260 million. The increase in energy supply costs reflects the inclusion of Renewable Obligation Certificates compliance costs, and growth in our direct supply business as noted previously.

(Gain)/loss from movements in derivative contracts.    With our trading strategy of selling forward our output, we have a number of contracts for delivery in the future with prices that are different to current market prices, which require to be marked to market at each reporting date. As a result of the increases in electricity market prices, movements in the fair values of commodity contracts and derivatives have resulted in charges of £171 million and gain of £37 million for period from January 15 to March 31, 2005 and for the period from April 1, 2004 to January 14, 2005, respectively. For the year ended March 31, 2004 a charge of £90 million was recognized in connection with the commodity contracts and derivatives.

Other operating expense.    For the period from January 15 to March 31, 2004 we had other operating expense primarily in connection with the recognition of certain commodity contracts at Restructuring.

Interest income and expense

Interest expense has been affected by the extinguishment of indebtedness pursuant to the Restructuring. Interest expense for the period from January 15 to March 31, 2005 was £10 million as a result of the issuance of the New Bonds due 2005 through 2022. Interest expense for the period from April 1, 2004 to January 14, 2005 consisted of £79 million of interest on Predecessor debt. For the year ended March 31, 2004, interest expense consisted of £60 million related to Predecessor debt.

We had interest income of £5 million, £15 million and £11 million for the periods from January 15 to March 31, 2005, from April 1, 2004 to January 14, 2005 and the year ended March 31, 2004. Interest income was further affected by an increase in interest rates and increase in balances of cash and cash equivalents.

Income Taxes

A tax benefit was recognized in connection with tax loss carry forwards for the period from January 15 to March 31, 2005 and the period from April 1, 2004 to January 14, 2005 respectively.

Net income/(loss)

As a result of the factors discussed above, net loss for the period from January 15 to March 31, 2005 was £122 million and £226 million for the period from April 1, 2004 to January 14, 2005. Net income for the year ended March 31, 2004 was £7,562 million, after taking account of the cumulative effect of a change in accounting principle of £7,640 million (net of taxes of £273 million) upon adoption of FASB Statement No. 143, Accounting for Asset Retirement Obligations (“SFAS 143”).

85

Year Ended March 31, 2004 compared to the Year Ended March 31, 2003

Revenue

The table below sets forth the revenue generated by each of our wholesale and direct supply routes to market.

	Year ended March 31,				Variance
	2004		2003		£		%
	(In £ millions)
Wholesale generation	703		852		(149	)	(17.5	)
Direct supply	522		419		103		24.6
	1,225		1,271		(46	)	(3.6	)
Energy supply costs recharged to customers	260		184		76		41.3
Miscellaneous income	31		73		(42	)	(57.5	)
Revenue	1,516		1,528		(12	)	(0.8	)
Per cent. split
Wholesale generation	57	%	67	%
Direct supply	43	%	33	%

The decrease in revenue was primarily due to lower realized prices for our electricity. Our realized price for the year ended March 31, 2004 was £16.9 MWh compared with £18.3 MWh for the year ended March 31, 2003, a 7.7 per cent. decrease.

The decrease in realized prices for electricity was partially offset by the growth in our direct supply business and increases in output. Our direct supply business become an important route to market for us, and one which demonstrates growth potential. Our target customer base is predominantly among the energy intensive industrial and commercial users, with electricity demands of over 1,000 MWh per annum. In the year ended March 31, 2004 we had contracts in place to supply some 1,350 direct supply customers at 7,500 sites. Our direct supply business increased by almost 30 per cent. in volume terms in the year ended March 31, 2004, to 29.0 TWh. The volume of power sold directly to customers through the direct supply business was equivalent to 40 per cent. of total output for the year ended March 31, 2004. This follows an increase of 20 per cent. in volume terms compared to the year ended March 31, 2003.

Total output for the year ended March 31, 2004 was 72.6 TWh, representing an increase of 3.1 TWh as compared with total output of 69.5 TWh for the year ended March 31, 2003. This increase was the result of output increases of 1.2 TWh from our nuclear plants and 1.9 TWh from the Eggborough power station. Our nuclear output was nevertheless affected by a number of unplanned outages. In particular, the major outage in both reactors at Heysham 1 resulted in the loss of 3.2 TWh due to cast iron pipe-work failure. The outages at Heysham 1 were equivalent to some £71 million of lost profit contribution inclusive of imbalance costs and associated fuel savings. Output at the Eggborough power station increased in 2004 compared with prior years in order to take advantage of higher electricity prices and to provide cover for the unplanned outages at our nuclear plants during the year.

86

Operating expenses

The following table sets forth the various components of our operating costs for the years ended March 31, 2004 and 2003.

	Year ended March 31,		Variance
	2004	2003	£		%
	(In £ millions)
Fuel costs	532	1,050	(518	)	(49.3	)
Staff costs	272	228	44		19.2
Operating and maintenance expense	451	598	(147	)	(24.6	)
Depreciation and amortization	101	300	(199	)	(66.3	)
Energy supply costs	260	184	76		(41.3	)
Loss from movements in derivative contracts	90	112	(22	)	(19.6	)
Impairment of property, plant and equipment	—	6,680	(6,680	)	(100.0	)
Total operating costs	1,706	9,152	(7,465	)	(81.6	)

Fuel cost.    Total fuel costs for the year ended March 31, 2004 amounted to £532 million, a decrease of £518 million compared with £1,050 million for the year ended March 31, 2003. Nuclear fuel costs were £437 million for the year ended March 31, 2004, representing a decrease of £540 million as compared with £977 million for the year ended March 31, 2003. Coal costs were £95 million for the year ended March 31, 2004, representing an increase of £22 million as compared with £73 million for the year ended March 31, 2003.

The £540 million decrease in the nuclear fuel cost, was attributable to the adoption of SFAS 143 on April 1, 2003. Upon adoption, back end fuel costs became recorded on a discounted basis as set out in SFAS 143. Previously, elements of back end fuel costs, uncontracted back end fuel in particular, were recorded on an undiscounted basis. The £22 million increase in coal costs relates primarily to the increase in output from the Eggborough power station over the year ended March 31, 2004.

Staff costs.    Staff costs increased by £44 million from £228 million for the year ended March 31, 2003 to £272 million for the year ended March 31, 2004 mainly due to increased pension costs, salary inflation and an increased head count.

Operating and maintenance expense.    Operating and maintenance expense comprise the operating expenses of the power stations and certain support functions. Operating and maintenance expense decreased £147 million from £598 million for the year ended March 31, 2003 to £451 million for the year ended March 31, 2004. The decrease was the result of the write down of slow moving inventory and the costs related to higher outages in 2003 as compared to 2004.

Depreciation and amortization.    Depreciation charges were £101 million for the year ended March 31, 2004 compared to £300 million for the year ended March 31, 2003. The charges for depreciation for the year ended March 31, 2004 were significantly affected by the property, plant and equipment impairment charge of £6,680 million at March 31, 2003.

Energy supply costs.    Energy supply costs mainly comprise the costs incurred by our direct supply business for the use of the distribution and transmission systems. These costs, however, are passed onto our customers and are fully recovered through revenue. For the year ended March 31, 2004 energy supply costs also included costs of £36 million related to meeting the cost of compliance with the Renewables Obligation. We are required to comply with the Renewables Obligation as part of the regulations introduced by the UK Government which are intended to address climate change. The

87

costs for the year ended March 31, 2004 were £260 million compared with £184 million for the year ended March 31, 2003, an increase of £76 million. This increase reflects the inclusion of costs associated with the Renewables Obligation and growth in the direct supply business since March 31, 2003 as discussed above.

Loss from movements in derivative contracts.    The fair value of derivative contracts decreased £90 million for the year ended March 31, 2004 as compared to £112 million for the year ended March 31, 2003. The decrease in fair values for derivative instruments was due to the continued strengthening of energy prices in the market as compared to our fixed and capped contract prices.

Impairment of property, plant and equipment.    During the year ended March 31, 2003, we recognized a significant impairment charge on our property, plant and equipment. No similar charge was required in the year ended March 31, 2004.

Interest income and expense

The interest expense of £60 million for the year ended March 31, 2004 was £208 million lower than the charge for the year ended March 31, 2003. The principal reason for this decrease was due to lower charges in relation to the interest rate swaps. In the year ended March 31, 2003 there were interest charges of £56 million resulting from out of the money element of interest rate swaps which were no longer considered to be effective as hedges together with the write-off of borrowing costs. The borrowing costs had been previously capitalized and were being amortized over the expected duration of loan financing in respect of the acquisition of the Eggborough Station. These decreases were offset by an increase in standstill interest due to a full year charge in the year ended March 31, 2004. For the year ended March 31, 2004 there were interest credits of £5 million reflecting a partial reversal of the provision for interest rate swaps.

Interest income for the year ended March 31, 2004 increased over the year ended March 31, 2003 primarily due to an increase in cash balances.

Income Taxes

A tax benefit was recognized for the year end March 31, 2004 primarily due to tax loss carry forwards.

Disposals

On December 22, 2003, British Energy plc completed the sale of its 50 per cent interest in AmerGen to Exelon for US$277 million in cash subject to certain post closing adjustments. The final adjustment to the AmerGen sale price was agreed on February 11, 2005, and resulted in a US$9.5 million reduction to the sale price. Taking account of the gain on disposal recorded in the year ended March 31, 2004 additional expense of £3 million was recognized in the period from April 1, 2004 to January 14, 2005.

Cumulative effect of adoption of new accounting policy

On April 1, 2003 we adopted SFAS 143 in connection with our nuclear fuel liabilities and decommissioning obligations. We recorded a cumulative adjustment of £7,640 million (net of tax charge of £273 million) primarily related to discounting the obligation to its present value.

Net income/(Loss)

As a result of the factors discussed above, the net profit was £7,562 million compared with a net loss of £7,800 million in the year ended March 31, 2003. The primary reason for the movement is attributable to the cumulative effect of adopting SFAS 143 in the year ended March 31, 2004 combined with the significant write-down in assets for the year ended March 31, 2003.

88

Liquidity and capital resources

As a result of the Restructuring our results of operations after January 14, 2005 are not comparable to results reported in prior periods because of differences in the bases of accounting and the capital structure for the Predecessor Company and the Successor Company.

Cash flows

Despite the loss for the period, cash provided by operating activities was £111 million for the period from January 15 to March 31, 2005 which reflects the non-cash nature of some of our charges in the statement of operations, together with cash settlements made in respect of liabilities and adverse working capital movements. Cash used in operations of £98 million for the period from April 1, 2004 to January 14, 2005 was related to working capital improvements were more than offset by non-cash charges and cash settlements on liabilities in addition to the loss for the period. Cash provided by operating activities was £158 million for the year ended March 31, 2004.

Cash provided by investing activities was £31 million for the period from January 15 to March 31, 2005 compared with £65 million used in investing activities for the period from April 1, 2004 to January 14, 2005. Cash used in investing activities was £6 million for the year ended March 31, 2004. In the post-Restructuring period, the amounts held on restricted use term deposits reduced, although this was offset partly by capital investment in the period.

Cash used in financing activities was £25 million for the period from January 15 to March 31, 2005 and £0 million for the period from April 1, 2004 to January 14, 2005. Cash used in financing activities was £7 million for the year ended March 31, 2004. In the post-Restructuring period, a total of £28 million of debt has been repaid.

Capital resources

On January 14, 2005 we issued £550 million of New Bonds due from 2005 to 2022 and a Project Finance Loan of £150 million in connection with the Restructuring. Interest is due quarterly beginning March 31, 2005. The New Bonds and the Project Finance Loan will be redeemed in 18 unequal installments on March 31 of each year from March 31, 2005 to March 31, 2022. The Project Finance Loan is secured on the assets of EPL. The New Bonds are guaranteed by the Company and substantially all existing and future material subsidiaries, and the Project Finance Loan is collateralized by a mortgage of shares in EPL, an assignment of the EPL Share Purchase Agreement and Tax Deed of Covenant and a debenture comprising fixed and floating charges over EPL assets.

As at March 31, 2005, total debt of £676 million comprised of an aggregate principal amount of £531 million of New Bonds and £145 million of Project Finance Loan.

The credit ratings as of March 31, 2005 for the New Bonds issued at Restructuring are as follows:

	Rating
Moody’s Investor Services	Ba3
Standard and Poor’s	BB
Fitch Ratings	BB-

Our £150 million Project Finance Loan is not rated. We maintain a close dialogue with the Rating Agencies, including twice yearly meetings and attendance at investor presentations.

Sub-investment grade credit rating has meant that we continue to provide significant levels of collateral to counterparties in order to cover their trading exposures or, to maintain trading arrangements, thereby substantially reducing the levels of cash resources available to us.

89

We are required to comply with certain covenants under the terms of the New Bonds that restricts our ability to incur additional indebtedness, make certain payments and engage in certain transactions, among other covenants. These are summarized as follows:

• The activities of the Company are limited to nuclear and renewable generation, together with generation from Eggborough, and the sale and trading of electricity. Furthermore, the nature of transactions with some other parties are restricted.

• The Company may not incur any further indebtedness other than as permitted under the terms of the New Bonds unless the Consolidated Fixed Charge Coverage Ratio of the Company, over a specified period, is greater than 2:1 based on UK GAAP (an equivalent ratio is in process of being determined for US GAAP). Further indebtedness is permitted if it arises from activities which are necessary for the operation of the business (e.g., the sale and trading of output; guarantees and indemnities in respect of environmental licenses and other permits, and operational and maintenance contracts etc). In addition, a maximum principal of £75 million may be drawn in order to meet costs resulting from outages and seasonal working capital, and credit support obligations in respect of trading arrangements.

• Certain types of payments are also restricted. These include dividends, redemption of capital stock, repayment of any subordinated indebtedness and investments in other companies unless permitted under the terms of the New Bonds. Restrictions apply if the Company is, or would be, in default of its obligations under the terms of the New Bonds, or the aggregate amount of these payments (excepting dividends) would exceed certain limits based on adjusted aggregate net income.

• The Company may not sell any capital stock of a subsidiary, or substantially all of a subsidiary’s properties or assets, or any other property or assets other than in the ordinary course of business unless 80 per cent. of the consideration is in cash (or equivalent), it is at a fair market value, and a resolution of the board of directors is delivered to the trustee. The proceeds of any such sale must either be reinvested in the Company, or retained to the extent that the target reserves (as required under the Contribution Agreement) exceed the cash reserves, or the amounts not so invested or retained shall be used to redeem the New Bonds, in accelerated decommissioning payments, and the payment of indebtedness ranking pari passu with the New Bonds.

• The Company is also restricted with regard to the guarantees that it can make for indebtedness, sale and leaseback transactions, the sale or transfer of capital stock of a subsidiary, and encumbrances or restrictions on the ability of a subsidiary to pay dividends or any indebtedness owed to the Company.

As at March 31, 2005 we were in compliance with our debt covenants.

Also in connection with the Restructuring, we issued 561.0 million New Shares and 29.5 million Warrants at a conversion price of £0.98 per share. The Warrants allow the holder to subscribe for New Shares within five years of issue.

On August 25, 2004 our subsidiary BEG entered into a receivables financing facility agreement with Barclays Bank plc. This contains detailed covenants for the benefit of the facility provider, which mirror those under the New Bonds. In addition to these, the agreement also contains a financial interest coverage covenant (assessed on a consolidated group-wide basis) and covenants relating to the conduct of the electricity supply business customary for a receivables facility. On April 1, 2005 this facility was transferred to BEDL at the same time as the Direct Supply Business was transferred from BEG to BEDL and BEG became a guarantor. At March 31, 2005 the facility was undrawn.

Future liquidity and commitments

Our main source of liquidity is our operating businesses. Cash generated by our operating businesses is dependent upon the reliability of our power stations in producing electricity, the realized

90

price for electricity, operational risk and capital investment expenditure and maintenance requirements. We believe that, with the completion of the Restructuring, our current available working capital is sufficient to meet our present requirements.

Cash and cash equivalents (including restricted cash).    As at March 31, 2005 we had £230 million in cash and cash equivalents. In addition, we had a further £226 million, classified as restricted cash, deposited as collateral in support of trading activities. In the event that outages, collateral requirements or other events impact our ability to generate sufficient cash or liquidity for our operations, we have access to the facilities described above.

Nuclear Liabilities Fund.    Under the new arrangements with the Secretary of State, the former NDF was enlarged into and renamed the NLF, which will fund, subject to certain exceptions, the Group’s qualifying uncontracted nuclear liabilities and qualifying decommissioning costs. To the extent there is any surplus in the NLF, this amount will be paid to the Secretary of State. We are responsible for funding certain excluded or disqualified liabilities and will, in certain circumstances, be required to compensate or indemnify the NLF and the Secretary of State in relation to such liabilities. Our obligations under these arrangements with the Secretary of State are guaranteed by certain companies in the Group.

In consideration for the assumption of these liabilities by the Secretary of State and the NLF, Holdings issued £275 million in New Bonds to the NLF. We will also now make the following payments to the NLF (i) an annual contribution initially equal to 65 per cent. of the British Energy Group’s adjusted net cash flow, adjusted for certain corporate actions but never to exceed 65 per cent. (the “NLF Cash Sweep Payment”) ii) fixed decommissioning contributions equal to £20 million per annum (indexed to RPI but tapering off as the nuclear power stations are currently scheduled to close); and (iii) £150,000 (indexed to RPI) for every tonne of uranium in PWR fuel loaded into the Sizewell B reactor after the Restructuring Effective Date.

The NLF has the right from time to time to convert all or part of the NLF Cash Sweep Payment into Convertible Shares (the NLF Conversion Right). On a full conversion, the NLF would hold up to 65 per cent. of the thereby enlarged equity share capital of the Company. However, the terms of the Convertible Shares include a limit on the voting rights attaching to such shares equal to a maximum of 29.9 per cent. The Secretary of State has confirmed that he has no current intention to direct the NLF to exercise the NLF Conversion Right but reserves the right to do so. As at March 31, 2005, the NLF had not converted all or part of the NLF Cash Sweep into convertible shares and the NLF Cash Sweep Payment contribution percentage was 64.99 per cent.

New BNFL Contracts.    At the Restructuring Effective Date, new contracts with BNFL covering front end (i.e. fuel preparation before it enters the reactor) and back end (i.e. handling, storage and ultimate disposal of spent fuel) AGR fuel services became effective. These contracts require variable payments based on the market price of electricity and amounts of fuel loaded. Under the new agreements, BNFL will assume title to new spent fuel on delivery to BNFL from our AGR power stations. As a result, we do not retain the obligation and future cost of disposing of the spent fuel.

Investment expenditure.    In relation to the financial year ending March 31, 2006, we expect that the investment in plant projects, major repairs and strategic spares across the whole company, including incremental costs associated with PiP will be in the range of £230 million to £250 million, compared with £162 million in the twelve months ended March 31, 2005.

Pension obligation.    We operate two pension arrangements within the Electricity Supply Pension Scheme (“ESPS”): the British Energy Generation Group (“BEGG”) for the majority of employees and the British Energy Combined Group (“BECG”) for employees at Eggborough Power Station. In addition, eligible senior employees are provided additional retirement benefits. The pension plans are defined

91

benefit plans, which are externally funded and subject to triennial actuarial valuation. The Restructuring did not have an impact on the number of participants or to the Company’s obligation to fund the ESPS. However, in applying purchase accounting in connection with the Restructuring, we recognized the full liability of the projected benefit obligation in excess of plan assets. We expect to make a contribution of £60 million to the pension scheme in the year ended March 31, 2006. Our expected future obligations for the years 2006 to 2015 are £943 million and based on actuarial calculations.

European Union’s Emission Trading Scheme.    On January 1, 2005 the ETS took effect. The scheme requires all producers of carbon dioxide to have a permit to emit greenhouse gases. Under the Scheme, certain companies were allocated a number of allowances to be submitted on annual basis to cover their emissions of carbon dioxide. To the extent that our emissions exceed the allowances granted to us, we will be required to purchase additional allowances from the market. The market price of allowances has risen since the beginning of 2005 and was in excess of €15/tonne of carbon dioxide on March 31, 2005 and €25/tonne at June 30, 2005. The Government has granted us, in connection with our Eggborough station, an allocation of 4.54 million tonnes of carbon dioxide allowances under the ETS scheme for each of the calendar years 2005, 2006 and 2007, which is equivalent to approximately 5 TWh of generation per annum.

Contingent liabilities.    Amounts owing by EPL to the Eggborough Banks are not guaranteed by the Company. However, the Company guarantees the payment of amounts by BEPET to EPL, calculated to cover EPL’s borrowing and operating costs.

On February 12, 2004 BE Ltd received a notice of warranty claims from the consortium which purchased the Group’s 82.4 per cent. 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.

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$64.5 million. The consortium also claims that the alleged erosion may reduce the operating life of the unit and/or result in further repairs involving further losses. We have rejected the claim and expect to defend it if it is pursued further.

The principal tax claim relates to the treatment of expenditure at the Bruce Power Station during the period of our 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 us which has not been recognized 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. We have rejected the claim and expect to defend it if it is pursued further. We believe 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 us.

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

We have given certain indemnities and guarantees in respect of the disposal of our investment in AmerGen.

We have given certain indemnities and guarantees in respect of our subsidiary undertakings. No losses are anticipated to arise under these indemnities and guarantees, provided relevant subsidiary undertakings continue on a going concern basis.

92

We are involved in a number of other claims and disputes arising in the normal course of business which are not expected to have a material effect on our operations, cash flows or financial position.

Disclosure of Contractual Obligations

We have made various financial commitments in the ordinary course of our business. Such commitments include entering into contracts for the supply of fuel for our power stations and capital expenditure commitments. In addition, we have made certain contingent financial commitments which may become payable under certain circumstances, for example in the event that a guarantee becomes payable.

The following table provides a summary of our general financial obligations:

	March 31, 2005 Payment due by period
	Total	2006	2007	2008	2009	2010	Thereafter
	(in £ millions)
New Bonds(1)	531	39	42	45	48	51	306
Project Finance Loan(1)	145	11	12	12	13	14	83
Debt interest payments	349	47	44	40	36	32	150
Nuclear fuel purchases	1,317	198	95	70	63	73	818
Coal purchases	162	95	40	27	—	—	—
Capital commitments	16	15	1	—	—	—	—
Operating leases	13	3	3	3	4	—	—
Pension and other post retirement obligations	943	83	84	85	87	92	512

⁽¹⁾ Final maturity in 2022.

As at March 31, 2005 the estimated minimum commitment for the supply of coal was 4 million tonnes which, at contract prices on March 31, 2005, amounts to approximately £162 million.

In addition to the liabilities and provisions described in the consolidated financial statements, we have provided certain guarantees and commitments in respect of the extent of capital expenditure by EPL. We also entered into commitments to purchase and sell electricity in the normal course of business.

The above table does not include any obligations in respect of the NLF Cash Sweep Payment which may fall due as the amounts will vary according to the cash flow in any year and the target reserves established by the Company. The NLF Cash Sweep Payment is the annual payment to be made to the NLF pursuant to the terms of Restructuring, initially, 65 per cent. (subject to adjustment) of the Company’s adjusted net cash flow.

In addition to the above, there are also amounts payable relating to our back end fuel costs and decommissioning liabilities. These amounts are based on our expected future output and costs. For more information as to how we calculate the amounts set forth below, see “—Critical Accounting Policies—Nuclear Liabilities and Decommissioning”.

	Payment due by period
	Total	2006	2007	2008	2009	2010	Thereafter
	(in £ millions)
Nuclear and decommissioning liabilities	12,222	187	187	187	236	191	11,234

Off-Balance Sheet Arrangements

On January 31, 2005 we entered into a sale and partial leaseback transaction with respect to property we owned. We sold our property in East Kilbride at its carrying value of £7 million, recognizing

93

no gain or loss on sale. As part of the transaction, we entered into an operating lease to lease approximately 16 per cent. of the office space. We do not retain any other interest in the disposed of property and do not retain any ongoing obligations with respect to the property.

Critical Accounting Policies

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States (“US GAAP”) requires us to make estimates and judgements that affect our reported amounts of assets and liabilities, revenues and expenses. We have identified the following critical accounting policies that affect the more significant estimates and judgements used in the preparation of our consolidated financial statements. On an ongoing basis, we evaluate our estimates, including those related to the matters described below. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could vary from those estimates under different assumptions or conditions.

Restructuring accounting

Completion of the Restructuring resulted in a new reporting entity. Under our Restructuring accounting as of January 14, 2005, when British Energy Group plc acquired BE Ltd, we have applied purchase accounting under FASB Statement No. 141 Business Combinations (“SFAS 141”). The entity allocated the consideration paid to the entity’s assets acquired and liabilities assumed, based on fair values. Pursuant to SFAS 141, in determining fair values, the market values of specific assets and liabilities were used. Where readily determinable market values were not available, we were required to estimate fair value using other methodologies requiring significant judgement and our best estimate of future prices, output, costs and discount rates. For certain assets and liabilities, where we believed additional valuation experience would be warranted, we engaged a firm of valuation specialists to assist us in the valuation of certain assets and liabilities.

The effective date of the Restructuring is considered to be the close of business on January 14, 2005 for financial reporting purposes. As a result of the implementation of the Restructuring accounting, the financial statements of the Company after the effective date are not comparable to the Company’s financial statements for prior periods.

Nuclear liabilities and decommissioning

We record liabilities for spent nuclear fuel and decommissioning costs. On April 1, 2003 we adopted SFAS 143 to account for legal obligations associated with the retirement of long-lived assets that result from the construction, development or normal operation of a long-lived asset.

A liability for an asset retirement obligation is recognized when a legal obligation arises and should be initially measured at fair value. The liability should also be capitalized as part of the carrying amount of the related long-lived asset. Changes in the liability due to the passage of time, accretion expense, are recorded as an operating expense in the statement of operations. The determination of the fair value of our asset retirement obligations requires management to make certain judgements about the estimated useful lives of our long-lived assets, changes in technology, economic and market conditions, and actions or assessments by our regulators. A change in these judgements can affect the amount of asset retirement obligations recognized in our financial statements.

The estimated costs of decommissioning are discounted at our credit adjusted risk free rate, to reflect the timescale before and during which the work will take place (following closure of the power station). We anticipate that after defueling the reactors, dismantling them will be deferred for at least 85 years (for AGRs), and up to 50 years (for PWRs). These liabilities have been discounted using a long term real rate of 3 per cent., which is consistent with the UK Government’s long term bond rate. This

94

long term bond rate was deemed to be appropriate given that the Secretary of State, under the NLFA, will assume payment for any nuclear and decommissioning liabilities should the NLF not be able to make such payment. This guarantee by the Secretary of State results in adjusting our credit adjusted risk free rate to the British Government’s long term borrowing rate for these specific asset retirement obligations.

Prior to the Restructuring, and any related guarantee by the Secretary of State, we used a credit adjusted risk free rate of 12.2 per cent., which was consistent with our credit status before the Restructuring.

Property, plant and equipment

Property, plant and equipment (other than assets in the course of construction) are stated in the balance sheet at cost less accumulated depreciation. Accumulated depreciation includes additional charges made where necessary to reflect impairment in value. Assets in the course of construction are stated at cost and are not depreciated until brought into commission.

Subsequent to the Restructuring, we have included strategic spares within property plant equipment and capitalized certain costs in connection with statutory outages, both of which we believe better represents the nature and usage of our assets.

The charge for depreciation of property, plant and equipment is based on the straight line method so as to write off the costs of assets, after taking into account provisions for diminution in value, over their estimated useful lives. The charges for depreciation are dependent on our estimates of the useful life for property, plant and equipment.

Accounting lifetimes of our nuclear power stations and other long-lived assets reflect our current assessment of potential life limiting technical factors and independent engineering assessments. The operating lifetime of a nuclear power station is limited principally by the lifetime of items which are uneconomical to replace such as the graphite core, the boiler (in AGRs) and other components inside the reactor pressure vessel. The methodologies and technology used to evaluate the expected lifetimes of nuclear stations are dynamic, resulting in progressively improved measurement capabilities that allow us to determine whether the safety case for an extended accounting life of a nuclear power station can be supported. The estimates of station accounting lives are therefore subjective. The extension of a station’s life may improve our results, in light of the incremental income and the largely fixed cost base. We carried out a fair value exercise as at the Restructuring Effective Date and concluded that the process of reviewing the station life extension at Dungeness B was sufficiently progressed at that time, that a willing buyer and willing seller would have increased the accounting life of Dungeness B from 25 years to 30 years. We are progressing with the technical and commercial work for Dungeness B life extension in line with our plans and we expect to make a decision in the fall.

Impairment of long-lived assets

Long-lived assets, such as property and equipment, are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When impairment is identified, the carrying amount of the asset is reduced to its estimated fair value. The calculation of estimated un-discounted future cash flows is based on our best estimates of future prices, output and costs and is therefore subjective.

95

Pensions

The Company accounts for its defined benefit pension plan following the accounting principles of FASB Statement No. 87, Employers’ Accounting for Pensions (“SFAS 87”) and the disclosure rules under FASB Statement No. 132R, Employers’ Disclosures about Pensions and Other Postretirement Benefits, an Amendment of FASB 87, 88 and 106 (“SFAS 132R”). We use an actuarial method for determining the pension costs and net pension liability or asset. Periodic pension costs are comprised of service and interest costs together with amortization of deferred actuarial gains and losses and offset by the expected return on plan assets. In computing our pension expense and obligation, significant assumptions and estimates are applied including:

• expected rate of returns on plan assets

• discount rates used in the valuation of benefit obligations

• timing of employee retirements.

Changes in these assumptions may result in a different pension expense and obligation than that presented in our financial statements.

As a result of the Restructuring and applying purchase accounting, a liability was recognized for the projected benefit obligation in excess of plan assets. As at March 31, 2005 the recorded pension liability was £456 million.

New and Recently Issued Accounting Pronouncements

The following new accounting standards were adopted by the Company during the year ended March 31, 2005 and the impact of such adoption, if applicable, has been presented in the accompanying Consolidated Financial Statements:

FASB Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”)—In January 2003, the FASB issued FIN 46 which requires the primary beneficiary of a variable interest entity’s activities to consolidate the variable interest entity. FIN 46 defines a variable interest entity as an entity in which the equity investors do not have substantive voting rights and there is not sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The primary beneficiary absorbs a majority of the expected losses and/or receives a majority of the expected residual returns of the variable interest entity’s activities. In December 2003, the FASB issued FIN 46 (Revised December 2003), Consolidation of Variable Interest Entities—An Interpretation of ARB No. 51 (“FIN 46R”), which supersedes and amends the provisions of FIN 46. The Company has not identified any material variable interest entities created, or interests in variable entities obtained which require consolidation or disclosure under FIN 46R.

EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments (“EITF 03-1”)—In March 2004, the EITF reached a consensus on Issue No. 03-1, which provides guidance on assessing whether impairments are other-than-temporary for marketable debt and equity securities accounted for under SFAS No. 115, and non-marketable equity securities accounted for under the cost method. The consensus also requires certain disclosures about unrealized losses that have not been recognized in earnings as other-than-temporary impairments.

In September 2004, the FASB issued FSP No. EITF Issue 03-1-1, Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments, which delays indefinitely the application of guidance provisions of EITF 03-1 until further application guidance can be considered by the FASB. The FSP did not delay the effective date for the disclosure provisions of EITF 03-1 which have been adopted by the Company. The Company does not expect the final guidance to have a material impact on its consolidated results of operations, financial position or cash flows.

96

The following new accounting standards were issued, but have not yet been adopted by the Company as of March 31, 2005:

FASB Statement No. 151, Inventory Costs—an amendment of ARB No. 43 (“SFAS 151”)—In November 2004 the FASB issued SFAS151 which requires idle facility expenses, freight, handling costs, and wasted material (spoilage) costs to be recognized as current period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company is evaluating the impact of this standard on its consolidated financial statements.

FASB Statement No. 123 (Revised 2004), Share-Based Payment (“SFAS 123R”)—In December 2004, the FASB issued SFAS 123R, which replaces SFAS 123 and supersedes APB Opinion 25. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values beginning with the first annual period beginning after June 15, 2005. The pro forma disclosures previously permitted under SFAS 123 will no longer be an alternative to financial statement recognition. Under SFAS 123R, the Company must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at the date of adoption. The transition methods include prospective and retroactive adoption options. Under the retroactive option, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested awards at the beginning of the first quarter of adoption of SFAS 123R, while the retroactive methods would record compensation expense for all unvested awards beginning in the first period restated. The Company does not anticipate the adoption of SFAS 123R on April 1, 2006 to have any material impact on its consolidated financial position, results of operations or cash flows. However, SFAS 123R also requires the benefit of tax deductions in excess of recognized compensation costs to be reported as a financing cash flow rather than an operating cash flow as required under current accounting guidance. This may result in the reduction of net operating cash flow and an increase of net financing cash flows in periods after the effective date.

FASB Statement No. 153, Exchanges of Non-monetary Assets—an amendment of APB Opinion No. 29—In December 2004, the FASB issued SFAS 153 which amends APB Opinion No. 29 by eliminating the exception to the fair-value principle for exchanges of similar productive assets. SFAS 153 also eliminates APB Opinion No. 29’s concept of culmination of an earnings process. The amendment requires that an exchange of non-monetary assets be accounted for at fair value if the exchange has commercial substance and fair value is determinable within reasonable limits. SFAS 153 is effective for non-monetary transactions occurring in fiscal periods beginning after June 15, 2005. The impact of SFAS 153 will depend on the nature and extent of any exchanges of non-monetary assets after the effective date, but the Company does not currently expect SFAS 153 to have a material impact on its consolidated financial position, results of operations or cash flows.

FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (“FIN 47”)—In March 2005, the FASB issued FIN 47 which clarifies that the term “conditional asset retirement obligation” as used in SFAS 143 refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. This Interpretation is effective no later than the end of the fiscal years ending after December 15, 2005. The Company does not expect the adoption of FIN 47 to have a material impact on its consolidated financial position, results of operations or cash flows.

97

ITEM 6.    DIRECTORS, SENIOR MANAGERS AND EMPLOYEES

Directors and Senior Management

We operate under the overall direction of our Board of Directors. Our Articles of Association provide that the number of Directors shall not, unless or until otherwise determined by an ordinary resolution, be less than four nor more than 15. The Articles of Association also provide that at every annual general meeting of shareholders any Director who has been appointed by the Board of Directors since the previous Annual General Meeting, together with such other Directors are required to ensure that one third (or the number nearest to but not less than one third) of the Directors shall retire from office. The Directors to retire by rotation in this manner in each year are the Directors who have been longest in office since their appointment or re-appointment. At our Annual General Meeting to be held on September 15, 2005, all our Directors will stand for election. Directors who retire by rotation in this manner are eligible to stand for re-election. The Directors may, at any time, appoint any person to be a director. Any person so appointed will hold office until the next Annual General Meeting of shareholders and shall then retire and be eligible for election. The Directors may appoint one or more of their number to the office of Chief Executive, Managing Director or to other executive office for such period and on such terms as the Directors think fit. All executive Directors have one-year rolling employment contracts with us, with the exception of William Coley, whose contract terms are yet to be agreed. The executive officers have contracts that are terminable by us on one year’s notice. It is our policy that Non-Executive Directors are appointed for a three-year term, renewable for a further three-year term on the basis of satisfactory performance, except where they are required to stand for re-election under the Articles of Association.

The name, title, age and date appointed of each of our Non-Executive Directors, our Executive Directors and our executive officers as at March 31, 2005 were as follows:

Name	Title	Age	Date appointed
Adrian Montague ¨	Chairman	57	November 28, 2002
William Coley §¨<†	Chief Executive	61	June 1, 2003
Stephen Billingham §¨<à	Finance Director	46	September 16, 2004
Roy Anderson #†§¨	Chief Nuclear Officer	56	September 16, 2004
Ian Harley +M¨<	Independent Director	54	June 1, 2002
Pascal Colombani *M†¨	Independent Director	59	June 1, 2003
Sir Robert Walmsley +*M#†¨	Independent Director	64	August 1, 2003
John Delucca +M¨<	Independent Director	61	February 9, 2004
Clare Spottiswoode +*M¨<	Deputy Chairman and Senior Independent Director	52	December 1, 2001
David Pryde +*M¨<	Independent Director	56	September 1, 2004
Robert Armour §<à	Company Secretary and General Counsel	45	December 13, 1995
Sally Smedley §à	Director, Human Resources and Communications	55	February 8, 1999
Neil O’Hara §<	Director, Power and Energy Trading	39	May 3, 2004

+ Denotes member of the Audit Committee.

* Denotes member of the Remuneration Committee.

M Denotes member of the Governance and Nominations Committee.

# Denotes member of the Safety, Health and Environment Committee.

† Denotes member of the Nuclear Performance Review Committee.

§ Denotes member of the Executive Committee.

¨ Denotes member of the British Energy Group plc Board.

^< Denotes member of the Trading Review Committee

à Denotes member of the Pensions Committee

William Coley was appointed as Chief Executive Officer on April 14, 2005 following the resignation of Mike Alexander on March 20, 2005. Prior to this William Coley served as an Independent Director from June 2003.

98

Each of the current British Energy Group plc Directors was appointed to the Board of the Company on September 16, 2004. Prior to the January 14, 2005, each of the Directors was also a Director of BE Ltd. The dates in the table above refer to the Directors’ dates of appointment as directors of BE Ltd.

The written consent of the Special Shareholder is required for the appointment of the Chairman of the Board. There are no family relationships between any of our Directors or executive officers.

In accordance with the terms of the Creditor Restructuring Agreement, John Delucca and David Pryde were both nominated to serve as Directors by the Bondholders. Their appointments were subject to our Board agreeing their suitability and experience. The Board remains satisfied as to their independence.

Directors

Adrian Montague joined British Energy as Chairman in November 2002 and also held an executive role until the appointment of Mike Alexander as Chief Executive in March 2003. He is currently also Chairman of Michael Page International plc, Chairman of Infrastructure Investors LP, Chairman of Cross London Rail Links Limited, and Chairman (since May 26, 2005) of Friends Provident plc and a non-executive director of Cellmark AB. A law graduate of Cambridge University, he was a partner with Linklaters & Paines, before joining Kleinwort Benson as Head of the Project and Export Finance Department in 1993, and subsequently became Global Head of Project Finance of Dresdner Kleinwort Benson in 1997. Then he undertook a number of senior roles in the implementation of the Government’s private finance policies, serving as the Chief Executive of the Treasury Taskforce from 1997-2000, and as Deputy Chairman of Partnerships UK plc, and a Private Finance Advisor to the Department of the Environment, Transport and The Regions between 2000 and 2001. He was awarded a CBE in 2001.

William Coley accepted the position of Chief Executive on March 20, 2005 following the resignation of Mike Alexander and took up the post on April 14, 2005. Prior to this he served as an independent Non-Executive Director from June 2003. He joined Duke Power, a major US utility company as an engineer in 1966, becoming Group President in 1997 and retiring from this position in 2003 after a 37 year career with the company. During his time at Duke Power he held a variety of management and executive roles including Vice-President, Central Division and Senior Vice-President, Power Delivery. He was elected to Duke Power’s Board of Directors in 1990, becoming Senior Vice-President, Customer Group and was President of the Associated Enterprises Group between 1994 and 1997. A Non-Executive Director of CT Communications Inc. and Peabody Energy (both publicly traded companies), and a director of ER Jahna Enterprises (a privately owned company) he holds a BSc in Electrical Engineering from the Georgia Institute of Technology. He is a registered Professional Engineer in North and South Carolina. He is a member of the Trading Review and Nuclear Performance Committees.

Stephen Billingham was appointed to the Board as Finance Director on September 16, 2004, having joined British Energy on August 25, 2004. Prior to joining British Energy, he was the Group Finance Director of the engineering consultancy and support services group, WS Atkins plc, during its successful financial recovery. Previously he led the finance team which signed the large and complex Metronet-London Underground Public Private Partnership, which maintains two-thirds of the London Underground infrastructure. For seven years he was the Group Treasurer of the engineering group BICC plc (now Balfour Beatty plc). He has held finance positions in Severn Trent plc, Burmah Oil plc and British Telecommunications plc. He holds a BSc from Brunel University and a PhD from the University of Aston in Birmingham. He is a member of the Association of Corporate Treasurers. He is also a member of the Trading Review and Pensions Committees.

99

Roy Anderson was appointed to the Board as Chief Nuclear Officer (designate) of British Energy on September 16, 2004 having joined British Energy on July 5, 2004. The introduction of the role of Chief Nuclear Officer was approved by the NII in April 2005. He was previously President of PSEG Nuclear in the US, and Chief Nuclear Officer of Nuclear Management Company and of Florida Power Corporation. His early career involved working for Carolina Power and Light Company, Boston Edison Company and General Electric Company, all in the US. He has a degree in marine and nuclear engineering and an MBA in operation research. He is a member of the Safety, Health and Environment and Nuclear Performance Review Committees.

Ian Harley was appointed as an independent Non-Executive Director in 2002 and is Chairman of the Audit Committee. He joined Abbey National in 1977 where he held a variety of posts in the Finance, Retail Banking and Wholesale Banking Divisions before joining its board in 1993. He spent nine years on the board as first Finance Director, then Chief Executive, before retiring in 2002. An Economics graduate of Edinburgh University, he is a Fellow of the Institute of Chartered Accountants and a Fellow and Past President of the Institute of Bankers. He is currently a Non-Executive Director of Rentokil Initial plc, JW Educational Limited and Remploy Limited, a Vice-President of the National Deaf Children’s Society and a Governor of the Whitgift Foundation. Previously Chairman of the Association for Payment Clearing Services, a member of the Deposit Protection Board, appointed by the Bank of England, and a member of the Financial Services Authority’s Practitioner Panel. He is also a member of the Governance and Nominations, and Trading Review Committees.

Dr. Pascal Colombani was appointed as an independent Non-Executive Director in 2003. He holds a doctorate in nuclear physics and is a former Chairman and CEO of the French Atomic Energy Commission. He is Associate Director at ATKearney, a director of Alstom SA, Rhodia SA and of the French Institute of Petroleum. He is Chairman of the French Association for the Advancement of Science and a member of the French Academy of Technology. He was also formerly the Chairman (non-executive) of Areva, the nuclear engineering conglomerate, and a board member of Electricité de France and France Télécom. He is Chairman of the Nuclear Performance Review Committee and a member of the Governance and Nominations, and Remuneration Committees.

Sir Robert Walmsley was appointed as an independent Non-Executive Director in 2003. Previously he served in the Royal Navy where his final appointment was as Controller of the Navy and member of the Navy Board as a Vice Admiral, starting in 1994. He was knighted in 1995. During his earlier naval career he held a number of nuclear related posts including service as the Chief Engineer of a nuclear submarine, Project Manager of a Nuclear Submarine Refit and Refuel, and Chairman of the Naval Nuclear Technical Safety Panel; he was Director General, Submarines between 1993 and 1994. He held roles in Procurement at the Ministry of Defense and was Executive Aide to the Chief of Defense Procurement between 1986 and 1987. After retiring from the Navy, he was appointed as Chief of Defense Procurement (a Permanent Secretary grade post in the Civil Service), occupying that position from 1996 until 2003. Holding an MA from Cambridge University and a postgraduate diploma in control engineering he also was awarded an MSc in Nuclear Science and Technology from the Royal Naval College. He is a Senior Adviser at bankers Morgan Stanley and an independent director of General Dynamics Corporation, Major Projects Association, EDO Corporation and Stratos Global Holding Limited. He is Chairman of the Governance and Nominations Committee and the Safety Health and Environment Committee, a member of the Audit, Remuneration, and Nuclear Performance Review Committees, and a Non-Executive Director of British Energy Generation Limited, the Group’s licensed nuclear generator subsidiary.

John Delucca was appointed as an independent Non-Executive Director in February 2004. He holds an MBA in Finance from Fairleigh-Dickinson University School of graduate study and a BA from Bloomfield College and has held a variety of senior roles in US business. Most recently, from 2003 until March of this year he was Executive Vice-President and Chief Financial Officer of the REL

100

Consultancy Group. Prior to that from 1998 to 2002 he was Executive Vice-President, Finance and Administration and Chief Financial Officer of Coty Inc and a member of their Executive Committee. Between 1993 and 1998 he was Senior Vice-President and Treasurer of RJR Nabisco Inc., having previously held executive positions with Hascoe Associates, a private investment group, the Lexington Group, providing financial consulting to distressed companies, the Trump Group and the International Controls Corporation, where he was Executive Vice-President and CFO as well as Chairman and CEO of a subsidiary, Transway Finance Company. He is a Non-Executive Director, and chairs the audit committees, of ITC Deltacom, Enzo Biochem and Elliott Company. He has been a lecturer at Fordham University’s Graduate School of Business Administration and Adjunct Assistant Professor at Seton Hall University School of Business Administration. He is Deputy Chairman of the Audit Committee and a member of the Trading Review and Governance and Nominations Committees.

Clare Spottiswoode was appointed as an independent Non-Executive Director in 2001. Chair of the Remuneration Committee. Her career started as an economist with the Treasury before establishing her own software company. Between 1993 and 1998 she was Director General of Ofgas and has also served as a member of the Government’s Deregulation Task Force (1993) and the Public Services Productivity Panel (1998). Mrs Spottiswoode currently chairs Economatters Limited and is also currently a Non-Executive Director of Advanced Technology (UK) plc, Tullow Oil plc, Anker plc, Biofuels Corporation and Petroleum Geo-Services ASA. Awarded a CBE for services to industry in 1999, she holds degrees from Cambridge and Yale Universities. She is the Deputy Chairman and the senior independent Non-Executive Director, Chairman of the Remuneration Committee and a member of the Trading Review, Audit and Governance and Nominations Committees.

David Pryde was appointed as an independent Non-Executive Director on September 1, 2004. He has extensive trading and risk management experience. Having formerly headed precious metals trading in Asia and NM Rothschild and Sons Ltd and Philipp Brothers Inc., he joined JP Morgan & Co Inc. in 1984 and has subsequently held various senior management positions in their trading businesses, including Global Head of Precious Metals Trading, Global Head of Commodity Derivatives Trading and Marketing and Global Head of Futures and Options Brokerage. He sat on the boards of the Commodity Exchange, the Chicago Mercantile Exchange and the Futures Industry Association. He is Chairman of the Trading Review Committee and a member of the Remuneration, Audit and Governance and Nominations Committees.

Mike Alexander (57) resigned as Chief Executive on March 20, 2005. Prior to his appointment as Chief Executive Officer at British Energy in March 2003 he was Chief Operating Officer and executive Board Member of Centrica plc, and before that Managing Director of British Gas Trading. He is a non-executive director of Associated British Foods plc and was previously Chairman of AG Solutions Limited, Hydrocarbons Offshore Limited and a Non-Executive Director of The Energy Saving Trust.

David Gilchrist, formerly Managing Director, Generation, resigned as a Director on August 5, 2004. Formerly Executive Vice President, Finance of Bruce Power LP (1999 – 2001), having previously been Financial & Commercial Director, British Energy North America, and he was Executive Director, Finance of Nuclear Electric Limited. A Chartered Engineer and member of the Institution of Mechanical Engineers, he was Business Development Director at GKN plc prior to joining Nuclear Electric in 1991.

Martin Gatto resigned as Interim Finance Director on September 16, 2004. He remained with the Company as Chief Financial Officer until December 31, 2004. Prior to joining British Energy he was interim Chief Financial Officer at Midlands Electricity plc and was Group Financial Director at Somerfield plc between 1993 and 2002.

101

Executive Officers

Robert Armour was appointed Company Secretary in 1995 and General Counsel in 2003. A solicitor, he was a partner in Wright Johnston & Mackenzie, solicitors, between 1986 and 1990 before joining Scottish Nuclear Limited as Company Secretary in 1990. He was Director of Performance Development for Scottish Nuclear Limited between 1993 and 1995. From 1997 to 2003 he was Director of Corporate Affairs. He holds a law degree and MBA from Edinburgh University and has also attended INSEAD’s Advanced Management Program. He is a member of the Executive and the Pensions and Trading Review Committees.

Neil O’Hara was appointed as Director of Power and Energy Trading in May 4, 2004. He has over ten years’ trading and risk management experience in the energy sector including the power, coal and gas sectors. His trading experience was gained in the UK and US whilst working at Manufacturers Hanover Trust, British Gas, Natural Gas Clearinghouse (Dynergy), Accord/Centrica and RWE. He has also worked on generation optimization, co-firing and operations and engineering projects. He is a member of the Executive and Trading Review Committees.

Sally Smedley was appointed as Director, Human Resources and Communications on February 8, 1999, previously she was Human Resources and Corporate Relations Director at East Midlands Electricity plc, and Employee Relations Director, the BOC Group plc. She has a BSc (Tech) in Occupational Psychology. She is a member of the Executive and Pensions Committees.

Peter Wakefield was appointed as Safety and Technical Director on April 4, 2005. He joined British Energy from Eskom, the vertically integrated South African power utility. He has extensive experience in the nuclear industry and all aspects of nuclear power plants. He was the first operating manager at Koeberg, holding a Senior Reactor Generator License, before moving through station, corporate engineering and technology management posts. Earlier in his career he spent four years in the UK power industry and one and a half years with EdF in the French nuclear program. He has an electrical engineering degree and an executive management education from South Africa and Switzerland. He is a member of the Executive and the Safety Health and Environment and Nuclear Performance Review Committees.

Details of other directorships and outside interests of our directors and executive officers are as follows:

	Other Directorships/Outside Interests
Adrian Montague	Michael Page International plc Cross London Rail Links Limited, Friends Provident plc, Cellmark AB; Infrastructure Investors LP
William Coley	CT Communications Inc; Peabody Energy
Pascal Colombani	AT Kearney; Alstom SA; French Institute of Petroleum, Rhodia, SNC-Lavali
Ian Harley	Rentokil Initial plc; Remploy Limited; National Deaf Children’s Society; JW Educational Limited
Clare Spottiswoode	Advanced Technology (UK) plc; Economatters Ltd; Tullow Oil plc; Anker plc; Biofuels Corporation; Petroleum Geo-Services ASA
John Delucca	ITC Deltacom; Enzo Biochem Inc.; The Elliott Company
Sir Robert Walmsley	EDO Corporation General Dynamics; Morgan Stanley; Major Projects Association; Stratos Global Limited
Stephen Billingham	None
Roy Anderson	None
David Pryde	None
Robert Armour	Scottish Council Development and Industry; Nuclear Industries Association
Neil O’Hara	None
Sally Smedley	Remploy Limited
Peter Wakefield	None

None of the other Directors or executive officers had other business interests outside of British Energy.

102

Compensation of Directors and Officers

During the year ended March 31, 2005, the aggregate amount of compensation we paid to all Executive and Non-Executive Directors and executive officers was £3,954,973 (excluding pension contributions, and any payment to Mike Alexander for loss of office). During the year ended March 31, 2005, the aggregate amounts set aside or accrued to provide pension, retirement or similar benefits for Executive and Non-Executive Directors and executive officers, pursuant to any existing plan, was £136,674.

In the year ending 31 March 2005, all our Executive Directors were entitled to bonus payments under the Interim Bonus Plan. This took the form of a deferred bonus granted to members of the Executive Committee either wholly in shares (in the case of Executive Directors) or mainly in shares and partly in cash in the case of other Executive Committee members. The maximum level of award was 150 per cent. of salary, except in the case of Roy Anderson who was hired from the US and is entitled to 1.67 times that figure.

On the basis of performance against a range of challenging targets underpinned by the safety and environmental priorities necessitated by the nature of our activities, Executive Committee members will each receive 38.2 per cent. of salary (63.6 per cent. in the case of Roy Anderson). So far as the award of shares is concerned one third of this amount is payable immediately with one third released in 2005/06 and the final third in 2006/07.

In recognition of the exceptional effort, commitment and determination required to meet both the engineering challenges and to complete the Restructuring the Remuneration Committee decided to make a one-off discretionary payment to members of the Executive Committee equal to 50 per cent. of base salary. This amount is shown under bonus in the Emoluments Table in the section below entitled “Directors’ Emoluments”.

William Coley became an Executive Director of British Energy Group plc on April 14, 2005 and the terms of his contract are yet to be finalised. His remuneration shall be a fixed salary of £531,915 per annum (or such higher rate as determined by the Remuneration Committee of the Board and approved by British Energy Group plc in General Meeting). This is in addition to Directors’ fees of £27,000 per annum and shares in the British Energy Group plc, having a value at the date of payment of £13,000, payable to him under his previous terms of appointment as a Non-Executive Director. He will be eligible for a bonus of £265,958 payable at the end of the financial year ending March 31, 2006 subject to the absolute discretion of the Remuneration Committee and approval by the Board. He will not be eligible for membership of any occupational pension scheme. He also receives an accommodation allowance of £105,770 per annum.

Service Contracts

We aim to set notice or contract periods for Executive Directors at one year or less. Where it is necessary to offer longer notice or contract periods to new Executive Directors recruited from outside the company, it is our policy to reduce the duration of these contracts as soon as possible after the initial period has expired. With the exception of William Coley, whose contract terms are yet to be agreed, all of our Executive Directors currently have 12-month rolling contracts.

Termination Provision

The Company’s policy is that Directors’ service contracts should not have express termination provisions other than the contractual notice periods.

103

David Gilchrist resigned from the Board on August 4, 2004 and his employment terminated on November 4, 2004. The payment to him disclosed under “Compensation for Loss of Office” in the table entitled “Directors’ Emoluments” represents the balance of his contractual notice plus a payment in respect of bonus entitlement for 2004/05 and for loss of bonus entitlement for a proportion of 2005/06.

Mike Alexander resigned from the Board on March 20, 2005. As at July 27, 2005 no compensation for loss of office had been agreed.

Independent and Non-Executive Directors

With the exception of Adrian Montague, who undertook an executive role with the Company from November 2002 to March 2003, we consider all our directors to be independent in accordance with the UK Combined Code on Corporate Governance.

The remuneration of Non-Executive Directors is determined by the Board. Appointed for three-year terms, our independent and Non-Executive Directors do not have service contracts, are not eligible for any of our share schemes and do not receive any pension provision from us.

The expiry dates of the current Non-Executive Directors’ appointments are:

Name	Expiry Date
P Colombani	05/31/2006
J Delucca	01/31/2007
I Harley	05/31/2008
A Montague	08/31/2005
D Pryde	05/30/2007
C Spottiswoode	11/30/2007
R Walmsley	07/31/2006

Board Practices

The Board meets sufficiently regularly to discharge its duties effectively. There is frequent contact amongst the Directors between Board Meetings to progress the Company’s business.

All of the Non-Executive Directors serving on the Board have held senior positions in other major organizations either in the UK or internationally. Each of them is involved in decision making on key issues facing the Group and brings a wide range of experience to the Board. The Non-Executive Directors of the Company meet as a group from time to time without Executive Directors present and from time to time also meet without the Chairman present.

The Board has a number of matters reserved to it, including appropriate strategic, financial and organizational matters. These are considered at the Board’s monthly meetings. The Board receives reports covering operational, financial, safety, risk management and regulatory performance to assist in identifying key issues for all of the business on a regular and timely basis. All Directors may obtain independent professional advice at the Company’s expense and all Directors have access to the advice and services of Robert Armour, the Company Secretary who is accountable to the Board through the Chairman on all corporate governance matters. Where appropriate, matters have been delegated to Board Committees, all of which have written constitutions and terms of reference. Further information on our committee structure is provided below.

104

We have maintained the Committee structure previously operated by BE Ltd. Our current committee structure is described below:

Remuneration Committee

The Remuneration Committee is concerned primarily with the pay, benefits and other employment conditions of Executive Directors and the members of the Executive Committee. The Committee is made up entirely of Independent Directors. In addition, it reviews the pay and benefits to other senior staff, to ensure reasonable consistency. The Terms of Reference for the Committee empower it to:

• establish the remuneration policies and practices for Executive Directors and certain other Directors and senior employees;

• design and implement long-term incentive schemes;

• determine and review the individual remuneration packages of the Executive Directors and other selected senior employees, including pension arrangements;

• authorize the annual performance incentive plan; and

• obtain professional advice and expertise necessary for the performance of its duties.

The Remuneration Committee is chaired by Clare Spottiswoode. Pascal Colombani, Sir Robert Walmsley and David Pryde are also members of the Committee.

Remuneration Policy

The Group’s remuneration policy aims to attract and retain management with the appropriate professional, managerial and operational expertise necessary to achieve the Group’s objectives.

It is the Committee’s aim to ensure that the total package (including benefits) is competitive not just in UK terms but can also attract specialists skills in the international nuclear market.

The Committee’s policy is that base salaries are positioned broadly around the market median with an incentive opportunity which will reflect the Company’s business strategy and the challenges it faces.

In particular it is the Committee’s policy that:

• A significant proportion of the Executive Directors pay should be variable and linked to the performance of the Company.

• Taking account of the external market the movements in base pay of Directors and Executive Committee Members should be broadly in line with the pay increases awarded to other staff.

• In determining the link between base and variable pay the Company should be mindful of Safety and Environmental issues.

• There should be a strong and clear link between reward and performance against agreed stretch targets.

The Committee has addressed the issue of suitable long-term incentives being in place for Executive Directors and senior staff. The Committee has decided that it is not appropriate to introduce a traditional long term plan at this stage of the Company’s development. It proposes to put in place an annual plan which pays out over three years.

105

Audit Committee

The Audit Committee is comprised entirely of independent Non-Executive Directors. Ian Harley is Chairman and John Delucca Deputy Chairman of the Committee. Ian Harley and John Delucca are considered to be audit committee financial experts. Sir Robert Walmsley, Clare Spottiswoode and David Pryde are also members of the Committee. The Audit Committee has the primary purpose of assisting the Board in overseeing the integrity of the Company’s financial statements, and overseeing the Company’s compliance with legal and regulatory requirements. The Committee is also responsible for considering and recommending appropriate accounting policies for the Group, and reviewing the adequacy and effectiveness of internal control and compliance procedures within British Energy and ensuring that the Group complies with all statutory requirements in relation to the principles, policies and practices adopted in the preparation of the financial statements including those arising as a result of the application of the US Sarbanes-Oxley Act 2002 (“the Sarbanes-Oxley Act”). The Committee reviewed risk management processes across the Group including actions to mitigate or control key risks facing British Energy. The Committee receives reports from both external and internal auditors in relation to matters arising from their work and is also responsible for encouraging and monitoring the adoption of best practice in corporate governance. The Committee receives reports twice per annum from the Group Risk Management Committee. The Committee reviews the scope and results of the external audit including the auditors’ cost effectiveness, independence and objectivity, and is responsible for making recommendations to the Board in relation to the appointment and independence of the external auditors and their remuneration. The Committee also reviews the nature and extent of the non-audit services provided by the external auditors to the Group to ensure that these are appropriate, and that a balance of objectivity and value for money is maintained.

Governance and Nominations Committee

The Governance and Nominations Committee is comprised entirely of Non-Executive Directors and is chaired by Sir Robert Walmsley. Ian Harley, Pascal Colombani, John Delucca, Clare Spottiswoode and David Pryde are also members. It replaced the BE Ltd Nominations Committee in November 2004. The Committee is responsible for encouraging and monitoring the adoption of good corporate governance practice drawing on the practices and codes prevailing in the UK, US and the EU. It reviews the Company’s code of conduct and ethics and compliance with this code and our legal obligations generally. The Committee also advises on the corporate social responsibility performance of the Group. The Committee also advises the Board in relation to senior appointments throughout the Group. Board appointments recommended by the Committee will be made after an appropriate search and selection process has been undertaken, including, where appropriate, the use of external advisers to identify suitable candidates.

Safety, Health and Environment Committee

This Committee provides advice to the Board in relation to the health and safety of staff, contractors, visitors and the general public, plant safety and our environmental performance. It reviews key safety and environmental risks affecting our business and the actions taken to mitigate or control them. It is chaired by Sir Robert Walmsley. Roy Anderson is also a member and the Committee also includes three independent experts as well as certain other senior managers of the Group. The meetings, which consider both site specific and generic issues, are held in rotation at the nuclear power stations with the Station Manager and site safety representatives in attendance.

Nuclear Performance Review Committee

The Nuclear Performance Review Committee considers and advises the Board and the Executive Committee on issues relating to the performance of and improvements to the Group’s nuclear fleet including operational performance, performance improvement, plant reliability, preventive maintenance

106

and Materiel Condition. The Committee reviews and advises on the implementation and direction of the Company’s ongoing Performance Improvement Program. The Committee is chaired by Pascal Colombani and its membership includes Sir Robert Walmsley, Roy Anderson, Peter Wakefield, and certain other senior managers with appropriate technical expertise. The Chief Executive and executives of the nuclear generation subsidiary board will continue to have responsibility for and will direct the operational and safety policy of the Group’s nuclear operations.

Trading Review Committee

The Trading Review Committee, chaired by David Pryde, was established shortly after his appointment and meets every second month to review hedging and risk management strategy for trading and to ensure activities are conducted within overall risk limits. The Committee reviews and provides advice on the management and use of risk measurements and control, as well as monitoring performance against strategy. It also oversees the management and maintenance of the policies, procedures, authorization and overall risk control framework which will is carried out by a sub-committee, the Trading Risk Sub-Committee. William Coley, Stephen Billingham, Ian Harley, John Delucca, Clare Spottiswoode, Robert Armour and Neil O’Hara are also members.

Executive Committee

Chaired by William Coley, the Executive Committee comprising the senior executives, directs the business of the Group in accordance with delegated authorities from the Board. The Executive Committee meets weekly to maintain close scrutiny and management of the Group’s affairs, directing performance, taking corrective action and ensuring the Board is kept abreast of all material events. Stephen Billingham, Roy Anderson, Robert Armour, Sally Smedley, Neil O’Hara and Peter Wakefield are also members.

Management Committees and Subsidiary Boards

Throughout the year a number of executive management committees and subsidiary boards were used to assist the Directors in controlling the business. These included the Generation Board which directed operational and safety policy in the Group’s nuclear operations. The Chief Executive and executives on the Generation Board continue to direct the operational and safety policy of our nuclear operations.

Group Risk Management Committee

This is an executive committee chaired by the Finance Director. It meets every two months to review the group-wide risk management processes of the business, maintain an overview of the risks facing the business and reports to the Audit Committee on a regular basis.

Pensions Committee

This is an executive committee which monitors the management of the two Group Pension Schemes and is chaired by Sally Smedley, the Group’s Human Resources and Communications Director. The Chairmen of the British Energy Generation Group Trustees and the British Energy Combined Group Trustees are members, as are certain other Directors and senior managers of the Group. The Committee reviews and advises on the policies being adopted by the Trustees of these Schemes and is responsible for advising the Board on all matters relating to these Schemes.

Share Ownership

Prior to the Restructuring BE Ltd operated several share option schemes (collectively, the “Old Share Plans”). The No. 1 Scheme was designed for approval by the UK Inland Revenue under

107

Schedule 9 of the UK Income and Corporation Taxes Act of 1988 and, consequently confers certain tax benefits on its participants. The No. 2 Scheme, also established by BE Ltd, is an unapproved share option scheme and does not, therefore, confer any particular tax benefits on its participants. Collectively, the No. 1 Scheme and No. 2 Scheme are referred to as the “Executive Share Option Schemes”. In order to be eligible to participate in the Executive Share Option Schemes an individual had to have been a full time director or employee of BE Ltd. The No. 3 Scheme (the “All-Employee Share Option Scheme”) was approved by the UK Inland Revenue and was available to all of our employees other than those who may participate in the Executive Share Option Schemes. There is also a Sharesave (save-as-you earn “SAYE”) Scheme that was open to all BE Ltd’s UK employees and full time Directors who had been continuously employed for such period as the Board prescribed (which could not exceed five years before the date the options were to be granted).

As at March 31, 2005 there were 2,803,541 options outstanding under the Executive Share Option Schemes, 14,223,094 options outstanding under the All-Employee Share Option Scheme, and 7,375,672 options outstanding under the Sharesave Scheme.

As at March 31, 2005, our Directors and executive officers as a group, held options to purchase 193,150 ordinary shares, all of which options were issued pursuant to our Executive Share Option Schemes. Detailed below are the No. 1 and No. 2 Scheme options held by Directors and executive officers. These options became exercisable three years after the date of grant, subject to achievement of a performance condition. For further details see the section entitled “Executive share options” below.

Upon Restructuring, British Energy Group plc adopted six stock compensation plans—a Sharesave Scheme, an Employee Share Option Plan, an Executive Share Option Plan, an Interim Deferred Bonus Plan, a Long Term Deferred Bonus Plan, and a Share Incentive Plan (collectively, the “New Share Plans”). The terms of the Sharesave Scheme, Employee Share Option Plan and the Executive Share Option Plan are not materially different from the Old Share Plans.

No shares or options had been granted under any of the New Share Plans as of March 31, 2005. Total awards granted under the New Share Plans cannot exceed 10 per cent. of share capital over a rolling 10-year period. Of the total awards, grants under the Executive Plan cannot exceed 5 per cent. of share capital over a rolling 10-year period.

A description of the material New Share Plans appears below.

Employee Share Option Plan (“Employee Plan”) and Executive Share Option Plan (“Executive Plan”)

The intention is that the Employee Plan will be used to facilitate grants to non-senior executives with grants to senior executives made under the Executive Plan. Under both plans, participants may be granted options over common stock but the proportion of those options which may be exercised is subject to the achievement of performance targets over a three-year performance period set by the Remuneration Committee. To the extent that an option or part of an option becomes capable of being exercised at the end of the three-year performance period, it will ordinarily remain exercisable between three and ten years from the date of grant.

Interim Deferred Bonus Plan

A deferred bonus in common stock and cash may be granted to executive directors and senior executives by the Remuneration Committee based on performance against targets in respect of the financial year ended March 31, 2005. It is intended that participants in the Interim Deferred Bonus Plan will not participate in the Executive Plan. It is intended that rewards for performance in subsequent financial years will be provided through the Long Term Deferred Bonus Plan.

108

Long Term Deferred Bonus Plan (“LT Plan”)

Certain executive directors and selected senior executives are eligible to receive conditionally awarded shares, or share options in the Company at no cost with the proportion of those shares which may vest subject to the achievement of performance targets over a three-year performance period. It is intended that participants in the LT Plan will not participate in the Executive Plan.

Directors’ Emoluments

During the year the Board reviewed the fees paid to non-executive Directors except the Chairman. With effect from September 1, 2004 the revised structure is:

Independent/Non-Executive Director (Basic Fee)	£	27,000
Additional fee for Deputy Chairman/Senior Independent Director	£	10,000
Additional fee for Chairing Committees (per Committee)	£	10,000
Membership of Committee	£	1,500
Attendance at Board Meeting or Committee Meeting	£	500
Telephone attendance at Board Meeting or Committee Meeting	£	250

In addition, with effect from April 1, 2004, those Non-Executive Directors who travel from the USA receive £1,000 per Board meeting subject to a maximum of £10,000 per annum. Those who reside elsewhere outside the UK are paid £500 per meeting to a maximum of £5,000 per annum.

Adrian Montague’s base fee is £150,000 per annum which was, as a consequence of the additional time commitment as in previous years maintained at a level of £300,000 per annum until Restructuring was achieved. He immediately reverted to his base fee on January 17, 2005, the date of listing of shares in the Company. Under a voluntary arrangement Mr Montague’s letter of appointment was amended such that 30 per cent. of his base fee is payable in shares. This arrangement became effective on March 1, 2005. His contract also provided for additional lump sum fees to be paid when certain milestones related to the Restructuring were achieved and £100,000 became eligible for payment in January 2005.

109

The payments to Directors and Executive Officers in each of the last three fiscal years (in each case ended March 31) were as follows:

	Basic Salary and Fees (£)			Bonus (£)			Contingent Fees (£)			Compensation for Loss of Office (£)
Name	2005	2004	2003	2005	2004	2003	2005	2004	2003	2005	2004	2003
A Montague	269,315	300,000	100,000	—	—	—	100,000	—	300,000	—	—	—
W Coley(1)	76,250	25,000	—	—	—	—	—	—	—	—	—	—
S Billingham(2)(13)	188,740	—	—	286,813	—	—	—	—	—	—	—	—
R Anderson(2)	300,939	—	—	361,333	—	—	—	—	—	—	—	—
P Colombani(3)	52,750	22,500	—	—	—	—	—	—	—	—	—	—
J Delucca(4)	70,083	4,500	—	—	—	—	—	—	—	—	—	—
I Harley	63,750	36,500	25,833	—	—	—	—	—	—	—	—	—
C Spottiswoode	80,500	59,000	53,333	—	—	—	—	—	—	—	—	—
R Walmsley(5)	75,083	24,667	—	—	—	—	—	—	—	—	—	—
D Pryde(6)	52,333	—	—	—	—	—	—	—	—	—	—	—
Total Emoluments for serving Directors at March 31, 2005	1,229,743	472,167	179,166	648,146	—	—	100,000	—	300,000	—	—	—
D Hawthorne(7)	—	25,228	152,978	—	—	—	—	—	—	—	—	—
M Alexander(8)	407,949	400,000	33,333	—	190,004	—	—	—	—	—	—	—
M Gatto(9)	179,596	130,000	—	25,868	36,013	—	—	—	—	—	—	—
D Gilchrist(10)	69,581	199,013	183,563	18,482	106,105	—	—	—	—	136,092	—	—
R Hill(11)	—	19,167	57,500	—	—	—	—	—	—	—	—	—
K Lough(12)	—	151,975	211,250	—	73,679	—	—	—	—	—	145,625	—
R Biggam(14)	—	—	11,167	—	—	—	—	—	—	—	—	—
R Jeffrey(15)	—	—	309,188	—	—	—	—	—	—	—	—	98,000
M Kirwan(16)	—	—	45,042	—	—	—	—	—	—	—	—	—
P Stevenson(17)	—	—	25,893	—	—	—	—	—	—	—	—	—
J Walsh(18)	—	—	7,325	—	—	—	—	—	—	—	—	—
Total Emoluments (all Directors)	1,886,869	1,397,550	1,216,405	692,496	405,801	—	100,000	—	300,000	136,092	145,625	98,000
S Smedley	173,413	157,875	148,025	157,968	76,239	—	—	—	—	—	—	—
N O’Hara	193,750	—	—	160,946	—	—	—	—	—	—	—	—
R Armour	157,150	141,700	127,550	142,965	69,161	—	—	—	—	—	—	—
Total Emoluments (all Directors & Executive Officers)	2,411,182	1,697,125	1,491,980	1,154,375	551,201	—	100,000	—	300,000	136,092	145,625	98,000

110

	Other Benefits (£)			Total Emoluments Excluding Pension (£)			Pension Contributions (£)
Name	2005	2004	2003	2005	2004	2003	2005	2004	2003
A Montague	—	—	209	369,315	300,000	400,209	—	—	—
W Coley(1)	—	—	—	76,250	25,000	—	—	—	—
S Billingham(2)(13)	8,046	—	—	483,599	—	—	8,925	—	—
R Anderson(2)	33,599	—	—	695,871	—	—	11,475	—	—
P Colombani(3)	—	—	—	52,750	22,500	—	—	—	—
J Delucca(4)	—	—	—	70,083	4,500	—	—	—	—
I Harley	—	—	—	63,750	36,500	25,833	—	—	—
C Spottiswoode	—	—	—	80,500	59,000	53,333	—	—	—
R Walmsley(5)	—	—	—	75,083	24,667	—	—	—	—
D Pryde(6)	—	—	—	52,333	—	—		—	—
Total Emoluments for serving Directors at March 31, 2005	41,645	—	209	2,019,534	472,167	479,375	20,400	—	—
D Hawthorne(7)	—	—	8,046	—	25,228	161,024	—	—	21,749
M Alexander(8)	28,218	32,864	2,202	436,167	622,868	35,535	15,300	16,929	1,385
M Gatto(9)	11	Nil	—	205,475	166,013	—	—	—	—
D Gilchrist(10)	9,034	15,247	20,067	233,189	320,365	203,630	9,257	16,929	12,020
R Hill(11)			—		19,167	57,500		—	—
K Lough(12)	—	11,309	12,886	—	382,588	224,136	—	11,657	12,020
R Biggam(14)	—	—	—	—	—	11,167	—	—	—
R Jeffrey(15)	—	—	17,349	—	—	424,537	—	—	—
M Kirwan(16)	—	—	4,007	—	—	49,049	—	—	4,453
P Stevenson(17)	—	—	—	—	—	25,893	—	—	—
J Walsh(18)	—	—	—	—	—	7,325	—	—	—
Total Emoluments (all Directors)	78,908	59,420	64766	2,894,365	2,008,396	1,679,171	44,957	45,515	51,627
S Smedley	10,991	8,248	10,879	342,372	242,362	158,904	15,300	16,929	12,020
N O’Hara	53,780	—	—	408,476	—	—	14,025	—	—
R Armour	9,645	10,287	8,784	309,760	221,148	136,334	15,300	16,929	12,020
Total Emoluments (all Directors & Executive Officers)	153,324	77,955	84429	3,954,973	2,471,906	1,974,409	89,582	79,373	75,667

Notes

⁽¹⁾ Appointed as a Non-Executive Director on June 1, 2003. Appointed as Chief Executive on April 14, 2005

⁽²⁾ Appointed as Executive Director on September 16, 2004. Emoluments relate to the period from July 2, 2004. He joined the Company on August 25, 2004.

⁽³⁾ Appointed as Non-Executive Director on June 1, 2003

⁽⁴⁾ Appointed as Non-Executive Director on February 9, 2004

⁽⁵⁾ Appointed as Non-Executive Director on August 1, 2003

⁽⁶⁾ Appointed as Non-Executive Director on September 1, 2004

⁽⁷⁾ Resigned as Executive Director on February 15, 2003. Appointed as Non-Executive Director on February 15, 2003 and resigned on March 12, 2004

⁽⁸⁾ Resigned as Executive Director on March 20, 2005. As at July 22, no compensation for loss of office had been agreed.

⁽⁹⁾ Appointed as Executive Director on December 8, 2003. Resigned on September 16, 2004

⁽¹⁰⁾ Resigned as Executive Director on August 4, 2004

⁽¹¹⁾ Retired as Non-Executive Director on July 31, 2003

⁽¹²⁾ Resigned as Executive Director on December 8, 2003

⁽¹³⁾ Bonus relates to a full year of service in line with his service agreement.

⁽¹⁴⁾ Resigned as Non-Executive Director on June 10, 2002.

⁽¹⁵⁾ Resigned Director on February 10, 2003.

⁽¹⁶⁾ Resigned as Director on May 31, 2002. The salary figure for 2003 includes accrued holiday pay of £13,458.

⁽¹⁷⁾ Resigned as Director on February 28, 2003.

⁽¹⁸⁾ Resigned as Non-Executive Director on July 16, 2003.

111

Directors and Executive’s Shareholdings

The table below lists the total number of shares held by our Directors and Executive Officers as at July 25, 2005

Ordinary shares	July 25, 2005(2)	As a % of total Issued share Capital(2)	March 31, 2004(1)	As a % of total Issued share Capital(1)
A Montague	3,258	0.0006	2,188	0.0004
W Coley	8,466	0.0015	—	—
S Billingham	—		—	—
R Anderson	3,547	0.0006	—	—
P Colombani	3,143	0.0006	—	—
J Delucca	3,161	0.0006	—	—
I Harley	3,183	0.0006	2,000	0.0003
C Spottiswoode	3,234	0.0006	—	—
R Walmsley	4,598	0.0008	—	—
D Pryde	8,197	0.0015	—	—
N O’Hara	—	—	—	—
S Smedley	1	0.0000002	50	0.00001
R Armour	193	0.000034	12,282	0.002
P Wakefield	—	—	—	—
Total	40,981	0.0073	16,520	0.0027

Notes:

⁽¹⁾ Ordinary Shares in British Energy plc (total of 620,362,444)

⁽²⁾ Ordinary Shares in British Energy Group plc (total of 561,315,459)

As at July 25, 2005, our Directors and executive officers as a group, held 40,981 shares, representing 0.0073 per cent. of our issued and outstanding ordinary shares. All British Energy Group plc ordinary shares are of the same class and therefore Directors and executive officers have the same voting rights as shareholders.

Any ordinary shares required to fulfill entitlements under current option schemes may be provided by the British Energy Employee Share Trust (“BEEST”). As beneficiaries under the BEEST, the Directors are deemed to be interested in the shares held by the Trust, which, at March 31, 2005, amounted to 434,701 ordinary shares and 912,872 warrants.

Executive share options

As at March 31, 2005 Directors’ interests in Executive and SAYE share options over ordinary shares were as follows:

No. 1 Scheme Options*

	Date of Grant	Date when option expires	Option price		Number of Ordinary Shares under Option
Robert Armour	August 12, 1997	August 11, 2007	£	2.60	11,538
Sally Smedley	February 8, 1999	February 7, 2009	£	6.67	4,497

112

No. 2 Scheme Options*

	Date of Grant	Date when option expires	Option price		Number of Ordinary Shares under Option
Robert Armour	June 29, 1998	June 28, 2005	£	5.08	11,392
	June 25, 1999	June 24, 2006	£	5.29	25,436
	July 14, 2000	July 13, 2007	£	2.41	43,523
Sally Smedley	February 8, 1999	February 7, 2006	£	6.67	15,368
	June 25, 1999	June 24, 2006	£	5.29	25,023
	July 14, 2000	July 13, 2007	£	2.41	56,373

* Share options were granted in previous years by BE Ltd. Legal advice has been obtained to the effect that the changes in the corporate structure of British Energy as a result of the restructuring did not trigger the early exercise provisions under these options. The Remuneration Committee decided not to allow holders of options in BE Ltd to roll them over into options over shares in the Company. The options granted by BE Ltd are still capable of exercise, but immediately on exercise the shares will be converted into shares in the Company in the ratio of 50:1. Accordingly the effective exercise price of the options is significantly higher than the current share price and it is unlikely the options will be exercised.

Retirement Benefits for Directors and Executive Officers

British Energy Generation Group ‘Approved’ Pension Plan Table—Standard Accrual 1/60th

Years of Service

	15		20		25		30		35
Remuneration(1)
>£102,000	£	25,500	£	34,000	£	42,500	£	51,000	£	59,500

⁽¹⁾ For the Directors and the executive officers covered the maximum remuneration that can be taken into account to calculate ‘Approved Scheme’ benefits is subject to an earnings’ cap which at March 31, 2005 was £102,000.

In the case of Sally Smedley the British Energy Generation Group (“BEGG”) of the Electricity Supply Pension Scheme approved plan will provide as much pension promise as possible subject to Inland Revenue Limits. Any excess pension will be provided through the company’s own finances via an UURBS (Unapproved Unfunded Retirement Benefits Scheme). All other Directors and executive officers with company pension arrangements will only receive the standard 1/60^th of capped pay from BEGG and all benefits in excess of this will be provided under the UURBS.

The following Directors and Executive Officers receive benefits from the UURBS in addition to the Approved Pension Scheme. The current Unfunded Pensionable Pay in excess of the Earnings Cap and accrual rate on which their total benefit will be calculated is:

Member Name	Current Pensionable Salary over earnings cap(1)	Accrual Rate	Estimated Credit Years of Service to Normal Retirement Age
S Billingham	212,000	Up to max 1/30	20
R Anderson	305,130	Up to max 1/30	9
M Alexander	323,000	£10k per annum for each year of service	2
D Gilchrist	100,100	Up to max 1/30	12
S Smedley(2)(3)	77,000	Up to max 1/30	14
R Armour	60,000	Up to max 1/30	33
N O’Hara	73,000	Up to max 1/45	28

⁽¹⁾ Current Pensionable salary over earnings cap = Full Pensionable salary minus the earnings cap.

⁽²⁾ Accrual Rate of 1/45^th to 31/03/2000 then up to max 1/30th

⁽³⁾ Subject to Inland Revenue limits the benefits may be provided entirely through BEGG Approved Scheme.

113

Roy Anderson and Stephen Billingham are members of BEGG. Mike Alexander and David Gilchrist were also members of BEGG when they were directors. Martin Gatto was not a member of any company pension scheme nor was any payment made to him in lieu of any pension arrangement. No elements of remuneration other than base pay are pensionable.

The following Directors have accrued entitlements under defined benefits scheme as follows:

Name	Age	Accrued Pension at March 31, 2005 (£)	Estimated Credit Years of Service to Normal Retirement Age
M Alexander	56	20,531	2
R Anderson	56	7,422	9
S Billingham	47	3,766	20
D Gilchrist	51	62,642	12
S Smedley	55	10,442	14
R Armour	45	30,321	33
N O’Hara	39	1,550	28

The accrued entitlements shown are those which would be paid annually on retirement based on service to the end of the year.

The accrual rate of Roy Anderson and Stephen Billingham is 1/30 subject to total pension from all sources not exceeding two-thirds of final salary.

Roy Anderson, Stephen Billingham, Robert Armour, Neil O’Hara (and Mike Alexander when he was a director) are required to make contributions of 5 per cent. capped salary to BEGG and to salary sacrifice 5 per cent. of pensionable pay in excess of earnings cap. Sally Smedley is required to pay 5 per cent. of total pensionable earnings to BEGG subject to a maximum of 15 per cent. of earnings cap; any contribution in excess of the 15 per cent. maximum will be paid via salary sacrifice.

Employees

The table below sets out the average number of full-time equivalent permanent employees of the British Energy Group for each of the last three financial years

Full-time equivalent Permanent Employees (year to March, 31)

2003	2004	2005
5,082	5,139	5,446

A large proportion of our employees (approximately 80 per cent. of the total) are members of trade unions and are covered by collective bargaining agreements. There have been no significant disputes in the last 12 months.

The average number of Agency temporary employees for the most recent financial year was 656.

Employee Share Schemes

Details of Employee Share Scheme are provided above under the heading ‘Share Ownership’.

114

ITEM 7.    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

Control of Registrant

We are not directly or indirectly owned or controlled by another corporation or by any government (except to the extent permitted by the Special Share, discussed below). As at July 22, 2005 we had been notified of the following interests of 3 per cent. or more of the issued ordinary share capital of British Energy Group plc.

Title of Class	Shareholder	Address	Number of Shares	Percentage
Ordinary	Deutsche Bank AG	Taunusanlage 12, 60262 Frankfurt am Main, Germany	80,819,369	14.3
Ordinary	Invesco Asset Management	Invesco Park, Henley on Thames, Oxfordshire, RG9 1HH	34,583,450	6.1
Ordinary	Schroder Investment Management	31 Gresham Street, London EC2V 7QA	30,791,787	5.4
Ordinary	Brian J Stark	3600 South Lake Drive, St Francis, Wisconsin 53253	30,651,582	5.4
Ordinary	M&G Investment Management	Governor’s House, 5 Laurence Pountney Hill, London, EC4R OHH	27,552,415	4.9
Ordinary	Fidelity Investments	FMR Corp., 82 Devonshire Street, Boston MA 02109	17,306,373	3.1
Ordinary	Duquesne Capital Management LLC	2579 Washington Road, Suite 322, Pittsburgh, PA 15241	17,140,150	3.0
Ordinary	Legal & General Investment Management	Bucklersbury House, 3 Queen Victoria Street, London, EC4N 8NH	16,950,363	3.0

The voting rights of holders of 3 per cent. or more of our ordinary shares do not differ from those of other shareholders.

On March 31, 2005, there were 72,240 registered holders of ordinary shares of whom 44 registered holders of a total of 16,265 ordinary shares had addresses in the US. The combined holdings of these US shareholders constituted less than 1 per cent. of the total number of ordinary shares outstanding. As certain of the ordinary shares are held by brokers and other nominees, these numbers may not be representative of the actual number of beneficial owners in the US or the number of ordinary shares beneficially held by US persons.

The NLF may, at its option, convert certain cash amounts due under the NLF Cash Sweep Payment into ordinary shares of British Energy. Such option if effective and if exercised may result in a change of control. For additional information, see Note 2 to our consolidated financial statements starting on page F-1. We do not know of any other current arrangements the operation of which may result in our change of control.

115

Our share capital includes one special rights redeemable preference share (the “Special Share”), with a nominal value of £1.00. The Special Share may only be held by the Special Shareholder, which includes any of one or more of Her Majesty’s Secretaries of State, another minister in the UK Government, the Treasury Solicitor or any person acting on behalf of the UK Government. The Special Shareholder may, after consulting with us and subject to the provisions of the Companies Act, require us to redeem the Special Share at any time after September 30, 2006 at its nominal value by giving us notice and delivering the relevant share certificate. The registered holder of the Special Share may attend and speak at any general or other meeting of holders of any class of our shares but has no right to vote at any such meeting.

Until such time as the Special Share is redeemed, our Articles of Association prohibit any person (other than certain permitted persons) from holding more than 15 per cent. of the voting rights of our issued share capital. We call this restriction the “Limitation”. As long as the Limitation is in effect, we are required by our articles to enforce the Limitation (including, without limitation, withdrawal of voting rights of such shares and the forced sale of such shares).

The written consent of the Special Shareholder is required for each of the following:

• The amendment, removal or alteration of the effect of (including the ratification of any breach of) certain provisions of our Articles of Association, including the provisions with respect to the Special Share and the Limitation.

• The creation or issue of any of our shares carrying voting rights other than (a) shares carrying voting rights in all circumstances at general meetings of our shareholders and (b) shares which do not constitute equity share capital (as defined in the Companies Act) and which, when aggregated with all other such shares, carry the right to cast less than 15 per cent. of the votes capable of being cast on a poll at any general meeting of our shareholders.

• Variation of any voting rights attached to any class of shares.

• The appointment of the Chairman of the Board.

• The passing of a resolution for our voluntary winding up.

• Any changes to the Articles of Association of our operating subsidiaries that would allow them to issue shares to any person other than to certain group companies in each case and the disposal by us of any such shares.

As a consequence of the Restructuring British Energy plc became a wholly-owned subsidiary of the Company. As a result, the interests of shareholders in British Energy plc were very substantially diluted. (See “Item 4. Information On The Company—Restructuring”)

Related Party Transactions

Interest of Management in Certain Transactions

There have been no material transactions during our most recent three fiscal years, nor are there presently proposed to be any material transactions to which we or any of our subsidiaries are or were a party and in which any Executive or Non-Executive Director, or 10 per cent. shareholder, or any relative or spouse thereof or any relative of such spouse, who had the same home as such person or who is a Director or Executive Officer of any parent or subsidiary of British Energy had or is to have a direct or indirect material interest.

116

Dr. Pascal Colombani, who is one of our independent Non-Executive Directors is also a director of Alstom SA (since July 2004). As part of our normal operations, we purchase goods and services from members of the Alstom group. Although none of these contracts for goods or services is adjudged to be material, over the three year period ending on March 31, 2005, we have purchased goods and services from Alstom with a total value of around £45 million.

Officers and Directors

A payroll systems error was identified and subsequently rectified during the year ended March 31, 2004. As a result of this error, personal retirement benefit contributions were not deducted in full from the salary of some higher paid employees. Following detailed investigation, the individuals concerned, including several Directors and senior officers of the company, were granted up until March 31, 2008 by our Remuneration Committee to repay salary overpayments. No interest was payable on the overpayments over the extended period. After further consideration, the Company recognized that this extended time period might constitute an unintentional breach of s402 of the Sarbanes-Oxley Act, and, consequently, the Directors involved were asked to repay all outstanding amounts. Up to March 31, 2005, Mike Alexander had repaid £10,200 (the maximum permissible under Inland Revenue limits). He subsequently repaid a further £3,400 up to the end of July 2005. The balance will be recovered from him as part of any payment of compensation for loss of office. David Gilchrist, Sally Smedley and Robert Armour have repaid the amounts in full. The Directors and officers who received the overpayment and the maximum amounts outstanding were as follows.

Mike Alexander	£	26,820
David Gilchrist	£	15,483
Sally Smedley	£	12,870
Robert Armour	£	7,302

The Company operates a car ownership scheme (the “COS Scheme”) under which employees who satisfy certain criteria are entitled to be provided with a car for business and personal use.

Under the COS Scheme, eligible employees are entitled to be provided with, amongst other things, both interest bearing and interest free loans to fund the purchase of a car. Two of our executive officers, Robert Armour, and Sally Smedley currently participate in the COS Scheme.

Following a review of these arrangements, we consider that the loan element of the COS Scheme may constitute a personal loan to each of the relevant executive officers under s402 of the Sarbanes-Oxley Act. As a consequence, we are taking steps to terminate the participation of these executive officers in the COS Scheme.

ITEM 8.    FINANCIAL INFORMATION

See “Item 18. Financial Statements”.

ITEM 9.    THE OFFER AND LISTING

Nature of Trading Market

The principal trading market for our ordinary shares is the London Stock Exchange. There is no established public trading market for our ordinary shares in the United States. Following the completion of our Restructuring, our shares were admitted to trading on January 17, 2005. The ordinary shares of British Energy plc were delisted from the London Stock Exchange on October 21, 2004. For further information see Item 4—Restructuring—“Requisitioned EGM and Delisting of BE Ltd’s ordinary shares, A shares and American Depository Receipts”. In addition, prior to September 28, 2004 ADRs, (each of which represented 75 ordinary shares in British Energy plc) issued by Morgan Guaranty Trust Company of New York, as depositary for our ADRs, or the Depositary, were listed on the NYSE. On

117

that date, following notification of our intention to delist the ordinary shares of British Energy plc from the official list of the London Stock Exchange, our ADRs were suspended from the New York Stock Exchange and have subsequently been permanently delisted. Since neither British Energy plc nor the Company were able to satisfy the relevant listing criteria for the NYSE on Admission, no new ADRs were issued on Admission. Holders of ADRs received the New Shares and/or Warrants to which they were entitled. The table below sets forth, for the calendar quarters of each year indicated, the highest and lowest middle-market quotations (the closing price quoted for a security on any given day on the London Stock Exchange as published in the Daily Official List of the London Stock Exchange) for the ordinary shares. For additional historic information on dividends see Item 3—Key Information.

	Ordinary Shares(1)(4)(5)		ADRs(2)(4)
	High	Low	High	Low
	(in pence)		(in US dollars)
QUARTERLY
2000
First	399.75	175.25	25.88	11.06
Second	205.00	119.50	12.50	7.25
Third	262.00	165.00	16.19	10.38
Fourth	258.00	162.25	14.81	9.50
2001
First	295.50	193.00	17.35	11.75
Second	324.00	228.50	19.10	13.20
Third	337.00	256.75	19.40	14.45
Fourth	293.00	219.00	16.60	12.90
2002
First	259.75	175.00	14.96	10.20
Second	190.00	161.00	10.94	9.42
Third	171.50	5.00	9.15	0.50
Fourth	16.88	5.15	1.07	0.36
2003
First	7.50	3.20	4.93	0.22
Second	7.17	3.50	8.72	4.05
Third	6.75	3.50	7.96	4.25
Fourth	5.50	4.03	6.90	5.53
2004
First	10.25	4.21	13.70	5.94
Second	14.30	7.00	19.29	9.79
Third	24.75	14.25	32.50	18.51
Fourth	15.25	12.75	—	—
2005 MONTHLY
January (from January 17, 2005)	267.50	247.00	—	—
February	256.25	238.00	—	—
March	290.25	255.00	—	—
April	325.50	279.25	—	—
May	338.50	307.50	—	—
June	409.50	333.50	—	—
July(3)	447.00	389.00	—	—

⁽¹⁾ The past performance of the ordinary shares is not necessarily indicative of future performance.

⁽²⁾ In order to meet the minimum price criteria set by and following discussions with the NYSE, on March 7, 2003 we announced that we would change the ratio of our shares traded on the NYSE. The effect of the change was to alter this ratio from one ADR to four ordinary shares, to a new ratio of one ADR to 75 ordinary shares. This change became effective on March 18, 2003.

118

⁽³⁾ Through July 22, 2005.

⁽⁴⁾ On September 5, 2002, our Board of Directors announced that it had initiated discussions with the Government with a view to seeking immediate financial support to implement a longer-term financial restructuring. At close of business on September 5, 2002, certain of our securities including our ordinary shares listed in London and our ADRs traded on the NYSE were subjected to temporary trading suspensions on the London Stock Exchange and the NYSE respectively. Our ordinary shares and our ADRs resumed trading on the London Stock Exchange and the NYSE on September 9, 2002. We announced on September 23, 2004 that we would be applying to the UKLA to cancel the listing of our ordinary and A shares. The listing of these shares was cancelled on October 21, 2004. As a consequence of our announcement of September 23, 2004 the NYSE suspended trading in our ADRs prior to the opening of trading on September 28, 2004. At that time, the NYSE also instituted delisting proceedings. Following an unsuccessful appeal by us, the NYSE affirmed the decision to delist our shares on December 6, 2004.

⁽⁵⁾ Share price information for the period prior to October 21, 2004 relates to Ordinary Shares and ADRs in British Energy plc. Ordinary shares in British Energy Group plc began trading on the official list of the London Stock Exchange on January 17, 2005.

ITEM 10.    ADDITIONAL INFORMATION

Material Contracts

(1) The Deed of Amendment and Guarantee between BEG, BNFL and British Energy plc dated March 31, 2003 (as amended on July 22, 2003 and October 30, 2003) Relating to the Agreement for the Supply of Fuel for Use in Advanced Gas Cooled Reactors between Nuclear Electric Limited and BNFL dated June 3, 1997, as amended.

This amendment gives effect to certain changes to the fuel supply arrangements and inserts new arrangements in relation to the supply of uranics used in the AGR fuel fabrication process and enriched uranium for on-supply by BEG to its PWR fuel fabricator. The amendments contained in the deed became effective on April 1, 2003 however, (except in relation to the amendments relating to the new uranics arrangements which were not subject to conditionality), the amendments were conditional on the completion of the Restructuring which took place on January 14, 2005.

The main amendments effected by the deed relate to:

• the reduction of the fixed annual payment by an agreed sum and a discount (which is calculated across both the BEG and BEG (UK) AGR fuel supply agreements in accordance with wholesale baseload electricity prices).

• the insertion of additional exceptions to the general prohibition on assignment of rights under the agreement without the consent of the other party (not to be unreasonably withheld) permitting both BNFL and BEG to assign rights under the fuel supply agreement without consent and/or on certain conditions.

• an additional obligation on the parties to provide assistance to the Government in relation to the state aid notification and to notify the agreements to the competition authorities.

• the insertion of a parent company guarantee by British Energy plc under which British Energy plc guaranteed the performance of BEG under BEG’s existing AGR fuel supply agreement as amended by the deed. British Energy plc’s liability under the guarantee is expressed to be no greater than the liability of BEG under the agreement. Once British Energy plc ceased to be the ultimate holding company of BEG, it was required to notify BNFL and assign certain contracts which it had entered into with BNFL.

• the insertion of a new provision whereby British Energy plc and BEG acknowledge and agree that no member of the Group will bring any claim against BNFL that the terms of the existing agreement/deed or the heads of terms dated November 28, 2002 between BNFL and British Energy plc infringe competition law or that the “hardship” provisions of the existing agreement may be invoked.

119

• new uranics arrangements under which BNFL will supply uranics to BEG for an initial firm period of seven years which either BEG or BNFL may terminate on 12 months’ notice (but not before the end of the sixth year) or earlier for non-performance by BNFL. This initial term is divided across BEG’s existing fuel supply agreement and its new post 2006 fuel supply agreement (see description in paragraph (2) below). BNFL is to supply BEG with uranics for the purposes of fabrication into AGR fuel in accordance with a procurement policy and a procurement strategy, and is required to provide certain information to BEG on a regular basis. BEG is required to pay variable charges to BNFL relating to the uranics contained in the fabricated fuel supplied to BEG, incidental services (such as transport, insurance, cylinder washing, cylinder hire or uranic analysis), administration based on the quantity of stocks held by BNFL for the purposes of supplying fuel to BEG under BEG’s fuel supply agreement and procurement and management services.

Stock is to be repurchased by BEG in the event that the value of BEG’s forecast of stock cover at the end of the first month of BEG’s 12 months’ forecast exceeds certain levels under the existing fuel supply agreement, and BNFL is to buy back and use any stock repurchased by BEG prior to purchasing any new uranium material. BEG has rights to step into the uranics supply arrangements and procure uranics required under the existing fuel supply agreement (at the sole cost of BNFL) in the event that the level of uranium material available for BEG for the purposes of fabricating into fuel under the fuel supply agreement falls below a percentage of forward months’ fuel requirements for a period of three months (subject to a grace period).

Upon the expiry or early termination of the uranics supply arrangements, BEG must repurchase all stock maintained by BNFL for the purposes of supplying fuel under BEG’s fuel supply agreement and take back all contracts novated to BNFL as well as all new contracts entered into by BNFL for the supply of uranics and/or for conversion or enrichment services in order to supply BEG with fabricated fuel (subject to consent of the counterparties). The stock repurchase will be immediate upon the expiry or elective termination of BEG or BNFL, and will take place over a period of five years in accordance with an agreed schedule where BEG terminated for breach by BNFL.

(2) An Agreement for the Supply of Fuel for Use in Advanced Gas Cooled Reactors from April 1, 2006 between BEG, BNFL and British Energy plc, dated March 31, 2003, (as amended on July 22, 2003 and October 30, 2003).

This agreement is based on BEG’s existing AGR fuel supply agreement and incorporates the new provisions inserted into BEG’s existing AGR fuel supply agreement by way of the deeds of amendment (entered into in 2003 as described above in paragraph (1)). The agreement took effect on April 1, 2006 and continues until the end of the fuel supply period (defined as the date following which no further AGR fuel is loaded into any AGR reactor of either BEG or BEG (UK)).

The main differences between the new post 2006 agreement and BEG’s existing AGR fuel supply agreement as amended by the deeds of amendment (entered into in 2003 as described above in paragraph (1)) are:

• the annual fixed charge is £25.5 million. This charge is adjusted in the same way as described above in relation to the deeds of amendment (entered into in 2003 as described above in paragraph (1));

• BNFL agrees to provide certain services relating to AGR fuel required as a result of the closure of a station (for example, the decommissioning or refurbishment of surplus fuel stocks and the return of or storage of surplus fuel) (on terms and conditions to be agreed); and

• the prices for the supply of ancillary components will be derived by adding an engineering, procurement and warranty charge to the buying-in price of externally sourced components. The prices charged to BEG will be reviewed annually.

120

(3) An Agreement for the Supply of Fuel for Use in Advanced Gas Cooled Reactors from April 1, 2006 between BEG (UK), BNFL and British Energy plc, dated March 31, 2003 (as amended on July 22, 2003 and October 30, 2003).

This agreement is based on BEG (UK)’s existing fuel supply agreement as amended by the deeds of amendment entered into in 2003 as described above in paragraph (1), and was subject to the same conditionality now satisfied as the deeds of amendment to the BEG and BEG (UK) existing fuel supply agreements and the BEG new post 2006 fuel supply agreement.

(4) A Deed of Amendment and Guarantee between BEG (UK), BNFL and British Energy plc, dated March 31, 2003 (as amended on July 22, 2003 and October 30, 2003) relating to the Agreement for the Supply of Fuel for Use in Advanced Gas Cooled Nuclear Reactors between Scottish Nuclear Limited and BNFL dated March 30, 1995 as amended.

The amendments contained in this deed are as set out above in paragraph (1) in respect of the deed of amendment to BEG’s existing fuel supply agreement, except in relation to the uranics arrangements which will essentially continue as set out in BEG (UK)’s existing fuel supply agreement. All amendments contained in this deed were conditional upon the completion of the Restructuring as described in relation to the deed of amendment to BEG’s existing fuel supply agreement described above in paragraph (1).

(5) BEG—Generation License: Scheme Made on September 28, 2001 Pursuant to Paragraph 8 of Schedule 7 to the Utilities Act 2000 in Respect of the Electricity Generation License of British Energy Generation Limited

See Item 4: “Regulation—Licenses—Electricity Generation Licenses”.

(6) Representative Nuclear Site License

See Item 4: “Regulation—Regulation of the UK Nuclear Generation Industry—Nuclear Site Licenses”.

(7) Purchase and Sale Agreement dated September 11, 2003 and made between British Energy International Limited (“BEIL”) and FPL Nuclear Mid-Atlantic, LLC (“FPL”) relating to the Sale and Purchase of BEIL’s indirect 50% interest in AmerGen (“Original AmerGen Agreement”).

The principal terms of the Original AmerGen Agreement are substantially identical to those of the new AmerGen agreement (see paragraph (8) below) save that references in the description of the new AmerGen agreement to Exelon as the buyer should be construed instead as references to FPL and the break fee arrangements are slightly different. As a result of the exercise by Exelon of its right of first refusal to purchase BEIL’s interest in AmerGen on the same terms as those offered to FPL (arising under a limited liability company agreement relating to AmerGen dated August 1, 2000 and amended on December 21, 2001 and May 1, 2002), the Original AmerGen Agreement terminated on October 13, 2003 following the service by BEIL of a formal notice to that effect on FPL.

(8) Purchase and Sale Agreement dated October 10, 2003 and made between BEIL and Exelon Relating to the Sale and Purchase of BEIL’s indirect 50% interest in AmerGen (“New AmerGen Agreement”).

In consideration of the disposal, BEIL received US$276.5 million in cash prior to adjustment for working capital levels, unspent nuclear fuel, inventory, capital expenditure and low level waste disposal costs at completion.

121

BEIL gave customary representations and warranties to Exelon, in relation to, amongst other things, the business and affairs of AmerGen. The obligations of BEIL to indemnify Exelon in respect of losses suffered by it in respect of such representations and warranties are broadly subject to a minimum aggregate loss threshold of US$5 million. Only aggregate claims in excess of the threshold are to be indemnified. There is a maximum claims limit of 75 per cent. of the purchase price following adjustment.

(9) Government Restructuring Agreement Entered into between British Energy plc, BEG (UK), BEG, BEPET, BEIL, District Energy Limited, BEIHL, BEUSH, BELP, Peel Park Funding Limited, the Secretary of State, the NDF (subsequently renamed the NLF) and the Trustees of the Nuclear Trust on October 1, 2003 (“Government Restructuring Agreement”).

This agreement set out the circumstances in which the Secretary of State agreed to support the Restructuring, including entering into the Nuclear Liabilities Funding Agreement described in paragraph (22).

Under the Government Restructuring Agreement, the obligations of the Secretary of State to support the Restructuring (including as the holder of a number of special shares) and of the parties to the nuclear liabilities agreements to enter into them were conditional on, amongst others:

• the Creditor Restructuring Agreement becoming effective (save for the extension of the standstill arrangements which was immediately effective) by October 31, 2003 or such later date as the Secretary of State may have agreed;

• the Creditor Restructuring Agreement becoming unconditional in all respects by January 31, 2005;

• the Secretary of State not having determined and notified BE plc in writing that, in her opinion, the Group (including British Energy Group plc and British Energy Holdings plc) would not be viable in all reasonably foreseeable conditions without access to additional financing (other than financing which the Secretary of State was satisfied had been committed and would continue to be available when required);

• there being no continuing event of default under the credit facility provided by the Government to the Group to meet the Group’s immediate requirements and stabilize its cash position post September 2002;

• receipt by the Secretary of State of copies of letters from the Group’s auditors and financial advisers giving the confirmations referred to in the terms of Rule 2.18 of the UKLA Listing Rules without qualification (whether or not British Energy Group plc was listed on the Official List of the UKLA) (without imposition of any duties, or increase in the liabilities of these advisers beyond those which would otherwise apply). (The confirmations referred to related to the requirement for the provision by British Energy Group plc of an unqualified working capital statement which was required to be produced by it in its listing particulars when listed pursuant to the Restructuring);

• the representations and warranties given by certain British Energy group companies to the Government Restructuring Agreement being true, accurate and not misleading when given and repeated at the effective date of the Restructuring; and there being no breach of any undertaking given by any such British Energy party under the Government Restructuring Agreement which, in the opinion of the Secretary of State, was likely to be material in the context of the Restructuring

122

(together, the “GRA Conditions”).

• If any of the GRA Conditions had not been fulfilled or waived by the Secretary of State by the time specified in the requisite condition or if no such date was specified by January 31, 2005, the Government Restructuring Agreement would have terminated and if a material adverse change had occured at any time before the order sanctioning the restructuring scheme was filed with the Scottish Registrar of Companies, the Secretary of State may have given written notice to British Energy plc to terminate the Government Restructuring Agreement.

• The Government Restructuring Agreement also provided for certain provisions of the Nuclear Liabilities Funding Agreement (see paragraph (22) below) (“NLFA”), Historic Liabilities Funding Agreement (see paragraph (23) below) (“HLFA”), Contribution Agreement (see paragraph (24) below) and the Government Option Agreement (see paragraph (26) below) to come into effect in the interim period before the GRA Conditions were satisfied and the nuclear liabilities agreements were entered into.

(10) British Energy Group plc Interim Deferred Bonus Plan 2005

See “Employee Stock Compensation” in Note 13 to our Consolidated Financial Statements on pages F-37 to F-40.

(11) British Energy Group plc Long Term Deferred Bonus Plan

See “Employee Stock Compensation” in Note 13 to our Consolidated Financial Statements on pages F-37 to F-40.

(12) British Energy Group plc Executive Share Option Plan 2004

See “Employee Stock Compensation” in Note 13 to our Consolidated Financial Statements on pages F-37 to F-40.

(13) British Energy Group plc Employees Share Option Plan 2004

See “Employee Stock Compensation” in Note 13 to our Consolidated Financial Statements on pages F-37 to F-40.

(14) Master Purchase Agreement in Respect of the Disposal of the Bruce group (“Bruce Group Disposal”) dated January 17, 2003 and made between British Energy plc, British Energy International Holdings Limited (“BEIHL”), British Energy Canada Limited (“BECL”), Bruce Power, Cameco, BPC Generation Infrastructure Trust (“BPC”), Ontario Municipal Employees Retirement Board (“OMERS”) (as guarantor for BPC), TransCanada Pipelines Limited (“TransCanada”) and 2020857 Ontario Inc.

The Bruce Group Disposal was effected by the sale of the entire issued share capital of BECL to a newly incorporated Ontario corporation funded by BPC, TransCanada and Cameco (together, the “Consortium”). At closing British Energy plc received C$630 million in cash. An additional payment of C$51 million was made at closing by the Consortium to British Energy plc in recognition of the capital contribution paid by British Energy plc to Bruce Power on December 30, 2002. British Energy plc also received: (i) C$30 million in accordance with the terms of the binding heads of agreement dated December 23, 2002 and made between Bruce Power, British Energy plc, BECL, Ontario Power Generation Inc. (“OPG”) Cameco, BPC, OMERS, TransCanada and others (“the OPG Heads”) following the restart of two Bruce A units; and (ii) C$20 million, which was held in an escrow account against a potential adjustment in respect of any deficit of more than C$10 million in the Bruce Power pension fund. A further C$20 million is still held in an escrow account to cover any successful claims in respect of representations and warranties made against British Energy and BEIHL within two years from the date of closing. In addition, C$80 million was placed in an escrow account to cover the estimated outstanding tax liabilities of the Bruce group.

123

In addition to the consideration referred to above, as a condition to the OPG Heads the Consortium paid C$100 million to British Energy plc at closing to fund a one-off estimation allowance and restructuring fee of C$100 million payable by British Energy plc to the Province (the sole shareholder of Ontario Power Generator Inc. (“OPG”)) in consideration of OPG consenting to the Bruce Group Disposal.

British Energy plc and BEIHL have jointly and severally given extensive representations and warranties to the Consortium in relation to, amongst other things, the business and affairs of the Bruce group. The obligations of British Energy plc and BEIHL to indemnify the Consortium in respect of any breach of such representations and warranties are mostly subject to a minimum claims limit of C$20 million, a maximum claims limit of C$1,175 million and customary time limits. British Energy plc has agreed to provide support services as requested from time to time by Bruce Power to support plant operations for a period of four years on terms to be agreed between British Energy plc and Bruce Power, acting reasonably.

Any balance of sums not applied to cover the outstanding tax liabilities of the Bruce group, any pension fund deficit or any successful claims for breach of representations and warranties will be paid to British Energy plc from the escrow account at the end of the relevant period for retention subject to confirmation from the Consortium, based upon written input from their accountants, actuaries, tax or legal advisers to the extent necessary, and in consultation with OPG that such a release is appropriate. In the event that sums due in respect of such adjustments or claims exceed the amount held back for that purpose, British Energy plc would be required to pay the amount of such excess to the Consortium.

(15) Deed Relating to the Decision of the European Commission Regarding State Aid Approval of the European Communities Entered into on October 8, 2004 and Made Between the Secretary of State and British Energy (“Deed of Undertaking” or “State Aid Approval”)

The Deed of Undertaking sets out the terms for implementing the obligations and other conditions the European Commission imposed on the Government by the State Aid Approval. The Deed of Undertaking binds British Energy plc as the then ultimate parent company of the British Energy Group.

Positive undertakings

The deed required British Energy plc to restructure, subject to obtaining all necessary consents, approvals, authorisations and permissions (together “Consents”), its DSB, the existing nuclear generation and the trading businesses by April 1, 2005. The purpose of this restructuring is to ensure that the Group’s existing nuclear generation business will be ring-fenced from its fossil fuel, supply and trading businesses to ensure the aid to the existing nuclear business is not used to cross subsidise any other business of the Group. This measure will last indefinitely.

This restructuring was to be implemented by British Energy plc:

(i) transferring the DSB being conducted by BEG to a separate wholly owned subsidiary of British Energy plc; if that subsidiary carries out any business other than DSB, British Energy plc will be obliged to identify separately its DSB activities in the accounts of that business; and

(ii) consolidating the existing nuclear generation activities being conducted by BEG and BEG (UK) into a separate wholly-owned subsidiary of British Energy plc which will only conduct such nuclear generation activities; and

(iii) procuring that its electricity trading business, conducted by BEPET, is maintained in, and conducted by, a separate subsidiary of British Energy plc.

124

We expect, on the basis of how we currently conduct our operations and discussions with relevant authorities and regulatory bodies, that the cross-subsidy prohibition will not have a material adverse impact on the arrangements involved in the Restructuring and the other internal arrangements between our existing nuclear generation business and the other business of the Group. We are also satisfied that the above described procedures will be sufficient to address the European Commission’s concerns in the State Aid Approval and demonstrate compliance with the cross-subsidy prohibition.

In addition, at the expiry of each financial period, British Energy Group plc will calculate the relevant payments made for its decommissioning, uncontracted and incremental nuclear liabilities and will notify the Secretary of State of such payments (accompanied by all necessary supporting information, documentation and explanations) before it publishes its audited accounts.

Furthermore, British Energy Group plc is obliged to notify and promptly provide the Secretary of State with all information, documentation, explanations and assistance required to meet her Enhanced Reporting obligations under the State Aid Approval. “Enhanced Reporting” means the additional reporting and auditing requirements, which the Government has undertaken to conduct if the £1.629 million threshold for uncontracted decommissioning and incremental nuclear liabilities (set by the European Commission) is exceeded. British Energy Group plc shall indemnify and keep indemnified the Secretary of State for all costs and expenses of any auditors engaged by the Secretary of State for the purposes of conducting the Enhanced Reporting.

British Energy Group plc is required to comply with all requests by the Secretary of State for any information, documentation or explanation that is required in order to ensure compliance with the European Commission’s conditions or any provisions of the deed.

Finally, if the European Commission decides that the Government must recover any aid given to any member of the British Energy Group plc and its subsidiaries in relation to the Restructuring and the CFI (or the ECJ) has not annulled in whole or in part the decision ordering recovery, then British Energy plc must repay (with interest at the applicable rate) any aid so ordered to be recovered.

Negative undertakings

British Energy Group plc shall not, until September 23, 2010, own or acquire rights of control over:

(i) additional operational, registered nuclear generation capacity in the EEA (which do not include rights to operation and maintenance contracts which do not give British Energy Group plc the right to electricity output), without obtaining the prior written consent of the European Commission; or

(ii) registered, operational, fossil-fuelled electricity generating capacity (as defined in the Renewables Obligations Order 2002) in the EEA or the capacity of any large hydro-electric generating station in the UK which, in aggregate, exceeds 2020 MWh (subject to certain exceptions which provide for the capacity of the Eggborough power station to be replaced in circumstances where generating capacity at the Eggborough power station becomes unavailable to the Group following the exercise of one of the Eggborough Options or the enforcement of security over the shares in, or assets of, EPL or otherwise).

In addition, British Energy Group plc is not permitted to dispose of all or part of its nuclear generation or electricity supply businesses, or carry out any corporate restructuring of the British Energy Group, without the Secretary of State’s prior approval (not to be unreasonably withheld), if such disposal or restructuring may cause the Secretary of State to be in breach of her obligations under the State Aid Approval.

125

The deed also provides that British Energy Group plc must not price the energy element of its DSB contracts to non-domestic end-users below the prevailing wholesale market price, taking into account electricity volumes, load factors/predictability, interruptibility, duration and credit/payment terms, unless there are exceptional market circumstances which need to be established by an independent expert on the basis of certain objective tests. The term of this restriction is for six years from the appointment of the independent expert who was required to be appointed within four months from the State Aid Approval.

(16) Receivables Financing Facility Agreement between BEG and Barclays Bank PLC (Barclays) dated August 25, 2004 and Amended and Restated on October 8, 2004 and November 8, 2004 (the “Receivables Facility Agreement”).

BEG has entered into a full-recourse trade receivables financing facility agreement with Barclays dated August 25, 2004 and amended and restated on October 8, 2004 and November 8, 2004. Under the Receivables Facility Agreement, Barclays has agreed to make available to BEG a credit facility in a maximum aggregate principal amount of £60 million (the “Receivables Facility”). The Receivables Facility is available for 3 years from August 25, 2004. The amount of funding available on any Receivables Facility utilisation is dependent on the amount of eligible receivables (including unbilled receivables) then available, which, in turn, is subject to, amongst other things, seasonal changes in the demand and price for electricity, certain reserving requirements that adjust over the life of the Receivables Facility and limits on customer concentrations within the receivables portfolio.

In addition to an arrangement and structuring fee that was paid on the signing of the Receivables Facility Agreement, a non-utilisation fee and administration fee will be payable quarterly in arrear from the date of signing. A facility charge, that will accrue daily on any drawn amount and will be payable quarterly in arrear, will also be payable under the Receivables Facility Agreement at a rate per annum that is approximately 2 per cent. above LIBOR.

On utilisation of the Receivables Facility, BEG will sell to Barclays all receivables which are legally capable of being assigned and the proceeds of all other receivables that have, up to the date of utilisation, arisen from its direct supply business. With effect from the date of the first utilisation, the proceeds of the receivables will be paid into an account at, and in the name of, Barclays (the “Collection Account”). Within 5 business days of the issue of the New Bonds, the other principal companies within the Group that are guaranteeing the New Bonds acceded to the Receivables Facility Agreement as primary obligors (in respect of certain representations, warranties and covenants) and entered into a guarantee (the “Receivables Guarantee”) under which they guaranteed all obligations under the Receivables Facility Agreement. Also, on the first utilisation, BEG will enter into a security deed (“Receivables Deed of Charge”), whereby it will grant, amongst other things, a first fixed charge over (i) any interest it holds in receivables arising from its direct supply business and the proceeds thereof; (ii) associated credit insurance policies (if any); (iii) the Collection Account; and (iv) any records, systems or other assets necessary for producing receivables invoices.

The availability of the first utilisation under the Receivables Facility is conditional on, amongst other things, requirements that are customary for this type of credit agreement, including satisfying Barclays as to BEG’s legal capacity to enter into the Receivables Facility Agreement, provision to Barclays of a legal opinion as to the legal, valid and binding nature of the facility documents, completion of due diligence and provision of other information relevant to the Receivables Facility.

The Receivables Facility Agreement contains customary representations, warranties and covenants appropriate to receivables and a credit agreement of this type and to the financial situation of BEG and the prospective guarantors. In particular, the Receivables Facility Agreement contains detailed covenants for the benefit of Barclays, which parallel those under the New Bonds, including

126

limitations on financial indebtedness (including guarantees), limitations on restrictions on distributions from Restricted Subsidiaries, limitations on the creation of security and limitations on entering into significant acquisitions, asset sales, sale and leaseback arrangements and, transactions with certain related parties. In addition to these New Bond-based covenants, the Receivables Facility Agreement also contains a financial interest coverage covenant (assessed on a consolidated group-wide basis) and receivables-specific covenants relating to the generation and maintenance of the receivables that are customary for this type of credit facility (and certain additional covenants in respect of obtaining specified consents and amendments to certain receivables contracts). Breach of the interest coverage covenant does not prevent BEG from continuing to utilise the Receivables Facility but entitles Barclays to require notices of assignment to be sent to BEG’s customers in respect of the receivables sold, and to exercise its rights under the power of attorney held by it.

The Receivables Facility Agreement contains customary credit facility events of default, including non-payment and insolvency-related events (provided that an event of default on the grounds of balance sheet insolvency may not be declared unless BEG or another obligor fails to provide a certificate as to solvency within five Business Days of being requested to do so by Barclays after completion of the Restructuring). Also, the Receivables Facility Agreement provides that an event of default may be declared where the financial indebtedness (as defined therein) of any member of the Group (where the amount of such indebtedness is in excess of £25 million (index-linked)) becomes (or becomes capable of being declared) payable before its stated maturity. Finally, the Receivables Facility Agreement provides that an event of default may be declared if BEG’s electricity supply license is revoked (save where transferred to a substitute obligor under the Receivables Facility Agreement). Upon the occurrence of an event of default, Barclays may enforce the security held by it, and/or take actions under the power of attorney held by it in respect of the receivables, and/or deliver notices of assignment to BEG’s customers in respect of the receivables that were sold to it, and/or may terminate, and/or demand repayment of the amount outstanding of the Receivables Facility.

In addition to the events of default, there are a number of termination events under the Receivables Facility Agreement that allow Barclays to take actions under the power of attorney held by it in respect of the receivables, and/or deliver notices of assignment to BEG’s customers in respect of the receivables that were sold to it, and/or cease to purchase any further receivables. These termination events under the Receivables Facility include, amongst others: certain breaches of covenant, certain misrepresentations, certain insolvency-related events, certain cross-defaults to other financial indebtedness, exceeding specified dilution, default and delinquency ratios in respect of the receivables portfolio, the Restructuring not being completed by the later of: (i) January 31, 2005; and (ii) the Restructuring Long Stop Date if extended in accordance with the Creditor Restructuring Agreement (with the consent of Barclays while an Eggborough Bank), occurrence of a material adverse change (as defined therein), or the occurrence of certain events (including any of the obligors ceasing to be a subsidiary of the ultimate holding company of the Group or it becoming unlawful for any obligor to fulfil its obligations under the Receivables Facility Agreement, the Receivables Guarantee or related documentation) whereby the gross assets, turnover and earnings of the remaining obligors under the Receivables Facility Agreement constitute less than 90 per cent. of those of the Group (excluding unrestricted subsidiaries).

Following the transfer of the Group’s direct sales business to BEDL on March 31, 2005, BEDL replaced BEG in the Receivables Facility Agreement and BEG became a Guarantor.

(17) The Debenture dated September 8, 2000 and made between EPL, British Energy, BEPET and the Security Trustee (the “Existing Debenture”).

Under the Existing Debenture, EPL grants:

(a) first ranking security for the benefit of the Eggborough Banks over all its assets (by way of first legal mortgages, fixed charges, assignments or floating charges) other than the

127

moneys standing to the credit of the Revenue Account (as defined in the Accounts Agreement);

(b) a first fixed charge over the Revenue Account for the benefit of BEPET;

(c) a second fixed charge over the Revenue Account for the benefit of the Eggborough Banks; and

(d) second ranking security for the benefit of British Energy plc.

The security constituted by the Existing Debenture becomes immediately enforceable upon the occurrence and continuance of an event of default under the Amended Credit Agreement.

(18) The Assignment of the Share Purchase Agreement and Tax Deed of Covenant dated September 8, 2000 Between EPHL and the Security Trustee (the “EPHL Assignment”).

Under the EPHL Assignment, EPHL assigns and charges by first fixed charge in favour of the Eggborough Banks all its rights under:

(a) a share purchase agreement dated November 16, 1999 between National Power and EPHL relating to the sale of the shares in EPL by National Power to EPHL; and

(b) a tax deed of covenant dated March 3, 2000 between National Power and EPHL relating to, amongst other things, certain tax liabilities of EPL arising prior to its sale by National Power to EPHL.

The security constituted by the EPHL Assignment becomes immediately enforceable upon the occurrence and continuance of an event of default under the Amended Credit Agreement.

(19) The Mortgage of Shares dated September 8, 2000 Between EPHL and the Security Trustee (the “Shares Pledge”).

Under the Shares Pledge, EPHL charges:

(a) by way of first equitable mortgage or a first fixed charge, all the shares in EPL; and

(b) by way of a first fixed charge all rights relating to the shares in EPL.

The security constituted by the Shares Pledge becomes immediately enforceable upon the occurrence and continuance of an event of default under the Amended Credit Agreement.

(20) Heads of Agreement dated September 30, 2004 and Made Between British Energy plc, the Ad Hoc Committee and Polygon Investment Partners LLP, Polygon Global Opportunities Master Fund and Polygon Investment Partners LP (together, “Polygon”) (the “Heads of Agreement”).

Under the Heads of Agreement, British Energy plc agreed to withdraw its action against Polygon in New York in return for the agreement by Polygon to vote against, and procure that its nominee, Vidacos Nominees Limited (“Vidacos”), voted against, the resolutions put to shareholders at the Requisitioned EGM. In addition, Polygon agreed not to initiate any court, regulatory or governmental process or to participate in any process in relation to the Members’ Scheme or the Creditors’ Scheme or delisting of British Energy plc’s shares or ADRs and not to take any other steps or commence any proceedings whatsoever in relation to the Restructuring, except where a failure to do so would expose Polygon to contempt of court or the equivalent. The parties also agreed that the proceedings in England would be stayed as against Polygon pending completion of the Restructuring, subject to certain conditions. The English proceedings as against Polygon were to be discontinued: (a) upon completion of the Restructuring; or (b) if the Restructuring was not completed by January 31, 2005 (or such later date as may be agreed) and Polygon had not materially breached the Heads of Agreement.

128

The Heads of Agreement also contain mutual releases, waivers and covenants not to sue for the benefit of the ad hoc committee, British Energy plc and Polygon in respect of any actual or potential claim relating to:

(i) the proceedings brought against Vidacos and Polygon in the UK;

(ii) the action brought against Polygon in New York;

(iii) the Creditor Restructuring Agreement;

(iv) the Restructuring; and

(v) Polygon’s acquisition of interests in British Energy securities,

with certain exceptions, including any rights the ad hoc committee may have against British Energy plc under the Creditor Restructuring Agreement.

(21) Warrant Instrument relating to Warrants to Subscribe for Ordinary Shares of 98 pence each in British Energy Group plc dated January 13, 2005.

Pursuant to the instrument by way of deed poll, British Energy Group plc, created and issued warrants to holders of British Energy plc shares, entitling the holders of the warrants to subscribe for 29,527,187 shares in British Energy Group plc at a subscription price per share (subject to adjustment) of 98p each. The warrants were issued in registered form and may be held in certificated or uncertificated form. The warrants will expire five years after the date of issue, if not exercised prior to that date. The conditions of the warrants, including adjustments to the subscription price upon the occurrence of certain events, are as more fully set out in the copy attached as an exhibit to this annual report on Form 20-F.

(22) Nuclear Liabilities Funding Agreement dated January 14, 2005 Between the Secretary of State, the NLF, BEG (UK), BEG, British Energy Group plc and British Energy Holdings plc (NLFA).

General

The fundamental purpose of the NLFA is the agreement of the NLF to make payments to meet the qualifying costs of decommissioning and qualifying costs of discharging uncontracted nuclear liabilities in relation to BEG and BEG (UK’s) nuclear power stations (together, “Costs of Discharging Liabilities”) and of the Secretary of State to fund any shortfall in the assets of the NLF to meet the Costs of Discharging Liabilities.

Secretary of State and NLF Payment Obligations

The NLF undertakes to make payments to Licensees or Approved Persons to meet the Costs of Discharging Liabilities, to the extent its assets are sufficient to make such payment, and is obliged to apply to the Secretary of State for funding if its assets are insufficient. A “Licensee” (defined as BEG or BEG (UK), but the term may also include future holders of nuclear site licenses in respect of BEG and BEG (UK’s) nuclear power stations) or certain contractors approved by the Licensees and the NLF (any such applicant, “Approved Persons”) may make applications to the NLF for payment in respect of the Costs of Discharging Liabilities. An application by an Approved Person must satisfy certain criteria. Before the NLF will make payment in respect of such costs, the NDA is required to confirm that the liabilities to be funded are qualifying liabilities (i.e. the works undertaken are in accordance with approved plans, the sum applied for has been accounted for in the liabilities budget, and the application is not in respect of excluded or disqualified liabilities). The NDA is a body established under the Energy Act, which the Secretary of State has designated as her agent to perform certain obligations under the Nuclear Liabilities Agreements.

129

Under the NLFA the Secretary of State undertakes to the Licensees to fund the NLF to meet the Costs of Discharging Liabilities whenever, and to the extent that, the NLF has insufficient funds to do so. A Licensee or an Approved Person will also have certain rights to make application to the Secretary of State direct on the event of default by the NLF. The Secretary of State will permanently assume the payment obligations of the NLF when the NLF no longer has any assets (and no further Group contributions are due under the Contribution Agreement) or on certain NLF insolvency events, such that all applications for payment going forward would be made direct to the Secretary of State.

Minimum performance standard, operational changes and excluded and disqualified liabilities

The Licensees have agreed to operate the nuclear stations in accordance with a minimum performance standard, defined as the application of practices, methods and procedures in good faith in compliance with applicable law and accepted standards (the latter being practices and procedures both considered by and acceptable to the Health and Safety Executive, the Environment Agency and the Scottish Environment Protection Agency) (the “Accepted Standards”).

Operational changes which are expected to give rise to an increase in the net present value of the Costs of Discharging Liabilities of £1 million or more must be notified immediately to the NDA. Operational changes which are expected to give rise to an increase in the net present value of the Costs of Discharging Liabilities of £100,000 or more must be notified annually. Pre-approval of an operational change is required if implementation of the operational change will result in or is reasonably expected to result in: (a) an increase in net present value of the Costs of Discharging Liabilities of £10 million or more; (b) an increase in such costs on an undiscounted basis of £25 million or more; or (c) payments having to be made within the next five years in respect of such costs of £5 million or more (on an undiscounted basis) (a Key Operational Change). Changes required to meet current or reasonably anticipated legal or regulatory requirements or to comply with the Accepted Standards will be permitted provided that in the case of such an anticipatory change which has an economic benefit for the Licensees, the Company would still implement the change even if there was no economic benefit. Otherwise approval will be given by the NDA upon reaching agreement as to the compensation to be paid to the NLF for incremental liabilities produced by that change.

The provisions of the NLFA relating to Operational Changes are subject to review by the Secretary of State and the Licensee at the request of any party and in any event, no later than three years after January 14, 2005.

The Licensees will be responsible for funding certain excluded or disqualified liabilities. The list of excluded liabilities which is set out below includes, amongst other things, employment and redundancy costs, certain environmental expenses and costs arising in connection with breaches of duty under the NIA in relation to occurrences involving injury to third parties arising from nuclear material or ionising radiation. Disqualified liabilities include the increases in the net present value of the Costs of Discharging Liabilities of £100,000 or more arising out of: (a) failures by the Licensees to behave in accordance with the minimum performance standard; or (b) the implementation of “Licensee Changes” (being operational changes made by a Licensee other than to meet current or reasonably anticipated legal or regulatory requirements or to comply with Accepted Standards). In addition, any such increases arising out of the implementation of Key Operational Changes without appropriate NDA approval will be disqualified liabilities.

The full list of excluded liabilities includes:

• costs in relation to new spent fuel;

• costs in relation to termination of employment (including redundancy) of any director, officer or employee of any member of the Group;

130

• costs in relation to any environmental works required by law or regulatory authority to be carried out other than where the works are required as part of decommissioning;

• costs in relation to any environmental works carried out in relation to land outside a nuclear power station boundary other than where the works are required as part of decommissioning;

• fines imposed in relation to environmental matters other than where related to decommissioning;

• costs arising in relation to any breach of duty under the NIA to secure that there is no occurrence involving nuclear material or ionising radiation;

• internal costs of any licensee except overheads attributable to decommissioning or the discharge of uncontracted nuclear liabilities;

• costs of any generic research relating to decommissioning a nuclear power station or discharging an uncontracted nuclear liability; and

• costs arising from any activity at a licensed site that is not connected with the existing nuclear power station; and costs incurred in relation to the administration, breach or dispute under any Nuclear Liabilities Agreement.

Also excluded are costs arising from:

• activities as part of day-to-day operation of a nuclear power station;

• activities undertaken before the Restructuring Effective Date;

• activities that would result in an economic benefit to the licensee (to the extent that an operator of the nuclear power station who did not have the benefit of the nuclear liabilities agreements but bore responsibility for and the costs of the discharge of liabilities would not have undertaking such activity).

Where the amount of compensation for disqualified liabilities exceeds £1 million, the Licensees will, subject to the Secretary of State’s discretion and certain other provisions (including, where reasonably required by the Secretary of State, the granting of security), be entitled to make payment in instalments.

The Secretary of State or NDA is entitled to require a Licensee to implement an operational change, subject to payment of compensation to the Licensee. There are no limitations on the nature of a change requested by the Secretary of State or NDA but a Licensee cannot be required to implement a change if: (i) the proposed change cannot reasonably be expected to result in a reduction in the net present value of the Costs of Discharging Liabilities of £10 million or more; (ii) a reasonable and prudent operator who was responsible for implementing the proposed change and bearing the Costs of Discharging Liabilities in connection with the power station, and taking into account the compensation or other amounts receivable in connection with the proposed change, would not make the change; or (iii) a regulator objects to the proposed change. If a Licensee fails to implement such a change other than on these grounds, the liabilities that would otherwise have been saved will become disqualified liabilities and shall fall to our account. In addition the Licensees may propose to the NDA to make an operational change that results in a reduction in the Costs of Discharging Liabilities but which results in a net cost for the Licensee. Compensation will be payable by the NLF to the Licensee in these circumstances. The timing of the compensation payments will match the timing of the incurrence of the relevant costs.

The Licensees are liable to reimburse the NLF, NDA and the Secretary of State for certain administration costs incurred in relation to the NLFA and HLFA, up to £1 million per annum in aggregate. This cap does not apply where such costs arise as a result of a breach by the Licences of the nuclear liability arrangements or an event of default thereunder.

131

Strategy Approval Process

The Licensees are required to give notice to the NDA of changes in the scheduled closure date of any of its stations and to obtain NDA consent to station life extensions if this could result in an increase in the cost of decommissioning or discharging uncontracted nuclear liabilities. This consent must be given if the Licensee can demonstrate that any economic benefits that are reasonably likely to accrue to the NLF or Secretary of State deriving from the extension are reasonably likely to exceed the reasonably likely corresponding increase in such costs. In other circumstances, the NDA in giving such consent will take into account any such economic benefits and in the case of a proposal to stagger the closure date of individual reactors of a station the NDA will consider whether this is consistent with maximising the efficiency of the process. The Licensee must also obtain the NDA’s approval to decommissioning plans, contracting strategy and other relevant plans, assessments and documents produced by the Licensees in respect of the management of qualifying liabilities. In reviewing and approving these documents, NDA agrees to consult with the regulators with the aim of adopting a common approach. The entry into contracts which are likely to incur Costs of Discharging Liabilities above specified thresholds will also require NDA approval.

Annual liabilities report

An annual report (the Annual Liabilities Report Part 1) will be produced by the Licensees which will include an analysis of events occurring during the year which have resulted in an increase in the Costs of Discharging Liabilities and assessing whether or not such increase represents excluded or disqualified liabilities. The report will be given to the NLF, NDA and the Secretary of State, following which the NDA may investigate any matters set out in the report or otherwise make enquiries to ensure that the report is complete and accurate. If it is established that disqualified liabilities have arisen, the NLF may elect whether it or the Licensee shall discharge the liability. If the NLF is to discharge the disqualified liability the Licensee will be required to pay compensation as described above. A second report (the Annual Liabilities Report Part 2) will include a budget describing the anticipated scope and expenditure for the discharge of qualifying liabilities for a rolling three year period.

NLF review

A review of the NLF assets may be held on each ten year anniversary from January 14, 2005 (or on a Secretary of State request in certain circumstances). If the estimated value of the NLF assets (adjusted for estimated taxes) exceeds 125 per cent. of the estimated liabilities, the NLF will pay such excess to the Secretary of State. On the earlier of termination of the NLFA, all nuclear power stations having been fully decommissioned and the Costs of Discharging Liabilities having been fully discharged or suitable alternative arrangements having been made, any remaining assets of the NLF will be converted into cash and paid, as to 99.9999 per cent. to the Secretary of State and as to 0.0001 per cent. to the NLF trustees.

Representations, warranties and covenants

The Licensees provide customary representations and warranties to the NLF and Secretary of State including requisite corporate authority, no breach of other instruments and orders by which they are bound and no insolvency.

The Company has given certain customary covenants in relation to the provision of financial information, including the provision of information reasonably required to monitor the financial robustness of the business, including rolling cashflow forecasts covering a period of 18 months, and each of the parties to the NLFA has accepted restrictions in relation to transactions with affiliates and the creation of security interests. These are very detailed but broadly follow the equivalent covenants in the terms and conditions of the New Bonds.

132

Events of default

The NLFA provides that, on an event of default (including material or persistent breach of any of the Nuclear Liabilities Agreements, failure to pay, failure to apply amounts paid by the NLF or the Secretary of State towards qualifying liabilities and insolvency-related events) in relation to a Licensee or a Material British Energy Group Company (as defined in the NLFA), the obligations of the NLF to meet the Costs of Discharging Liabilities and of the Secretary of State to fund the NLF, as described above, will continue. However, the Secretary of State may suspend the Licensees’ or a Material British Energy Group Company’s rights to receive any other payments due to it, the Licensees or guarantors are not entitled to take part in certain group exercises of rights under the NLFA and the NLF or the Secretary of State may discharge certain specified excluded liabilities and seek indemnity from the Licensees or guarantors. In addition, on certain insolvency events of default, the Secretary of State may, inter alia, require the acceleration of payments which have accrued but not yet become due and payable from the Licensees under the NLFA (e.g. compensation for Licensee Changes). Each party waives any rights it may have to terminate the NLFA.

Liability

The obligations of the Licensees under the NLFA are joint and several, although it is recognised that Group companies will not be jointly and severally liable with any third parties who may become Licensees under the NLFA (see below).

Other clauses

A Licensee may assign all or any part of its rights and obligations under the NLFA to a Group company if, amongst other things, the assignee has a power station transferred to it by the Licensee and accedes to the NLFA as a Licensee. The assignee must also hold all necessary licences and other regulatory consents, authorisations and approvals for undertaking the operation of a power station and, in relation to any reactor which has permanently closed, decommissioning and discharging uncontracted liabilities.

Where a nuclear power station is transferred or transmitted (whether by agreement, operation of law or otherwise) to a third party, that person may also be deemed (at the discretion of the Secretary of State) a Licensee or Approved Person for the purposes of the NLFA. In exercising her discretion, the Secretary of State shall have due regard to whether the third party has the financial and technical competence to carry out its obligations under the Nuclear Liabilities Agreements and is a fit and proper transferee of the relevant asset. In such circumstances the Secretary of State will indemnify the Licensee and the Material British Energy Group Companies against any losses incurred where such a third party is deemed a Licensee without the consent in writing of the Licensees.

The Secretary of State has the right, on notice to the other parties, to require the assumption of any of its rights and obligations under the NLFA by another government entity provided that the new entity’s obligations (unless the new entity is a minister of the Crown or a government department) are guaranteed by the Secretary of State. The parties are currently proposing an amendment to this provision under which the NLF may, on notice to the other parties and subject to the prior written consent of the Secretary of State, require the assumption of any of its rights and obligations under the NLFA to another government entity. It is intended that in the case of the NLF (as is currently the case in relation to an assignment by the Secretary of State) an assumption may not be required if it will adversely affect any of the rights of, or impose additional obligations on, any other party to the NLFA.

The NLFA imposes wide-ranging obligations on the Licensees, British Energy Group plc and British Energy Holdings plc to provide the NLF, the Secretary of State or the NDA (or their advisers) on request with information and access to its records, directors and employees (and in any case, those of any guarantor or member of the Group) and nuclear power stations to enable them to exercise their

133

rights and perform their obligations under the Nuclear Liabilities Agreements (including to determine whether a Licensee has complied with the provisions of the NLFA relating to operational changes and to assess the impact of operational changes on the Costs of Discharging Liabilities) and to use their reasonable endeavours to make available third party advice to enable the NLF, the Secretary of State or the NDA to verify that amounts paid by the NLF and the Secretary of State under the NLFA are properly expended in meeting the Costs of Discharging Liabilities or otherwise in accordance with the terms of the agreement.

The monetary values stated in the NLFA are as at March 2003, indexed to RPI.

The obligations of BEG, BEG (UK), British Energy Group plc and British Energy Holdings plc under the NLFA are guaranteed by the Material New British Energy Group Companies under the Guarantee and Indemnity dated January 14, 2005 between the Secretary of State, NLF and the Guarantors (as defined in Schedule 7 therein).

(23) Historic Liabilities Funding Agreement dated January 14, 2005 and made between the Secretary of State, BEG (UK), BEG, British Energy Group plc and British Energy Holdings plc (“HLFA”).

General

The historic liabilities are the contracted liabilities for the management of historic spent fuel (i.e. fuel loaded into BEG and BEG (UK)’s AGRs prior to the Restructuring Effective Date). The relevant contracts have been entered into with BNFL, and comprise the Historic Fuel Agreements and, to the extent that they relate to historic spent fuel, certain other agreements (together, the BNFL Historic Contracts). (Further information regarding the implications of the State Aid Approval on the liabilities of the Secretary of State under these agreements is set out in Item 4—Information on the Company—the Restructuring).

Secretary of State payments

Under the terms of the HLFA, the Secretary of State will make payments in respect of historic liabilities. In doing so she will meet the fixed monthly payments due to BNFL as well as, subject to the exceptions described below, incremental liabilities that arise under the BNFL Historic Contracts. In most cases, BNFL will be paid directly by the Secretary of State. Any application made by BEG and BEG (UK) for fixed monthly payments due to BNFL and incremental liabilities must satisfy certain criteria in respect of each type of liability.

Excluded liabilities

Under the terms of the HLFA, the Secretary of State will not be responsible for certain incremental liabilities under the BNFL Historic Contracts including, inter alia, liabilities arising under certain BNFL ancillary agreements and liabilities arising out of:

(i) any breach by BEG or BEG (UK) of the terms of a BNFL Historic Contract;

(ii) the failure by BEG and BEG (UK) to behave in accordance with the minimum performance standard or to exercise their rights under the BNFL Historic Contracts in accordance with a minimum contracting standard referred to below;

(iii) as a result of operational changes made by BEG or BEG (UK) other than to meet current or reasonably anticipated legal or regulatory requirement or to comply with the accepted standards; or

(iv) incremental liabilities arising from certain types of non-standard spent fuel.

BEG and BEG (UK) will remain liable to BNFL for these excluded liabilities.

134

In addition, BEG and BEG (UK) have agreed with the Secretary of State to exercise their rights under the BNFL Historic Contracts with reasonable care, in compliance with applicable law and the accepted standards, and in a similar manner as if BEG and BEG (UK) were bearing these contracted liabilities and all other nuclear-related liabilities arising in connection with the operation of its nuclear power generating plant, such as decommissioning and uncontracted liabilities (the minimum contracting standard).

Exercise of rights by licensee

Certain exercises of rights under the BNFL Historic Contracts must be approved by the Secretary of State. These rights are specified in the agreement and include all exercises of rights that relate to the long term strategic management of the historic spent fuel (Strategic Exercise of Rights). In relation to any other exercises of rights that are reasonably expected to give rise to incremental liabilities under the BNFL Historic Contracts above a threshold of: (a) £15,000 (on an undiscounted basis) or more; or (b) when the increase in historic liabilities arising as a result of the exercise of rights is aggregated with all other increases in historic liabilities arising from exercises of rights in that year, £50,000 or more, and in addition, any exercises of rights which are not Strategic Exercises of Rights (“Non-Strategic Exercises of Rights”), the Licensee has the option of either applying for pre-approval of such exercises of rights or of carrying out the Non-Strategic Exercise of Rights and paying BNFL itself, then subsequently seeking reimbursement from the Secretary of State which will be made as long as it does not relate to an excluded liability.

The Secretary of State can require BEG or BEG (UK) to exercise rights under the BNFL Historic Contracts, if such exercise would lead to a reduction in historic liabilities of £10 million (in NPV terms) or more. The conditions to such exercise and the provisions as to compensation for the Licensee are the same as in relation to a similar exercise under the NLFA (see paragraph (22) above).

The provisions of the HLFA relating to exercises of rights are subject to review by the Secretary of State and the Licensees at the request of any party and in any event no later than three years after January 14, 2005.

Amendments to BNFL Historic Contracts

The HLFA provides that no Licensee may amend any term of a BNFL Historic Contract without obtaining the written consent of the Secretary of State which shall not be unreasonably withheld if the amendment will result in either: (i) no increase in the historic liabilities and the Costs of Discharging liabilities; or (ii) such increase does not exceed £50,000 and the Secretary of State is satisfied that BEG or BEG (UK) complied with the minimum contracting standard in respect of such amendment. Minor or typographical amendments do not require consent. Further no amendment may be made to the terms of any other agreement with BNFL without the prior written consent of the Secretary of State if to do so would reasonably be expected to result in an increase in the amount of historic liabilities.

Title to fuel at Sellafield

The Secretary of State has the option to require that BEG or BEG (UK) transfer to the Secretary of State (or a nominee) the title rights to all of its historic spent fuel and spent fuel products at Sellafield.

Termination of BNFL Historic Contracts

In the event that any of the BNFL Historic Contracts terminate as a result of an insolvency event affecting BEG, BEG (UK) or the ultimate parent company, the Secretary of State will pay amounts accrued under the BNFL Historic Contracts but not paid at the date of termination. In those

135

circumstances, and also on the expiry of the services provided under the BNFL Historic Contracts, the provision of future spent fuel management services in relation to historic spent fuel will be covered under the NLFA, as an uncontracted liability.

Other provisions

Other provisions in the HLFA relating to the effect of events of default in relation to a Licensee or guarantor, the joint and several nature of the Licensees’ liability, assignment within the group and assignment by the Secretary of State, representations and warranties as well as other boilerplate clauses, are equivalent to the provisions of the NLFA (see description in paragraph (22) above).

The money values in the HLFA are stated in 2003 values and indexed to RPI.

The obligations of BEG, BEG (UK), British Energy Group plc and British Energy Holdings plc under the HLFA are guaranteed by the Material British Energy Group Companies under the Guarantee and Indemnity detailed in paragraph (27) below.

(24) Contribution Agreement dated January 14, 2005 between the Secretary of State, NLF, BEG (UK), BEG, British Energy Group plc and British Energy Holdings plc (“Contribution Agreement”).

Contributions

Pursuant to the Contribution Agreement, British Energy Holdings plc contributed £275 million of fully paid New Bonds to the NLF on January 14, 2005. In addition, the following ongoing contributions will be made to the NLF with effect from January 14, 2005:

(i) fixed decommissioning contributions of £20 million per annum (in March 2003 values and indexed to RPI and tapering off as our nuclear power stations are currently scheduled to close) payable by BEG and BEG (UK), the last scheduled payment being on March 31, 2037 (the “Decommissioning Payments”);

(ii) £150,000 (in March 2003 values and indexed to RPI) for every tonne of uranium in PWR fuel loaded into the Sizewell B reactor payable by BEG; and

(iii) payments by British Energy Group plc of a percentage (initially 65 per cent.) (the “Payment Percentage”) of British Energy Group plc group’s adjusted net cash flow (calculated on the basis set out below) (the “NLF Cash Sweep Payment”).

Decommissioning Payments

The Decommissioning Payments are accelerated on a net present value basis (discounted at an agreed rate) and become immediately due and payable on various insolvency events relating to BEG, BEG (UK), British Energy Group plc, British Energy Holdings plc, any Guarantor (as defined therein) or any Material British Energy Group Company. The Decommissioning Default Payments are guaranteed by all principal Group companies (excluding EPL and EPHL) and secured by charges on their assets pursuant to the debenture dated January 14, 2005.

Any early redemption of the New Bonds will oblige BEG and BEG (UK) to pay the Accelerated Decommissioning Payment to the NLF which is an amount equal to the product of the proportion of the New Bonds to be redeemed and the net present value of the next five years of Decommissioning Payments, indexed to RPI up to the date of early redemption. The amount payable to the NLF will also take into account any premium payable on redemption of the New Bonds.

136

Prior to any Legal Defeasance or Covenant Defeasance (each as defined in the Trust Deed) of the New Bonds (other than as permitted under the Trust Deed and resulting from or financed by a contemporaneous refinancing of the whole or part of the New Bonds in issue from time to time), British Energy Group plc shall irrevocably deposit with the Trustee, on trust, for the benefit of the NLF a Defeasance Decommissioning Deposit (as defined in and calculated in accordance with the terms of the Trust Deed).

Cash Reserves

Available cash within the Group and cash which is used for the purpose of providing collateral for, and for operations ancillary to, the generation, sale and purchase by the Group of electricity (the “Agreed Collateral Purposes”) in an amount up to the Target Amount but excluding the Forecast Expenditure Reserve (see below) constitutes the Cash Reserves. The initial target amount for the Cash Reserves will be £490 million plus the amount by which cash employed as collateral exceeds £200 million (the “Target Amount”).

Cash comprised in the Cash Reserves may only be invested by the Group: (a) in accordance with the Group’s treasury policy on investments, and (b) subject to the prior written consent of the Secretary of State, in investments falling outside this policy. The Company is required to provide the NLF and the Secretary of State, within ten business days following the end of each quarter of a financial period, with a written summary (in such form as NLF may reasonably request) of such investments.

British Energy Group plc may reduce the Target Amount in certain circumstances. A reduction is only permitted if British Energy Group plc and its subsidiaries achieve an investment grade rating or to the extent committed facilities are available and intended and expected to be used for the purposes for which the Cash Reserves would have been applied and, in any event, for so long as the New Bonds are in issue, only if the availability of, or drawdown under, any such committed facilities does not breach certain covenants under the terms of the New Bonds. If British Energy Group plc and its subsidiaries cease to have an investment grade rating or if the committed facilities cease to be available, the Target Amount will automatically be increased by the amount by which it was formerly reduced. For these purposes “investment grade rating” means a credit rating for the long term, unsecured, unguaranteed and unsubordinated debt of the Group of: (i) Baa3 or higher from Moody’s; (ii) BBB or higher from Standard & Poor’s; (iii) BBB- or higher from Fitch; or (iv) if all of those rating agencies have ceased business, the minimum rating recognised generally in international capital markets as being an investment grade rating from another rating agency of international repute.

If at any time the Target Amount is reduced in reliance on British Energy Group plc and its subsidiaries having achieved an investment grade rating, British Energy Group plc may not (nor shall it allow any member of the Group and its subsidiaries to) announce or pay any cash distribution, make any capital distribution or make any legally binding commitment to make any acquisition of any undertaking, if it knows or has reasonable grounds to believe (whether as a result of the relevant rating agency’s guidance and conditions to grant of the investment grade rating or otherwise) that doing so would or would be likely to result in the loss of such investment grade rating, save to the extent such distribution or acquisition would not reduce the aggregate of the Cash Reserves and any committed facilities (which are available for, and intended and expected by the Board to be used or maintained for, the same purposes for which the Cash Reserves may be applied) below the Target Amount. If required to do so by the NLF, the Company shall seek from the relevant rating agency or agencies appropriate guidance as to whether or not the announcement or payment of any such distribution or acquisition would or would be likely to result in the loss of the investment grade rating.

A reduction in the Target Amount may lead to an obligation to apply the cash deemed released from the Cash Reserves as a result of such reduction in prepaying the New Bonds under the terms of the New Bonds.

137

Forecast Expenditure Reserve

If available cash in British Energy Group plc and its subsidiaries exceeds the Target Amount, it is entitled to allocate cash to the Forecast Expenditure Reserve (and thereby reduce the amount of any NLF Payment for a particular financial period) to meet capital expenditure anticipated to be due in that financial period, to fund capital expenditure on an acquisition or financing of a fixed asset or so as to reserve funds raised for general purposes through an issue of listed securities. Amounts standing to the credit of the Forecast Expenditure Reserve not spent during the accounting period in which the amount was set aside must be released from this notional reserve annually but may be reallocated to it provided that this is done for purposes for which the cash was originally permitted to be allocated and the Board continues to approve such purpose and has reasonable grounds for believing that the acquisition or financing in question has a reasonable prospect of completing in a specified accounting period.

NLF Cash Sweep Payment

The NLF Cash Sweep Payment is calculated on the basis of the increase/decrease in cash (as per the audited accounts of the Group) adjusted to reflect the increase/ decrease in Cash. For these purposes “Cash” means cash in hand and deposits repayable on demand with any qualifying financial institution, any other cash deposits (regardless of their repayment maturity), current asset investments held as readily disposable stores of value (being investments which are disposable by the holder without curtailing or disrupting its or any member of the Group’s business and which are either readily convertible into known amounts of cash at or close to their carrying amount or traded in an active market), and any permitted investment of the Cash Reserves as set out above but excluding cash or deposits subject to escrow or similar restrictions, and deducting overdrafts from any qualifying financial institution repayable on demand. The increase/decrease in Cash is then further adjusted to add back: (a) payments made during the period to the NLF and Shareholders; (b) amounts allocated to the Forecast Expenditure Reserve in the prior period; and (c) the amount of cash deemed released from the Cash Reserves by a reduction in the Target Amount during the period and to deduct: (x) proceeds from the issue or sale by British Energy Group plc of ordinary shares, (y) amounts allocated to Forecast Expenditure Reserve in the relevant period, and (z) the amount of Cash required to be retained in order to meet the Target Amount.

The NLF Cash Sweep Payment is to be made annually and within 15 Business Days following delivery of the NLF cash flow statement by the Company in the same or substantially similar form to that set out in a schedule to the Contribution Agreement. The Company must, and must use its reasonable endeavours to procure that its auditors, within ten business days of a request, provide all such information and explanations as the NLF may reasonably request to satisfy the NLF (acting reasonably) that the NLF cash flow statement (including, without limitation, movements in Cash Reserves, cash applied to the Agreed Collateral Purposes and the allocation of amounts to the Forecast Expenditure Reserve) is correct in accordance with the terms of the Contribution Agreement. Such information may include the working papers relating to the basis of preparation of the relevant NLF cash flow statement.

The NLF will have the right from time to time to convert all or part of its entitlement to the NLF Cash Sweep Payment into Convertible Shares (as defined in British Energy Group plc’s Articles of Association, see exhibit 1.01) (the “NLF Conversion Right”). However, any Convertible Shares issued to the NLF will be subject to certain voting restrictions, including a limitation that for so long as those shares are held by the NLF they would be non-voting to the extent that they would otherwise trigger a mandatory offer under the Takeover Code, being currently 29.9 per cent. (and, for this purpose, taking into account the voting rights attributable to any other ordinary shares held or acquired by any person acting in concert with the NLF). These voting restrictions do not apply on any resolution for the winding up of the Company, or on resolutions to modify, vary or abrogate the rights attaching to the Company’s

138

ordinary shares or Convertible Shares and on a poll, the number of votes that the NLF will be entitled to exercise in relation to any such resolution will be equal to the number of Convertible Shares which the NLF would be entitled to vote if the Convertible Shares were ordinary shares. The Convertible Shares will rank pari passu with the Company’s ordinary shares in all other respects. The Convertible Shares shall convert automatically into ordinary shares on a transfer by the NLF to a third party (other than the NLF’s successors and permitted assignees) but will otherwise not be convertible at the option of the NLF.

Disposals

The NLF may not exercise the NLF Conversion Right or dispose of any Convertible Shares resulting from such exercise if such exercise or disposal will require British Energy Group plc to have produced listing particulars or a prospectus more than five times in any consecutive period of 7.5 years. If NLF notifies British Energy Group plc of its intention to exercise the NLF Conversion Right or to dispose of any or all of its Convertible Shares in either case within the three month period immediately following the NLF becoming aware of a breach by a member of the Group of any of the covenants in the Contribution Agreement, the exercise of the NLF Conversion Right or the disposal of the corresponding Convertible Shares pursuant to such notice shall not be taken into consideration for the purposes of the limitation contained in this provision, provided that NLF has promptly given notice to the Company upon becoming aware of such a breach.

In addition, the NLF may not (except pursuant to a general offer or a partial offer open to all Shareholders for the acquisition of all or not less than 14.9 per cent. of the ordinary share capital of the Company) dispose of any interest in Convertible Shares which will, when converted into ordinary shares, constitute more than 10 per cent. of the Company’s share capital until the earlier of the expiry of three months from NLF giving notice of its intention to dispose of such shares and admission of the shares to the Official List and to trading on the London Stock Exchange. Disposals of between 3 per cent. and 10 per cent. are subject to prior reasonable consultation with British Energy Group plc as to timing and manner of disposal.

British Energy Group plc has undertaken that if the NLF wishes to offer or sell some or all of its Convertible Shares, it shall make available to NLF, with respect to any investor presentations or similar exercises conducted by or on behalf of the NLF in connection with such offering, such directors and senior management of the Group as NLF may reasonably request, provided that the Company shall be under no obligation to comply with this provision in respect of any offer of shares constituting less that 10 per cent. of the Company’s issued share capital. In addition, British Energy Group plc has undertaken to:

(i) notify the NLF and the Secretary of State of any proposed offer of British Energy Group plc securities within the following six months and, in connection with such offer, consult with the NLF with a view to ensuring that any prospectus, listing particulars or other marketing document produced in connection with such offer are consistent with any prospectus, listing particulars or other marketing document produced, or to be produced in connection with, an offering by the NLF; and

(ii) take all such steps and do all such other things as the NLF may reasonably request in connection with the registration with the SEC of some or all of any shares to be offered by the NLF, provided that British Energy Group plc shall be under no obligation to comply with this obligation if, at the scheduled date of such offering, the registration of ordinary shares and any other equity securities with the SEC will have ceased wholly or in all material respects.

The NLF will pay British Energy Group plc’s reasonable out of pocket costs and expenses incurred by any member of the Group in complying with these obligations and in preparing any listing particulars

139

required to be prepared pursuant to the exercise of the NLF Conversion Right or the conversion of Convertible Shares into the British Energy Group plc’s ordinary shares. To the extent that any such costs and expenses would have been incurred by the Group in the absence of any such offering the amount of such costs and expenses shall be agreed by the NLF and British Energy Group plc acting in good faith and shall be borne by British Energy Group plc.

NLF investment policy

The manner in which the NLF will deal with NLF Cash Sweep Payment, including any exercise of the NLF Conversion Right, is prescribed by the investment policy of the NLF as determined by the Secretary of State from time to time. The Company has received confirmation from the Secretary of State that the current investment policy of the NLF is to invest in gilts.

The NLF will, subject to the restrictions on the disposal of Convertible Shares issued pursuant to the exercise of the NLF Conversion Right set out above, comply with any directions given to it by the Secretary of State in relation to the exercise of the NLF Conversion Right and the retention or disposal of any shares in the Company resulting from such conversion. The NLF will not take any action to exercise the NLF Conversion Right or dispose of any shares in the Company before receiving such directions.

The Secretary of State has no current intention to direct the NLF to exercise the NLF Conversion Right but reserves the right to do so. The Secretary of State intends to ensure that, prior to the giving of any direction to the NLF to exercise the NLF Conversion Right or to dispose of the shares issued pursuant to such exercise, he (and/or the NLF at his direction) would take financial advice and would take such advice as to the market impact of the conversion or disposal (including the desirability of avoiding multiple sales of small amounts of shares).

The Secretary of State has confirmed to the Company that he does not currently intend to change the investment policy as regards the matters described above.

Adjustment to Payment Percentage

The Payment Percentage will be 65 per cent. as at January 14, 2005 and will be subject to the adjustments set out below.

(A) Issue of ordinary shares

If and wherever British Energy Group plc: (i) issues ordinary shares or sells ordinary shares held as treasury shares after January 14, 2005 other than an issue or sale (as the case may be) at less than 95 per cent. of the current market price as at the date of such issue or sale; or (ii) issues ordinary shares after January 14, 2005 as a result of the exercise of rights, granted on or after January 14, 2005, of conversion into, exchange or subscription for, or purchase of, such ordinary shares (including ordinary shares issued for cash pursuant to rights to subscribe for or purchase such ordinary shares under the Warrants) (each, a Share Issue), the Payment Percentage shall be reduced as follows from the date of the Share Issue:

P =	x × y
	y + z (1 – x)

where:

P is the new Payment Percentage expressed as a decimal;

x is the Payment Percentage previously in effect expressed as a decimal;

140

y is the number of ordinary shares and Convertible Shares in issue prior to the Share Issue (excluding any ordinary shares held by British Energy Group plc as treasury shares); and

z is the number of ordinary shares issued or sold out of treasury by British Energy Group plc pursuant to the Share Issue.

(B) Payment of cash distributions and NLF Cash Sweep Payments

(i) If and whenever British Energy Group plc makes any cash distribution or an NLF Cash Sweep Payment is made the Payment Percentage shall be adjusted on the relevant record date for that cash distribution or the relevant NLF Cash Sweep Payment date (as the case may be) as follows:

(A X B) / (1 – A)

B / (1 – A) + (((1 – G) / G X C) + ((1 – A) / A X F) – D) / E

where:

A is the current Payment Percentage expressed as a decimal;

B is the number of ordinary shares and Convertible Shares in issue at the relevant record date or NLF Cash Sweep Payment date (as the case may be);

C is the NLF Cash Sweep Payment, if any;

D is an amount equal to such cash distribution, if any;

E is the average of the middle market quotation for an ordinary share in British Energy Group plc derived from the Daily Official List of the London Stock Exchange for the 60 days immediately preceding the date of the cash distribution or NLF Cash Sweep Payment date;

F is any Additional Payment made pursuant to paragraph B(ii) below; and

G is the weighted average Payment Percentage as at the relevant record date or NLF Cash Sweep Payment date (as the case may be).

(ii) If British Energy Group plc makes any cash distribution which is more than:

(1 – G)	X C
G

British Energy Group plc may elect to make a further payment to the NLF (an Additional Payment), at the same time as such cash distribution, equal or up to:

(A X D)	– C X	[	1 – G	X	A	]
(1 – A)			G		1 – A

where A, D and G have the same meanings as in paragraph B(i) above and C is the NLF Cash Sweep Payment (if any) made at the same time as such cash distribution, provided that British Energy Group plc shall not make any Additional Payment to the extent it reduces the Payment Percentage to less than the Payment Percentage prevailing immediately prior to the cash distribution being made.

141

(C) Partial exercise of NLF Conversion Right

Any partial exercise by NLF of the NLF Conversion Right shall reduce the Payment Percentage as follows from the date of exercise:

P = B – (A x B)

where:

P is the new Payment Percentage expressed as a percentage;

A is the percentage of the NLF Conversion Right available to NLF immediately prior to such exercise exercised by NLF expressed as a decimal; and

B is the Payment Percentage in effect immediately prior to such partial exercise expressed as a percentage.

(D) Further Adjustments to the Payment Percentage

If any of the events described in paragraphs (D)(i) to (vii) below (each an Adjustment Event) occur the Payment Percentage shall be adjusted. Adjustments will be by reference to C, where C is a nominal Conversion Factor per ordinary share, being 100 as at January 14, 2005, as adjusted from time to time pursuant to paragraphs (D)(i) to (vii) below.

The Payment Percentage immediately following an Adjustment Event shall be equal to:

N	(expressed as a percentage)
E + N

where:

E is the number of ordinary shares and Conversion Shares in issue immediately following the Adjustment Event; and

N is the number of Convertible Shares to be issued to NLF upon exercise in full of the NLF Conversion Right immediately following the Adjustment Event and is equal to:

Nt X Ct

C

where:

Nt is the number of Convertible Shares to be issued to NLF upon exercise in full of the NLF Conversion Right immediately prior to the Adjustment Event;

Ct is the Conversion Factor immediately prior to the Adjustment Event; and

C is the Conversion Factor immediately following the Adjustment Event.

The adjustments to the Conversion Factor described in paragraphs (D)(i) to (vii) below will result in adjustments to C (and consequently the Payment Percentage) in accordance with the above.

142

(i) Capital Distributions

Subject to paragraph (D)(viii) below, if and whenever British Energy Group plc pays or makes any capital distribution to its ordinary shareholders, the Conversion Factor shall be adjusted by multiplying the Conversion Factor in force immediately prior to such capital distribution by the following fraction:

A –	[	B –	D	]
			Nt
A

where:

A is the current market price of one ordinary share on the dealing day last preceding the date on which the capital distribution is publicly announced;

B is the fair market value on the date of such announcement of the portion of the capital distribution attributable to one ordinary share; and

D is the amount of any payment notified and paid to NLF by British Energy Group plc prior to or at the same time as such capital distribution (where D/Nt does not exceed B).

Any payments referred to in D above shall be at the discretion of British Energy Group plc, shall be made in addition to any other payment obligations of any member of the Group under the Contribution Agreement and must not result in a reduction to the Payment Percentage below the Payment Percentage prevailing immediately prior to such capital distribution. Any adjustment to the Payment Percentage as a result of such payment shall become effective on the record date of the capital distribution to which it relates is made.

(ii) Issue by Way of Rights

If and whenever British Energy Group plc issues ordinary shares to its ordinary shareholders as a class by way of rights, or grants to ordinary shareholders as a class by way of rights, options, warrants or other rights to subscribe for or purchase any ordinary shares, in each case at a price per ordinary share which is less than 95 per cent. of the current market price per ordinary share on the dealing day last preceding the date of the announcement of the terms of the issue or grant of such ordinary shares, options, warrants or other rights, the Conversion Factor shall be adjusted by multiplying the Conversion Factor in force immediately prior to such issue or grant by the following fraction:

A + B

A + C

where:

A is the number of ordinary shares and Convertible Shares in issue immediately before such announcement;

B is the number of ordinary shares which the aggregate consideration (if any) payable for the ordinary shares issued by way of rights, or for the options or warrants or other rights issued by way of rights and for the total number of ordinary shares comprised therein would purchase at such Current Market Price per ordinary share; and

C is the number of ordinary shares issued or, as the case may be, comprised in the issue or grant.

Such adjustment shall become effective on the first date on which the ordinary shares are traded ex-rights, ex-options or ex-warrants on the London Stock Exchange.

143

(iii) Issue of Securities

Subject to paragraph (D)(viii) below, if and whenever British Energy Group plc issues any securities (other than ordinary shares or options, warrants or other rights to subscribe for or purchase any ordinary shares) to its ordinary shareholders as a class by way of rights or grants to its ordinary shareholders as a class by way of rights any options, warrants or other rights to subscribe for or purchase any securities (other than ordinary shares or options, warrants or other rights to subscribe for or purchase any ordinary shares), the Conversion Factor shall be adjusted by multiplying the Conversion Factor in force immediately prior to such issue or grant by the following fraction:

A –	[	B –	D	]
			Nt
A

where:

A is the current market price of one ordinary share on the dealing day immediately preceding the date on which the terms of such issue or grant are publicly announced;

B is the fair market value on the date of such announcement of the portion of the rights attributable to one ordinary share; and

D is the amount of any payment notified and paid to NLF by British Energy Group plc prior to or at the same time as such issue of securities (where D/Nt does not exceed B).

Any payments referred to in D above shall be at the discretion of British Energy Group plc, shall be made in addition to any other payment obligations of any member of the Group under the Contribution Agreement and must not result in a reduction to the Payment Percentage below the Payment Percentage prevailing immediately prior to such issue of securities. Any adjustment to the Payment Percentage as a result of such payment shall become effective on the first date on which the ordinary shares are traded ex-rights, ex-options or ex-warrants on the London Stock Exchange.

(iv) Issue of ordinary shares

If and whenever British Energy Group plc (i) issues (otherwise than as mentioned in paragraph (D)(ii) above) wholly for cash any ordinary shares (other than Convertible Shares issued on the exercise of the NLF Conversion Right or on the exercise of the Warrants or of any other rights of conversion into, or exchange or subscription for, or purchase of, ordinary shares), or (ii) grants (otherwise than as mentioned in paragraph (D)(ii) above) wholly for cash any options, warrants or other rights to subscribe for or purchase any ordinary shares, or sell any ordinary shares previously held as treasury shares wholly for cash in each case at a price per ordinary share in respect of which the aggregate consideration receivable (whether at the time of grant or upon exercise of the rights to subscribe for or purchase such ordinary shares) is less than 95 per cent. of the current market price per ordinary share on the dealing day last preceding the date of announcement of the terms of such issue or grant, the Conversion Factor shall be adjusted by multiplying the Conversion Factor in force immediately prior to such issue or grant by the following fraction:

A + B

A + C

144

where:

A is the number of ordinary shares and Convertible Shares in issue immediately before the issue of such additional ordinary shares or the grant of such options, warrants or rights or the sale of such treasury shares;

B is the number of ordinary shares which the aggregate consideration (if any) receivable for the issue of such ordinary shares or, as the case may be, for the ordinary shares to be issued or otherwise made available upon the exercise of any such options, warrants or rights would purchase at such current market price per ordinary share; and

C is the maximum number of ordinary shares to be issued pursuant to such issue of such additional ordinary shares or upon exercise of such options, warrants or rights or to be sold pursuant to the sale of the treasury shares.

Such adjustment shall become effective on the record date for such issue of additional ordinary shares or, as the case may be, the grant of such options, warrants or rights.

(v) Issue of Convertible Securities

If and whenever British Energy Group plc or any of its subsidiary or (at the direction or request of or pursuant to any arrangements with British Energy Group plc or any of its subsidiary) any other company, person or entity issues wholly for cash (otherwise than as mentioned in paragraphs (D)(ii)(iii) or (iv) above) any securities (other than the New Bonds or the Convertible Shares) which by their terms of issue carry rights of conversion into, or exchange or subscription for, or purchase of, ordinary shares issued or to be issued by British Energy Group plc (or shall grant any such rights in respect of existing securities so issued) or carry rights which may entitle such securities to be redesignated as ordinary shares (other than the Convertible Shares), and the consideration per ordinary share receivable upon conversion, exchange, subscription or redesignation is less than 95 per cent. of the current market price per ordinary share on the dealing day last preceding the date of announcement of the terms of issue of such securities (or the terms of such grant), the Conversion Factor shall be adjusted by multiplying the conversion factor in force immediately prior to such issue (or grant) by the following fraction:

A + B

A + C

where:

A is the number of ordinary shares and Convertible Shares in issue immediately before such issue or grant;

B is the number of ordinary shares which the aggregate consideration (if any) receivable for the ordinary shares to be issued upon conversion or exchange or upon exercise of the right of subscription or purchase attached to such securities or, as the case may be, for the ordinary shares to be issued or to arise from any such redesignation would purchase at such current market price per ordinary share; and

C is the maximum number of ordinary shares to be issued upon conversion or exchange of such securities or upon the exercise of such rights of subscription or purchase attached thereto at the initial conversion, exchange, subscription or purchase price or rate or, as the case may be, the maximum number of ordinary shares to be issued or to arise from any such redesignation.

Such adjustment shall become effective on the date of issue or grant.

145

(vi) Modification of Rights

If and whenever there shall be any modification of the rights of conversion, exchange, subscription or purchase attaching to any such securities as are mentioned in paragraph (D)(iv) above (other than in accordance with the terms (including terms as to adjustment) applicable to such securities) so that following such modification the consideration per ordinary share receivable upon conversion, exchange, subscription or purchase is less than 95 per cent. of the current market price per ordinary share on the dealing day last preceding the date of announcement of the proposals for such modification, the conversion factor shall be adjusted by multiplying the conversion factor in force immediately prior to such modification by the following fraction:

A + B

A + C

where:

A is the number of ordinary shares and Convertible Shares in issue immediately before such modification;

B is the number of ordinary shares which the aggregate consideration (if any) receivable by British Energy Group plc for the ordinary shares to be issued upon conversion or exchange or upon exercise of the right of subscription or purchase attached to such securities, in each case as so modified, would purchase at such current market price per ordinary share or, if lower, the existing conversion, exchange, subscription or purchase price of such securities; and

C is the maximum number of ordinary shares to be issued upon conversion or exchange of such securities or upon the exercise of such rights of subscription or purchase attached thereto at the modified conversion, exchange, subscription or purchase price or rate but giving credit in such manner as an independent investment bank of international repute, selected by British Energy Group plc and approved in writing by NLF, shall, acting as an expert, consider appropriate for any previous adjustment under this paragraph or paragraph (D)(iv) above.

Such adjustment shall become effective on the date of modification of the rights of conversion, exchange, subscription or purchase attaching to such Securities.

(vii) Offer of Securities

Subject to paragraph (D)(viii) below, if and whenever British Energy Group plc or any of its subsidiaries or (at the direction or request of, or pursuant to any arrangements with, British Energy Group plc or any of its subsidiaries) any other company, person or entity shall offer any securities in connection with which offer ordinary shareholders as a class are entitled to participate in arrangements whereby such securities may be acquired by them (except where the conversion factor falls to be adjusted under paragraph (D)(ii) above (or would fall to be so adjusted if the relevant issue or grant was at a price less than 95 per cent. of the current market price per ordinary share on the relevant dealing day) or paragraph (D)(iii) above) the Conversion Factor shall be adjusted by multiplying the Conversion Factor in force immediately before the making of such offer by the following fraction:

A –	[	B –	D	]
			Nt
A

146

where:

A is the current market price of one ordinary share on the dealing day immediately preceding the date on which the terms of such offer are publicly announced;

B is the fair market value on the date of such announcement of the portion of the relevant offer attributable to one ordinary share; and

D is the amount of any payment notified and paid to NLF by British Energy Group plc prior to or at the same time as such offer of securities (where D/Nt does not exceed B).

Any payments referred to in D above shall be at the discretion of British Energy Group plc, shall be made in addition to any other payment obligations of any member of the Group under the Contribution Agreement and must not result in a reduction to the Payment Percentage below the Payment Percentage prevailing immediately prior to such offer of securities. Any adjustment to the Payment Percentage as a result of such payment shall become effective on the first date on which the ordinary shares are traded ex-rights on the London Stock Exchange.

(viii) Further Adjustments

(a) If either:

(i) any party determines that an adjustment should be made to the Payment Percentage as a result of one or more events or circumstances not referred to in paragraphs (D)(i) to (vii) above (even if the relevant event or circumstance is specifically excluded from the operation of paragraphs (D)(i) to (vii) above); or

(ii) paragraph (D)(i), (iii) or (vii) would otherwise apply but the value of

[	B –	D	]	would equal or exceed A,
		Nt

NLF and British Energy Group plc shall request an investment bank of international repute to determine as soon as practicable what adjustment (if any) to the conversion factor is fair and reasonable to take account thereof and the date on which such adjustment should take effect.

(b) Upon such determination such adjustment (if any) shall be made and shall take effect in accordance with such determination, provided that an adjustment shall only be made pursuant to this paragraph (D)(viii) if such investment bank is so requested to make such a determination not more than 50 business days after the date on which the relevant event or circumstance arises, and provided that where the circumstances giving rise to any adjustment pursuant to the above provisions have already resulted or will result in an adjustment to the conversion factor or where the circumstances giving rise to any adjustment arise by virtue of any other circumstances which have already given or will give rise to an adjustment to the conversion factor, such modification (if any) shall be made to the operation of the above provisions as may be advised by the investment bank to be in their opinion appropriate to give the intended result.

(c) The fees charged by the investment bank for making such a determination shall be shared equally by NLF and British Energy Group plc.

(E) Supplementary provisions relating to adjustment of the conversion factor

(i) Where more than one event which gives or may give rise to an adjustment to the conversion factor occurs within such a short period of time that in the opinion of the investment bank the foregoing provisions would need to be operated subject to some

147

modification in order to give the intended result, such modification shall be made to the operation of the foregoing provisions as may be advised by such investment bank to be in its opinion appropriate in order to give such intended result.

(ii) No adjustment will be made to the conversion factor where ordinary shares or other securities (including rights, warrants and options) are issued, offered, exercised, allotted, appropriated, modified or granted to, or for the benefit of, employees or former employees (including directors holding or formerly holding executive office) of British Energy Group plc or any of its subsidiaries or any associated company or to trustees to be held for the benefit of any such person, in any such case pursuant to any employees’ share scheme (as defined in section 743 of the Companies Act).

(iii) If any doubt shall arise as to the appropriate adjustment to the Conversion Factor, a certificate of the investment bank shall be conclusive and binding on all concerned, save in the case of manifest or proven error.

(iv) On any adjustment, the resultant conversion factor shall be rounded down to two decimal places. Any amount by which the conversion factor has been rounded down, shall be carried forward and taken into account in any subsequent adjustment.

For these purposes:

“Current Market Price” means, in respect of an ordinary share in British Energy Group plc at a particular date, the average of the bid and offer quotations published in the London Stock Exchange Daily Official List for one ordinary share for the five consecutive dealing days (in respect of which such quotations are published) ending on the dealing day (in respect of which such quotations are published) immediately preceding such date, provided that if at any time during the said five day period the ordinary shares shall have been quoted ex-dividend or ex-any other entitlement and during some other part of that period the ordinary shares shall have been quoted cum-dividend or cum-any other entitlement then:

(i) if the ordinary shares to be delivered do not rank for the dividend or entitlement in question, the quotations on the dates on which the ordinary shares shall have been quoted cum-dividend or cum-any other entitlement shall for the purpose of this definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend or other cash entitlement or, as the case may be, the value (as determined by an investment bank of international repute appointed by British Energy Group plc and the NLF ) of any entitlement or dividend (where that is other than cash) per ordinary share (excluding, in the case of a dividend in cash, any associated tax credit and less the tax (if any) falling to be deducted on payment thereof to a resident of the United Kingdom); or

(ii) if the ordinary shares to be delivered do rank for the dividend or entitlement in question, the quotations on the dates on which the ordinary shares shall have been quoted ex-dividend or ex-any other entitlement shall for the purpose of this definition be deemed to be the amount thereof increased by such similar amount, and provided further that if the ordinary shares on each of the said five dealing days have been quoted cum-dividend or cum-any other entitlement in respect of a dividend or entitlement which has been declared or announced but the ordinary shares to be delivered do not rank for that dividend or entitlement, the quotations on each of such dates shall for the purposes of this definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend or other cash entitlement, or as the case may be, the value (as determined by the aforementioned investment bank) of any entitlement or dividend (where that is other than cash) per ordinary share (excluding, in the case of a dividend in cash, any associated tax credit and less the tax (if any) falling to be deducted on payment thereof to a resident of the United Kingdom); and

148

“Fair Market Value” means, with respect to any property on any date, the fair market value of that property as determined by an investment bank of international repute to be appointed by British Energy Group plc and the NLF provided that:

(i) the fair market value of an ordinary share in British Energy Group plc on any date shall be the current market price of an ordinary share on that date;

(ii) the fair market value of a cash dividend paid or to be paid per ordinary share shall be the amount of such cash dividend per ordinary share determined as at the date of announcement of such dividend; and

(iii) where options, warrants or other rights are publicly traded in a market of adequate liquidity (as determined by such investment bank) the fair market value of such options, warrants or other rights shall equal the arithmetic mean of the daily closing prices of such options, warrants or other rights during the period of five trading days on the relevant market commencing on the first such trading day such options, warrants or other rights are publicly traded,

in each case converted into pounds sterling (if expressed in a currency other than pounds sterling) at such rate of exchange as may be determined in good faith by the aforementioned investment bank to be the spot rate ruling at the close of business on that date (or if no such rate is available on that date, the equivalent rate on the immediately preceding day on which such a rate is available).

Waivers

The NLF may waive its right to an NLF Cash Sweep Payment if such payment would result in a reduction of the Payment Percentage. However, the NLF cannot, through the waiving of the NLF Cash Sweep Payment for any period, increase the Payment Percentage above the Payment Percentage applicable at that time.

Covenants

There are a number of covenants in the Contribution Agreement. These are intended to ensure, amongst other things, that the NLF is able to exercise the NLF Conversion Right.

In addition, for as long as any member of the Group owns and operates any power station, members of the Group will not be entitled to:

(A) incur any expenditure for any purpose other than:

(i) Agreed Collateral Purposes

(ii) covering lost revenue and costs from outages of generating stations;

(iii) meeting:

(a) working capital requirements (including the provision of collateral for such purposes);

(b) payments or repayments of principal and interest due in respect of outstanding Group borrowings including, for the avoidance of doubt, any amounts to be paid under a Mandatory Repurchase Offer, as described in the terms of the New Bonds; and

(c) operating costs and expenses of the Group; and

(iv) funding expenditure in respect of any or all of the nuclear power stations and/or the Eggborough power station, the primary purpose of which is any of the following:

(a) maintenance of the nuclear power stations and/or the Eggborough power station;

149

(b) non-recurring maintenance of the nuclear power stations and/or the Eggborough power station;

(c) repair of a capital nature to the nuclear power stations and/or the Eggborough power station;

(d) enabling aggregate annual output of the nuclear power stations at a level which is around the highest annual output of the nuclear power stations in any one of the immediately preceding five financial periods (subject to a minimum of 68 TWh), such annual output calculation to be appropriately adjusted as nuclear power stations are closed, provided that, without prejudice to the foregoing paragraphs of this covenant, this paragraph (d) does not permit capital investment in excess of £20 million per annum (or such higher amount as the Secretary of State may, in her absolute discretion, agree from time to time) where the principal purpose of such capital investment is to enable the extension of the scheduled closure date of one or more of the nuclear power stations; and/or

(e) enabling output at the Eggborough power station at a level which is consistent with historical performance levels; or

(B) distribute, announce or pay any dividend or enter into a legally binding contract to make any acquisition unless:

(i) as at the end of the immediately preceding accounting period Cash (including cash used for Agreed Collateral Purposes ) equalled or exceeded the aggregate of:

(a) the NLF Cash Sweep Payment (if any) for the preceding accounting period,

(b) the amount allocated to the Forecast Expenditure Reserve,

(c) in the case of dividends and acquisitions, the amount of the intended dividend or acquisition (less any allocation to Forecast Expenditure Reserve in respect of any such acquisition), and

(d) the Target Amount on the date such expenditure, dividend or acquisition is made, declared or proposed, and

(ii) as at the end of the then accounting period Cash (including cash used for Agreed Collateral Purposes) would or would be likely to equal or exceed:

(a) the aggregate amount of such expenditure, dividend or acquisition, and

(b) the Target Amount at the end of the then accounting period, or

(c) in the case of expenditure (other than on distributions or acquisitions of an undertaking), such expenditure is already provided for in the Forecast Expenditure Reserve.

However, no member of the Group shall be restricted under these provisions from:

(i) incurring expenditure, up to a maximum amount of:

(a) £2 million for the financial period ending March 31, 2005;

(b) £1.5 million for the financial period ending March 31, 2006; and

(c) £1 million for each financial period thereafter,

on the development of renewable energy projects identified and agreed by British Energy Group plc and the Secretary of State as at January 14, 2005, and which would qualify for ROCs, including costs incurred in the sale of such projects but excluding any costs of construction;

150

(ii) exercising one or more options, identified and agreed by British Energy Group plc and the Secretary of State as at January 14, to purchase wind farm developments pursuant to the “Option to Purchase and Development Services in Relation to Wind Farm Sites” dated November 20, 2001 between British Energy Renewables Ltd and Amec Services Ltd, subject to the aggregate exercise fees paid since November 29, 2002 not exceeding £10 million; or

(iii) complying with its obligations under the agreed forms of each of the following:

(a) the New CTA referred to in paragraph (29) below;

(b) the Amended Credit Agreement referred to in paragraph (28) below;

(c) the Share Option Agreement referred to in paragraph (31) below; and

(d) the Asset Option Agreement referred to in paragraph (30) below,

In addition none of these covenants shall prevent any member of the Group from complying with its obligations under the Nuclear Liabilities Agreements or from implementing the Restructuring in accordance with or as contemplated by the Creditor Restructuring Agreement.

Trading principles

Under the terms of the Contribution Agreement British Energy Group plc must also adopt prudent trading policies and once adopted, it must comply with and procure that its subsidiaries comply with such policies. By a letter from British Energy Group plc, British Energy Holdings plc, BEG and BEG (UK) to the Secretary of State and the NLF dated January 14, 2005, British Energy Group plc notified the Secretary of State and the NLF of the approval and adoption of certain trading principles in connection with its agreement to adopt prudent trading policies. The board’s stated overriding policy is to be risk averse with the objective of ensuring the ongoing sustainable viability of its business and accordingly its trading strategy will seek to protect against downside risk without foregoing prudent opportunities to enhance the value of its output. The principles referred to above are set out below:

(A) Scope

(i) British Energy Group plc’s core markets are those appropriate or necessary to protect or enhance the value of the core assets. The trading activities within those markets shall be those appropriate or necessary to protect and enhance that value.

(ii) For as long as British Energy Group plc does not hold an investment grade rating activities undertaken in non-core markets will be to hedge or enhance the value to be realised in the core markets.

(iii) British Energy Group plc will not undertake material new trading activities or engage in new markets without having conducted an internal pre-authorisation process consistent with industry best practice. The Board will endeavour to satisfy itself that under reasonably foreseeable circumstances British Energy Group plc will not, as a result of entry into the new activities or new markets, incur significant additional risk of a shortfall of financial resources and that the medium term risk-return profile of the new activities or new markets supports value creation.

(B) Governance and internal controls

(iv) British Energy Group plc will ensure that it has rigorous trading governance arrangements in place. These arrangements shall include, but are not limited to, the appointment of persons independent of trading line management with oversight responsibility for the assessment and management of trading risk within the company (“trading risk personnel”). These persons should have appropriate authority and shall report periodically to an appropriate board committee chaired by a non-executive director.

151

(v) British Energy Group plc will ensure that at all times appropriately qualified and experienced staff are in place to conduct trading and risk management activities to a “best practice” standard commensurate with and aligned to the risks faced by British Energy Group plc.

(vi) British Energy Group plc will develop, adopt and maintain a system of value and risk management metrics that conform to industry standards where these are established and are comprehensive across British Energy Group plc’s markets and activities. These systems shall allow the prompt reporting to the Chief Executive and Board of a breach, of the financial and commercial viability principles referred to below.

(C) Reporting

(vii) The Board shall consider, at least annually, a report on how these principles have been implemented and the Chief Executive will report to the Secretary of State on an annual basis with an assessment of how the trading activities of the Company have been and continue to be compliant with these principles.

(viii) The Board shall require that an independent expert, who may also be British Energy Group plc’s external auditor, conduct an annual assessment of the governance, control and risk management systems relating to the Company’s trading activities in respect of their effectiveness and appropriateness.

(ix) As part of the process to be undertaken annually, British Energy Group plc will ensure compliance with the revised Combined Code on Corporate Governance and the requirements of the US Sarbanes-Oxley Act, 2002 (as appropriate).

(D) Alignment of trading to generating and supply activities

(x) British Energy Group plc will ensure that any trading strategy adopted takes account of the performance characteristics and capability of British Energy Group plc’s generating plant, including a realistic view of the likelihood and magnitude of unplanned outages based on past performance and trends.

(xi) British Energy Group plc will ensure that there is an appropriate risk transfer and pricing mechanism between the trading, generation and supply business units (or any successors of these entities).

(E) Financial and commercial viability

(xii) British Energy Group plc will conduct its trading activities with the aim of ensuring it retains adequate working capital headroom for its trading activities. In doing so it will closely and regularly monitor its working capital headroom, which will be defined as the difference between: (i) working capital available (including cash and other liquid reserves); and (ii) working capital requirements (including total collateral, and capital committed to other expenditure).

(xiii) When the working capital headroom is tight, i.e. at or below 10 per cent. of the working capital available, or reasonably forseeable sensitivities (including changes to output levels, market price shocks, reserves for credit and operational losses) within the next twelve months indicate that headroom is likely to become tight during that period, British Energy Group plc will take all necessary reasonable actions to husband cash and implement, as soon as practicable, those measures required to provide an actual, or forecast, working capital headroom in excess of 10 per cent. of working capital available.

(xiv) British Energy Group plc will maintain this oversight on at least a monthly basis. A summary of all instances where the working capital headroom falls below the 10 per cent.

152

threshold, and the actions taken to restore the adequate working capital headroom, shall be reported annually to the Secretary of State.

(xv) When adopting or endorsing any trading strategy, British Energy Group plc will take explicit account of the need to preserve its ability to generate value in both the medium and long term across its routes to market. It shall adopt a risk based capital allocation process with a view to achieving the overall objective described in the first paragraph that takes account, amongst others, of:

(a) expected returns and associated risks;

(b) the timing of sales;

(c) the balance between: (i) volumes under fixed price contracts; and (ii) uncontracted volumes and volumes under floating price contracts;

(d) the preservation of routes to market; and

(e) access to counterparties.

Other clauses

Each of BEG, BEG (UK), British Energy Group plc and British Energy Holdings plc may assign and transfer all or any part of its rights, benefits and obligations under the Contribution Agreement to a wholly-owned subsidiary of the Group or to the ultimate parent company of the Group if the assignee has a nuclear power station transferred to it by BEG or BEG (UK), holds all necessary regulatory consents and approvals, delivers to NLF and the Secretary of State a duly completed and executed deed of adherence in respect of the Contribution Agreement, has entered into a deed of adherence in respect of, and in accordance with the terms of, the NLFA, the Government Option Agreement and the HLFA, and has become an additional guarantor in accordance with the Guarantee and Indemnity described in paragraph (27) below.

Each of BEG, BEG (UK), British Energy Group plc and British Energy Holdings plc may also assign and transfer all or any part of its rights, benefits and obligations under the Contribution Agreement to any person which is not a wholly-owned subsidiary or the ultimate parent company of the Group but any such assignment or transfer must be effected pursuant to, and in accordance with, the provisions of the NLFA.

The Secretary of State and NLF may at any time assign all or any part of the benefit of their rights or benefits under the Contribution Agreement to their successors in title, a Minister of the Crown, the Treasury, a department, non-departmental body or other agency of the Crown, any body corporate established by statute some or all of the members of which are appointed by a Minister of the Crown or other government entity or any person directly or indirectly owned by, or held on trust for, the Secretary of State or other Minister of the Crown. The parties are currently proposing an amendment to this provision so that the NLF may only assign all or any part of the benefit of its rights or benefits under the Contribution Agreement with the consent of the Secretary of State.

The obligations of BEG, BEG (UK), British Energy Group plc and British Energy Holdings plc under the Contribution Agreement are guaranteed by the Material New British Energy Group Companies under the Guarantee and Indemnity dated January 14, 2005;

Review

Following the second anniversary of January 14, 2005, each of the parties to the Contribution Agreement must review how the agreement has operated in practice and shall, in the conduct of the review, submit a paper to the other parties detailing the implementation of the agreement in the period since January 14, 2005 and any proposals for improving the operation of the agreement.

153

(25) Debenture dated January 14, 2005 entered into between the Secretary of State, the NLF and the Obligors (as defined in Schedule 1 thereto). (“Debenture”)

In order to secure the Decommissioning Default Payment and related costs and expenses related thereto and pursuant to this debenture, the Obligors have given certain security over their assets in favour of the NLF. This security consists of a first legal mortgage over the Key Properties (set out in Schedule 2 to the Debenture) and a first fixed charge over each Obligor’s Charged Securities (set out in Schedule 3 to the Debenture). Furthermore, each Obligor has given security by way of a first floating charge over all of its present and future assets, property, business, undertaking and uncalled capital, including all rights under and in respect of these. The floating charge is deemed to rank second in priority to: (i) a charge created in favour of Barclays Bank plc pursuant to the Receivables Deed of Charge to the Receivables Facility Agreement (subject to certain restrictions); and (ii) in respect of the BACS Facility Collateral (as defined therein) to the extent that such BACS Facility Collateral is subject to a charge created by BEG (UK) in favour of Citibank N.A.

The following assets have also been excluded from the floating charge:

(i) each obligor’s rights and benefits under the NLFA and HLFA;

(ii) cash collateral, letters of credit or other forms of credit support which are subject to a security interest used to secure obligations of either BEG, BEG (UK), BEPET, EPL, BETS or the Electricity Supply Subsidiary (as defined therein) under certain trading, procurement and supply arrangements (subject to certain restrictions); and

(iii) cash collateral provided to HSBC Bank plc by BE to secure the Group’s liabilities pursuant to the Group’s credit card facilities agreement (subject to certain restrictions).

The Debenture contains further assurance provisions as well as a power of attorney to ensure that all future acquired property will fall within the scope of the security created above. The NLF must seek the instruction of the Secretary of State before exercising any right or performing any obligation, must take any such action as the Secretary of State instructs, may only act in accordance with the instructions of the Secretary of State and will rely on the instructions of the Secretary of State.

(26) Option Agreement dated January 14, 2005 Between the Secretary of State, BEG (UK), BEG, British Energy Group plc and British Energy Holdings plc (“Government Option Agreement”).

Options

Pursuant to the Government Option Agreement, BEG and BEG (UK) each grant irrevocable options to the Secretary of State to acquire BEG and BEG (UK)’s nuclear power stations in order to decommission them (each an “Option to Decommission”) or extend their operating life beyond its scheduled closure date or its early closure date (if BEG or BEG (UK) decides to close a station before its scheduled closure date) (an “Option to Operate”) (each a “Station Option”). Upon exercise of a Station Option, the Secretary of State is entitled to nominate another person or persons to acquire the relevant power station (the “Station Purchaser”). The consideration to be paid by the Station Purchaser to BEG or BEG (UK), as the case may be, for each station will be a nominal £1.00.

In addition to the grant of the Station Options, BEG and BEG (UK) also each grant to the Secretary of State a separate option (a “Partial Closure Option”) exercisable where one but not both reactors at a power station is closed either before its scheduled closure date or the scheduled/actual closure date of the other reactor at the relevant power station. A Partial Closure Option is for the Secretary of State to require BEG or BEG (UK), as the case may be, to continue operating the relevant closed reactor under a maintenance and operation contract (on terms to be agreed following principles set out in the Government Option Agreement); the Station Purchaser will not acquire the relevant power station.

154

An Option to Decommission is exercisable at any time, whether before or after the relevant power station’s closure date. An Option to Operate may be exercised at any time up to and including the date which is two years before the scheduled closure date of a power station. Where BEG or BEG (UK) has given notice, as it is obliged to do under the Government Option Agreement, that it will close a power station early, the time period within which the Secretary of State may exercise an Option to Operate varies depending on the length of notice of the early closure which BEG or BEG (UK) (as the case may be) has been able to give the Secretary of State.

Cost allocation

If the Secretary of State exercises a Station Option, then with effect from the Option Effective Date (being the date of scheduled or early closure of a power station or in the latter case a short time thereafter, depending on the length of notice of closure BEG has provided to the Secretary of State) the Group will bear all the costs and expenses incurred as a result of operating the relevant power station and receive any payments and other benefits in relation to the operation of such power station in the period up to (but excluding) the Option Effective Date, and the Station Purchaser will bear all costs and expenses (and pay to the Group a reasonable margin as agreed on those costs and expenses) which are incurred and receive any payments and other benefits in relation to the operation of the relevant power station in the period after the Option Effective Date.

Specific cost allocation provisions require the Secretary of State to reimburse BEG or BEG (UK)’s costs if he terminates the acquisition of a power station having exercised an Option to Operate or Option to Decommission that power station. However, this costs reimbursement only applies to costs which are incurred solely as a result of the Secretary of State’s exercise of that option. In addition, this cost reimbursement provision does not apply in certain specified circumstances (namely, where the acquisition is terminated because of breach of warranty or completion obligation by BEG or BEG (UK) or where the completion conditions cannot be fulfilled). Where a Station Option is not exercised in respect of a power station or part of a power station, BEG or BEG (UK) as relevant, shall bear all the costs relating to such power station up to and including the closure date of the power station, and thereafter the costs and expenses relating to that station will be borne by the Secretary of State in accordance with and to the extent contemplated by the NLFA.

Where a Station Option is not exercised, costs relating to decommissioning will be dealt with under the NLFA.

Completion of a transfer of station following exercise of an option

The date of completion of the sale or transfer of the relevant power station following the exercise of a Station Option will be (unless otherwise agreed): (i) on the exercise of an Option to Decommission, the later of (a) 36 months after the exercise of the Station Option and (b) the scheduled closure date or early closure date (as the case may be) of the relevant power station; (ii) on the exercise of an Option to Operate (a) on the scheduled closure date or (b) early closure date of the relevant power station (where the same is more than 30 months after notice by BEG or BEG (UK) of the early closure date); and (c) in all other circumstances, no later than 36 months after the exercise of such an option.

The completion of the sale or transfer of a power station following exercise of a Station Option is conditional, primarily upon the licensing of the Station Purchaser to carry out the decommissioning or operation of the relevant power station, and other matters including the Station Purchaser obtaining all required consents and authorisations.

Station and station assets

The following assets will be passed to the Station Purchaser upon completion of the sale or transfer of an optioned power station: (i) plant and machinery; (ii) the benefit and burden of contracts

155

relating to the operation of the relevant power station current at the date of completion (certain contracts are excluded); (iii) intellectual property as is exclusively used, acquired for use, held for use or developed for use in connection with the relevant power station at the date of completion; (iv) certain nuclear fuel located and loaded into a reactor at the relevant power station; (v) stocks of consumable materials; (vi) certain large items of spare plant and machinery such as turbines, transformers, generators and pump and gas circular components located at the relevant power station (the Station Specific Spares); (vii) all allowances allocated to the relevant power station under any emissions trading scheme from time to time; and (viii) all other property, assets, and rights of Group companies used solely in connection with the operation of the relevant power station as at the completion date, excluding cash in hand or at bank, certain amounts recoverable for taxation, and intellectual property not exclusively used at the relevant power station.

Risk in the assets to be transferred to the Station Purchaser following the exercise of a Station Option passes on the Option Effective Date.

Except in the case of intellectual property transferring upon completion, BEG or BEG (UK), as relevant, will grant a non-exclusive, royalty-free and irrevocable license under all intellectual property relating to the relevant power station for the duration of the operation of that power station.

Certain assets are excluded from the sale (the “Excluded Assets”). These include: (i) nuclear fuel located at the relevant power station which has not been loaded into a reactor (“Excluded Fuel”), which may be separately purchased by the Station Purchaser; and (ii) any item of plant and machinery whose non-availability would potentially involve a loss of electricity generation at a power station over a certain threshold, and which is retained by the Group in relation to its fleet of power stations as a whole (“Strategic Spares”), which may also be separately requested by the Station Purchaser, provided that the Station Purchaser must promptly replace such equipment, and in certain circumstances, pay to BEG or BEG (UK) any net loss of revenue incurred by them in the period before the equipment was replaced.

Upon the commencement of the decommissioning of a power station which has transferred to the Station Purchaser under the Government Option Agreement, BEG or BEG (UK), as relevant, is entitled to remove certain equipment if required for use in power stations retained by the Group. If such equipment is later sold or loaned to a third party, BEG or BEG (UK) must pay the amount of consideration received by them from such sale or loan of the equipment to the Secretary of State.

In relation to the licensed power station site, the Government Option Agreement provides for the land within the existing security fence boundary and any additional land which is required by the Station Purchaser to either decommission or operate the relevant power station to be transferred to the Station Purchaser. Any portion of land which is not so required will remain with BEG or BEG (UK) as the case may be. Land outside the existing station security fence boundary which may be so transferred is to be transferred subject only to matters affecting it at the date of the agreement save for subsequent matters arising otherwise than by reason of the voluntary act of the Group or its successors in title. The agreement provides for certain rights (principally of access and provision of services) to be granted at the time of transfer of the land to the Secretary of State (or its nominated purchaser) over land owned by the Group. There are restrictions to protect those rights and the Secretary of State’s consent is required to any new, varied or supplemented property documents affecting the land which may be transferred as a result of the agreement.

Post completion contracts

On exercising a Station Option, the Secretary of State may also require BEG or BEG (UK) (as the case may be) to enter into a contract: (i) for the continued operation of the relevant power station after its scheduled/early closure date (providing ancillary services or the management and operation of the

156

station); or (ii) for the defueling of that power station. Where the Station Purchaser will carry out the decommissioning or continued operation of a power station following completion by itself, BEG or BEG (UK) may also be required to enter into ancillary services agreements with the Station Purchaser. The terms and conditions of these contracts are to be negotiated and agreed on an arms’ length basis guided by general principles set out in the Government Option Agreement, and agreement on the terms of these contracts, if to be entered into, is a precondition to completion of the sale or transfer of a power station.

The Government Option Agreement contemplates the application of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (the Regulations) in relation to the employees located at an optioned power station in the event of the sale or transfer of a power station and in the event of the termination of any of the post completion contracts referred to above (if any). Where the Regulations apply, the Station Purchaser will take responsibility for all employment costs which arise after the date of transfer, and the relevant Group company remains liable for all pre-transfer costs and liabilities. Bonus payments will be apportioned on a pro rata basis. If the Regulations trigger the transfer of any employee who is essential (e.g. for regulatory or safety reasons) for the continued operation of a station which remains with the Group, the Station Purchaser, if requested by the Group, is required to provide the services of that essential employee back to the relevant Group company on terms to be negotiated in good faith.

The Government Option Agreement provides for the arrangements in respect of the pensions of employees transferring to the Station Purchaser following the exercise of a Station Option to be addressed at a date closer to the relevant power station’s scheduled closure date. BEG and BEG (UK) have obligations to provide certain information regarding their pensions arrangements to the Secretary of State.

Excluded liabilities

The provisions of the Government Option Agreement are without prejudice to BEG or BEG (UK)’s right to extend or defer the scheduled or early closure date of a power station pursuant to the NLFA. Further, except in respect of the redundancy costs of power station employees and certain environmental liabilities relating to an optioned power station (see below for further detail), the rights of the Secretary of State or Station Purchaser in respect of BEG and BEG (UK)’s obligations to discharge, and indemnities given in respect of, the excluded liabilities under the NLFA or excluded liabilities under the HLFA are not affected by the Government Option Agreement. However, the Secretary of State is required to discharge, and indemnifies BEG, BEG (UK), British Energy Group plc and British Energy Holdings plc in respect of any incremental increases to the excluded liabilities which are caused by it (increased excluded liabilities).

In respect of environmental matters regarding an optioned power station, the Group’s obligations to discharge and indemnify the Secretary of State for the excluded liabilities as referred to above (whether under the NLFA or the Government Option Agreement) (the “BE Environmental Indemnification”) do not apply to certain environmental matters in relation to that power station which are first caused, arise or come into existence after the restructuring Effective Date as defined in the Government Option Agreement. The specific provisions and exceptions to this vary according to whether an Option to Operate or an Option to Decommission is exercised. The Secretary of State and Station Purchaser are obliged to mitigate any claim under the BE Environmental Indemnification in respect of environmental matters, and the BE Environmental Indemnification does not apply to environmental works carried out as part of the decommissioning of a power station.

In relation to the redundancy costs of employees who transfer with an optioned power station but are later dismissed by the Station Purchaser, the Government Option Agreement sets out the apportionment of redundancy costs to be borne by the Station Purchaser and BEG or BEG (UK) as the

157

case may be, based upon the periods of employment of the relevant employee by the Station Purchaser and by BEG or BEG (UK). The calculation of costs to be apportioned will take into account salary, any compensation payable under relevant legislation or any discretionary redundancy scheme relevant to the dismissed employee, and any entitlements to pension enhancements.

Indemnities

The Secretary of State agrees to provide indemnification to BEG, BEG (UK) and certain Group companies in respect of transferring employees, redundancy costs, failures to comply with the Regulations (in each of these situations, from the date on which the employment of such transferring employees transfers under the Regulations), and for any losses arising from the waiver of any condition to completion, increased excluded liabilities, and in respect of those environmental matters which are not subject to the BE Environmental Indemnification.

The Station Purchaser provides indemnification to BEG, BEG (UK) and certain Group companies for losses arising as a consequence of its communication with employees of a relevant power station in respect of the sale or transfer of a power station or proposed changes to such employees’ terms and conditions of employment.

BEG, BEG (UK), British Energy Group plc and British Energy Holdings plc agree to indemnify the Secretary of State or Station Purchaser for losses arising from debts, liabilities or obligations which are not expressly the responsibility of the Secretary of State or the Station Purchaser under the Government Option Agreement or other Nuclear Liabilities Agreements, excluded liabilities, the employment (or termination) of any transferring employee prior to the specified transfer time, any failure of those parties to comply with their obligations to consult with employees under the Regulations, any breach of the parties’ obligations to bear costs relating to the transferring employees prior to the specified transfer time and any other act or omission done by those parties in relation to any transferring employee on or before the specified transfer time.

In addition to corporate authority representations and warranties, certain warranties and representations are provided by BEG, BEG (UK), British Energy Group plc and British Energy Holdings plc in respect of the power station and assets to be transferred under the Government Option Agreement. The bringing of claims against BEG, BEG (UK), British Energy plc or British Energy Holdings plc by the Secretary of State or the Station Purchaser in respect of any of the warranties given by the Group under the Government Option Agreement are restricted unless written notice is provided to the relevant Group company on or prior to the second anniversary of the relevant completion date of the sale or transfer of the relevant power station.

Assignment

Each of BEG, BEG (UK), British Energy Group plc and British Energy Holdings plc may assign and transfer all or any part of its rights, benefits and obligations under the Government Option Agreement to a wholly-owned subsidiary of the Group or to the ultimate parent company of the Group if the assignee has a power station transferred to it by BEG or BEG (UK), holds all necessary regulatory consents and approvals, delivers to the Secretary of State a duly completed and executed deed of adherence in respect of the Government Option Agreement, has entered into a deed of adherence in respect of, and in accordance with the terms of, the NLFA, the Contribution Agreement and the HLFA, and has become an additional guarantor in accordance with the Guarantee and Indemnity described in paragraph (27) below.

Each of BEG, BEG (UK), British Energy Group plc and British Energy Holdings plc may also assign and transfer all or any part of its rights, benefits and obligations under the Government Option

158

Agreement to any person which is not a wholly-owned subsidiary or the ultimate parent company of the Group, but any such assignment or transfer must be effected pursuant to, and in accordance with, the provisions of the NLFA.

The Secretary of State may at any time assign all or any part of the benefit of their rights or benefits under the Government Option Agreement to their successors in title, a Minister of the Crown, the Treasury, a department, non-departmental body or other agency of the Crown, any body corporate established by statute some or all of the members of which are appointed by a Minister of the Crown or other government entity or any person directly or indirectly owned by, or held on trust for, the Secretary of State or other Minister of the Crown.

This provision came into effect on October 1, 2003 under the Government Restructuring Agreement, as set out above.

Restrictions

Certain restrictions are imposed on the Group during the option exercise periods, including the obligation on BEG and BEG (UK) to use all reasonable endeavours to operate the station in the ordinary course of its business and to comply with the Minimum Performance Standard as defined under the NLFA. BEG and BEG (UK) are also prohibited from carrying out certain matters (including (amongst others), the entry into certain contracts or commitments for capital expenditure (except where approved under the Contribution Agreement or NLFA), or granting security over the power stations without approval from the Secretary of State) or certain other actions which may affect the stations following transfer under the agreement) without the prior consent in writing of the Station Purchaser.

In addition, the Government Option Agreement imposes a general obligation upon BEG, BEG (UK), British Energy Group plc and British Energy Holdings plc to provide information and/or access to its records, employees or advisers, upon request, and in order to assist the Secretary of State in deciding whether or not to exercise a Station Option or Partial Closure Option. BEG and BEG (UK) are required to warrant the accuracy of some of the information which may be provided. This obligation to provide information on early station closure came into effect on October 1, 2003 pursuant to the Government Restructuring Agreement, as set out above.

Other clauses

The obligations of BEG, BEG (UK), British Energy Group plc and British Energy Holdings plc under the Government Option Agreement are guaranteed by the Material British Energy Group Companies under the Guarantee and Indemnity dated January 14, 2005.

Other general and boilerplate provisions came into effect on October 1, 2003 under the Government Restructuring Agreement, as set out above.

(27) Guarantee and Indemnity dated January 14, 2005 Between the Secretary of State, the NLF and the Guarantors (Being at the date of the Guarantee and Indemnity, the Companies set out in Schedule 1 thereof) (“Guarantee and Indemnity”).

Under the Guarantee and Indemnity, the Material New British Energy Group Companies (as defined) will guarantee to the NLF, the Secretary of State and any assignee or nominee of the Secretary of State (including without limitation any Station Purchaser) the obligations of the Licensees, British Energy Holdings plc and British Energy Group plc (or such other person as is from time to time the ultimate holding company of the Group) under or pursuant to each of the NLFA, HLFA, Contribution Agreement, Government Option Agreement and the DDP Debenture.

159

The Secretary of State may require that each member of the Group that is a Material Subsidiary become an additional guarantor. For these purposes, whilst the New Bonds are in issue, a Material Subsidiary is each member of the Group whose gross assets, turnover or profits is 5 per cent. or more of the consolidated assets, turnover or profits respectively of the Group. Thereafter, a Material Subsidiary is each member of the Group whose profits are 15 per cent. or more of the consolidated profits of the Group or whose gross assets are 15 per cent. or more of the consolidated gross assets of the Group.

Whilst the New Bonds are in issue, British Energy Group plc must procure that the gross assets, turnover and profits of all the guarantors under the Guarantee and Indemnity will at all times constitute in aggregate at least 90 per cent. of the consolidated gross assets, turnover and profits of the Group (excluding: (i) all assets relating to amounts receivable under the Nuclear Liabilities Agreements; (ii) EPL and EPHL; and (iii) BETS). In order to comply with this provision British Energy Group plc may elect, without the consent of the Secretary of State or NLF, to procure that any subsidiary accedes to be bound by the Guarantee and Indemnity as an additional guarantor.

British Energy Group plc (or such other person as is from time to time the ultimate holding company of the Group) may request that a guarantor ceases to be a guarantor under the Guarantee and Indemnity. If the guarantor is a material subsidiary, the Secretary of State may, in its sole and absolute discretion, accept or reject such request and if the guarantor is no longer a Material Subsidiary, the Secretary of State shall accept such request.

Each guarantor under the Guarantee and Indemnity undertakes, amongst other things, to provide certain information to the NLF and the Secretary of State and that it shall not enter into certain types of transactions or create certain security interests.

(28) Credit Agreement Originally dated July 13, 2000 as Amended and/or Restated on September 8, 2000, October 24, 2000, December 12, 2000, February 5, 2001 and on the Restatement Date (as Defined in the Amendment and Restatement Agreement) Between, amongst others, EPL, Barclays Bank plc as agent (“Agent”) and the Security Trustee (Security Trustee) and the Eggborough Banks (“Amended Credit Agreement”).

The provisions of the Amended Credit Agreement became effective on January 14, 2005.

Under the Amended Credit Agreement, the principal amount outstanding of the borrowing is restated to £150 million (the “Loan”).

The payment terms of the Loan match those under the £150 million 7 per cent. bonds that are to be held by EPL (the “CTA Bonds”). Consequently: (a) the Loan is repayable in 18 annual instalments (the first repayment was due on March 31, 2005 and the final repayment is scheduled for March 31, 2022); and (b) interest on the Loan is calculated at 7 per cent. per annum payable quarterly in arrears. EPL shall use the payments it receives under the CTA Bonds to meet its corresponding payment obligations under the Amended Credit Agreement.

The Amended Credit Agreement provides for:

(a) voluntary prepayment at EPL’s discretion (including prepayment to an Eggborough Bank to which EPL is required to make grossed-up payments); and

(b) mandatory prepayment in certain specified circumstances; these include:

(i) receipt by EPL of an early prepayment of principal under the CTA Bonds, in which case EPL is required to prepay an equal amount of the Loan in such a manner as to ensure that the payment profile of the CTA Bonds and the Amended Credit Agreement correspond after such prepayment;

160

(ii) it becoming unlawful for an Eggborough Bank to give effect to any of its obligations under the Amended Credit Agreement or to fund or maintain its participation in the Loan, in which case EPL is required to prepay that Eggborough Bank’s participation in the Loan; or

(iii) receipt by EPL of insurance proceeds over £10 million (other than those arising as a result of loss of availability of the Eggborough power station, consequential loss or third party liability), in which case EPL is required to prepay the instalments under the Loan in inverse order of maturity unless such proceeds are to be applied towards meeting the liability or loss giving rise to the relevant insurance claim (this requires the consent of the Majority Banks: (a) if the insurance proceeds are equal to or greater than £10 million but less than £30 million, acting reasonably and with regard to the advice of their technical adviser; or (b) if the insurance proceeds are equal to or greater than £30 million, such consent not to be unreasonably withheld or delayed).

EPL makes representations and warranties on the Restatement Date (as defined in the Amendment and Restatement Agreement) that are customary for a secured project finance facility. In addition EPL gives a series of undertakings which, amongst other things, relate to the running of the Eggborough power station and the financial condition of EPL (these include covenants in relation to: (a) the operation and maintenance of, and capital investment in, the Eggborough power station; (b) authorisations; (c) material contracts; (d) the granting of security and the making of loans; (e) borrowings and disposals; (f) compliance with laws; (g) environmental matters; (h) insurances; (i) mothballing; (j) employees; and (k) pensions). These undertakings are divided into two categories, namely those that remain in force until the earlier of March 31, 2010 and the date on which an Option is completed and those that remain in force so long as any amount may be outstanding under the Amended Credit Agreement and certain associated documents (the Finance Documents).

The events of default are divided into three categories: (a) payment default; (b) station defaults; and (c) residual defaults. Payment default refers to non-payment under a Finance Document that continues unremedied for 14 days. Station defaults relate to the Station and EPL and include: (a) non-payment under the New CTA summarised in paragraph (29) below; (b) breach of an undertaking; (c) misrepresentation; (d) cross-default; (e) breach or termination of a project contract; (f) nationalisation; (g) change of ownership; (h) failure to complete certain works at the Eggborough power station; (i) cessation of business; (j) failure to comply with certain pension provisions; and (k) insolvency.

Residual defaults are defaults occurring under the bonds that have not been remedied or waived by the Bond Trustee within 30 days of their occurrence.

On and at any time after the occurrence of an event of default that is continuing, the Agent (acting on the instructions of the Majority Banks) in the Amended Credit Agreement may accelerate the Loan, and the Security Trustee may either: (a) enforce the Eggborough Security (as defined in the Asset Option Agreement); or (b) exercise the Share Enforcement Option (as defined in the Share Option Agreement) or the Asset Enforcement Option(as defined in the Share Option Agreement). Once the Share Enforcement Option or the Asset Enforcement Option has been exercised, the Security Trustee may not enforce the Eggborough Security unless it is permitted to do so as a result of a failure by EPL to transfer its material assets in accordance with the Asset Option Agreement. Equally, once the Eggborough Security has been enforced, the Security Trustee may not exercise the Share Enforcement Option or the Asset Enforcement Option.

The Amended Credit Agreement permits any EPL Lender to assign, transfer or novate any part of its commitment and/or rights and/or obligations under the Finance Documents to:

(a) another bank or financial institution which is a qualifying bank for tax purposes; or

161

(b) to a limited company that is a qualifying bank for tax purposes, provided that:

(i) and for so long as, such company’s entire share capital is owned by banks and financial institutions;

(ii) such company has been established for the sole purpose of owning power generation assets in the United Kingdom; and

(iii) all other existing Eggborough Banks also transfer their rights and obligations under the Finance Documents and the Share Subscription Agreement.

Any such transfer, if of part of an EPL Lender’s commitment only, must be in a minimum amount of at least £5 million and EPL’s prior consent is required (not to be unreasonably withheld or delayed) unless the transferee is: (a) another Eggborough Bank or an affiliate of an Eggborough Bank; or (b) a bank, financial institution or other entity which is incorporated in an OECD Member Country.

(29) Capacity and Tolling Agreement dated September 30, 2004 between BEPET and EPL (the “New CTA”).

The provisions of the New CTA became effective on January 14, 2005 and continue to be in full force until the earlier of: (a) March 31, 2010; (b) the date on which an Option is completed; or (c) the date on which the New CTA terminates in accordance with its terms following the occurrence of an event of default.

Under the New CTA, EPL has agreed, amongst other things: (a) to operate the Eggborough power station as a reasonable and prudent operator and in accordance with BEPET’s instructions; (b) subject to certain limited exceptions, to make available to BEPET all the electricity generated at the Eggborough power station (the “Electricity”); (c) subject to, and in accordance with, the industry documents, to provide all reasonable assistance to BEPET in connection with the sale, trade or other disposal by BEPET of Electricity; (d) subject to, and in accordance with, the industry documents, to make available to BEPET any additional benefits (including emission allowances, levy exemption certificates and renewable obligations certificates); (e) to pay or procure the payment of any income or other receivables payable to it under certain revenue generating agreements to BEPET (including, in certain circumstances, the benefit of any insurance proceeds received by EPL under any business interruption insurances or any loss of profit insurances); and (f) to implement any measures that would result in cost savings at the Eggborough power station.

In turn, BEPET agrees to: (a) pay certain specified operating and maintenance costs and staff costs (including any claims made by employees or former employees for industrial disease or personal injury) of EPL as and when such costs become due and payable; (b) pay EPL’s corporation tax as and when such tax becomes due and payable; (c) to supply approved fuel to the Eggborough power station; and (d) fund the capital investments set out in a schedule agreed between EPL and BEPET (the Capital Investment Works Schedule). The maximum amount that BEPET is required to fund under the Capital Investment Works Schedule is approximately £70 million. BEPET has the option to fund the payments it is obliged to make in respect of corporation tax and capital investment works by way of a subscription for deferred shares in EPL.

The parties make customary representations and warranties on the date of the New CTA. In addition, the New CTA sets out a number of events of default, the occurrence of which entitles the non-defaulting party to terminate the New CTA. The events of default include: (a) the making of any order of a competent court or the passing of an effective resolution for winding up or dissolution of either party (subject to certain limited exceptions); (b) the initiation of proceedings under any applicable bankruptcy, reorganisation, composition or insolvency law by or against either party (subject to certain limited exceptions); (c) any steps are taken to accelerate the Loan, enforce the Eggborough Security or exercise a Share Enforcement Option or Asset Enforcement Option following an event of default under

162

the Amended Credit Agreement; (d) non-payment by either party of any amount due under the New CTA; (e) breach by either party of any of its material obligations under the New CTA; and (f) the making of a materially incorrect or misleading representation by either party.

Neither EPL nor BEPET shall be in breach of their respective obligations under the New CTA for so long as, and to the extent that, performance of such obligations continues to be prevented by Force Majeure (unless, in the case of BEPET only, such obligations relate to payment). Force Majeure is defined as an event the occurrence of which is beyond the control of the relevant party, acting as a reasonable and prudent operator, and: (a) in the case of EPL, which has a material effect upon the Eggborough power station or EPL’s ability to comply with its obligations under the New CTA; or (b) in the case of BEPET, which has a material effect upon BEPET’s ability to comply with its material obligations under the New CTA.

The New CTA prohibits both the parties from either assigning or transferring any of their rights or obligations without the prior written consent of the other party, provided that: (a) EPL may assign by way of security and/or charge any of its rights or transfer any of its obligations to the Security Trustee; and (b) BEPET may assign any of its rights or transfer any of its obligations to any of its affiliates with the prior consent of EPL (such consent not to be unreasonably withheld or delayed).

(30) Asset Option Agreement dated September 30, 2004 between EPL (“Seller”), Barclays Bank plc (as Agent and Security Trustee for the Finance Parties) (“Buyer”) and BEPET (the “Asset Option Agreement”).

The provisions of the Asset Option Agreement became effective on January 14, 2005.

Under the Asset Option Agreement, in consideration for £2,500,000, the Seller irrevocably grants to the Buyer: (a) an option to buy the business and the Eggborough power station (the Station Assets) on March 31, 2010 (the “Asset Break Option”); and (b) an option to buy the Station Assets at any time after an event of default has occurred and is continuing under the Amended Credit Agreement but prior to August 31, 2009 (the “Asset Enforcement Option” and together with the Asset Break Option, the “Asset Options”).

The provisions of the Asset Option Agreement shall terminate on the earlier of: (a) the exercise of a Share Option; (b) the enforcement of the Eggborough Security; (c) April 1, 2010; or (d) otherwise with the agreement of all parties (unless, in each case, an Asset Option has been exercised (and not subsequently revoked) or a clause of the Asset Option Agreement is expressed to survive such termination).

The Buyer may exercise:

(a) the Asset Break Option (in whole and not in part), by delivery of a notice to the Seller at any time after January 14, 2005 but prior to August 31, 2009, provided that no such notice may be delivered after:

(i) the Asset Enforcement Option has been exercised;

(ii) a Share Option has been exercised; or

(iii) the Eggborough Security has been enforced; or

(b) the Asset Enforcement Option (in whole and not in part), by delivery of a notice to the Seller at any time after an event of default has occurred and is continuing under the Amended Credit Agreement but prior to August 31, 2009, provided that no such notice may be delivered after:

(i) the Asset Break Option has been exercised;

(ii) a Share Option has been exercised; or

(iii) the Eggborough Security has been enforced.

163

The Buyer may not revoke a notice to exercise an Asset Option unless: (a) it has the prior written consent of the Seller; or (b) a Frustration Event (as defined in the Asset Option Agreement) has occurred and is continuing and the Majority Banks have voted to enforce Eggborough Security. A Frustration Event is defined as: (a) a nationalisation or similar type of event of default under the Amended Credit Agreement; (b) the destruction of all, or a material part of, the Eggborough power station; or (c) in respect of the Asset Break Option only, at any time after August 31, 2009 but prior to March 31, 2010, a breach by the Seller of certain specified covenants under the Amended Credit Agreement that has resulted in a reduction in the value of the Eggborough power station taken as a whole (as compared against the aggregate value of the Eggborough power station as at August 31, 2009) in excess of £104 million and provided that such event has been notified by the Buyer to the Seller no later than one calendar month prior to March 31, 2010 and confirmed by certain experts.

The consideration payable by the Buyer for the Station Assets on exercise of the Asset Break Option shall consist of:

(a) an amount (if any) representing the benefit to the Eggborough Banks after the completion date of any capital expenditure at the Eggborough power station over and above that which BEPET is required to fund under the New CTA (the “Additional Capital Expenditure Amount”); and

(b) a fee consisting of £104 million and an amount equal to all early repayments of principal made under the Amended Credit Agreement prior to the completion date (the “Break Fee”).

The Break Fee is subject to a deduction of an amount (if any) that certain experts determine is necessary to reflect the material loss of value in the Eggborough power station as a result of the Seller’s failure to comply with certain specified covenants under the Amended Credit Agreement.

The consideration payable by the Buyer for the Station Assets on exercise of the Asset Enforcement Option shall consist of:

(a) the Additional Capital Expenditure Amount (if any);

(b) an enforcement fee (the “Enforcement Fee”) consisting of:

(i) if the Asset Enforcement Option has been exercised as a result of a payment default or station default under the Amended Credit Agreement, £1.00, or otherwise the amount set out in a schedule of the Asset Option Agreement; and

(ii) an amount equal to all early repayments of principal made under the Amended Credit Agreement prior to the completion date; and

(c) a redemption fee, which shall be the amount (if any) by which:

(i) the proceeds of the sale of the Station Assets by the Eggborough Banks (such proceeds may be real or notional depending on whether the Station Assets have been sold at the time of calculation) less the Enforcement Fee; exceed

(ii) (x) £267.3 million plus all EPL Swap Crystallised Liabilities (as defined in Schedule 3 to the Creditor Restructuring Agreement) calculated as being due from EPL in respect of the termination of all Swap Agreements (as defined in schedule 3 to the Creditor Restructuring Agreement) on the earlier of: (1) October 20, 2004; and (2) the Restatement Date (as defined in the Amendment and Restatement Agreement) less (y) an amount equal to the middle market quotation for ordinary shares in British Energy Group plc on the date the Asset Enforcement Option is to be completed multiplied by the number of ordinary shares issued to the Eggborough Banks on January 14, 2005 (together with interest on such amount).

164

In addition, on the date an Asset Option is completed, the Buyer shall deliver to the Seller evidence that: (a) all the liabilities under the Finance Documents have been fully and irrevocably discharged; and (b) the Eggborough Security has been fully and irrevocably released.

If following the exercise of an Asset Option, the Seller fails to transfer title to the material Station Assets within 5 business days, or if the Seller is actively assisting the Buyer with such transfer 30 business days after the completion date, the Buyer shall be entitled to exercise its right to accelerate the outstandings under the Amended Credit Agreement and enforce the Eggborough Security and have a liquidated damages claim.

Within 30 business days of completion of an Asset Option, BEPET shall sell and the Buyer shall buy any fuel stored at the Eggborough power station that is approved for burning at the Eggborough power station by an expert. The consideration payable by the Buyer for such fuel shall be: (a) if the Asset Break Option has been exercised, an amount equal to the book value of such fuel as recorded in the accounting records of BEPET in accordance with generally accepted accounting principles in the United Kingdom; or (b) if the Asset Enforcement Option has been exercised, an amount equal to the then applicable market value of such fuel (taking into account the cost of delivering fuel equivalent to that stored at the Eggborough power station) as agreed between the Buyer and the Seller, or, if they cannot agree, as determined by an expert.

Subject to certain exceptions relating to Station contracts, employees, pensions, the environment, permits and tax, following completion of an Asset Option, the Seller shall remain responsible, and indemnify the Buyer, for all pre-completion date liabilities and the Buyer shall be responsible, and indemnify the Seller, for all post-completion date liabilities. In addition, the Asset Option Agreement also contains provisions relating to the release of collateral provided by the British Energy Group.

No party may (nor purport to) assign or transfer, or declare a trust for the benefit of, or in any other way dispose of any of its rights under the Asset Option Agreement, in whole or in part, without having first obtained the other parties’ prior written consent save that:

(a) the Seller shall be entitled to assign and/or transfer all (but not part only) of its rights under the Asset Option Agreement by way of security for the Second Intercompany Loan Agreement; and

(b) the Buyer shall be entitled to assign and/or transfer all (but not part only) of its rights under the Asset Option Agreement to a third party, subject to a preemption right in favour of the Seller under which the Seller may purchase such rights at 105 per cent. of the price offered by the relevant third party.

(31) Share Option Agreement dated September 30, 2004 and made Between EPHL (“Seller”), Barclays Bank plc (as Agent and Security Trustee for the Finance Parties) (“Buyer”), EPL and BEPET (the “Share Option Agreement”).

The provisions of the Share Option Agreement became effective on January 14, 2005.

Under the Share Option Agreement, in consideration for £2,500,000, the Seller irrevocably grants to the Buyer: (a) an option to buy all the shares in EPL (the “Shares”) on March 31, 2010 (the “Share Break Option”); and (b) an option to buy the Shares at any time after an event of default has occurred and is continuing under the Amended Credit Agreement but prior to August 31, 2009 (the “Share Enforcement Option” and together with the Share Break Option the “Share Options”).

The provisions of the Share Option Agreement shall terminate on the earlier of: (a) the exercise of an Asset Option; (b) the enforcement of the Eggborough Security; (c) April 1, 2010; and (d) otherwise with the agreement of all parties (unless, in each case, a Share Option has been exercised (and not subsequently revoked) or a clause of the Share Option Agreement is expressed to survive such termination).

165

The Buyer may exercise:

(a) the Share Break Option (in whole and not in part), by delivery of a notice to the Seller at any time after January 14, 2005 but prior to August 31, 2009, provided that no such notice may be delivered after (i) the Share Enforcement Option has been exercised; (ii) an Asset Option has been exercised; or (iii) the Eggborough Security has been enforced; or

(b) the Share Enforcement Option (in whole and not in part), by delivery of a notice to the Seller at any time after an event of default has occurred and is continuing under the Amended Credit Agreement but prior to August 31, 2009, provided that no such notice may be delivered after:

(i) the Share Break Option has been exercised;

(ii) an Asset Option has been exercised; or

(iii) the Eggborough Security has been enforced.

The Buyer may not revoke a notice to exercise a Share Option unless: (a) it has the prior written consent of the Seller; or (b) a Frustration Event has occurred and is continuing and the Majority Banks have voted to enforce the Eggborough Security. A Frustration Event is defined as: (a) a nationalisation or similar type of event of default under the Amended Credit Agreement; (b) the destruction of all, or a material part of, the Eggborough power station; or (c) in respect of the Share Break Option only, at any time after August 31, 2009 but prior to March 31, 2010, a breach by the Company of certain specified covenants under the Amended Credit Agreement that has resulted in a reduction in the value of the Eggborough power station taken as a whole (as compared against the aggregate value of the Eggborough power station as at August 31, 2009) in excess of £104 million and provided that such event has been notified by the Buyer to the Seller no later than one calendar month prior to March 31, 2010 and confirmed by certain experts. The consideration payable by the Buyer for the Shares on, or in certain circumstances after, completion of the Share Break Option shall consist of:

(a) an amount (if any) representing the benefit to the Eggborough Banks after the completion date of any capital expenditure at the Eggborough power station over and above that which BEPET is required to fund under the New CTA (the “Additional Capital Expenditure Amount”); and

(b) a break fee consisting of a £104 million fee and an amount equal to all early repayments of principal made under the Amended Credit Agreement prior to the completion date (the “Break Fee”).

The Break Fee is subject to a working capital adjustment and a deduction of an amount (if any) which certain experts determine is necessary to reflect the material loss of value in the Eggborough power station as a result of EPL’s failure to comply with certain specified covenants under the Amended Credit Agreement. The consideration payable by the Buyer for the Shares on exercise of the Share Enforcement Option shall consist of:

(a) the Additional Capital Expenditure Amount (if any);

(b) an enforcement fee consisting of:

(i) if the Share Enforcement Option has been exercised as a result of a payment default or station default under the Amended Credit Agreement, £1.00, otherwise the amount set out in a schedule of the Share Option Agreement; and

(ii) an amount equal to all early repayments of principal made under the Amended Credit Agreement prior to the completion date (the “Enforcement Fee”); and

(c) a redemption fee, which shall be the amount (if any) by which:

(i) the proceeds of the sale of the Shares by the Eggborough Banks (such proceeds may be real or notional depending on whether the Shares have been sold at the time of

166

calculation and may include any proceeds of the sale of any assets of EPL prior to the disposal of the Shares) less the Enforcement Fee; exceed

(ii) (x) £267.3 million plus all EPL Swap Crystallised Liabilities (as defined in schedule 3 to the Creditor Restructuring Agreement dated as of September 30, 2003 (as amended)) calculated as being due from EPL in respect of the termination of all Swap Agreements (as defined in schedule 3 to the Creditor Restructuring Agreement) on October 20, 2004 less (y) an amount equal to the middle market quotation for ordinary shares in British Energy Group plc on the date the Share Enforcement Option is to be completed multiplied by the number of ordinary shares issued to the Eggborough Banks on the January 14, 2005 (together with interest on such amount).

In addition, on the date a Share Option is completed, the Buyer shall deliver to the Seller evidence that: (a) all the liabilities under the Finance Documents have been fully and irrevocably discharged; and (b) the Eggborough Security has been fully and irrevocably released.

If following the exercise of a Share Option, the Seller fails to transfer title to the Shares within 5 business days, or if the Seller is actively assisting the Buyer with such transfer 30 business days after the completion date, the Buyer shall be entitled to exercise its right to accelerate the outstandings under the Amended Credit Agreement and enforce the Eggborough Security and have a liquidated damages claim.

Within 30 business days of completion of a Share Option, BEPET shall sell and the Buyer shall buy any fuel stored at the Eggborough power station that is approved for burning at the Eggborough power station by an expert. The consideration payable by the Buyer for such fuel shall be: (a) if the Share Break Option has been exercised, an amount equal to the book value of such fuel as recorded in the accounting records of BEPET in accordance with generally accepted accounting principles in the United Kingdom; or (b) if the Share Enforcement Option has been exercised, an amount equal to the then applicable market value of such fuel (taking into account the cost of delivering fuel equivalent to that stored at the Eggborough power station) as agreed between the Buyer and the Seller, or, if they cannot agree, as determined by an expert.

The Share Option Agreement also contains provisions relating to the release of collateral provided by the British Energy Group and the transfer of certain pension obligations.

No party may (nor purport to) assign or transfer, or declare a trust of the benefit of, or in any other way dispose of any of its rights under the Share Option Agreement, in whole or in part, without having first obtained the other parties’ prior written consent, save that:

(a) the Seller shall be entitled to assign and/or transfer all (but not part only) of its rights under the Share Option Agreement by way of security for the First Intercompany Loan Agreement (between British Energy Holdings plc and EPHL); and

(b) the Buyer shall be entitled to assign and/or transfer all (but not part only) of its rights under the Share Option Agreement to a third party, subject to a preemption right in favour of the Seller under which the Seller may purchase such rights at 105 per cent. of the price offered by the relevant third party.

(32) Debenture dated September 30, 2004 Between EPL, BEPET, EPHL and the Security Trustee (the “New Debenture”).

The provisions of the New Debenture became effective on January 14, 2005.

Under the New Debenture, EPL grants:

(a) first ranking security for the benefit of the Eggborough Banks, BEPET and EPHL over all its assets (by way of first legal mortgages, first fixed charges (including over the CTA Bonds held

167

by EPL), assignments or first floating charges) other than the moneys standing to the credit of the Revenue Account and the Asset Option Account (as defined in the Accounts Agreement);

(b) first fixed and floating charges over the Revenue Account for the benefit of BEPET;

(c) second fixed and floating charges over the Revenue Account for the benefit of the Eggborough Banks;

(d) a first fixed charge over the Asset Option Account for the benefit of EPHL; and

(e) a second floating charge over the Asset Option Account for the benefit of the Eggborough Banks.

The security granted under the New Debenture secures:

(a) in favour of the Eggborough Banks, all obligations of EPL and EPHL due to the Eggborough Banks under the Finance Documents;

(b) in favour of BEPET, all obligations of EPL under the New CTA; and

(c) in favour of EPHL, all obligations of EPL under the Second Intercompany Loan,

except, in each case, for any obligation which, if it were so included, would result in the New Debenture constituting unlawful financial assistance under s. 151 and/or s. 152 of the Companies Act (paragraphs (a), (b) and (c) together, the “Liabilities”).

The New Debenture shall be discharged on the date when the Security Trustee is satisfied that all Liabilities have been unconditionally and irrevocably paid in full.

In addition, EPL grants the Security Trustee the right to exercise all its rights and powers under the CTA Bonds, provided that all payments received under the CTA Bonds are paid into the CTA Bond Account (as defined in the Accounts Agreement) save to the extent otherwise required under the Amended Intercreditor Agreement.

The New Debenture is expressed to be subject to the terms and conditions of the Amended Intercreditor Agreement and the Share Subscription Agreement and the security constituted by the New Debenture is expressed to be subject to the security constituted by the Existing Debenture.

The security constituted by the New Debenture becomes immediately enforceable upon the occurrence and continuance of an event of default under the Amended Credit Agreement.

(33) Deed of Assignment and Mortgage dated September 30, 2004 Between EPHL and the Security Trustee (“EPHL Security Document”).

The provisions of the EPHL Security Document became effective on January 14, 2005.

Under the EPHL Security Document, EPHL grants security in favour of the Eggborough Banks:

(a) an assignment and a first fixed charge over EPHL’s rights under the Share Purchase Agreement and the Tax Deed of Covenant on substantially the same terms as under the EPHL Assignment; and

(b) a first equitable mortgage and a first fixed charge over the shares in EPL, and all rights relating to such shares, on substantially the same terms as under the Shares Pledge.

The security granted by EPHL in favour of the Eggborough Banks under the EPHL Security Document secures all obligations of EPL and EPHL to the Eggborough Banks under the Finance

168

Documents (except for any obligation which, if it were so included, would result in the provision of unlawful financial assistance by EPHL (the “Secured Obligations”)).

The security interests created under the EPHL Security Document shall be discharged on the date when the Security Trustee, acting reasonably, is satisfied that the Secured Obligations have been unconditionally and irrevocably paid in full.

The EPHL Security Document is expressed to be subject to the terms and conditions of the Amended Intercreditor Agreement and the Share Subscription Agreement and the security constituted by the EPHL Security Document is expressed to be subject to the security constituted by the EPHL Assignment and the Shares Pledge.

The security constituted by the EPHL Security Document becomes immediately enforceable upon the occurrence and continuance of an event of default under the Amended Credit Agreement.

(34) The Intercreditor Agreement Originally dated September 8, 2000 as Amended and Restated on or about the Restatement Date Between EPL, EPHL, BEPET and the Eggborough Banks (“Amended Intercreditor Agreement”).

The provisions of the Amended Intercreditor Agreement became effective on January 14, 2005.

Under the Amended Intercreditor Agreement, the parties agree that:

(a) the liabilities owed to the Eggborough Banks under the Finance Documents (the “Senior Debt”) shall rank ahead of the liabilities owed to EPHL under the Second Intercompany Loan (the “Subordinated Debt”), provided that EPHL’s right to prepayment of the Subordinated Debt out of amounts owed to EPL under the Asset Option Agreement shall rank ahead of the Senior Debt; and

(b) at any time while BEPET is not in default of its payment obligations under the New CTA, the liabilities owed to BEPET under the New CTA (the “New CTA Debt”) and the Senior Debt shall rank equally; and at any time while BEPET is in default of its payment obligations under the New CTA, the Senior Debt shall rank ahead of the New CTA Debt.

The Amended Intercreditor Agreement sets out the payments that EPL may make in respect of each of the Senior Debt, the Subordinated Debt and the New CTA Debt and requires the parties to turnover non-permitted payments to the Security Trustee for application in accordance with the Amended Intercreditor Agreement.

Following enforcement of the Eggborough Security:

(a) in the event that all the shares in, or all the assets of, EPL are sold within 12 months of such enforcement, the net amount recovered from such sale shall be determined within 15 business days of the sale date; or

(b) in the event that all the shares in, or all the assets of, EPL are not sold within 12 months of such enforcement, the value of the Eggborough power station shall be determined by an expert on the date falling 12 months after such enforcement,

(the “Ascertained Security Value”).

As of the date that the Ascertained Security Value is determined (the “Determination Date”), the Finance Parties Percentage and the EPHL Percentage shall be calculated.

The Finance Parties Percentage shall equal ((the outstandings under the CTA Bonds—the Ascertained Security Value) / the outstandings under the CTA Bonds) x one hundred (100), as

169

calculated on the Determination Date, provided that if the Ascertained Security Value is equal to or greater than the outstandings under the CTA Bonds on the Determination Date, the Finance Parties Percentage shall equal zero (0).

The EPHL Percentage shall equal (the Ascertained Security Value / the outstandings under the CTA Bonds) x one hundred (100), as calculated on the Determination Date, provided that if the Ascertained Security Value is equal to or greater than the outstandings under the CTA Bonds on the Determination Date, the EPHL Percentage shall equal one hundred (100).

The proceeds of enforcement of the security interests conferred by the Eggborough Security over the CTA Bonds (the “CTA Bond Security”) shall be applied in the following order:

(a) first, towards the payment of any unpaid fees, costs and expenses of the Security Trustee and/or any receiver, attorney or agent appointed under the Eggborough Security to the extent such fees, costs and/or expenses relate to the enforcement of the CTA Bond Security;

(b) second:

(i) up to and including the date on which the Ascertained Security Value is determined, to an escrow account in the name of the Bond Trustee pending application in accordance with paragraph (ii) below; and

(ii) from (but excluding) the Determination Date, in payment to the Eggborough Banks for application in or towards the Senior Debt and EPHL in or towards payment of the Subordinated Debt in the following proportions:

(1) the Eggborough Banks shall receive an amount of any such proceeds that is equal to such proceeds multiplied by the Finance Parties Percentage; and

(2) EPHL shall receive an amount of any such proceeds equal to such proceeds multiplied by the EPHL Percentage.

The proceeds of enforcement of the security interests conferred by the Second Security Assignment shall be paid to EPHL for application in or towards payment of the Subordinated Debt.

The proceeds of enforcement of the security interests conferred by the Eggborough Security over amounts owed to EPL under the Asset Option Agreement shall be applied in the following order:

(a) first, towards the payment of any unpaid fees, costs and expenses of the Security Trustee and/or any receiver, attorney or agent appointed under the Eggborough Security to the extent such fees, costs and/or expenses relate to the enforcement of the Asset Option Security;

(b) second, to EPHL for application in or towards payment of the Subordinated Debt;

(c) third, the payment of the surplus (if any) to EPL, EPHL or any other person entitled to it.

The proceeds of enforcement of the security interests conferred by the Eggborough Security over amounts owed to EPL pursuant to certain revenue generating agreements (the “Revenue Security”) shall be applied in the following order:

(a) first, towards the payment of any unpaid fees, costs and expenses of the Security Trustee and/or any receiver, attorney or agent appointed under the Eggborough Security to the extent such fees, costs and/or expenses relate to the enforcement of the Revenue Security;

(b) second:

(i) at any time while BEPET is not in default of its payment obligations under the New CTA:

(1) first, in payment to BEPET for application in or towards payment of the New CTA Debt; and

170

(2) second, in payment to the Eggborough Banks for application in or towards payment of the Senior Debt; or

(ii) at any time while BEPET is in default of its payment obligations under the New CTA:

(1) first, in payment to the Eggborough Banks for application in or towards payment of the Senior Debt; and

(2) second, in payment to the BEPET for application in or towards payment of the New CTA Debt; and

(c) third, in payment of the surplus (if any) to EPL, EPHL or any other person entitled to it.

The proceeds of enforcement of the security interests conferred by the Eggborough Security over any assets of EPL not subject to the CTA Bond Security, the Asset Option Security or the Revenue Security (the “General Security”) shall be applied by the Security Trustee in the following order:

(a) first, towards the payment of any unpaid fees, costs and expenses of the Security Trustee and/or any receiver, attorney or agent appointed under the Eggborough Security to the extent such fees, costs and/or expenses relate to the enforcement of the General Security;

(b) second, in or towards payment (to the extent they are, under the Finance Documents, payable) of any costs and expenses of any Finance Party;

(c) third, in payment to the Finance Parties for application in or towards payment of the Senior Debt;

(d) fourth, in payment to BEPET for application in or towards payment of the New CTA Debt;

(e) fifth, in payment to EPHL for application in or towards payment of the Subordinated Debt; and

(f) sixth, the payment of any surplus (if any) to EPL, EPHL or any other person entitled to it.

The Security Trustee shall exercise its rights in accordance with:

(a) prior to the date on which the Senior Debt has been unconditionally paid and discharged in full, the instructions given to it by the Agent (acting on the instructions of the Majority Banks), unless and to the extent that:

(i) any matter relates to the Subordinated Debt, in which case the Security Trustee shall act on the instructions of EPHL; or

(ii) any matter relates to the New CTA Debt and provided that BEPET is not in default of its payment obligations under the New CTA, in which case the Security Trustee shall act on the instructions of BEPET; or

(b) post the date on which the Senior Debt has been unconditionally paid and discharged in full, the Security Trustee shall act on the instructions of EPHL and BEPET.

The Agent and the Eggborough Banks may not give the Security Trustee instructions to enforce the Eggborough Security following the exercise of an Option other than where the enforcement of the Eggborough Security is as a result of:

(a) EPHL failing to transfer the shares in EPL in default of its obligations under the Share Option Agreement; or

(b) EPL failing to transfer its assets in default of its obligations under the Asset Option Agreement.

The Security Trustee is prohibited from releasing any Asset Option Security, CTA Bond Security or Revenue Security in favour of EPHL or BEPET without the prior written consent of EPHL and BEPET.

171

(35) Amendment and Restatement Agreement dated September 30, 2004 Between, amongst others, the Agent, the Security Trustee and the Eggborough Banks Amending and Restating the Credit Agreement Originally dated July 13, 2000 and the Intercreditor Agreement Originally dated September 8, 2000 (“Amendment and Restatement Agreement”).

This agreement amends and restates the terms of:

(a) the Eggborough Credit Agreement on the same terms as the Amended Credit Agreement; and

(b) the intercreditor agreement dated September 8, 2000 (the “Existing Intercreditor Agreement”) on the same terms as the Amended Intercreditor Agreement.

The amending and restatement of the Eggborough Credit Agreement and the Existing Intercreditor Agreement occurred on January 14, 2005, the date on which the CTA Bonds were sold to the Borrower pursuant to the Second Intercompany Loan (the “Restatement Date”).

Under the Amendment and Restatement Agreement, the Eggborough Banks agree that, from the Restatement Date:

(a) the exception in the definition of Secured Senior Liabilities in the Existing Debenture in respect of unlawful financial assistance under Sections 151 and 152 of the Companies Act includes, without limitation, any obligation of EPHL under the Share Option Agreement;

(b) the Security Trustee may only convert a floating charge created by the Existing Debenture into a fixed charge in circumstances where it may convert a floating charge created under the New Debenture into a fixed charge;

(c) the Borrower shall not be in breach of any representation or warranty given under the Existing Debenture unless it would be in breach of a corresponding representation or warranty under the New Debenture;

(d) the Borrower shall not be in breach of any covenant in the Existing Debenture unless it would be in breach of a corresponding covenant in the New Debenture and EPL is not obliged to comply with any covenants in the Existing Debenture that are more onerous than the covenants in the New Debenture;

(e) notwithstanding any provision in the Existing Debenture to the contrary, the Borrower may deal with the Relevant Agreements (as defined in the New Debenture) (and any payments thereunder) in the manner set out in the New Debenture;

(f) the Security Trustee may only enforce the security constituted by the Existing Debenture in circumstances where the Security Trustee has the right to enforce the security constituted by the New Debenture;

(g) the exceptions under the New Debenture as to when the Security Trustee may redeem any prior security interest, procure the transfer of a security interest to itself or settle and pass the accounts of a prior mortgagee, chargee or encumbrancer shall apply to the corresponding provisions of the Existing Debenture;

(h) the Security Trustee or any receiver appointed under the Existing Debenture shall not be entitled to exercise any rights, powers or discretions over and above those granted to the Security Trustee or any receiver appointed under the New Debenture;

(i) any moneys received by the Security Trustee or any Receiver under or pursuant to the Existing Debenture shall be applied in accordance with the Amended Intercreditor Agreement;

(j) the Borrower shall not be in breach of any representation or warranty given under the Shares Pledge or EPHL Assignment unless it would be in breach of a corresponding representation or warranty under the EPHL Security Document;

172

(k) the Borrower shall not be in breach of any covenant in the Shares Pledge or EPHL Assignment unless it would be in breach of a corresponding covenant in the EPHL Security Document and EPL is not obliged to comply with any covenants in the Shares Pledge or EPHL Assignment that are more onerous than the covenants in the EPHL Security Document;

(l) the Security Trustee may only enforce the security constituted by the Shares Pledge or the EPHL Assignment in circumstances where the Security Trustee has the right to enforce the security constituted by the EPHL Security Document;

(m) the exceptions under the EPHL Security Document as to when the Security Trustee may redeem any prior security interest, procure the transfer of a security interest to itself or settle and pass the accounts of a prior mortgagee, chargee or encumbrancer shall apply to the corresponding provisions of the Shares Pledge and the EPHL Security Assignment;

(n) the Security Trustee or any receiver appointed under the Shares Pledge or the EPHL Assignment shall not be entitled to exercise any rights, powers or discretions over and above those granted to the Security Trustee or any receiver appointed under the EPHL Security Document; and

(o) any moneys received by the Security Trustee or any Receiver under or pursuant to the Shares Pledge or the EPHL Security Assignment shall be applied in accordance with the Amended Intercreditor Agreement.

(36) First Security Assignment dated September 30, 2004 Between EPHL and British Energy Holdings plc (“First Security Assignment”).

The provisions of the First Security Assignment became effective on January 14, 2005.

Under the First Security Assignment, EPHL shall assign to British Energy Holdings plc by way of security for the repayment of the First Intercompany Loan its rights under (a) the Share Option Agreement; (b) the Second Intercompany Loan; (c) the Second Security Assignment; and (d) the Amended Intercreditor Agreement.

British Energy Holdings plc shall be entitled to enforce the security created under the First Security Assignment on the earlier of (a) the date on which British Energy Holdings plc demands repayment under the First Intercompany Loan; and (b) the date on which EPHL is required to make a prepayment under the First Intercompany Loan.

The First Security Assignment shall permit British Energy Holdings plc to assign and/or transfer all or any of its rights and obligations but prohibit EPHL from doing the same.

(37) Second Security Assignment dated on September 30, 2004 between EPL and EPHL (“Second Security Assignment”).

The provisions of the Second Security Assignment became effective on January 14, 2005.

Under the Second Security Assignment, EPL shall assign to EPHL by way of security for the repayment of the Second Intercompany Loan its rights under (a) the Asset Option Agreement; and (b) the Amended Intercreditor Agreement.

EPHL shall be entitled to enforce the security created under the First Security Assignment on the earlier of (a) the date on which EPHL demands repayment under the Second Intercompany Loan; and (b) the date on which EPL is required to make a prepayment under the Second Intercompany Loan.

The Second Security Assignment shall permit EPHL to assign and/or transfer all or any of its rights and obligations but prohibit EPL from doing the same.

173

(38) Share Subscription Agreement dated September 30, 2004 Between EPL, EPHL, British Energy Group plc, British Energy Holdings plc and Barclays Bank (“Share Subscription Agreement”).

The provisions of the Share Subscription Agreement became effective on the Restatement Date (as defined in the Amendment and Restatement Agreement).

Under the Share Subscription Agreement:

(a) immediately after EPL ceases to hold the CTA Bonds as a result of completion of an Asset Option, all the CTA Bonds shall be sold to British Energy Holdings plc by the holder of the CTA Bonds at such time (the CTA Bondholder) in consideration for the issue of deferred shares by British Energy Holdings plc to the CTA Bondholder;

(b) immediately after EPHL ceases to hold the shares in EPL as a result of completion of a Share Option, all the CTA Bonds shall be sold to British Energy Holdings plc by EPL in consideration for the issue of deferred shares by British Energy Holdings plc to EPL;

(c) immediately after EPL ceases to hold the CTA Bonds as a result of enforcement of all or any part of the security constituted by the Existing Debenture and/or the New Debenture:

(i) if the Ascertained Security Value is equal to or greater than the amount outstanding under the CTA Bonds, all the CTA Bonds shall be sold to British Energy Holdings plc by the CTA Bondholder in consideration for the issue of deferred shares by British Energy Holdings plc to the CTA Bondholder; or

(ii) if the Ascertained Security Value is less than the amount outstanding under the CTA Bonds, CTA Bonds in an amount equal to the Ascertained Security Value shall be sold to British Energy Holdings plc by the CTA Bondholder in consideration for the issue of deferred shares by British Energy Holdings plc to the CTA Bondholder;

(d) in the event that EPHL ceases to own the shares in EPL on or at any time before the Determination Date as a result of the enforcement of all or any part of the security constituted by the Shares Pledge or the EPHL Security Document, then immediately after the Determination Date:

(i) if the Ascertained Security Value is equal to or greater than the amount outstanding under the CTA Bonds, all the CTA Bonds shall be sold to British Energy Holdings plc by EPL in consideration for the issue of deferred shares by British Energy Holdings plc to EPL; or

(ii) if the Ascertained Security Value is less than the amount outstanding under the CTA Bonds, CTA Bonds in an amount equal to the Ascertained Security Value shall be sold to British Energy Holdings plc by EPL in consideration for the issue of deferred shares by British Energy Holdings plc to EPL;

(e) in the event that EPHL ceases to hold the shares in EPL following completion of a Share Option, any sums owed by EPHL to EPL under the Existing Intercompany Loan at such time shall be set-off against any sums owed by EPL to EPHL under the Second Intercompany Loan at such time and, immediately after such set-off, EPHL shall issue to EPL at par such number of deferred shares in EPHL as have an issue price equal to the outstandings under the Existing Intercompany Loan following such set-off and in consideration therefor EPL shall accept that the remaining outstandings under the Existing Intercompany Loan have been repaid by EPHL; and

(f) in the event that EPHL ceases to own the shares in EPL on or at any time before the Determination Date as a result of the enforcement of all or any part of the security constituted by the Shares Pledge or the EPHL Security Document, then immediately after the Determination

174

Date EPHL shall issue to EPL at par such number of deferred shares in EPHL as have an issue price equal to all amounts outstanding under the Existing Intercompany Loan at such time and in consideration therefor EPL shall accept that all amounts outstanding under the Existing Intercompany Loan at such time have been repaid by EPHL.

The deferred shares referred to in the paragraphs above shall be shares each with a nominal value of £1.00 issued with no voting rights on the following terms:

(a) on return of capital, a right to the return of the amount paid up only and no right to share in the surplus;

(b) the return of the amount paid up to be deferred until the return on each other share in British Energy Holdings plc has been paid in full and has received a £1 million per share liquidation surplus; and

(c) a dividend right of £1.00 per annum per £1 million of nominal share capital.

(39) Deed of Termination dated September 30, 2004 between, amongst others, British Energy plc, BEPET, EPHL, EPL, the Agent, the Security Trustee and the Eggborough Banks (“Deed of Termination”).

Under the Deed of Termination, with effect from January 14, 2005, the parties agree to terminate and release all their respective rights and obligations under the following agreements:

(a) the calculations and forecasting agreement originally dated July 13, 2000 as amended and restated on September 8, 2000 between EPL and the Agent;

(b) the sponsor undertaking originally dated July 13, 2000 as amended and restated on September 8, 2000 between British Energy plc, EPHL, BEPET, EPL, the Agent and the Security Trustee;

(c) the capacity and tolling agreement originally dated July 13, 2000 as amended and restated on September 8, 2000 and February 5, 2001 between BEPET and EPL;

(d) the CTA guarantee dated September 8, 2000 given by British Energy plc to EPL;

(e) the capacity and tolling agreement direct agreement originally dated July 13, 2000 as amended and restated on September 8, 2000 between BEPET, EPL and the Agent;

(f) the deed of indemnity in relation to employees liabilities dated July 13, 2000 between British Energy plc and EPL;

(g) the subordinated loan agreement originally dated July 13, 2000 as amended and restated on September 8, 2000 between EPL and British Energy;

(h) the service contract dated September 8, 2000 between British Energy plc and EPL;

(i) the accounts agreement dated September 8, between EPL and the Agent;

(j) the deed of payment originally dated July 13, 2000 as amended and restated on September 8, 2000 between EPL and BEPET;

(k) the ISDA Master Agreement originally dated October 6, 2000 as amended on April 9, 2003 between EPL and Barclays Bank PLC together with all associated confirmations;

(l) the ISDA Master Agreement originally dated March 15, 2001 as amended on April 10, 2003 between EPL and RBS together with all associated confirmations;

(m) the ISDA Master Agreement originally dated May 5, 2001 as amended on April 24, 2003 between EPL and WestLB AG together with all associated confirmations; and

(n) the ISDA Master Agreement originally dated March 5, 2001 as amended on April 9, 2003 between EPL and the Toronto Dominion Bank together with all associated confirmations.

175

(40) Accounts Agreement between EPL and Barclays Bank PLC (Acting as Agent and Account Bank) dated September 30, 2004 (“Accounts Agreement”).

The provisions of the Accounts Agreement became effective on January 14, 2005.

Under the Accounts Agreement, EPL has agreed to open and maintain the following accounts with the Account Bank at its London branch:

(a) the Operating Account;

(b) the Insurance Proceeds Account;

(c) the CTA Bond Account;

(d) the Authorised Investment Account, (together the “Project Accounts”);

(e) the Asset Option Account; and

(f) the Revenue Account.

Operating Account: EPL shall procure that all amounts received by it from BEPET under the New CTA are paid into the Operating Account (provided that this shall not prevent BEPET from settling certain specified operating and maintenance costs of EPL and certain of EPL’s taxes directly for and on behalf of EPL). EPL may only withdraw amounts standing to the credit of the Operating Account to make payments in respect of: (a) certain specified operating and maintenance costs of EPL; (b) certain project taxes of EPL; and (c) to meet the cost of scheduled capital investment works.

Insurance Proceeds Account: EPL shall procure that all amounts received by it under certain insurances (not including proceeds relating to third party liability) are paid into the Insurance Proceeds Account. EPL shall apply such insurance proceeds in accordance with the Amended Credit Agreement.

CTA Bond Account: EPL shall procure that all amounts received by it pursuant to the CTA Bonds are paid into the CTA Bond Account. EPL may only withdraw amounts standing to the credit of the CTA Bond Account to meet payments due under the Amended Credit Agreement.

Asset Option Account: EPL shall procure that amounts received by it pursuant to the Asset Option Agreement are paid into the Asset Option Account. Immediately upon receipt of any monies into the Asset Option Account, EPL shall withdraw an amount equal to the amount received and apply such monies in prepayment of the Second Intercompany Loan.

Revenue Account: EPL shall procure that all amounts received by it that it is required to pay to BEPET pursuant to the New CTA are paid directly to BEPET in accordance with the New CTA or to the Revenue Account. EPL may only withdraw amounts from the Revenue Account to make a payment under the New CTA, provided that: (a) such payment is due and payable; (b) an amount equal to such payment is standing to the credit of the Revenue Account; and (c) the payment is permitted under the Amended Credit Agreement.

Authorised Investment Account: EPL may procure that amounts standing to the credit of the Operating Account, the Insurance Proceeds Account and the Revenue Account are paid into the Authorised Investment Account for the purposes of investing in Cash Equivalents (as defined in the New Bonds).

On and any time after the occurrence of an event of default under the Amended Credit Agreement which is continuing, the Account Bank, if directed by the Agent, acting on the instructions of the Majority Banks, must not pay any moneys from any Project Account.

176

(41) Agreement for the Sale and Purchase of Direct Supply and Export Consolidation Business dated March 30, 2005 Among BEG, BEPET and British Energy Direct Limited (“BEDL”).

Agreement pursuant to which BEG, BEDL and BEPET (together the “Vendor”) sold to BEDL with effect from April 1, 2005:

• certain prescribed assets of;

• the goodwill and listed intellectual property of;

• the books, files, records, other documents relating to;

• the benefit of certain disclosed contracts relating to;

• the rights of BEDL against third parties arising out of or in connection with; and

• all other property, assets and rights of the Vendor used in or solely for the purposes of, or solely in connection with the prescribed assets of;

the entire electricity supply business carried on by BEG under the name British Energy Direct Supply and the entire electricity export and consolidation business carried on by BEG.

(42) Agreement between BEG (UK) and BEG for the Acquisition of Substantially all the Business and Associated Assets of BEG (UK) dated June 27, 2005 (“BTA”).

Under the terms of the BTA, BEG (UK) agreed to sell substantially all of its business and assets, comprising its nuclear generation business, to BEG (“Transfer”). The Transfer took effect on July 1, 2005.

The Transfer implemented the obligation of British Energy Group plc under the Deed of Undertaking to consolidate the nuclear generation activities then being conducted by BEG and BEG (UK) into a separate wholly-owned subsidiary of British Energy Group plc which will only conduct such nuclear generation activities.

The consideration for the sale and purchase of the transferring business and the assets is a sum equal to the net book value (“Net Book Value”) of the business and the assets as at completion of the Transfer (“Completion”) to be satisfied (1) by BEG indemnifying BEG (UK) (as it undertook to do on demand) against all liabilities and obligations of BEG (UK) existing at the time of sale (other than excluded liabilities) whether or not incurred in connection with the transferring business and assets and whether or not such liabilities and obligations fell due for performance or satisfaction before or after Completion (“Liabilities”) notwithstanding such Liabilities may be greater than the Net Book Value; and (2) as to the amount, if any, by which the Net Book Value exceeds the Liabilities by the creation of an inter-company loan by BEG (UK) to BEG to be made on the conditions set out in part 7 of the schedule to the BTA. In addition, BEG agreed to discharge, perform and satisfy the Liabilities and to indemnify BEG (UK), on demand, in respect of all claims, actions, demands, losses and expenses in connection with the Liabilities.

If the benefit of any of BEG(UK)’s contracts to be assigned under the BTA, can be assigned by BEG (UK) without any person’s consent, then the BTA constitutes an assignation by BEG(UK) of the relevant contracts to BEG. If a relevant contract cannot be transferred to BEG except by an assignation made with the consent of a third party or by a novation agreement then until the consent is obtained or novation is achieved, BEG(UK) shall hold such contract and all monies, goods, services or other benefits thereunder as trustee for BEG and do each act and thing reasonably requested of it by BEG to enable performance of the contract and to provide for BEG the benefits of the contract and shall upon receipt of any monies, goods, services or benefits account for and pay or deliver the same to BEG.

177

BEG(UK) agreed, at the request of BEG, at or after Completion, to do and execute all acts, things and documents and use all reasonable endeavours to procure that the same be done by third parties having a relevant interest so that the full benefit of the BTA, the transferring business and assets is vested in BEG.

As part of the arrangements put in place in connection with the Transfer BEG (UK) was released from its obligations under the NLFA, the Contribution Agreement, the HLFA and the Option Agreement, and BEG assumed such obligations. In addition BEG(UK) was released from its obligations under the Guarantee and Indemnity.

(43) Standard Security over Torness Power Station dated January 14, 2005 and entered into between BEG (UK) and the NLF (the “First Torness Standard Security”).

In order to secure the Decommissioning Default Payment and related costs and expenses under the Contribution Agreement, in addition to the DDP Debenture, BEG (UK) granted a first ranking Scottish standard security in favour of the NLF over the property known as and forming Torness Power Station, Torness, East Lothian, as more particularly described in the Schedule to the Torness Standard Security.

The NLF must seek the instruction of the Secretary of State before exercising any right or performing any obligation, must take any such action as the Secretary of State instructs, may only act in accordance with the instructions of the Secretary of State and will rely on the instructions of the Secretary of State.

The First Torness Standard Security was discharged and replaced by the Second Torness Standard Security on July 1, 2005 (see paragraph (45) below).

(44) Standard Security over Hunterston B Power Station dated January 14, 2005 and entered into between BEG (UK) and the NLF (the “First Hunterston Standard Security”).

In order to secure the Decommissioning Default Payment and related costs and expenses under the Contribution Agreement, in addition to the DDP Debenture, BEG (UK) has granted a first ranking Scottish standard security in favour of the NLF over the property known as and forming Hunterston B Power Station, West Kilbride, Ayrshire, as more particularly described in the Schedule to the First Hunterston Standard Security.

The NLF seek the instruction of the Secretary of State before exercising any right or performing any obligation, must take any such action as the Secretary of State instructs, may only act in accordance with the instructions of the Secretary of State and will rely on the instructions of the Secretary of State.

The First Hunterston Standard Security was discharged and replaced by the Second Hunterston Standard Security on July 1, 2005 (see paragraph (46) below.

(45) Standard Security over Torness Power Station dated June 27, 2005 and entered into between British Energy Generation Limited and the NLF (the “Second Torness Standard Security”).

The Second Torness Standard Security replaced the First Torness Standard Security, on the same principal terms, as part of the arrangements put in place in connection with the Transfer.

178

(46) Standard Security over Hunterston B Power Station dated June 27, 2005 and entered into between British Energy Generation Limited and the NLF (the “Second Hunterston Standard Security”).

The Second Hunterston Standard Security replaced the First Hunterston Standard Security, on the same principal terms, as part of the arrangements put in place in connection with the Transfer.

Memorandum and Articles of Association of the Company

Clause 4 of our memorandum of association (“Memorandum”) states that our principal objects are, amongst other things, to carry on the business of a holding company. Our objects are set out in full in clause 4 of our Memorandum which is filed herewith as Exhibit Number 1.02.

In the following summary of our Articles of Association (“Articles”), references to the “Statutes” are to the Companies Act and all statutes and subordinated legislation made thereunder, for the time being in force concerning companies and affecting the Company.

Voting Rights

Subject to the provisions of the Articles and to any special rights or restrictions as to voting for the time being attached to any shares, every Shareholder present at any general meeting has one vote on a show of hands and, on a poll, every Shareholder present in person or by proxy has one vote for each share which they hold or represent.

Voting at all meetings of Shareholders is by a show of hands unless a poll is demanded by the chairman of the meeting, by at least five Shareholders at the meeting who are entitled to vote on the resolution (or their proxies), by one or more Shareholders at the meeting entitled to vote (or their proxies) and who have, between them, not less than 10 per cent. of the total votes of all Shareholders who have the right to vote at the meeting, or by one or more Shareholders at the meeting entitled to vote (or their proxies) who have, between them, shares conferring the right to vote on a resolution on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

Having regard to the requirements of the Listing Rules, if the holder of, or any person appearing to be interested in, any share in the Company has been served with a notice under section 212 of the Act and, in respect of that share (a “default share”), has not supplied to the Company the information required by the section 212 notice, the following restrictions shall apply:

(a) if the default shares represent less than 0.25 per cent. in nominal value of the issued shares of the class, the holder shall not be entitled, in respect of those shares, to attend or to vote, either personally or by proxy, at any general meeting or at any separate general meeting of the holders of any class of shares in the Company or on a poll; or

(b) if the default shares represent at least 0.25 per cent. in nominal value of the issued shares of the class, the holder shall not be entitled, in respect of those shares, to attend or vote at any general meeting, to receive any dividend or other distribution or amount payable in respect of the default shares, or to transfer or agree to transfer any of those shares or any rights in them,

provided that the restrictions in paragraphs (a) and (b) above shall not prejudice the right of either the member holding the default shares or, if different, any person having a power of sale over those shares to sell or agree to sell those shares under a market transfer.

These restrictions shall continue until the earliest of:

(a) the date seven days after the date on which the Board is satisfied that the default is remedied; or

179

(b) the date seven days after the date on which the Company is notified that the default share is the subject of a market transfer; or

(c) the Board decides to waive those restrictions, in whole or in part.

At any general meeting, the necessary quorum is two persons present in person or by proxy and entitled to vote.

Uncertificated shares

Subject to the Statutes, The Uncertificated Securities Regulations 2001, as amended from time to time (the “Regulations”) and the rules made and practices instituted by the Operator (as defined in the Regulations) of any relevant system (as defined in the Regulations), the Board may permit the holding and transfer of any class of shares in uncertificated form by means of a relevant system and, subject as aforesaid, the Board may at any time determine that any class of shares shall become a participating security (as defined in the Regulations) or that a class of shares shall cease to be a participating security.

Ordinary shares

Rights and restrictions

Subject to the rights attached to any other share or class of share, the holders of ordinary shares shall be entitled to be paid any profits of the Company available for distribution and determined to be distributed.

Subject to the rights attached to any other share or class of share, on a return of capital on a winding-up or otherwise (except on a redemption in accordance with the terms of issue of any share, or purchase by the Company of any share, or on a capitalization issue and subject to the rights of any other class of shares that may be issued) there shall be paid to the holders of the ordinary shares the nominal capital paid up or credited as paid up on such ordinary shares together with any further amounts available which shall be paid to the holders of the ordinary shares ratably according to the amounts paid up or credited as paid up in respect of each ordinary share.

Attendance and voting at general meetings

The holders of ordinary shares shall be entitled in respect of their holding of such shares, to receive notice of general meetings and to attend, speak and vote at such meetings in accordance with the Articles.

Convertible Shares and Special Share

Details of the provisions in our Articles relating to the Convertible Shares and the Special Share are set out in the Section headed Convertible Shares and Special Shares and Limitations on shareholders below.

Non-voting ordinary shares

Our authorized share capital includes 50,000 non-voting ordinary shares of £1.00 each. The rights and restrictions attaching to the non-voting ordinary shares are as follows.

General

Save as provided below, our non-voting ordinary shares shall have the same rights, be subject to the same restrictions and rank pari passu with our ordinary shares in all respects.

180

Attendance and voting in general meetings

The holders of the non-voting ordinary shares shall not be entitled in their capacity as holders of such shares to receive notice of or to attend and vote at any general meeting of the Company unless a resolution is to be proposed:

(a) to wind up the Company; or

(b) which varies, modifies, alters or abrogates any of the rights attaching to the non-voting ordinary shares.

Limitations on shareholdings

Our Articles contain provisions in relation to limitations on shareholdings in the Company. Details of these provisions are set out under Convertible Shares and Special Share and Limitations on shareholders below.

Variation of class rights

Subject to the provisions of the Statutes, whenever our share capital is split into different classes of shares, all or any of the rights attached to any of those classes can be varied or withdrawn either:

(a) in such manner (if any) as may be provided by those rights; or

(b) in the absence of such provision, either with the consent in writing of the holders of at least three-quarters in nominal value of the issued shares of that class or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders of those shares validly held in accordance with our Articles, but not otherwise.

Unless otherwise expressly provided by the terms of their issue, the rights attached to any class of shares shall not be deemed to be varied by the creation or issue of further shares ranking equally with them or subsequent to them or by the purchase or redemption by us of our own shares or by any other reduction of capital.

Changes in capital

We may by ordinary resolution:

(a) increase our share capital by the creation of new shares of the amount prescribed by the resolution;

(b) cancel any shares which have not, at the date of the ordinary resolution, been taken or agreed to be taken by any person and which diminish the amount of our share capital by the amount of the shares so cancelled;

(c) consolidate and divide all or any of our share capital into shares of a larger amount than its existing shares; and

(d) sub-divide all or part of our share capital into shares of a smaller amount than is fixed by our Memorandum or Articles.

We may also, subject to the provisions of the Statutes and to any rights conferred to the holders of any class of shares:

(a) purchase all or any of our shares of any class, including any redeemable shares; and

(b) by special resolution reduce our share capital, any capital redemption reserve, any share premium account and any undistributable reserve in any way.

181

Transfer of shares

Our certificated shares may be transferred in writing either by an instrument of transfer in the usual standard form or another form approved by the Board. The transfer form must be signed or made effective by or on behalf of the person making the transfer. The person making the transfer will be treated as continuing to be the holder of the shares transferred until the name of the person to whom the shares are being transferred is entered in the register of members of the Company. Subject to the requirements of the Listing Rules, the Board may, in its absolute discretion and without giving any reason for its decision, refuse to register the transfer of a certificated share not fully paid up, or a certificated share on which we have a lien.

In exceptional circumstances approved by the UKLA, the Board may refuse to register a transfer of certificated shares, provided that such refusal would not disturb the market in those shares. The Board may also refuse to register any transfer of any share held in certificated form unless it is:

(a) in respect of only one class of shares;

(b) in favor of no more than four joint transferees;

(c) left at the place decided by the Board for registration;

(d) accompanied by the certificate for each share to be transferred and such other evidence (if any) as the Board may reasonably require to prove the title of the intending transferor or his right to transfer the shares and the due execution by him of the transfer or, if the transfer is executed by some other person on his behalf, the authority of that person to do so; and

(e) duty stamped if required.

Transfers of uncertificated shares must be carried out in such manner as may be prescribed by or pursuant to the Regulations and the rules made and practices instituted by the Operator of the relevant system. The Board can refuse to register a transfer of an uncertificated share in the circumstances permitted by the Regulations.

If the Board decides not to register a transfer of a share, they must notify the person to whom the share was to be transferred within two months of either the transfer, or the instruction from the Operator of the relevant system being lodged with us.

Subject to the Statutes, the Board can decide to suspend the registration of transfer, for up to 30 days a year, but unless otherwise permitted by the Regulations, we may not close any relevant register relating to a particular security without the consent of the Operator of the relevant system.

Directors’ remuneration

Excluding remuneration referred to below, the Directors will be paid in aggregate such fees for their services as the Board decides, not exceeding £1,000,000 a year or such larger sum as the Company may by ordinary resolution determine, to be divided amongst them in such proportion and manner as the Board decides (or else equally). The Directors may be paid expenses properly incurred by them in connection with the discharge of their duties as Directors.

The Board can award extra fees to a Director who performs any special or extra services to or at the request of the Board.

The Board may provide pensions or other benefits to, amongst others, any Director or former Director or persons connected with them.

182

Directors’ interests and voting

A Director need not be a shareholder, but a Director who is not a shareholder can still attend and speak at shareholders’ meetings.

Subject to the Statutes and as set out below, a Director, notwithstanding his office:

(a) may enter into or otherwise be interested in a contract with us or in which we are otherwise interested;

(b) may hold another office with the Company (except that of auditor or auditor of a subsidiary of the Company) in conjunction with the office of Director and may act by himself or through his firm in a professional capacity to the Company, and in that case on such terms as to remuneration and otherwise as the Board may decide either in addition to, or instead of, remuneration provided for by another provision of the Articles; and

(c) may be a director or other officer of, or employed by, or a party to a contract, or otherwise interested in, a company in which we are interested; and

(d) shall not be liable to account to us for a profit, remuneration or other benefit realized by such office, employment or contract and no such contract shall be avoided on the grounds of any such interest or benefit.

A Director who, to his knowledge, is in any way (directly or indirectly) interested in a contract with us must declare the nature of his interest at the meeting of the Board at which the contract is first considered and may not vote on a resolution of the Board concerning such a contract if he has a material interest in it (otherwise than by virtue of his interest in shares or debentures or other securities of or otherwise in or through us), but this prohibition shall not apply to a resolution concerning certain specified matters set out in the Articles.

A director may not vote or be counted in the quorum on a resolution of the Board concerning his own appointment (including, without limitation, fixing or varying the terms of his appointment or its termination) as the holder of an office with us or any company in which we are interested.

Subject to the Statutes, the Company may by ordinary resolution suspend or relax these provisions to any extent or ratify any contract, arrangement, transaction or proposal not properly authorized by reason of a contravention of these provisions.

Retirement of Directors

No person can be appointed a Director of the Company if at the time of the appointment he has attained the age of sixty-six unless the appointment was approved by the Company in general meeting.

Any Director appointed by the Directors since the last annual general meeting must automatically retire at the next following annual general meeting, and is then eligible for election.

At every annual general meeting, one third of the Directors (or if their number is not a multiple of three, the number nearest to but not greater than one-third) must retire by rotation as Directors. The Directors to retire are selected on the basis of time in office since their last election. A retiring Director is eligible for re-election. For these purposes, Directors who are obliged to retire by reason of having been appointed by the Board since the previous annual general meeting shall be included in the calculation of the number of Directors required to retire by rotation.

Borrowing powers

The Board may exercise all the powers of the Company to borrow money and to mortgage or charge all or part of our undertaking, property and assets (present or future) and uncalled capital and,

183

to issue debentures and other securities, whether outright or as collateral security for a debt, liability or obligation of the Company or of a third party. The Board shall restrict the borrowings of the Company and shall exercise all voting and other rights or powers of control exercisable by the Company in relation to our subsidiary undertakings so as to ensure (as regards subsidiary undertakings, to the extent possible) that the aggregate principal amount outstanding in respect of moneys borrowed by the British Energy Group does not, without the previous sanction of an ordinary resolution of the Company, at any time exceed the higher of £1,200,000,000 and a sum equal to two times the adjusted capital and reserves.

NIA

The Directors shall seek to ensure, insofar as this is consistent with their duties to the Company, that any of our subsidiaries which is the holder of any nuclear site license under the NIA is able to comply with the conditions of such licence.

Dividends

Subject to the provisions of the Statutes and our Articles, we may declare dividends by passing an ordinary resolution. No dividend can exceed the amount recommended by the Directors. The Board may declare and pay such interim dividends as appear to be justified by the profits of the Company available for distribution and may also pay any dividend payable at a fixed rate at intervals settled by the Board whenever the profits of the Company available for distribution justify its payment.

The Directors can (with the authority of an ordinary resolution of the Company) offer Shareholders the right to choose to receive new shares, which are credited as fully paid, instead of some or all of their cash dividend.

Capitalization of reserves

Subject to the Statutes, the Board may, with the authority of an ordinary resolution of the Company resolve to:

(a) capitalize any sum standing to the credit of any reserve account of the Company or any sum standing to the credit of profit and loss account not required for the payment of any preferential dividend;

(b) appropriate that sum as capital to the Shareholders who would have been entitled to it if it were distributed by way of dividend; and

(c) apply that sum on their behalf in paying up in full any unissued shares or debentures of the Company of a nominal amount equal to that sum and allot the shares or debentures credited as fully paid to those Shareholders.

Distribution of assets on liquidation

If we are in voluntary liquidation, the liquidator may, with the sanction of an extraordinary resolution of the Company, and any other sanction required by the Statutes, divide amongst Shareholders all or any part of the assets of the Company or vest the whole or any part of the assets in trustees upon such trusts for the benefit of Shareholders as the liquidator shall determine. The liquidator may set the value he deems fair on a class or classes of property, and may determine on the basis of that valuation and in accordance with the then existing rights of Shareholders how the division is to be carried out between Shareholders or classes of Shareholders.

The liquidator may not, however, distribute to a Shareholder without his consent an asset to which there is attached a liability or potential liability for the owner.

184

Unclaimed dividends

Any dividend which has not been claimed for 12 years after it was declared or became due for payment may be forfeited and will cease to remain owing by us.

We can stop paying dividends to a Shareholder if payments for two dividends in a row are sent back or not cashed or have not been able to be made, until the Shareholder notifies us of an address or account to be used for this purpose.

Untraced shareholders

Subject to the Regulations, we may sell any shares after advertising our intention to do so and waiting for three months if:

(a) the shares have been in issue for at last 12 years;

(b) during that period at least three dividends have become payable on them and have not been claimed; and

(c) we have not heard from the Shareholder or any person entitled to the dividends by transmission.

We shall account for the net proceeds of sale to the former Shareholder or the person entitled to them by transmission if that Shareholder, or that other person, asks for them.

General meetings of Shareholders

Every year we must hold an annual general meeting. The Board can call an extraordinary general meeting at any time, and it must call one on a valid Shareholder’s requisition pursuant to the provisions of the Statutes.

Indemnity

Subject to the Statutes, but without prejudice to any indemnity to which he may otherwise be entitled, every person who is or was a Director, alternate Director or secretary of the Company shall be and shall be kept indemnified out of the assets of the Company against all costs, charges, losses and liabilities incurred by him in the proper execution of his duties or the proper exercise of his powers, authorities and discretions including, without limitation, a liability incurred:

(a) defending proceedings (whether civil or criminal) in which judgement is given in his favor or in which he is acquitted, or which are otherwise disposed of without a finding or admission of material breach of duty on his part; or

(b) in connection with any application in which relief is granted to him by the court from liability for negligence, default, breach of duty or breach of trust in relation to the affairs of the Company.

Subject to the Statutes, the Board may exercise all the powers of the Company to purchase and maintain insurance for the benefit of a person who is or was:

(a) a Director, alternate Director or secretary of the Company or of a company which is or was a subsidiary undertaking of the Company or in which the Company has or had an interest (whether direct or indirect); or

(b) trustee of a retirement benefits scheme or other trust in which a person referred to in paragraph (a) above is or has been interested,

indemnifying him and keeping him indemnified against liability for negligence, default, breach of duty or breach of trust or other liability which may lawfully be insured against by the Company.

185

Convertible Shares And Special Share And Limitations On Shareholders

Convertible Shares

Our authorized share capital includes Convertible Shares which may only be held by the NLF (or its nominee) or its successor in title, a Minister of the Crown, the Treasury, a department, non-departmental body or other agency of the Crown, any body corporate established by statute some or all of the members of which are appointed by a Minister of the Crown or other UK government entity or any person directly or indirectly wholly-owned by, or held on trust for, the Secretary of State or other Minister of the Crown (the “Convertible Shareholder”). The rights and restrictions attaching to the Convertible Shares are as follows:

General

Save as set out in this paragraph, the Convertible Shares shall have the same rights, be subject to the same restrictions and shall rank pari passu with our ordinary shares in all respects.

The nominal amount of each Convertible Share shall at all times be the same as the nominal amount of each ordinary share in the Company and if we propose, without limitation, to increase our share capital by the creation of new ordinary shares, cancel any ordinary shares, consolidate and divide all or any of our ordinary share capital or, subject to the Statutes, sub-divide our ordinary shares, we shall propose that the same action be taken in relation to the Convertible Shares. If a resolution to approve such action is duly passed in general meeting, the Convertible Shareholder shall be deemed irrevocably to consent to and sanction any variation of the rights attaching to the Convertible Shares which may be involved in or deemed to be involved in the taking of such action and, if required in order to render such consent effective, shall, in accordance with the provisions of article 15 of our Articles (relating to variation of rights), consent in writing or vote at a separate meeting of the Convertible Shareholder in favor of any extraordinary resolution to sanction such variation.

Attendance and voting in general meetings

The Convertible Shareholder, whilst it holds Convertible Shares, shall be entitled to receive notice of, and to attend and speak at, any general meeting and on a show of hands, the Convertible Shareholder shall have one vote. On a poll, the number of votes that the Convertible Shareholder is entitled to exercise in respect of its holding of Convertible Shares shall be the lesser of:

(a) the maximum percentage of voting rights attributable to our share capital which are exercisable at a general meeting and which may, from time to time, be held without triggering a mandatory offer for the Company under the Takeover Code (being, as at the date of adoption of the Articles, 29.9 per cent. and, for this purpose, taking into account the voting rights attributable to any other ordinary shares held or acquired by any person acting in concert with the Convertible Shareholder); and

(b) the number of Convertible Shares which the Convertible Shareholder would otherwise be entitled to vote if the Convertible Shares were ordinary shares.

Notwithstanding the foregoing, on any resolution:

(a) for our winding up;

(b) to modify, vary or abrogate the rights attaching to our ordinary shares (other than any resolution proposed pursuant to the paragraph headed ‘General’ above); or

(c) to modify, vary or abrogate the rights attaching to our Convertible Shares (other than any resolution proposed pursuant to the paragraph headed ‘General’ above),

the restrictions on the number of votes that the Convertible Shareholder is entitled to exercise shall not apply and on a poll, the number of votes that the Convertible Shareholder is entitled to

186

exercise in relation to any such resolution shall be equal to the number of Convertible Shares which the Convertible Shareholder would be entitled to vote if the Convertible Shares were ordinary shares.

On any resolution to modify, vary or abrogate the rights attaching to the Convertible Shares (other than any resolution proposed pursuant to the paragraph headed ‘General’ above) the provisions of article 15 of our Articles relating to variation of rights shall apply.

Conversion

Save for any transfer of Convertible Shares to a permitted assignee, on a transfer, sale or disposal of Convertible Shares by the Convertible Shareholder (or its nominee) to a third party, the relevant Convertible Shares will convert into ordinary shares in the Company at the rate of one ordinary share for every one Convertible Share (the “Conversion Rate”) automatically upon, and contemporaneously with, registration by us or our registrar for the time being of the transfer in the register of members following receipt of a duly executed and stamped stock transfer form and the share certificates in respect of such Convertible Shares. The date on which the transfer is registered shall be the conversion date. Other than in these circumstances, neither the Convertible Shareholder nor its nominee will be entitled at any time to convert all or any of its Convertible Shares.

Conversion of Convertible Shares will be effected by the Board determining to re-designate the relevant Convertible Shares as ordinary shares in the Company or in any other manner that the Board may in its absolute discretion from time to time decide, subject to the provisions of the Articles and the Statutes. In any such case, the Convertible Shareholder shall be deemed irrevocably to approve such re-designation of the relevant Convertible Shares and to consent to any variation or abrogation of its class rights as may be occasioned by such re-designation.

From the conversion date, all entitlements to dividends and other distributions payable thereafter or to be made on Convertible Shares so converted shall cease and the relevant Shareholder shall instead be entitled in respect of the ordinary shares arising on such conversion to all dividends and other distributions payable or to be made on ordinary shares thereafter, whether or not such dividends or distributions are in respect of any earlier financial year or accounting period.

The new ordinary shares arising on conversion shall rank pari passu in all respects with the ordinary shares then in issue and fully paid.

Obligations

For as long as there are Convertible Shares in issue, we shall use all reasonable endeavors to ensure that any action taken in relation to, or any offer made by us to the holders of, ordinary shares, is taken in respect of, or the same offer is made to, the Convertible Shareholder.

Without limiting the generality of the foregoing, if, amongst others, (1) any offer (not being a rights offer by the Company) is made to (a) all (or as nearly as may be practicable all) the holders of ordinary shares or (b) all (or as nearly as may be practicable all) holders of ordinary shares other than the offeror and/or any associate of the offeror (as defined in section 430E(4) of the Companies Act) to acquire the whole or any part of our issued ordinary share capital, or (2) if any person proposes a scheme with regard to such acquisition, we shall give notice of such offer or scheme to the Convertible Shareholder at the same time as any notice thereof is sent to the holders of ordinary shares (or as soon as practicable thereafter) and we shall use reasonable endeavors to ensure that (a) the Convertible Shareholder is given the opportunity to transfer its Convertible Shares at the conversion rate prior to expiry of the offer and (b) the offer extends to any ordinary shares arising upon conversion of any Convertible Shares as set out in the paragraph headed “Conversion” above.

187

We shall use all reasonable endeavors to procure that any ordinary shares to be issued upon, or resulting from conversion of the Convertible Shares, are admitted to the Official List of the UKLA and to trading on the London Stock Exchange as soon as reasonably practicable (taking into account, without limitation, any requirement to produce listing particulars in respect of such ordinary shares) after the earlier of:

(a) the conversion date; and

(b) the date on which the Convertible Shareholder notifies us that it intends to dispose of Convertible Shares.

No admission to listing or admission to trading shall be sought for the Convertible Shares whilst they remain Convertible Shares.

Special Share

Our authorized share capital includes one Special Share which is a special rights redeemable preference share of £1. The Special Share may only be issued to, held by and transferred to one or more of Her Majesty’s Secretaries of State, another Minister of the Crown, the Solicitor for the affairs of Her Majesty’s Treasury or any other person acting on behalf of the Crown (the “Special Shareholder”). The rights and restrictions attaching to the Special Share are as follows:

Rights

Notwithstanding any provision in our Articles to the contrary, each of the following matters shall be deemed to be a variation of the rights attaching to the Special Share and shall accordingly be effective only with the consent in writing of the Special Shareholder (and the Special Shareholder shall only be entitled to withhold that consent to a matter set out in paragraphs (b), (c), (d), (e) or (f) below if, in the Special Shareholder’s opinion, the matter in question would be contrary to the interests of national security) and without such consent shall not be done or caused to be done:

(a) the amendment or removal or alteration of the effect of (which, for the avoidance of doubt, shall include the ratification of any breach of) all or any of the following:

(1) in article 2 of our Articles (relating to the interpretation of the articles), the definition of “Special Share” and “Special Shareholder”;

(2) article 16 of our Articles (relating to the Special Share);

(3) article 17 of our Articles (relating to limitations on shareholdings); and

(4) in article 44 of our Articles (relating to disclosure of interests in shares) paragraphs (10) to (12) inclusive.

(b) the creation or issue of any shares in the Company with voting rights attached, other than those which are, or would on issue be:

(1) shares comprised in the relevant share capital (as defined in section 198(2) of the Companies Act) of the Company; or

(2) shares which do not constitute equity share capital (as defined in section 744 of the Companies Act) and which, when aggregated with all other such shares, carry or on issue would carry the right to cast less than 15 per cent. of the maximum number of votes capable of being cast on a poll on any resolution at any general meeting of the Company (in whatever circumstances, and for whatever purpose, the same may have been convened);

(c) the variation of any voting rights attached to any of our shares (and, for the avoidance of doubt, the creation or issue of shares falling within paragraph (b) (1) or (2) above shall not be regarded as a variation for the purposes of this paragraph);

188

(d) the giving by us of any consent or agreement to (including without limitation the casting of any vote in favor of) the amendment or removal or alteration of the effect of (which, for the avoidance of doubt shall include any ratification of the breach of) the articles of association of Holdings plc, BE Ltd, BEG (UK) or BEG if the effect would be to enable the board of directors of Holdings plc, BE Ltd, BEG (UK) or BEG to issue any shares (other than (i) in the case of Holdings plc, to us, (ii) in the case of BE Ltd, to us or Holdings plc, (iii) in the case of BEG (UK) to us, BE Ltd or Holdings plc, and (iv) in the case of BEG to BEG (UK), Holdings plc, BE Ltd or to us) without the consent in writing of the Special Shareholder (such consent only to be withheld if, in the Special Shareholder’s opinion, such issue would be contrary to the interests of national security);

(e) the giving by us of any consent or agreement to (including without limitation the casting of any vote in favor of) any issue of shares in Holdings plc, BE Ltd, BEG (UK) or BEG, (other than (i) in the case of Holdings plc, to us, (ii) in the case of BE Ltd, to us or Holdings plc, (iii) in the case of BEG (UK) to us or Holdings plc, and (iv) in the case of BEG to us, Holdings plc or BEG (UK); and

(f) the disposal by us of any or all of the shares held (directly or indirectly) by us in Holdings plc, BE Ltd, BEG (UK) or BEG or of any rights or interests therein or the entering into by us of any agreement or arrangement with respect to, or the exercise of any rights attaching to, such shares.

For these purposes, “disposal” shall include any sale, gift, lease, licence, assignation, mortgage, charge, or the grant of any other encumbrance or the permitting of any encumbrance to subsist or any other alienation or disposition to a third party.

Voting at general meetings

Notwithstanding any other provisions of our Articles to the contrary, the Special Shareholder shall be entitled to receive notice of, and to attend and speak at, any general meeting or any separate meeting of the holders of any class of shares, but the Special Share shall carry no right to vote nor any other rights at any such meeting.

Distributions

In a distribution of capital on our winding-up, the Special Shareholder shall be entitled to repayment of the capital paid on the Special Share in priority to any repayment of capital to any other member. The Special Share shall confer no other right to participate in the capital, and no right to participate in the profits, of the Company.

Redemption

The Special Shareholder may, after consulting the Company and subject to the provisions of the Companies Act, require us to redeem the Special Share at par at any time after September 30, 2006 by giving us notice and delivering to us the relevant share certificate.

Limitations on Shareholdings

Our Articles contain limitations on shareholdings which will remain in force until the Special Share referred to in the paragraph headed “Special Share” above is redeemed. The limitations are as follows:

Required Disposal

If, to the knowledge of the Board, any person other than a Permitted Person has, or who appears to the Board to have, an interest in our shares which carry 15 per cent. or more of the total votes

189

attaching to Relevant Share capital (a “Relevant Person”), the Board shall promptly give notice to the Special Shareholder. If the Special Shareholder gives notice to the Board within 28 days of the receipt of the Board’s notice that, in the Special Shareholder’s opinion, ownership or control of such shares by the Relevant Person would be contrary to the interests of national security, the Board shall give notice to all persons (other than those of whom the Board does not know the identity or address) who appear to the Board to have interests in the Relevant Shares and, if different, to the registered holders of those shares. The notice shall set out the restrictions referred to below and call for a Required Disposal to be made within 21 days of the giving of the notice to the registered holder or such longer period as the Board considers reasonable.

After the giving of such a notice, and save for the purpose of a Required Disposal, no transfer of any of the Relevant Shares may be made or registered until either the notice is withdrawn or a Required Disposal has been made to the satisfaction of the Board and registered. If that notice is not complied with to the satisfaction of the Board and has not been withdrawn, the Board must, so far as it is able, effect a Required Disposal on the terms as it decides, based upon advice obtained by it for the purpose and being reasonably practicable having regard to all the circumstances. The Board is not required to send a notice to any person if it does not know that person’s identity or address. Not delivering a notice in such case and any accidental error in or failure to give notice to a person to whom notice is required to be sent under this provision will not prevent the implementation of or invalidate any procedure under the relevant article. Any resolution or determination of, or decision or exercise of any discretion or power by, the Board is final and conclusive.

Certain specified Shareholders, including clearing houses, acting in that capacity are not subject to these restrictions.

Restrictions on shares

A registered holder on whom a valid notice referred to above has been served, is not entitled in respect of the share or shares comprised in the interest, until that notice has been complied with to the satisfaction of the Board or withdrawn, to attend or vote at any general meeting of the Company or meeting of the holders of a class of shares and those rights will vest in the chairman of the meeting who may act entirely at his discretion.

Determination of the Board

Any resolution or determination of, or decision or exercise of any discretion or power by, the Board or any Director or by the chairman of any meeting under or pursuant to these provisions (including without prejudice to the generality of the foregoing as to what constitutes reasonable enquiry or as to the manner, timing and terms of any Required Disposal made by the Board) shall be final and conclusive; and any disposal or transfer made, or other thing done, by or on behalf of, or on the authority of, the Board or any Director pursuant to the foregoing provisions shall be conclusive and binding on all persons concerned. The Board shall not be required to give any reasons for any decision, determination or declaration taken or made in accordance with this article.

Duration

Article 17 of our Articles shall apply notwithstanding any provision in any other of our Articles which is inconsistent with or contrary to it and shall remain in force until the date of redemption of the Special Share pursuant to article 16(6) of our Articles notwithstanding any provision in our Articles to the contrary.

190

General

For the purpose of these provisions:

“interest”, in relation to shares, means:

(a) any interest which would be taken into account in determining for the purposes of Part VI of the Companies Act whether a person has a notifiable interest in a share (including any interest which he would be taken as having for those purposes); and

(b) any interest which would have been included within section 208(4)(b) of the Companies Act had the entitlements referred to in that provision extended to “entitlements” which could arise under an agreement or arrangement as defined in section 204(5) and (6) of the Companies Act;

and “interested” shall be construed accordingly;

“Permitted Person” means:

(a) an ADR depository, acting in its capacity as such;

(b) a clearing house, acting in its capacity as such;

(c) the chairman of a meeting of the Company or of a meeting of the holders of relevant share capital or of any class thereof when exercising the voting rights conferred on him whilst a notice that has been served on a Relevant Person has not been complied with;

(d) a trustee (acting in that capacity) of any employees’ share scheme of the Company;

(e) the Crown or one of Her Majesty’s Secretaries of State, another Minister of the Crown, the Solicitor for the affairs of Her Majesty’s Treasury and any other person acting on behalf of the Crown;

(f) the NLF or its nominee;

(g) any person who has an interest but who, if the incidents of his interest were governed by the laws of England and Wales, would in the opinion of the Board be regarded as a bare trustee of that interest, in respect of that interest only;

(h) an underwriter in respect of interests in shares which exist only by virtue of a contingent obligation to purchase or subscribe for such shares pursuant to underwriting or sub-underwriting arrangements approved by the Board or, for a period of three months, in respect of interests in shares purchased or subscribed for by it pursuant to such an obligation;

(i) any other person who (under arrangements approved by the Board) subscribes or otherwise acquires Relevant Share Capital (or interests therein) which has been allotted or issued with a view to that person (or purchasers from that person) offering the same to the public, for a period not exceeding three months from the date of the relevant allotment or issue (and in respect only of the shares so subscribed or otherwise acquired);

(j) Depository Trust Company and/or its nominee acting in the capacity of a clearing agency in respect of dealings in American Depository Receipts; or

(k) any person who has an interest, and who shows to the satisfaction of the Board that he has it, by virtue only of being entitled to exercise or control the exercise (within the meaning of section 203(4) of the Companies Act) of one third or more of the voting power at general meetings of any company which is a Permitted Person within (a) to (i) above;

“Relevant Share Capital” means the relevant share capital (as defined in section 198(2) of the Companies Act) of the Company;

191

“Relevant Shares” means all shares comprised in the Relevant Share Capital in which a Relevant Person has, or appears to the Board to have, an interest or which are deemed for the purposes of article 17 of our Articles to be Relevant Shares; and

“Required Disposal” means a disposal or disposals of such a number of Relevant Shares or interests therein as will cause a Relevant Person to cease to be a Relevant Person, not being a disposal to another Relevant Person (other than a Permitted Person) or a disposal which constitutes any other person (other than a Permitted Person) being a Relevant Person.

Our Articles do not contain any specific provisions governing any of the following:

• the Directors’ power, in the absence of an independent quorum, to vote compensation to themselves or any member of their body;

• specific redemption provisions;

• sinking fund provisions;

• provisions discriminating against any existing or prospective holder of ordinary shares as a result of such shareholder owning a substantial number of shares;

• provisions which have the effect of delaying, deferring or preventing a change in control of the Company and that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company or any of its subsidiaries or;

• provisions governing the ownership threshold above which ownership must be disclosed.

Exchange Controls and other Limitations Affecting Security Holders

There are no UK laws or regulations, including foreign exchange contracts that restrict the import or export of capital to or from the United Kingdom. Except as discussed in “Taxation” below, there are no restrictions on our payment of dividends or other amounts to non-UK resident holders of our securities. Except with respect to the Limitation, neither UK law nor our articles impose any restrictions on the rights of non-UK resident or non-UK citizen holders of our ordinary shares to hold or to vote such securities.

Taxation

The following discussion describes certain US federal income tax and UK tax consequences of the acquisition, ownership and disposition of our ordinary shares for absolute beneficial owners of our ordinary shares.

• who are residents of the United States for purposes of the income tax convention between the United States and the United Kingdom;

• whose ownership of our ordinary shares are not, for the purposes of the income tax convention, attributable to a permanent establishment in the United Kingdom;

• who otherwise qualify for the full benefits of the income tax convention; and

• who are US holders (as defined below).

The statements of US federal income tax and UK tax laws set out below:

• are based on the laws in force and as interpreted by the relevant taxation authorities as of the date hereof; and

• are subject to any changes in US federal income tax or UK tax law, in the interpretation thereof by the relevant taxation authorities, or in the income tax convention, occurring after the date hereof.

192

No assurance can be given that taxing authorities or the courts will agree with this analysis. For purposes of this discussion, the terms “we”, “us” and “our” refers to British Energy Group plc.

This discussion is not a complete listing of all potential tax consequences to a US Holder of the acquisition, ownership or disposition of our ordinary shares, and does not address all aspects of UK taxation that may be relevant to a US holder and is not intended to reflect the individual tax position of any US holder, including tax considerations that arise from rules of general application to all taxpayers or to certain classes of investors or that are generally assumed to be known by investors.

The portions of this summary relating to US federal taxation are based upon the US Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, existing and proposed US Treasury regulations promulgated thereunder, published rulings by the US Internal Revenue Service (“IRS”), and court decisions, all in effect as of the date hereof, all of which authorities are subject to change or differing interpretations, which changes or differing interpretations could apply retroactively. The portions of this summary relating to US federal taxation are limited to US Holders who hold our ordinary shares as capital assets within the meaning of Section 1221 of the Code, generally, property held for investment, and does not purport to deal with investors in special tax situations, such as expatriates, dealers in securities or currencies, persons whose functional currency is not the US dollar and certain persons, including but not limited to life insurance companies, tax exempt entities, banks, financial institutions, traders in securities that elect to use a “mark-to-market” method of accounting for their securities holdings, regulated investment companies, persons holding our ordinary shares as part of a hedging, integrated, conversion or constructive sale transaction or straddle or persons subject to the alternative minimum tax, who may be subject to special rules not discussed below. In particular, the following summary does not address the tax treatment to a US holder if the US holder owns, directly or by attribution, 10 per cent. or more of our outstanding voting share capital for US federal tax income purposes.

As used herein, the term “US holder” means a beneficial owner of our ordinary shares who or which is for US federal income tax purposes:

• a citizen or resident of the United States;

• a corporation (or other entity treated as a corporation) created or organized in or under the laws of the United States or any political subdivision thereof;

• an estate the income of which is subject to US federal income taxation regardless of its source; or

• a trust (1) that is subject to the supervision of a court within the United States and the control of one or more US persons as described in section 7701(a)(30) of the Code or (2) that has a valid election in effect under applicable US Treasury regulations to be treated as a US person.

If a partnership (or other entity treated as a partnership) holds our ordinary shares, the US federal income tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If a US holder is a partner of a partnership holding our ordinary shares, the US holder should consult its own tax advisors regarding the US federal income tax consequences of the partnership acquiring, owning and disposing of the shares.

The summary does not include any description of the tax laws of any state, local or foreign governments that may be applicable to the acquisition, ownership and disposition of our ordinary shares. Shareholders are urged to consult their own tax advisor regarding the US federal, state, and local tax consequences to them of the acquisition, ownership and disposition of shares, as well as the tax consequences to them in the United Kingdom and any other jurisdictions arising from the acquisition, ownership or disposition of our ordinary shares.

193

For the purposes of the income tax convention and the Code, a US holder will be treated as the owner of our ordinary shares.

New Income Tax Convention

The new income tax convention between the United States and the United Kingdom (the “New Convention”) has recently been ratified by the competent authorities in the two countries and entered into force on March 31, 2003. The New Convention put in place new rules that modify the treatment of US holders under the previous income tax convention between the United States and the United Kingdom (the “Old Convention”) in several aspects. Specific references to the new rules under the New Convention have been included as appropriate throughout this summary. Each US holder should consult its own tax advisor regarding the effect of the New Convention on its investment in shares.

Taxation of dividends

United Kingdom

No withholding tax is charged or due when a UK incorporated company pays dividends. An individual shareholder resident in the United Kingdom will generally be entitled to a tax credit in respect of any dividend received. The amount of the tax credit is equal to one-ninth of the cash dividend or 10 per cent. of the aggregate of the cash dividend and the associated tax credit. Under the New Convention, a US holder is not entitled to a payment from the UK Inland Revenue in respect to the tax credit.

United States

Subject to the Passive Foreign Investment Company discussion below, generally, distributions a US holder receives from us will constitute dividend income to the extent paid out of our current and accumulated earnings and profits, as determined under US federal income tax principles, and, subject to discussions below, taxed at ordinary income tax rates applicable to the US Holder. Distributions in excess of our current and accumulated earnings and profits will first be treated as a nontaxable return on capital to the extent of the US holder’s adjusted tax basis (generally equal to the US holder’s acquisition cost of the shares) in the shares and then as gain from the sale or exchange of a capital asset. Dividends paid by us will not be eligible for the dividends received deduction that is applicable to US corporations. For the purposes of computing the foreign tax credit, dividends paid on our ordinary shares are treated as income from sources outside the United States, but generally will be grouped separately, together with other items of “passive” or for taxable years beginning before January 1, 2007 “financial services” or, for taxable years beginning after December 31, 2006, “general category” income. The rules governing the foreign tax credit are complex. US holders should consult their own tax advisors regarding the availability of the foreign tax credit in their particular circumstances.

Under current law, the maximum US federal income tax rate applicable to individual US Holders has been reduced to a maximum 15 per cent tax rate on certain types of qualified dividend income. The reduced rates of tax applies through the 2008 taxable years. Generally, dividends paid by a foreign corporation will be treated as qualified dividend income and eligible for this reduced rate of tax if the foreign corporation (a) is not a “passive foreign investment company”, (b)(i) is eligible for benefits under a comprehensive income tax convention with the United States that satisfies certain requirements or (ii) the stock with respect to which the dividend is paid is readily tradable on an established securities market in the United States. In addition, individual US Holders will be eligible for the reduced rate only if the holding period and certain other requirements are met by the holder. Individual US Holders should consult their own advisors as to the eligibility of the reduced rate of tax to dividends paid by us.

194

During the periods the Old Convention was in effect, if a US holder were eligible for benefits under, and elected the application of, the Old Convention, the US holder would include in gross income, as dividends, an amount equal to the sum of the actual dividend plus the tax credit amount (to the extent such amount is paid out of our earnings and profits), and the US holder would be treated for US foreign tax credit purposes, as having paid UK withholding tax equal to the amount of the tax credit. A US holder could elect the application of the Old Convention by filing a timely and duly completed Form 8833 with the US holder’s income tax return for the relevant year. Subject to certain conditions and limitations, the UK deemed withholding tax could be deducted from taxable income, or instead credited against the US holder’s US federal income tax liability.

Under the New Income Tax Convention, the amount of dividends to be included in a US holder’s gross income no longer includes the amount any UK tax credit amount described above. Therefore, the amount of dividends that a US holder is treated as receiving from us will be the amount of dividends the US holder actually receive from us. US holders should consult their own tax advisors regarding the effects of the Old Convention and the New Convention on their investment in our ordinary shares, and their eligibility for benefits under the Old Convention and the New Convention with respect to distributions from us.

The amount of any dividend paid in pounds sterling will equal the US dollar value of the pounds sterling received calculated by reference to the exchange rate in effect on the date the dividend is received by a US holder regardless of whether the pounds sterling are converted into US dollars. If a US holder does not convert the pounds sterling received as a dividend into US dollars on the date of receipt, the US holder will have a basis in the pounds sterling equal to their US dollar value on the date of receipt. Generally, any gain or loss realized on the US holder’s subsequent conversion or other disposition of the pounds sterling will be treated as ordinary income or loss from US sources.

Taxation of capital gains

United Kingdom

If a US holder is not resident or ordinarily resident in the United Kingdom for UK tax purposes, the US holder is not liable for UK tax on capital gains realized or accrued on the sale or other disposition of shares unless the shares are held in connection with the US holder’s trade or business (which for this purpose includes a profession or a vocation) carried on in the United Kingdom through a branch, agency or permanent establishment and the shares are or have been used, held or acquired for the purposes of such trade or business of such branch, agency or such permanent establishment.

A US holder who was an individual normally resident or ordinarily resident in the UK but who has on or after March 17, 1998 ceased to be resident or ordinarily resident in the United Kingdom for a period of less than five years and who disposes of shares during that period may also be liable for UK tax on capital gains on his return to the UK notwithstanding that the person may not be resident or ordinarily resident in the United Kingdom at the time of the disposal.

United States

Subject to the passive foreign investment company discussion below, gain or loss realized by a US holder on the sale or other disposition of the shares will be subject to US federal income tax as capital gain or loss in an amount equal to the difference between the US holder’s adjusted tax basis in the shares and the amount realized on the disposition. The capital gain or loss will be long-term capital gain or loss if the US holder has held the shares or for more than one year at the time of the sale or exchange. In the case of individual US Holders, the maximum long-term capital gains tax rate is 15 per cent. for sales and exchanges occurring through 2008. Gain or loss realized by a US holder generally will be treated as US source gain or loss for US foreign tax credit purposes.

195

Passive foreign investment company considerations

Generally, for US federal income tax purposes, we will be a “passive foreign investment company”, or a “PFIC”, for any taxable year if either (i) 75 per cent. or more of our gross income is “passive” income or (ii) 50 per cent. or more of the value of our assets, determined on the basis of a quarterly average, is attributable to assets that produce or are held for the production of passive income. Passive income generally includes dividends, interest, royalties and rents not arising from the active conduct of a trade or business, and gains from the sale of assets that produce such income. If we are a PFIC in any taxable year that a US holder owns our ordinary shares, the US holder may be subject to tax at ordinary income rates and may be subject to an interest change on (a) a portion of any gain recognized on the sale of our ordinary shares and (b) any “excess distribution” paid on our ordinary shares (generally, a distribution in excess of 125 per cent. of the average annual distributions paid by us in the three preceding taxable years). In addition, any dividends paid by us that would otherwise be treated as qualified dividend income eligible for the reduced rate of tax as discussed above, will not be treated as qualified dividend income eligible for such reduced rate of tax if we are a PFIC.

Based on our current activities and assets, although the matter is not free from doubt, we do not believe that we are a “passive foreign investment company” or a “PFIC”, and we do not expect to become a PFIC in the foreseeable future for US federal income tax purposes. The determination of whether we are a PFIC is made annually. Accordingly, it may be possible that we will become a PFIC in the current or any future year due to changes in our asset or income composition.

UK stamp duty and stamp duty reserve tax

Subject to certain exemptions, stamp duty or stamp duty reserve tax will be charged at the rate of 1.5 per cent. rounded up to the nearest £5, on the amount or value of the consideration paid, or in some circumstances the issue price or open market value, on a transfer or issue of shares (1) to, or to a nominee for, a person whose business is or includes the provision of clearance services, or (2) to, or to a nominee for, a person whose business is or includes the issuing of depositary receipts. Where stamp duty reserve tax is charged on a transfer of shares and ad valorem stamp duty is chargeable on the instrument effecting the transfer, the amount of the stamp duty reserve tax charged is an amount equal to the excess, if any, of the stamp duty reserve tax charge due on the transfer after the deduction of the stamp duty paid.

For US federal income tax purposes, a US holder will not be entitled to a foreign tax credit with respect to any UK stamp duty or stamp duty reserve tax, but may be entitled to a deduction subject to applicable limitations under the Code. US holders are urged to consult their own tax advisors regarding the availability of a deduction under their particular circumstances.

Issue and transfer of Shares in registered form

Except in relation to persons whose business is or includes the issue of depositary receipts or the provision of clearance services or their nominees, the allotment and issue of shares by us will not normally give rise to a charge to UK stamp duty or stamp duty reserve tax.

Transfers of shares will attract ad valorem stamp duty normally at the rate of 0.5 per cent of the value of the consideration (rounded up to the nearest £5). A charge to stamp duty reserve tax, normally at the rate of 0.5 per cent of the consideration, arises, in the case of an unconditional agreement to transfers shares, on the date of the agreement, and in the case of a conditional agreement the date on which the agreement becomes unconditional. In the case of transfers effected through the CREST system, ordinarily the stamp duty reserve tax is collected through the system. In other cases, the stamp duty reserve tax is payable on the seventh day of the month following the month in which the

196

charge arises. Where an instrument of transfer is executed and duly stamped before the expiry of a period of six years beginning with the date of that agreement, any stamp duty reserve tax that has not been paid ceases to be payable, and if any stamp duty reserve tax has been paid a claim may be made for its repayment (with interest) provided that the tax paid is not less than 25 pounds sterling.

Information reporting and backup withholding

Payments that relate to the shares that are made in the United States or by a US related financial intermediary will be subject to information reporting. Information reporting generally will require each paying agent making payments, which relate to a share, to provide the US Internal Revenue Service, or the IRS, with information, including the beneficial owner’s name, address, taxpayer identification number, and the aggregate amount of dividends paid to such beneficial owner during the calendar year. These reporting requirements, however, do not apply to all beneficial owners. Specifically, corporations, securities broker-dealers, other financial institutions, tax-exempt organizations, qualified pension and profit sharing trusts and individual retirement accounts and others that establish an exemption are all generally excluded from reporting requirements.

We may be required to withhold, as a backup against a US holder’s US federal income tax liability, a portion of each payment of dividends on our ordinary shares in the event that the US holder:

• fails to establish its exemption from the back up withholding or information reporting requirements;

• is subject to the reporting requirements described above and fails to supply its correct taxpayer identification number in the manner required by applicable law; or

• underreports its tax liability; or

• if we are otherwise notified by the IRS.

This backup withholding tax is not an additional tax and may be credited against the beneficial owner’s US federal income tax liability if the required information is furnished to the IRS.

ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussions about our 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 discussions summarize the financial instruments, derivative instruments and derivative commodity instruments held by us at March 31, 2005, which are potentially sensitive to changes in interest rates, foreign exchange rates, commodity prices and equity markets. We use foreign exchange contracts and other derivative instruments to hedge the primary market exposures associated with our underlying assets, liabilities and committed transactions. None of the instruments we have entered into are leveraged or held for speculative purposes. We use fixed rate interest rate borrowings and deposits to reduce our exposure to fluctuations in interest rates.

Financial Instruments and Risk Management

Overview

The main financial risks faced are trading risks in respect of both price and volume output on the sale of electricity. There is also an exposure to risks associated with fluctuations in the equity markets through the 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.

197

The Power and Energy Trading Division manage electricity trading risks. The Power and Energy Trading Division operate within policies and procedures that 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 the 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 the Internal Audit Department.

Interest Rate Risk Management

Debt at March 31, 2005 was £676 million, comprised of New Bonds and a project finance loan due in 2022. As a result of the Restructuring, £883 million of debt outstanding at March 31, 2004 was eliminated.

The market value of our debt varies with fluctuations in prevailing interest rates in the United Kingdom. The debt is analyzed as follows:

	Expected Maturity Date							Fair Value at March 31,
Liabilities	2006	2007	2008	2009	2010	Thereafter	Total	2005
	(in millions of pounds, except percentages)
Fixed rate bond due 2022 at 7.0%	50	53	57	61	65	390	676	675
Weighted average interest rate,        %	7.0	7.0	7.0	7.0	7.0	7.0		—

At March 31, 2005 the total of investments in liquid funds and cash at bank amounted to £456 million and in each case 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 March 31, 2005 the term deposits and money market funds not used to fund collateral were due to mature or were available within one month and earned interest at an average rate of 4.77 per cent. Term deposits, money market funds and bank balances at March 31, 2005 include £226 million of cash that has been deposited in collateral bank accounts and earned interest at an average rate of 4.02 per cent. 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 March 31, 2005 approximates the fair market value.

Foreign Exchange Risk Management

There are potential future foreign currency receivables in respect of the retentions outstanding from the sales of Bruce Power. 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 March 31, 2005 there were no foreign exchange contracts in place.

At March 31, 2005 we had fuel commitments denominated in Euros. The underlying fuel purchase commitments as at March 31, 2005 are analyzed as follows:

	Expected Maturity Date						Fair Value at March 31,
Total fuel commitments per currency (millions) as at March 31, 2005	2006	2007	2008	2009	2010	Thereafter	2005
Euros	0	10	10	0	11	36	62

198

We do not have significant commodity price exposure in relation to our procurement of nuclear fuels.

Electricity Trading Risk Management

Electricity trading activities relate principally to supporting the 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 minimizing the market risk associated with the output of the power stations.

Under BETTA, which took effect from April 1, 2005, any mismatch between actual metered generation (or demand) and the notified contract position is settled through the balancing mechanism at generally unfavorable prices. British Energy aims to sell all planned nuclear output forward and to minimize exposure to the balancing mechanism.

The risks in the wholesale market are managed through a contracting strategy that builds a portfolio of forward contracts of different lengths.

While operating primarily as a flexible mid-merit plant, Eggborough provides a flexible generation capability that fulfils three purposes designed to enhance profitability. Firstly, it provides a means for compensating for unplanned lost output from British Energy’s nuclear units at short notice; secondly, it provides the capability to adjust in a cost effective manner the Company’s total generation to meet the requirements of both wholesale and Direct Sales Business customers; and thirdly, it provides a capability that can be offered at short notice to the system operator via the balancing mechanism.

A sub-committee of the Board strictly monitors energy trading activities and risks which are controlled through delegated authorities within an overall energy trading risk management policy. There are procedures for setting limits on market and operational risks and managing credit exposure to trading and financial counterparties within clearly defined limits.

Credit risk

Credit risk represents the loss that the Company would incur if a counterparty failed to meet its contractual obligations.

The Company sells and purchases electricity through a variety of routes to market, primarily the DSB bilateral structured contracts and other contracts covered by Grid Trade Master Agreements (“GTMA”).

Direct Sales Business.    The DSB sells electricity to large Industrial and Commercial customers. These contracts are typically of 12 month’s duration, invoiced on a monthly basis. Normally there are no credit support arrangements contained within these contracts. However, the Company has credit insurance in place to minimize losses from the failure of customers. At March 31, 2005, approximately 50 per cent. (or approximately £70 million) of the accounts receivable from these customers was insured.

Grid Trade Master Agreements.    Bilateral structured contracts are normally based upon Grid Trade Master Agreement (“GTMA”) terms and conditions. These can contain specific credit support requirements for both counterparties, which seek to minimize the Company’s exposure to credit default, while also, in certain contracts, seeking to limit the requirement of the Company to provide credit support.

The GTMA is an industry standard set of terms and conditions containing, among other terms, clauses stipulating credit support requirements. Counterparties with an Investment Grade rating (from

199

Standard and Poor’s and/or Moody’s) are not generally required to provide credit support for trading activities. Those counterparties without an Investment Grade rating, however, are required to provide credit support in a form acceptable to the other counterparty. This normally takes the form of either a Parent Company Guarantee from an Investment Grade rated affiliate, a Letter of Credit from a bank, or cash. Where the Company transacts with a counterparty that does not have an Investment Grade rating, then one of these forms of credit support is obtained.

The Company’s policy is to manage credit exposure to trading counterparties within clearly defined limits. A sub-committee of the Executive Committee strictly monitors electricity trading activities which are controlled through delegated authorities and procedures, and which include specific criteria for the management of counterparty credit exposures. All of the Company’s counterparties are assigned an internal credit limit, based either upon the counterparty credit rating and net worth, or upon the limit of credit support provided by that counterparty. It is the Company’s policy never to trade above these limits without specific prior authority from the aforementioned sub-committee. A daily report is produced detailing the credit exposure to each counterparty, which is reviewed by management. Specific trigger points dictate certain activities to ensure that credit limits are not breached.

The Company is also exposed to credit risk from its cash balance. As at March 31, 2005, the Company had collateral backed by £155 million on deposit with one UK financial institution. The Company is looking to manage this risk by diversifying the number of institutions which will back its collateral. In addition to the cash on deposit for collateral, the Company holds cash with a number of other financial institutions.

Trading objectives

During the year the overriding concern of the Company was to reduce the Company’s exposure to potential falls in the market price of electricity. Therefore a prudent trading strategy was adopted to sell forward a high proportion of the Company’s output. As a result the Company has not fully benefited from the more recent rises in market prices. The Company has continued with its trading strategy to reduce exposure to volatility in medium-term market prices, utilizing diverse routes to market while minimizing the amount of trading collateral required. The routes to market include direct sales to industrial and commercial customers, contracting in the wholesale market, and long-term contracts together with sales of balancing and ancillary services to National Grid. There are contracts in place for substantially all planned production in 2005/06. A large majority of these are fixed-price contracts. As of March 31, 2005 and June 30, 2005, the average price of the fixed-price contracts for 2005/06 was £26.4/MWh and £29.8/MWh, respectively.

Equity Risk Management

Following completion of the Restructuring, our liabilities in respect of the decommissioning of our stations are now governed by the terms of certain of the restructuring agreements with Government relating to the establishment and operation of the NLF. As a consequence, our level of obligation for decommissioning liabilities is pre-determined, and is not subject to fluctuations in the values of assets held by the NLF.

At March 31, 2005 we reported a pension liability of £456 million related to our employee Pension Schemes. At that date the Pension Schemes’ assets were valued at £1,971 million of which £1,616 million was held in equities and bonds. The level of employer contributions to the pension schemes was formally confirmed following the triennial actuarial valuation with an effective date of March 31, 2004.

200

ITEM 12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

ITEM 13.    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not Applicable.

ITEM 14.    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

(None).

ITEM 15.    CONTROLS AND PROCEDURES

The New Bonds issued by British Energy Holdings plc to certain creditors under the terms of the Restructuring require the Company to comply with the provisions of s404 of the United States Sarbanes-Oxley Act. Accordingly, management’s report on its s404 attestation is set out below.

Management’s Report On Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes of conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2005. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.

Based on management’s assessment and the criteria set forth in the COSO Internal Control-Integrated Framework, we believe that, as of March 31, 2005 the Company’s internal control over financial reporting is effective.

Management’s assessment of the effectiveness of internal control over financial reporting as of March 31, 2005 has been audited by PricewaterhouseCoopers LLP, United Kingdom, an independent registered public accounting firm, as stated in their report on pages F-2 and F-3 of this Annual Report.

ITEM 16.    RESERVED

ITEM 16A.    AUDIT COMMITTEE FINANCIAL EXPERT

Our Board of Directors has determined that Ian Harley and John Delucca are “audit committee financial experts.” Our Board of Directors considers both Mr Harley and Mr Delucca to be independent. For further biographical details see Item 6—Directors, Senior Managers and Employees.

201

ITEM 16B.    CODE OF ETHICS

British Energy has a written code of conduct that applies to all of our employees, including our directors, Chief Executive Officer and Chief Financial Officer. British Energy recognizes that the senior financial officers of the group hold an important and elevated role in corporate governance. As such they are subject to the Code of Ethics for Senior Financial Officers in addition to the code of conduct. The Code of Ethics for Senior Financial Officers was adopted in January 2005 and is available on our website: http://www.british-energy.com

ITEM 16C.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

It is our policy to engage PricewaterhouseCoopers LLP on assignments where their expertise with British Energy are important, or where they win work on a competitive basis. An analysis of auditors’ remuneration for the past three fiscal years ending March 31, 2003, 2004 and 2005 is as follows:

	2005		2004		2003
	£’000	%	£’000	%	£’000	%
Audit Related Fees	3,477	36	768	14	695	23
Tax Fees	305	3	510	9	331	11
All Other Fees
—  Creditors’ long form report	951	10	2,017	35	—	—
—  Reporting accountant working capital report	1,149	12	1,208	21	532	17
—  Review of Accounting for restructuring	1,977	21	1,114	20	1,111	36
—  Prospectus	1,171	12	—	—	—	—
—  Other non-audit services	579	6	80	1	409	13
	9,609	100	5,697	100	3,078	100

Audit Committee Pre-Approval Policy

A pre-approval policy for services performed by the auditors was approved by the Audit Committee on January 19, 2005. The policy describes the audit, audit related, tax, and other services permitted to be performed by the auditors, subject to the Audit Committee’s prior approval of the services and related fees. Requests for the auditors to perform services are submitted jointly by both management and the auditors. Any pre-approved services that would exceed the aggregate agreed fee amount require specific additional pre-approval by the Audit Committee. At each of its regular committee meetings, the Audit Committee reviews summaries of the pre-approved services being provided, along with the related fee being charged, by the auditors.

ITEM 16D.

Not Applicable

ITEM 16E.

Not Applicable

ITEM 17.    FINANCIAL STATEMENTS

See Item 18.

ITEM 18.    FINANCIAL STATEMENTS

See our audited consolidated financial statements beginning at page F-1.

202

ITEM 19.

Exhibit Number	Description
1.01	British Energy Group plc’s Articles of Association.	Filed herewith
1.02	British Energy Group plc’s Memorandum of Association.	Filed herewith
4.01	The Deed of Amendment and Guarantee between British Energy Generation Limited, British Nuclear Fuels plc and British Energy plc dated March 31, 2003 (as amended on July 22, 2003) relating to the Agreement for the supply of Fuel for Use in Advanced Gas Cooled Reactors between Nuclear Electric Limited and BNFL dated June 3, 1997, as amended.	Incorporated by reference to British Energy plc’s annual report on Form 20-F filed in a prior year.
4.02	Agreement for the Supply of Fuel for Use in Advanced Gas Cooled Reactors from April 1, 2006 between British Energy Generation Limited, British Nuclear Fuels plc and British Energy plc dated March 31, 2003, (as amended).	Incorporated by reference to British Energy plc’s annual report on Form 20-F filed in a prior year.
4.03	Agreement for the Supply of Fuel for Use in Advanced Gas Cooled Reactors from April 1, 2006 between British Energy Generation (UK) Limited, British Nuclear Fuels plc and British Energy plc, dated March 31, 2003 (as amended).	Incorporated by reference to British Energy plc’s annual report on Form 20-F filed in a prior year.
4.04	Deed of Amendment and Guarantee between British Energy Generation (UK) Limited, British Nuclear Fuels plc and British Energy plc, dated March 31, 2003 (as amended) relating to the Agreement for the Supply of Fuel for Use in Advanced Gas Cooled Nuclear Reactors between Scottish Nuclear and BNFL dated March 30, 1995 as amended.	Incorporated by reference to British Energy plc’s annual report on Form 20-F filed in a prior year.
4.05	British Energy Generation Limited—Generation License1	Filed herewith.
4.06	Representative Nuclear Site License.	Incorporated by reference to British Energy plc’s annual report on Form 20-F filed in a prior year.
4.07	Purchase and Sale Agreement dated as of September 11, 2003 between British Energy Investment Limited and FPL Energy Nuclear Mid-Atlantic, LLC relating to the sale and purchase of 100 per cent of the shares of British Energy US Holdings Inc.	Incorporated by reference to British Energy plc’s annual report on Form 20-F filed in a prior year.

203

Exhibit Number	Description
4.08	Purchase and Sale Agreement dated as of October 10, 2003 between British Energy Investment Limited and Exelon Generation Company, LLC relating to the sale and purchase of 100 per cent of the shares of British Energy US Holdings Inc.	Incorporated by reference to British Energy plc’s annual report on Form 20-F filed in a prior year.
4.09	Government Restructuring Agreement dated October 1, 2003 between British Energy Plc, British Energy Generation (UK) Limited, British Energy Generation Limited, certain other British Energy Parties, the Nuclear Generation Decommissioning Fund Limited (to be renamed Nuclear Liabilities Fund Limited), the Trustees of the Nuclear Trust and the Secretary of State for Trade and Industry.	Incorporated by reference to British Energy plc’s annual report on Form 20-F filed in a prior year.
4.10	The British Energy Group plc Interim Deferred Bonus Plan 2005 dated November 28, 2004.	Filed herewith.
4.11	The British Energy Group plc Long Term Deferred Bonus Plan dated November 28, 2004.	Filed herewith.
4.12	British Energy Group plc Executive Share Option Plan 2004 (Parts one and two) dated November 28, 2004.	Filed herewith.
4.13	British Energy Group plc Employee Share Option Plan 2004 dated November 28, 2004.	Filed herewith.
4.14	Master purchase agreement in respect of the disposal of the Bruce group dated January 17, 2003 and made between British Energy, BEIHL, BECL, Bruce Power, Cameco Corporation, BPC Generation Infrastructure Trust, Ontario Municipal Employees Retirement Board (“OMERS”) (as guarantor for BPC), TransCanada Pipelines Limited and 2020857 Ontario Inc.	Incorporated by reference to British Energy plc’s annual report on Form 20-F filed in a prior year.
4.15	Deed relating to the decision of the Commission of the European Communities, dated October 8, 2004.*	Filed herewith.
4.16	Deed of Amendment between Barclays Bank PLC (as Bank) and British Energy Generation Limited (as Seller) relating to a Master Trade Receivables Financing Facility dated August 25, 2004, amended and restated on October 8, 2004, amended on November 8, 2004, and amended to transfer certain rights on 1 April 2005.	Filed herewith.

204

Exhibit Number	Description
4.17	Debenture dated 8 September 2000 and made between Eggborough Power Ltd., British Energy plc, BEPET and the Security Trustee.	Filed herewith.
4.18	The Assignment of the Share Purchase Agreement and Tax Deed of Covenant dated September 8, 2000 and made between Eggborough Power (Holdings) Ltd. and the Security Trustee.	Filed herewith.
4.19	The mortgage of shares dated September 8, 2000 and made between Eggborough Power (Holdings) Ltd and the Security Trustee.	Filed herewith.
4.20	Heads of Agreement dated September 30, 2004 and made between British Energy plc, the ad hoc bondholder committee and Polygon Investment Partners LLP, Polygon Global Opportunities Master Fund and Polygon Investment Partners LP.	Filed herewith.
4.21	Warrant instrument relating to warrants to subscribe for ordinary shares of 98 pence each in British Energy Group PLC dated January 14, 2005.	Filed herewith.
4.22	Nuclear Liabilities Funding Agreement dated January 14, 2005 between the Secretary of State, NLF, BEG (UK), BEG, British Energy Group plc and British Energy Holdings plc.	Filed herewith.
4.23	Historic Liabilities Funding Agreement dated January 14, 2005 between the Secretary of State, BEG (UK), BEG, British Energy Group plc and British Energy Holdings plc.*	Filed herewith.
4.24	Contribution Agreement dated January 14, 2005 between the Secretary of State, NLF, BEG (UK), BEG, British Energy Group plc and British Energy Holdings plc.	Filed herewith.
4.25	Debenture dated January 14, 2005 between the Secretary of State, the NLF and the Obligors (as defined in Schedule 1 therein).	Filed herewith
4.26	Option Agreement dated January 14, 2005 between the Secretary of State, BEG (UK), BEG, British Energy Group plc and British Energy Holdings plc.*	Filed herewith.
4.27	Guarantee and Indemnity dated January 14, 2005 between the Secretary of State, NLF and the guarantors (as defined in Schedule 1 therein).	Filed herewith.

205

Exhibit Number	Description
4.28	Amended and Restated Credit Agreement to Credit Agreement originally dated July 13, 2000 as amended and restated by an amendment and restatement agreement dated September 30, 2004 for £150,000,000 Facility between Eggborough Power Limited as Borrower and Barclays Capital as Arranger and Barclays Bank Plc as Agent and Security Trustee.*	Filed herewith.
4.29	Capacity and Tolling Agreement between BEPET and Eggborough Power Ltd dated September 30, 2004.*	Filed herewith.
4.30	Asset Option Agreement between Eggborough Power Ltd (the Seller), Barclays Bank plc (as agent and security trustee for the finance parties) (the Buyer) and BEPET, dated September 30, 2004.*	Filed herewith.
4.31	Share Option Agreement made between Eggborough Power (Holdings) Ltd (the Seller), Barclays Bank plc (as agent and security trustee for the finance parties) (the Buyer), Eggborough Power Ltd and BEPET dated September 30, 2004.*	Filed herewith.
4.32	Debenture between Eggborough Power Limited, British Energy Power and Energy Trading Limited, Eggborough Power (Holdings) Limited and Barclays Bank plc as Security Trustee entered into subject to and with the benefit of the terms of an Intercreditor deed originally dated September 8, 2000 as amended by an Amendment and Restatement deed dated September 30, 2004.	Filed herewith.
4.33	The Deed of Assignment and mortgage dated September 30, 2004 between Eggborough Power (Holdings) Ltd and Barclays Bank plc.*	Filed herewith.
4.34	The Amended and Restated Intercreditor Agreement dated September 30, 2004 between Eggborough Power Ltd., Eggborough Power (Holdings) Ltd., BEPET and the Eggborough Banks.*	Filed herewith.

206

Exhibit Number	Description
4.35	The Amendment and Restatement Agreement dated September 30, 2004 between, amongst others, Eggborough Power Ltd., BEPET, Eggborough Power (Holdings) Ltd., Barclays Capital, Barclays Bank plc and certain other financial institutions listed in Schedule 1 thereto amending and restating the Credit Agreement originally dated July 13, 2000.	Filed herewith.
4.36	The First Security Assignment dated September 30, 2004 between Eggborough Power (Holdings) Limited and British Energy Holdings plc.	Filed herewith.
4.37	The Second Security Assignment dated September 30, 2004 between Eggborough Power Ltd and Eggborough Power (Holdings) Ltd.	Filed herewith.
4.38	The Share Subscription Deed dated September 30, 2004 between Eggborough Power Ltd, Eggborough Power (Holdings) Ltd., British Energy Group plc, British Energy Holdings Ltd and Barclays Bank plc.*	Filed herewith.
4.39	The Deed of Termination dated September 30, 2004 between, amongst others, British Energy plc, BEPET, Eggborough Power (Holdings) Ltd., Eggborough Power Ltd., the Agent, the Security Trustee and the Eggborough Banks.	Filed herewith.
4.40	The Accounts Agreement between Eggborough Power Ltd. and Barclays Bank PLC (acting as Agent and Account Bank) dated September 30, 2004.*	Filed herewith.
4.41	Agreement for the Sale and Purchase of the Direct Supply and Export Consolidation Business dated March 30, 2005 among BEG, BEPET and BEDL.	Filed herewith.
4.42	Agreement between British Energy Generation (UK) Limited and British Energy Generation Limited for the Acquisition of Substantially All the Business and Associated Assets of British Energy Generation (UK) Limited dated June 27, 2005.	Filed herewith.
4.43	Standard Security Agreement dated 14 January 2005 by British Energy Generation (UK) Limited in favour of Nuclear Generation Decommissioning Fund Limited regarding the Torness Power Station.	Filed herewith.

207

Exhibit Number	Description
4.44	Standard Security Agreement dated 14 January 2005 by British Energy Generation (UK) Limited in favour of Nuclear Generation Decommissioning Fund Limited regarding the Hunterston B Power Station.	Filed herewith.
4.45	Standard Security Agreement dated 27 June 2005 by British Energy Generation Limited in favour of NLF regarding the Torness Power Station.	Filed herewith.
4.46	Standard Security Agreement dated 27 June 2005 by British Energy Generation Limited in favour of NLF regarding the Hunterston “B” Power Station.	Filed herewith.
6.01	Earnings per share: The information set forth under the heading “(Loss)/Earnings per Share” in Note 16 to the Consolidated Financial Statements is incorporated herein by reference.	Incorporated by reference as indicated.
8.01	List of subsidiaries of British Energy Group plc.	Filed herewith.
12.01	Certification of William Coley, Chief Executive Officer of British Energy Group plc, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith.
12.02	Certification of Stephen Billingham, Chief Financial Officer of British Energy Group plc, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith.
13.01	Certification by Chief Executive Officer of British Energy Group plc of periodic financial report pursuant to 18 U.S.C. Section 1350, as mandated by Section 906 of the Sarbanes-Oxley Act of 2002.	Furnished herewith.
13.02	Certification by Chief Financial Officer of British Energy Group plc of periodic financial report pursuant to 18 U.S.C. Section 1350, as mandated by Section 906 of the Sarbanes-Oxley Act of 2002.	Furnished herewith.
15.01	Service Agreement for Executive Director between British Energy plc and Michael Alexander.	Filed herewith.
15.02	Draft Service Agreement for Executive Director between British Energy Group plc and William Coley.	Filed herewith.

208

Exhibit Number	Description
15.03	Contract of Employment between British Energy plc and Neil O’Hara dated March 3, 2004.	Filed herewith.
15.04	Contract of Employment between British Energy plc and Sally Smedley dated February 8, 1999.	Filed herewith.
15.05	Service agreement for Executive Director between British Energy plc and Stephen Billingham dated October 13, 2004.	Filed herewith
15.06	Service Agreement for Executive Director between British Energy plc and Roy Anderson dated October 5, 2004.	Filed herewith
15.07	Service Agreement for Executive Director between British Energy plc and David Gilchrist dated 26 September 2001.	Filed herewith
15.08	Service Agreement for Executive Director between British Energy plc and Martin Gatto dated December 1, 2003.	Filed herewith

¹ All subsequent amendments or modifications to the standard conditions can be found on the Ofgem website (www.ofgem.gov.uk).

* Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Commission.

The registrant agrees to furnish to the Commission upon request a copy of any instrument which defines the rights of holders of long-term debt of British Energy Group plc and its consolidated subsidiaries.

209

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

BRITISH ENERGY GROUP plc
By:	/s/ Stephen Billingham
Name:	Stephen Billingham
Title:	Finance Director
July 28, 2005

210

US FORM 20-F

Consolidated Financial Statements

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

OF BRITISH ENERGY GROUP PLC

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-5
Consolidated Statements of Operations	F-6
Consolidated Statements of Cash Flows	F-7
Consolidated Statements of Shareholders’ Equity/(Deficit) and Comprehensive Income/(Loss)	F-8
Notes to Consolidated Financial Statements	F-9

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of British Energy Group plc:

We have completed an integrated audit of British Energy Group plc’s 2005 consolidated financial statements and of its internal control over financial reporting as of March 31, 2005 in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinion, based on our audit, is presented below.

Consolidated financial statements

In our opinion, the accompanying consolidated balance sheet and the related statements of operations, of shareholders’ equity/(deficit) and comprehensive income/(loss) and of cash flows, present fairly, in all material respects, the financial position of British Energy Group plc and its subsidiaries at March 31, 2005, and the results of their operations and their cash flows for the period from January 15, 2005 to March 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting (Item 15), that the Company maintained effective internal control over financial reporting as of March 31, 2005 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2005, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the

F-2

maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP

Edinburgh, United Kingdom

July 28, 2005

F-3

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of British Energy Group plc:

We have audited the accompanying consolidated balance sheet of British Energy plc and its subsidiaries as of March 31, 2004 and the related consolidated statements of operations, of shareholders’ equity/(deficit) and comprehensive income/(loss) and of cash flows for each of the two years in the period ended March 31, 2004 and for the period from April 1, 2004 to January 14, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the Standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of British Energy plc and its subsidiaries at March 31, 2004 and the results of their operations and their cash flows for each of the two years in the period ended March 31, 2004 and for the period from April 1, 2004 to January 14, 2005, in conformity with accounting principles generally accepted in the United States of America.

As described in Note 8, British Energy plc prospectively adopted Financial Accounting Standard No.143, Accounting for Asset Retirement Obligations, effective April 1, 2003.

PricewaterhouseCoopers LLP

Edinburgh, United Kingdom

July 28, 2005

F-4

BRITISH ENERGY GROUP PLC

CONSOLIDATED BALANCE SHEETS

		Successor		Predecessor
	Note	March 31, 2005		March 31, 2004
		(In £ millions)
ASSETS
Current Assets
Cash and cash equivalents		230		276
Restricted cash		226		297
Accounts receivable—net	3	105		119
Unbilled revenues		166		149
Inventory—net	4	64		97
Prepaid assets		21		5
Other current assets		40		10
Total current assets		852		953
Property, Plant and Equipment—net	5	3,923		1,128
Nuclear liabilities fund	6	782		440
Nuclear liabilities receivable		2,312		—
Other assets		7		39
Total Assets		7,876		2,560
LIABILITIES AND SHAREHOLDERS’ EQUITY/(DEFICIT)
Current Liabilities
Long-term debt due within one year	7	50		197
Accounts payable		129		180
Accrued expenses		255		190
Asset retirement obligations due within one year	8	181		554
Other current liabilities	9	270		391
Total current liabilities		885		1,512
Long-Term Debt—net of current portion	7	626		662
Deferred Credits and Other Liabilities
Asset retirement obligations	8	4,215		1,468
Pension obligation	10	456		152
Deferred tax	11	57		179
Other long-term obligations	9	220		56
Total deferred credits and other liabilities		4,948		1,855
Commitments and Contingencies	19
Shareholders’ Equity/(Deficit)	12
“A” Shares, £0.60 par value, 720,339,029 shares authorized, 155,660,598 issued and outstanding		—		93
Common stock, £0.44 28/43 par value, 991,679,020 shares authorized, 620,362,444 issued and outstanding		—		277
Common stock, £0.10 par value, 2,800,000,000 shares authorized, 561,315,459 issued and outstanding		56		—
Additional paid in capital		1,435		499
Warrants		51		—
Retained losses		(122	)	(2,050	)
Treasury stock at cost (434,701 shares of common stock, par value £0.10, at March 31, 2005 and 46,192,413 shares of common stock, par value £0.44 28/43, at March 31, 2004)		(3	)	(159	)
Accumulated other comprehensive loss		—		(129	)
Total shareholders’ equity/(deficit)		1,417		(1,469	)
Total Liabilities and Shareholders’ Equity/(Deficit)		7,876		2,560

See the accompanying notes to Consolidated Financial Statements

F-5

BRITISH ENERGY GROUP PLC

CONSOLIDATED STATEMENTS OF OPERATIONS

		Successor			Predecessor
	Note	January 15, 2005 through March 31, 2005			April 1, 2004 through January 14, 2005			Year ended March 31, 2004			Year ended March 31, 2003
		(In £ millions, except per share amounts)
Operating Revenues
Operating revenues			482			1,222			1,516			1,528
Operating Expenses
Fuel costs			(127	)		(507	)		(532	)		(1,050	)
Staff costs			(81	)		(233	)		(272	)		(228	)
Operating and maintenance expenses			(101	)		(390	)		(451	)		(598	)
Depreciation and amortization			(73	)		(87	)		(101	)		(300	)
Energy supply costs			(73	)		(229	)		(260	)		(184	)
(Loss)/gain from movements in derivative commodity contracts	14		(171	)		37			(90	)		(112	)
Other operating expenses			(16	)		—			—			—
Impairment of property, plant and equipment			—			—			—			(6,680	)
Total operating expenses			(642	)		(1,409	)		(1,706	)		(9,152	)
Operating loss			(160	)		(187	)		(190	)		(7,624	)
Equity in net earnings of joint venture	15		—			—			51			60
Interest income			5			15			11			9
Interest expense			(10	)		(79	)		(60	)		(268	)
Loss from Continuing Operations Before Income Tax Benefit/(Charge)			(165	)		(251	)		(188	)		(7,823	)
Income tax benefit/(charge) from continuing operations	11		43			24			110			(30	)
Discontinued Operations
Income from discontinued operations net of tax	15		—			—			—			59
Gain/(loss) from disposal of discontinued operations			—			1			—			(6	)
Loss Before Cumulative Effect of Change in Accounting Principle			(122	)		(226	)		(78	)		(7,800	)
Cumulative effect of change in accounting principle			—			—			7,913			—
Tax on cumulative effect of change in accounting principle			—			—			(273	)		—
Net (Loss)/Income			(122	)		(226	)		7,562			(7,800	)
Loss per share from continuing operations—basic and diluted	16	£	(0.22	)	£	(0.38	)	£	(0.13	)	£	(13.05	)
(Loss)/earnings per share—basic and diluted	16	£	(0.22	)	£	(0.38	)	£	12.56		£	(12.96	)

See the accompanying notes to Consolidated Financial Statements

F-6

BRITISH ENERGY GROUP PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Successor		Predecessor
	January 15, 2005 through March 31, 2005		April 1, 2004 through January 14, 2005		Year ended March 31, 2004		Year ended March 31, 2003
	(In £ millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)/income	(122	)	(226	)	7,562		(7,800	)
Adjustments to reconcile net (loss)/income to net cash provided by/(used in) operating activities:
Depreciation and amortization (including amortization of nuclear fuel)	73		87		101		300
Impairment of property, plant and equipment	—		—		—		6,680
Cumulative effect of change in accounting principle	—		—		(7,640	)	—
Income from joint venture	—		—		(200	)	(57	)
Net (gains)/losses on sales of equity investments and other assets	—		(1	)	118		6
Deferred tax	(43	)	(24	)	(110	)	52
Pension expense	8		32		50		19
Stock compensation expense	—		(1	)	—		—
Employee severance provision	17		9		—		—
Loss/(gain) from movements in derivative contracts and interest rate swaps	171		(37	)	90		112
Loss from movements in other contracts	16		—		—		—
Accretion of nuclear liabilities	52		247		244		193
Changes in operating assets and liabilities:
Accounts receivable	183		(172	)	51		307
Unbilled revenues	(122	)	105		(12	)	(17	)
Liabilities discharged	(185	)	(122	)	(60	)	418
Nuclear liabilities receivable	155		—		—		—
Inventory	5		(5	)	(8	)	88
Other assets	(3	)	(24	)	(9	)	215
Fuel asset	18		(7	)	18		49
Accounts payable and accrued expenses	(96	)	65		18		(140	)
Other liabilities	(16	)	(24	)	(55	)	(152	)
Net cash provided by/(used in) operating activities	111		(98	)	158		273
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of investments	—		4		171		262
Proceeds from sale of property, plant and equipment	7		—		—		—
Amounts placed on/(released from) restricted use term deposit	64		12		(88	)	(209	)
Contributions to nuclear liabilities funds	(5	)	(15	)	(19	)	(18	)
Purchase of property, plant and equipment	(35	)	(66	)	(70	)	(282	)
Net cash provided by/(used in) investing activities	31		(65	)	(6	)	(247	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of short term debt	(4	)	—		—		(1	)
Repayments of long term debt	(24	)	—		—		(79	)
Payments on bank overdraft	—		—		(7	)	(54	)
Proceeds from sale of treasury stock	3		—		—		—
Dividends paid on common equity	—		—		—		(31	)
Net cash used in financing activities	(25	)	—		(7	)	(165	)
Net increase/(decrease) in cash and cash equivalents	117		(163	)	145		(139	)
Cash and cash equivalents at beginning of period	113		276		131		270
Cash and cash equivalents at end of period	230		113		276		131
Supplemental information
Cash paid during the period for:
Interest and related charges, including capitalized amounts	11		72		85		91
Income taxes	—		—		12		—
Non cash investing and financing activities:
Consideration for purchase of British Energy plc	1,536		—		—		—

See the accompanying notes to Consolidated Financial Statements

F-7

BRITISH ENERGY GROUP PLC

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY/(DEFICIT) AND COMPREHENSIVE INCOME/(LOSS)

	“A” Shares				Common Stock				Treasury Stock				Additional Paid In Capital		Accumulated Other Comprehensive (Loss)/Income			Retained Losses		Total		Comprehensive (Loss)/Income
	Shares		Amount		Shares		Amount		Shares		Amount						Warrants
	No.		£		No.		£		No.		£		£		£		£	£		£		£
	(In millions)
Predecessor
Balance at April 1, 2002	156		93		620		277		(46	)	(159	)	499		18		—	(1,780	)	(1,052	)
Net loss for year	—		—		—		—		—		—		—		—		—	(7,800	)	(7,800	)	(7,800	)
Other comprehensive loss, net of tax:
Translation adjustments for year	—		—		—		—		—		—		—		—		—	—		—		(25	)
Unrealized gains on securities for year net of tax	—		—		—		—		—		—		—		—		—	—		—		21
Additional minimum pension liability	—		—		—		—		—		—		—		—		—	—		—		(249	)
Other comprehensive loss															(253	)		—		(253	)	(253	)
Total comprehensive loss	—		—		—		—		—		—		—		—		—	—		—		(8,053	)
Dividends	—		—		—		—		—		—		—		—		—	(32	)	(32	)
Balance at March 31, 2003	156		93		620		277		(46	)	(159	)	499		(235	)	—	(9,612	)	(9,137	)
Net income for year	—		—		—		—		—		—		—		—		—	7,562		7,562		7,562
Other comprehensive income, net of tax:
Translation adjustments for year	—		—		—		—		—		—		—		—		—	—		—		(15	)
Unrealized gains on securities for year net of tax	—		—		—		—		—		—		—		—		—	—		—		87
Additional minimum pension liability	—		—		—		—		—		—		—		—		—	—		—		34
Other comprehensive income															106					106		106
Total comprehensive income	—		—		—		—		—		—		—		—		—	—		—		7,668
Balance at March 31, 2004	156		93		620		277		(46	)	(159	)	499		(129	)	—	(2,050	)	(1,469	)
Net loss for period	—		—		—		—		—		—		—		—		—	(226	)	(226	)	(226	)
Other comprehensive loss, net of tax:
Unrealized gains on securities for the period net of tax	—		—		—		—		—		—		—		—		—	—		—		63
Additional minimum pension liability	—		—		—		—		—		—		—		—		—	—		—		(106	)
Other comprehensive loss	—		—		—		—		—		—		—		(43	)	—	—		(43	)	(43	)
Total comprehensive loss	—		—		—		—		—		—		—		—		—	—		—		(269	)
Non-cash compensation	—		—		—		—		—		—		(1	)	—		—	—		(1	)
Balance at January 14, 2005	156		93		620		277		(46	)	(159	)	498		(172	)	—	(2,276	)	(1,739	)
Restructuring adjustments	(156	)	(93	)	(59	)	(221	)	45		153		937		172		51	2,276		3,275
Successor	—		—		561		56		(1	)	(6	)	1,435		—		51	—		1,536
Net loss for the period	—		—		—		—		—		—		—		—		—	(122	)	(122	)	(122	)
Total comprehensive loss	—		—		—		—		—		—		—		—		—	—		—		(122	)
Sale of treasury stock	—		—		—		—		1		3		—		—		—	—		3
Balance at March 31, 2005	—		—		561		56		0		(3	)	1,435		—		51	(122	)	1,417

See the accompanying notes to Consolidated Financial Statements

F-8

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

British Energy plc completed its Restructuring on January 14, 2005 and on that date was acquired by British Energy Group plc (the “Company”), a new parent company for the Group. The Company is the UK’s largest generator of electricity, producing approximately one fifth of the UK’s electricity and employing over 5,400 staff. The Company owns and operates eight nuclear power stations and one coal fired power station in the UK. The Company’s power stations have a combined capacity of approximately 11,600 MW.

The Company uses a variety of sales channels in the UK, including the wholesale market, direct sales and long term contract sales.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”).

The consolidated financial statements include, after eliminating inter company transactions and balances, the accounts of British Energy Group plc and all its subsidiaries. The Company consolidates all majority-owned and controlled subsidiaries and uses the equity method of accounting for joint ventures and investments in associated companies over which the company has significant influence, but does not have effective control and is not the primary beneficiary.

The Company completed its Restructuring on January 14, 2005 (the “Restructuring Effective Date”). Pursuant to the Restructuring a new entity was created and was used to acquire British Energy plc. The Restructuring was thus accounted for as a business combination under FASB Statement No. 141, Business Combinations (“SFAS 141”). The carrying values of the assets and liabilities were adjusted to their fair values. Since the Restructuring materially changed the carrying values recorded in the Company’s consolidated balance sheet, the terms “Successor” and “Predecessor” are used to distinguish the consolidated financial statements for periods after the Restructuring from the consolidated financial statements prior to the Restructuring. The terms “Predecessor” refers to the Company and its subsidiaries for periods prior to and including January 14, 2005. The terms “Successor” refers to the Company and its subsidiaries for periods including and subsequent to January 15, 2005.

The accounting policies being applied by the Successor are, in some cases, different to those which were applied by the Predecessor and have been identified in the notes below.

See Note 2 for a presentation of the unaudited pro forma financial information illustrating the effect of the Company’s Restructuring and the effect of implementing certain fair value accounting adjustments.

On February 14, 2003, British Energy plc disposed of its stake in Bruce Power Limited Partnership and Huron Wind Limited Partnership; therefore, their results up to the point of disposal have been classified as discontinued operations within prior reporting periods. All other activities of the Company have been shown as continuing activities.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and

F-9

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from estimates. Significant estimates include amounts for Restructuring activity, nuclear liabilities and decommissioning, property, plant and equipment, and pensions.

Cash and Cash Equivalents

The Company considers cash on deposit and all temporary cash investments purchased with an original maturity of three months or less to be cash equivalents.

Restricted Cash

Restricted cash is primarily held for trading collateral purposes. The Company had restricted cash of £226 million at March 31, 2005 and £297 million at March 31, 2004.

Accounts Receivable

Accounts receivable are stated at cost less the allowance for doubtful accounts. No interest has been charged on accounts receivable.

Unbilled Revenues

Unbilled revenues, in connection with the direct sales business, are recognised on revenue that has been earned through contracted arrangements, but not yet billed due to the timing of the period end.

Inventory

Successor Company

At the Restructuring Effective Date, inventory was recorded at fair value. Inventory consists of coal held for electrical generation and stores. Inventory is stated at cost (first-in, first-out or average cost), but not in excess of realizable value. A provision for inventory is recorded based on the life and residual value of parts. In addition, inventory is assessed for obsolescence based on historical usage patterns and projected utilization of the parts and written off as appropriate.

Predecessor Company

Prior to the Restructuring, inventory also included strategic spares, which are pieces of equipment integral to power station operation (such as turbines and gas circulators) that are held for repair and maintenance purposes. Subsequent to the Restructuring, the Successor Company classified strategic spares within property, plant and equipment so as to reflect the long-term nature of the assets.

Property, Plant and Equipment

Property, plant and equipment is comprised of assets acquired or constructed by the Company. Expenditures of a capital nature incurred to improve operational performance, safety, or to meet increased regulatory standards are also capitalized. Interest on major capital projects is included in the cost of the property, plant and equipment from the date of cash settlement until that date of commissioning. Other expenditures, including those incurred on preliminary studies and on the initiation of new technologies not yet adopted, are charged to operations as incurred.

Property, plant and equipment (other than assets in the course of construction) are stated in the balance sheet at cost less accumulated depreciation. In the Successor period, property, plant and equipment is stated at cost, or the then-fair value for the assets acquired at Restructuring, less accumulated depreciation. Accumulated depreciation includes additional charges made where necessary to reflect impairment in value. Assets in the course of construction are stated at cost.

F-10

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The charge for depreciation of property, plant and equipment is on a straight line basis after taking into account provisions for salvage value, over their estimated useful lives. Upon retirement or disposal of property, plant and equipment, the related costs and accumulated depreciation are removed from the respective accounts and any gains or losses are included in the statements of operations.

The asset lives adopted are subject to regular review and for the year ended March 31, 2005 were as follows:

	Successor	Predecessor
AGR power stations	6-18 years	25-35 years
PWR power station	30 years	40 years
Coal power station	11 years	12 years
Other buildings	30 years	40 years
Other plant and equipment	18 months-5 years	5 years

In the Successor period, overhaul costs, being the costs incurred in relation to statutory outages, are capitalized in other plant and equipment and depreciated over the period until the next statutory outage. For AGR power stations, this depreciation period is three years and for the PWR power station is eighteen months. Overhaul costs for planned outages at Eggborough are capitalized in other plant and equipment and depreciated over the four-year period until the next planned outage.

Subsequent to the Restructuring, strategic spares are included within the power stations category and are carried at the lower of cost, or the then-fair value for assets as a result of the Restructuring, and net realizable value and depreciated over the life of the asset to which they relate.

Capitalized Interest

Interest incurred on borrowings, which could have been avoided if the expenditure on the asset had not been made, is included in property, plant and equipment and depreciated over the lives of the related assets. The amount of interest capitalized is determined by reference to average interest rates on outstanding long-term borrowings.

Impairment of Long-Lived Assets

The carrying values of long-lived assets are reviewed for impairment whenever indications of impairment exist in accordance with the requirements of FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”). The carrying value of long-lived assets is considered impaired when the projected undiscounted cash flows are less than the carrying value. In that event, a loss would be recognized based on the amount by which the carrying value of the asset exceeds its fair value. Fair value is determined primarily by available market valuations or discounted cash flows.

Nuclear Liabilities Fund

Successor Company

The Company makes contributions into an independently administered investment fund, the Nuclear Liabilities Fund (“NLF”), to fund, among other matters, the costs of decommissioning its nuclear power stations. The Company accounts for the NLF and contributions to it by applying deposit accounting principles similar to AICPA Statement of Position No. 98-7, Deposit Accounting: Accounting

F-11

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk (“SOP 98-7”). SOP 98-7 requires the use of deposit accounting for insurance contracts with an indeterminate risk. Contributions to the NLF are considered premiums paid for the Nuclear Liabilities Receivable and are accounted for as a deposit until the amount of coverage can be estimated and the premium allocated to the coverage provided. The assets held by the NLF are recorded at fair value on the Balance Sheet with both realized and unrealized gains and losses from these assets recorded in the Statement of Operations.

Predecessor Company

Prior to the Restructuring, the Company made contributions to a decommissioning fund and accounted for this fund as an investment on the balance sheet. The investments were accounted for as available-for-sale securities in accordance with FASB Statement No. 115, Accounting for certain investments in Debt and Equity Securities (“SFAS 115”) and these securities were reported at their estimated fair value in the Company’s balance sheet under “Decommissioning Fund.” Using the specific identification method to determine cost, realized gains and losses from these securities were included in the Statements of Operations. Unrealized gains and losses were excluded from income until realized and reported as a separate component of shareholders’ equity.

Nuclear Liabilities Receivable

Pursuant to the Government Restructuring Agreement in connection with the Restructuring, the UK Government (“Secretary of State”) will fund certain historic nuclear liabilities that existed as at the Restructuring Effective Date. As a result, the Company has recognized a Nuclear Liabilities Receivable for the amounts due from the Secretary of State as these amounts are known and measurable.

Financial Instruments and Derivatives

FASB Statement No. (“SFAS”) 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS 137, Accounting for Derivative Instruments and Hedging Activities—deferral of the effective date of FASB Statement No. 133, SFAS 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, and SFAS 149, Amendment of Statement 133 on Derivative Instrument and Hedging Activities, (hereinafter referred to collectively as “SFAS 133”) were adopted by the Company effective April 1, 2001. SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as “derivatives”) and for hedging activities. The Company has also adopted EITF 02-3, Accounting for Contracts Involved in Energy Trading and Risk Management Activities, and, to the extent that EITF 02-3 has been superseded, EITF 03-11, Reporting Realized Gains and Losses on Derivative Instruments That Are Subject to FASB Statement No. 133 and Not “Held for Trading Purposes” as defined in Issue No. 02-03.

The Company uses derivative and non-derivative financial instruments to manage its foreign currency, commodity price and interest rate exposures.

As described more fully in Note 14, the Company generally recognizes all derivatives which do not qualify for the Normal Purchase Normal Sale exemption on the balance sheets at their fair value with the change in fair value recognized in the Statement of Operations.

At the Restructuring Effective Date, all derivative contracts, outstanding at that time including those which qualify for the Normal Purchase Normal Sale exemption, were recorded at fair value.

F-12

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Severance Charges

The Company initiated a plan in March 2005 which will involve selected voluntary severance and some selected voluntary early retirements. The Company recognizes a liability for costs associated with an exit or disposal activity when the liability is incurred as required under FASB Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities (“SFAS 146”). SFAS 146 also establishes that the liability should initially be measured and recorded at fair value. The liability is relieved as qualifying payments are made.

Asset Retirement Obligations

The Company adopted the provisions of FASB Statement No. 143, Asset Retirement Obligations (“SFAS 143”), on April 1, 2003. SFAS 143 provides the accounting requirements for asset retirement obligations associated with tangible, long-lived assets. The Company records the estimated fair value of legal obligations associated with the retirement of tangible long-lived assets in the period in which the liabilities are incurred. The corresponding asset retirement costs are incorporated as part of the book value of the related long-lived asset. The estimated costs include the demolition and site clearance of the stations’ radioactive facilities and the management of spent nuclear fuel and waste.

The Company is required to adjust the asset retirement obligation to its present value in subsequent periods as accretion expense is recorded. Corresponding increases in asset book values are depreciated over the remaining useful life of the related asset. Uncertainties as to the probability, timing or amount of cash flows associated with an asset retirement obligation affect the estimate of fair value.

Emissions Trading Scheme

Beginning January 1, 2005, the Company is subject to the European Union Emissions Trading Scheme (“ETS”). The Company received notification from the National Emissions-Trading Agency that it is entitled to receive allowances to emit 4.54 million tonnes of CO₂, in connection with the Eggborough Station, during the compliance period 2005 through 2007. As of January 1, 2005, the Company began to monitor its CO₂ emissions and surrender ETS allowances equal to its actual annual emissions of CO₂ within four months from the end of the calendar year in which such emissions arose. In any year, the Company may not exceed its ETS allowances for that year unless it has purchased additional allowances to cover such excess emissions. The Company recognizes a liability at current allowance prices to the extent that actual emissions exceed the allowances retained.

Pensions and Other Post-retirement Benefits

The Company accounts for its defined benefit pension plans using FASB Statement No. 87, Employer’s Accounting for Pensions (“SFAS 87”) and the disclosure requirements under FASB Statement No. 132 (revised), Employer’s Disclosures about Pensions and other Post Retirement Benefits (“SFAS 132R”), an Amendment of FASB Statements 87, 88 and 106. Under SFAS 87, pension expense is recognized on an accrual basis over the employee’s approximate service periods. SFAS 87 requires the use of an actuarial method for determining defined benefit pension costs and provides for the deferral of actuarial gains and losses (in excess of a specified corridor) that result from changes in assumptions or actual experience differing from that assumed. SFAS 87 also provides for the prospective amortization of costs related to changes in the benefit plan, as well as the obligation resulting from the transition. Disclosure of the components of periodic pension cost and the funded status of the pension plans are also required. In applying purchase accounting at Restructuring, a pension liability was recognized for the projected benefit obligation in excess of plan assets.

F-13

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Income Taxes

The Company accounts for income taxes using the liability method. Under this method deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates in effect for years in which differences are expected to reverse. Deferred income tax expense/(credit) represents the change in net deferred tax assets and liabilities during the year. The Company recognizes a valuation allowance against such deferred tax assets when it is “more likely than not” that such assets will not be recovered.

Employee Stock Compensation Plans

The Company accounts for its stock compensation plans in accordance with FASB Statement No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), using the Black-Scholes option-pricing model, under which a fair value is calculated for the share option schemes as at the grant date of the options. The fair value is charged to operations over the period from the date the options were granted to the date at which the options are expected to vest. The corresponding credit is included in shareholders’ equity.

Treasury Stock

Successor Company

As a result of the Restructuring treasury stock was recorded at fair value as at the Restructuring Effective Date.

Predecessor Company

Treasury shares are held by a wholly-owned subsidiary trust and are purchased in anticipation of issuances under employee stock compensation plans. The Company records treasury stock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. The weighted average method is used on the subsequent reissuance of shares and any resulting gains or losses are credited or charged to retained earnings. Treasury stock activity is presented in the consolidated statements of shareholders’ equity.

Revenue Recognition

Revenue represents sales of electricity, net of electricity purchases, and sales of other related goods. Revenue is shown net of value added tax and climate change levy.

The revenues from the sale of electricity are recognized on the basis of the metered output supplied by the Company’s power stations during the accounting period. The income is matched with the cost of fuel burnt and other associated generation costs in each accounting period on an accrual basis. The revenues arising from direct supply sales are based on the metered consumption of each customer during the period and matched with the associated cost of producing and purchasing this volume of electricity. Wholesale generation and direct supply sales are recognized on an accruals basis with reference to meter readings or where required based on management’s best estimate of electricity supplied.

Fuel Costs

The Company incurs the following costs in relation to fuel:

Successor Company

Advanced Gas Cooled Reactors (“AGR”)

Front end fuel costs consist of the costs of procurement of uranium, conversion and enrichment services and fuel element fabrication. Fabrication costs comprise fixed and variable elements. All costs are capitalized into property, plant and equipment and are charged to operations in proportion to the amount of fuel burnt.

F-14

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Spent fuel extracted from the reactors is sent for reprocessing and/or long-term storage and eventual disposal of resulting waste products. Back end fuel costs comprise the following:

(a) a cost per tonne of uranium in AGR fuel, in respect of amounts payable on loading of fuel into any one of the AGR reactors.

(b) a rebate/surcharge against the cost mentioned in (a) above that is dependent on the out-turn electricity price in the year.

The loading related cost and the rebate/surcharge is capitalized into property, plant and equipment and charged to the profit and loss account in proportion to the amount of fuel burnt.

Pressurized Water Reactor (“PWR”)

All front end fuel costs are variable and are charged to operations in proportion to the amount of fuel burnt.

Back end fuel costs are based on wet storage in station ponds followed by dry storage and subsequent direct disposal of fuel. Back end fuel costs comprise the estimated cost of this process at current prices discounted back to current value. Back end fuel costs are capitalized into property, plant and equipment and are charged to operations in proportion to the amount of fuel burnt.

Un-burnt Fuel at Shutdown

Due to the nature of the nuclear fuel process there will be some un-burnt fuel in the reactors at station closure. The costs of this fuel (final core) are fully provided at the balance sheet date and any changes in the carrying value of nuclear fuel attributed to the final core are charged to operations in the year.

Coal

Fuel costs for coal are determined on a weighted average cost basis.

Predecessor Company

Advanced Gas Cooled Reactors (“AGR”)

Front end fuel costs consist of the costs of procurement of uranium, conversion and enrichment services and fuel element fabrication. Fabrication costs comprise fixed and variable elements. The fixed element is charged to operations as incurred and the variable element, other than for unburnt fuel at shutdown, is charged to operations in proportion to the amount of fuel burnt.

Spent fuel extracted from the reactors is sent for reprocessing and/or long-term storage and eventual disposal of resulting waste products. Back end fuel costs comprise the estimated cost of this process at current prices discounted back to current value in respect of both the amount of irradiated fuel burnt during the year and an appropriate proportion of unburnt fuel which will remain in the reactors at the end of their lives. All back end fuel costs, other than for unburnt fuel at shutdown, are charged to operations in proportion to the amount of fuel burnt.

Pressurized Water Reactor (“PWR”)

All front end fuel costs are variable and, other than for unburnt fuel at shutdown below, are charged to operations in proportion to the amount of fuel burnt.

F-15

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Back end fuel costs are based on wet storage in station ponds followed by dry storage and subsequent direct disposal of fuel. Back end fuel costs comprise the estimated cost of this process at current prices discounted back to current value. All back end fuel costs, other than for unburnt fuel at shutdown, are charged to income in proportion to the amount of fuel burnt.

Un-burnt Fuel at Shutdown

Due to the nature of the nuclear fuel process there will be some un-burnt fuel in the reactors at station closure. The front end and back end costs of this fuel are charged to operations over the estimated useful life of each nuclear station on a straight line basis.

Coal

Fuel costs for coal are determined on a weighted average cost basis.

Bruce Power

Front end fuel costs are recognized when fuel is loaded into the reactor. The reactors are continually reloaded and as such this method closely reflects fuel burnt. Under the terms of the Bruce Power lease the responsibility for spent fuel, waste and decommissioning remains with Ontario Power Generation Inc. British Energy plc disposed of its interest in Bruce Power on February 14, 2003.

Energy Supply Costs

Annual commitments payable under Renewable Obligation Certificates are reflected in the statements of operations based on the volume of direct supply sales. Acquired certificates are recognized as assets on purchase and are offset against related obligation payments.

Research and Development

Research and development expenditures are charged to operations as incurred.

Foreign Currencies

The assets and liabilities of the Company denominated in foreign currencies are translated into Sterling at the rate of exchange ruling at the date of the balance sheet or at the contracted rate if applicable and revenues and expenses are translated at the average rates for the respective years.

Exchange gains and losses on translation of the Company’s subsidiary foreign currency financial statements are reported as a separate component of accumulated other comprehensive income/(loss) in shareholders’ equity. Foreign currency transaction gains and losses are recorded in the Statements of Operations.

Earnings/(Loss) Per Share

Basic and diluted earnings/(loss) per share are calculated in accordance with FASB Statement No. 128, Earnings Per Share (“SFAS 128”). Basic earnings/(loss) per share is computed by dividing net income/(loss) by the weighted average number of common shares outstanding. Diluted earnings/(loss) per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted to common stock. Dilutive securities are excluded from the diluted earnings/(loss) per share calculation for items with a net loss due to their anti-dilutive effect.

F-16

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Reclassifications

Certain reclassifications have been made to the financial statements for the years ended March 31, 2004 and 2003 to conform to the periods from April 1, 2004 through January 14, 2005 and January 15 through March 31, 2005. These reclassifications had no effect on net income/(loss) or shareholders’ equity/(deficit) as previously reported.

New Accounting Pronouncements

Adopted during the year

The following new accounting standards were adopted by the Company during the year ended March 31, 2005 and the impact of such adoption, if applicable, has been presented in the accompanying Consolidated Financial Statements:

FASB Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”)—In January 2003, the FASB issued FIN 46 which requires the primary beneficiary of a variable interest entity’s activities to consolidate the variable interest entity. FIN 46 defines a variable interest entity as an entity in which the equity investors do not have substantive voting rights and there is not sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The primary beneficiary absorbs a majority of the expected losses and/or receives a majority of the expected residual returns of the variable interest entity’s activities. In December 2003, the FASB issued FIN 46 (Revised December 2003), Consolidation of Variable Interest Entities—An Interpretation of ARB No. 51 (“FIN 46R”), which supersedes and amends the provisions of FIN 46. The Company has not identified any material variable interest entities created, or interests in variable entities obtained which require consolidation or disclosure under FIN 46R.

EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments (“EITF 03-1”)—In March 2004, the EITF reached a consensus on Issue No. 03-1, which provides guidance on assessing whether impairments are other-than-temporary for marketable debt and equity securities accounted for under SFAS No. 115, and non-marketable equity securities accounted for under the cost method. The consensus also requires certain disclosures about unrealized losses that have not been recognized in earnings as other-than-temporary impairments.

In September 2004, the FASB issued FSP No. EITF Issue 03-1-1, Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments,” which delays indefinitely the application of guidance provisions of EITF 03-1 until further application guidance can be considered by the FASB. The FSP did not delay the effective date for the disclosure provisions of EITF 03-1 which have been adopted by the Company. The Company does not expect the final guidance to have a material impact on its consolidated results of operations, financial position or cash flows.

New pronouncements not yet adopted

The following new accounting standards were issued, but have not yet been adopted by the Company as of March 31, 2005:

FASB Statement No. 151, Inventory Costs—an amendment of ARB No. 43 (“SFAS 151”)—In November 2004, the FASB issued SFAS 151 which requires idle facility expenses, freight, handling costs, and wasted material (spoilage) costs to be recognized as current period charges. It also requires that the allocation of fixed production overheads to the costs of conversion be based on the normal

F-17

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

capacity of the production facilities. SFAS No. 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company is evaluating the impact of this standard on its consolidation financial statements.

FASB Statement No. 123 (Revised 2004), Share-Based Payment (“SFAS 123R”)—In December 2004, the FASB issued SFAS 123R, which replaces SFAS 123 and supersedes APB Opinion 25. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values beginning with the first annual period beginning after June 15, 2005. The pro forma disclosures previously permitted under SFAS 123 will no longer be an alternative to financial statement recognition. Under SFAS 123R, the Company must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at the date of adoption. The transition methods include prospective and retroactive adoption options. Under the retroactive option, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be recorded for all unvested awards at the beginning of the first quarter of adoption of SFAS 123R, while the retroactive methods would record compensation expense for all unvested awards beginning in the first period restated. The Company does not anticipate the adoption of SFAS 123R on April 1, 2006 to have any material impact on its consolidated financial position, results of operations or cash flows. However, SFAS 123R also requires the benefit of tax deductions in excess of recognized compensation costs to be reported as a financing cash flow rather than an operating cash flow as required under current accounting guidance. This may result in the reduction of net operating cash flow and an increase of net financing cash flows in periods after the effective date.

FASB Statement No. 153, Exchanges of Non-monetary Assets—an amendment of APB Opinion No. 29 (“SFAS 153”)—In December 2004, the FASB issued SFAS 153 which amends APB Opinion No. 29 by eliminating the exception to the fair-value principle for exchanges of similar productive assets. SFAS 153 also eliminates APB Opinion No. 29’s concept of culmination of an earnings process. The amendment requires that an exchange of non-monetary assets be accounted for at fair value if the exchange has commercial substance and fair value is determinable within reasonable limits. SFAS 153 is effective for non-monetary transactions occurring in fiscal periods beginning after June 15, 2005. The impact of SFAS 153 will depend on the nature and extent of any exchanges of non-monetary assets after the effective date, but the Company does not currently expect SFAS 153 to have a material impact on its consolidated financial position, results of operations or cash flows.

FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (“FIN 47”)—In March 2005, the FASB issued FIN 47 which clarifies that the term “conditional asset retirement obligation” as used in SFAS 143 refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. This Interpretation is effective no later than the end of the fiscal years ending after December 15, 2005. The Company does not expect the adoption of FIN 47 to have a material impact on its consolidated financial position, results of operations or cash flows.

2.    THE RESTRUCTURING

In October 2003 British Energy plc announced that it had agreed a plan of Restructuring with the Secretary of State and certain of its creditors. On January 14, 2005 the Restructuring became

F-18

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

effective, thereby creating a new group structure comprising a holding company, British Energy Group plc, which acquired British Energy plc and subsidiaries, and a new intermediate holding company, British Energy Holdings plc. British Energy Group plc shares and the bonds of British Energy Holdings plc were listed on the London Stock Exchange on January 17, 2005.

The Restructuring provided that, in exchange for compromising debt and other obligations, the British Energy plc participating creditors received £275 million of 7.0 per cent Bonds, a £150 million Project Finance Loan, and 547 million of shares of common stock in British Energy Group plc. In addition, existing shareholders received 14 million of shares of common stock in British Energy Group plc and 29 million warrants exercisable into common stock of British Energy Group plc.

In addition, the Eggborough Banks, holders of the £150 million Project Finance Loan, were granted an option under which they may acquire the Eggborough Power Station in 2010 upon payment of £104 million and the cancellation of the outstanding payments due under the Project Finance Loan at that time.

Furthermore, under the Government Restructuring Agreement the Secretary of State will fund qualifying uncontracted nuclear liabilities and qualifying decommissioning costs to the extent they exceed the assets of the NLF. In addition, the Secretary of State will also fund certain contracted liabilities for historical spent fuel. In consideration, British Energy Holdings plc issued £275 million of 7.0 per cent Bonds to the NLF and will make various payments to the NLF, including the NLF Cash Sweep Payment which is convertible into convertible shares at the option of the NLF.

Under new arrangements with the Secretary of State, the former Nuclear Decommissioning Fund was enlarged and renamed the Nuclear Liabilities Fund, which will fund, subject to certain exceptions, the Company’s qualifying uncontracted nuclear liabilities and qualifying decommissioning costs. To the extent there is any surplus in the NLF, this amount will be paid to the Secretary of State. The Company is responsible for funding certain excluded or disqualified liabilities and will, in certain circumstances, be required to compensate or indemnify the NLF and the Secretary of State in relation to such liabilities. The Company’s obligations under these arrangements with the Secretary of State are guaranteed by certain subsidiaries of the Company.

In consideration for the assumption of these liabilities by the Secretary of State and the NLF, British Energy Holdings plc issued £275 million in 7.0 per cent Bonds to the NLF. The Company will also now make the following payments to the NLF (i) an annual contribution (the “Cash Sweep Payment”) initially equal to 65 per cent of the British Energy Group’s adjusted net cash flow, adjusted for certain corporate actions but never to exceed 65 per cent (“Cash Sweep Percentage”) (ii) fixed decommissioning contributions equal to £20m per annum (indexed to RPI but tapering off as the nuclear power stations are currently scheduled to close); and (iii) £150,000 (indexed to RPI) for every tonne of uranium in PWR fuel loaded into the Sizewell B reactor after the Restructuring Effective Date.

The NLF has the right from time to time to convert all or part of its right to the Cash Sweep Payment into Convertible Shares (the “NLF Conversion Right”). On a full conversion, the NLF would hold up to 65 per cent of the thereby enlarged equity share capital of the Company. However, the terms of the Convertible Shares include a limit on the voting rights attaching to such shares equal to a maximum of 29.9 per cent while held by the NLF. At the time of the listing, the Secretary of State confirmed that she had no current intention to direct the NLF to exercise the NLF Conversion Right but reserved the right to do so.

F-19

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

British Energy plc incurred costs directly associated with the Restructuring of £56 million and £43 million for the period from April 1, 2004 to January 14, 2005 and the year ended March 31, 2004 respectively.

The Restructuring became effective January 14, 2005 with the acquisition of British Energy plc by British Energy Group plc. The Restructuring was accounted for using purchase accounting principles as set out in SFAS 141. Under purchase accounting, the fair value of consideration paid is allocated to the fair value of the assets acquired and liabilities assumed. The fair value of consideration paid was £1,536 million (including £10 million of costs incurred in connection with the acquisition) based on the market price of British Energy Group plc shares and warrants trading on January 17, 2005, the date at which the new shares and warrants in the Company began trading. The value of the warrants issued with the new shares at the Restructuring date was £51 million.

The Restructuring Effective Date of January 14, 2005 is considered to be the close of business for financial reporting purposes for British Energy plc. The periods presented prior to and including January 14, 2005 have been designated “Predecessor Company” and the periods subsequent to January 14, 2005 have been designated “Successor Company.” As a result of the Restructuring, the financial statements of the Company subsequent to January 14, 2005 are not comparable to the Company’s financial statements for prior periods.

F-20

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the fair values of the assets acquired and the liabilities assumed at the date of Restructuring. The Quinquennial Review which assesses the nuclear liabilities and related accounts every 5 years, is scheduled to be completed in autumn 2005 which may impact the fair value of nuclear liabilities below. Management believes that the fair values are based on the best information currently available. The Company has obtained third party valuations of certain assets and liabilities in connection with this transaction.

	Predecessor January 14, 2005		Restructuring, Fair Value and Other Adjustments			Successor January 15, 2005
	(In £ millions)
ASSETS
Current assets	890		24		(1)	914
Property, plant and equipment—net	1,158		2,820		(2)	3,978
Nuclear liabilities fund	499		275		(3)	774
Nuclear liabilities receivable	—		2,467		(4)	2,467
Other assets	41		(41	)	(5)	—
Total Assets	2,588		5,545			8,133
LIABILITIES AND SHAREHOLDERS’ EQUITY/(DEFICIT)
Current liabilities	1,642		(628	)	(6),(7)	1,014
Long-term debt—net of current portion	618		58		(6)	676
Deferred tax	133		(33	)		100
Deferred credits and other liabilities	1,934		2,873		(8)	4,807
Total Liabilities	4,327		2,270			6,597
Shareholders’ Equity/(Deficit)
Common stock	277		(221	)	(9)	56
Additional paid in capital	498		937		(10)	1,435
Warrants	—		51			51
“A” Shares	93		(93	)	(10)	—
Retained losses	(2,276	)	2,276		(10)	—
Treasury stock	(159	)	153		(11)	(6	)
Accumulated other comprehensive loss	(172	)	172		(10)	—
Total Shareholders’ Equity/(Deficit)	(1,739	)	3,275			1,536
Total Liabilities and Shareholders’ Equity/(Deficit)	2,588		5,545			8,133

Notes:

⁽¹⁾ To record “in-the-money” contracts which are not marked to market under SFAS 133 at fair value, and to classify strategic spares from inventory to property, plant and equipment, and to classify the investment in Lochside as restricted cash.

⁽²⁾ To record property, plant and equipment at fair value, to classify strategic spares and overhaul costs in property, plant and equipment, and to reflect the back-end fuel provision based on the new contractual arrangements with BNFL.

⁽³⁾ To reflect the uplift in fair value of the decommissioning fund as a result of issuing the new bonds.

⁽⁴⁾ To record the Nuclear Liabilities Receivable at the value which reflects the qualifying historic nuclear liabilities.

⁽⁵⁾ To eliminate the pension intangible asset in line with pension purchase accounting, and to classify the investment in Lochside to restricted cash.

⁽⁶⁾ To record the cancellation of old debt in return for new shares and bonds.

⁽⁷⁾ To record “out the money” contracts which are not marked to market under SFAS 133 at fair value, and to record the adjustment to nuclear liabilities due in less than one year as a result of the change in the credit-adjusted risk-free rate.

⁽⁸⁾ To record the adjustment to nuclear liabilities due in more than one year as a result of the change in the credit adjusted risk-free rate.

⁽⁹⁾ To record the elimination of old shares and the issuance of new shares.

⁽¹⁰⁾ To eliminate accumulated other comprehensive loss, retained losses and “A” shares on acquisition.

⁽¹¹⁾ To record treasury stock at the fair value to the acquiring Company.

F-21

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Unaudited Pro forma financial information

The following table sets forth the unaudited pro forma results of operations of the Company for the years ended March 31, 2005 and 2004, respectively. The unaudited pro forma information summarizes the results of operations for the periods indicated as if the restructuring had occurred at the beginning of each of the annual periods presented. These pro forma results are not indicative of the results that would have actually been obtained if the restructuring occurred as of the beginning of each of the periods presented or that may be obtained in the future.

	March 31, 2005			March 31, 2004
	(in £ millions, except per share amounts)
Total revenues		1,704			1,516
Loss before cumulative effect of change in accounting principle		(367	)		(201	)
Net (loss)/income		(367	)		7,439
(Loss)/earnings per share	£	(0.65	)	£	13.26

3.    ACCOUNTS RECEIVABLE—NET

Accounts receivable consist of the following:

	Successor		Predecessor
	March 31, 2005		March 31, 2004
	(In £ millions)
Trade receivables	87		106
Other receivables	21		16
	108		122
Less—allowance for doubtful accounts	(3	)	(3	)
Total Accounts receivables—net	105		119

The activity in the allowance for doubtful accounts is as follows:

	Successor	Predecessor
	January 15, 2005 through March 31, 2005	April 1, 2004 through January 14, 2005	Year ended March 31, 2004	Year ended March 31, 2003
	(In £ millions)
Balance at beginning of period	3	3	3	3
Allowance for doubtful accounts	—	—	—	—
Write-offs of doubtful accounts	—	—	—	—
Balance at end of period	3	3	3	3

F-22

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

4.    INVENTORY—NET

Inventory consists of the following:

	Successor	Predecessor
	March 31, 2005	March 31, 2004
	(In £ millions)
Coal stock	14	15
Stores	50	51
Strategic spares	—	31
Total inventory—net	64	97

5.    PROPERTY, PLANT AND EQUIPMENT—NET

The components of property, plant and equipment and related depreciation are as follows:

	Successor		Predecessor
	March 31, 2005		March 31, 2004
	(In £ millions)
Power stations	3,846		13,261
Other land and buildings	39		47
Other plant and equipment	113		440
	3,998		13,748
Accumulated depreciation	(75	)	(12,620	)
Total property, plant and equipment—net	3,923		1,128

Included within power stations are capitalized fuel costs of £269 million and £543 million at March 31, 2005 and March 31, 2004, respectively. Fuel cost depreciation of £2 million, £4 million, £8 million and £5 million was recognized as fuel expense in the period from January 15, 2005 through March 31, 2005, the period from April 1, 2004 to January 14, 2005, and the years ended March 31, 2004 and 2003, respectively.

Depreciation expense for property, plant and equipment of £73 million, £50 million, £50 million and £172 million was recognized in the period from January 15, 2005 to March 31, 2005, the period from April 1, 2004 to January 14, 2005, and the years ended March 31, 2004 and 2003, respectively.

On Restructuring, the carrying value of property, plant and equipment was uplifted by £2,820 million to reflect its fair value as at the Restructuring Effective Date. The depreciation charge for the period from January 15, 2005 through March 31, 2005 has been calculated based on the fair value of property, plant and equipment at the Restructuring Effective Date.

Also included in property, plant and equipment from Restructuring onwards are strategic spares, which were classified as inventory prior to Restructuring.

On January 31, 2005, the Company entered into a sale and partial leaseback transaction with respect to its former head office premises in East Kilbride. The property was sold at its carrying value

F-23

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

of £7 million and no gain or loss on sale was recognized. As part of the transaction, the Company entered into an operating lease to lease approximately 16 per cent of the office space. The Company does not retain any other interest in the disposed of property and does not retain any ongoing obligations with respect to the property.

In the year ended March 31, 2003, the Company performed an impairment review of its property, plant and equipment. The impairment test indicated that the carrying value of the Company’s power stations exceeded their discounted future cash flow fair value by £6,680 million.

On March 31, 2003, the gross amount of capitalized interest was £2,037 million and accumulated depreciation was £1,983 million. As a result of the impairment review performed in 2003, the interest capitalized was fully impaired. An additional £54 million of capitalized interest was included in the impairment charge as at that date.

Upon adoption of SFAS 143 on April 1, 2003, approximately £2,671 million was credited to the 2004 statement of operations as part of the cumulative effect of the change in accounting principle.

6.    NUCLEAR LIABILITIES FUND

The NLF assets are held in trust to discharge the future decommissioning obligations of the Company. The fair value of the assets in the NLF as of March 31, 2005 and 2004 was £782 million and £440 million, respectively. At Restructuring, £275 million of 7.0 per cent New Bonds were issued by the Company to the NLF.

Successor Company

Contributions made to the NLF totaled £5 million during the period from January 15, 2005 to March 31, 2005. The Company recognized £3 million of realized and unrealized gains and losses in the statement of operations for the period from January 15, 2005 to March 31, 2005.

Predecessor Company

Prior to the Restructuring and the formation of the NLF, assets held to discharge the future decommissioning obligations of the Company were held in a similar decommissioning fund (the Nuclear Decommissioning Fund). The Predecessor Company classified these assets as available-for-sale securities under the provisions of SFAS 115. Accordingly, the available-for-sale marketable securities for the year ended March 31, 2004 are summarized below:

	March 31, 2004
	Cost	Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In £ millions)
UK equities	173	53	(9	)	217
Non-UK equities	100	36	(2	)	134
Index linked gilts	38	5	—		43
Property	42	5	(1	)	46
	353	99	(12	)	440

F-24

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Unrealized gains and losses are excluded from operations until realized and reported as other comprehensive income/(loss).

Proceeds and realized gains and losses from sales of available-for-sale securities are presented below. These proceeds were not withdrawn from the fund.

	Predecessor
	April 1, 2004 through January 14, 2005	Year ended March 31, 2004	Year ended March 31, 2003
	(In £ millions)
Proceeds	44	40	69
Gross realized gains	1	3	—
Gross realized losses	2	6	94

7.    DEBT

Debt consists of the following at March 31:

	Successor		Predecessor
	March 31, 2005		March 31, 2004
	(In £ millions)
7.0 per cent Bonds due 2005—2022	531		—
Project Finance Loan	145		—
5.949 per cent Bond due 2003	—		110
6.077 per cent Bond due 2006	—		155
6.202 per cent Bond due 2016	—		119
Old Project Finance Loan	—		475
Less: current portion	(50	)	(197	)
Long term debt—net of current portion	626		662

The weighted average interest rate on outstanding borrowings was 7.0 per cent and 5.72 per cent at March 31, 2005 and March 31, 2004, respectively.

At March 31, 2005, the scheduled debt payments due are as follows:

	(In £ millions)
2006	50
2007	53
2008	57
2009	61
2010	65
Thereafter	390
Total	676

F-25

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

7.0 per cent Bonds Due 2005-2022 and Project Finance Loan

As described in Note 2, British Energy Holdings plc issued £550 million aggregate principal amount of Bonds due 2005-2022 (“7.0 per cent Bonds”) and a Project Finance Loan of £150 million in connection with the Restructuring. The 7.0 per cent Bonds and Project Finance Loan bear interest at a rate of 7.0 per cent per annum; quarterly interest payments are due on each March 31, June 30, September 30 and December 31 beginning March 31, 2005. The 7.0 per cent Bonds and Project Finance Loan will be redeemed in 18 unequal installments on March 31 of each year beginning March 31, 2005 to March 31, 2022. The 7.0 per cent Bonds are guaranteed by the Company and substantially all existing and future material subsidiaries. The Project Finance Loan is collateralized by a mortgage of shares in Eggbrough Power Limited (“EPL”), an assignment of the EPL Share Purchase Agreement and Tax Deed of Covenant, and a debenture comprising fixed and floating charges over EPL assets.

The Company is required to comply with certain covenants under the terms of the 7.0 per cent Bonds which financially restrict its business. These restrictions are summarized below.

The activities of the Company are limited to nuclear and renewable generation, together with generation from Eggborough, and the sale and trading of electricity. Furthermore, the nature of transactions with some other parties are restricted.

The Company may not incur any further indebtedness other than as permitted under the terms of the Bonds unless the Consolidated Fixed Charge Coverage Ratio of the Company, over a specified period, is greater than 2:1 based on UK GAAP (an equivalent ratio is in process of being determined for US GAAP). Further indebtedness is permitted if it arises from activities which are necessary for the operation of the business (e.g. the sale and trading of output; guarantees and indemnities in respect of environmental licenses and other permits, and operational and maintenance contracts etc). In addition, a maximum principal of £75 million may be drawn in order to meet costs resulting from outages and seasonal working capital, and credit support obligations in respect of trading arrangements.

Certain types of payments are also restricted. These include dividends, redemption of capital stock, repayment of any subordinated indebtedness and investments in other companies unless permitted under the terms of the bonds. Restrictions apply if the Company is, or would be, in default of its obligations under the terms of the bonds, or the aggregate amount of these payments (excepting dividends) would exceed certain limits based on adjusted aggregate net income.

The Company may not sell any capital stock of a subsidiary, or substantially all of a subsidiary’s properties or assets, or any other property or assets other than in the ordinary course of business unless 80 per cent of the consideration is in cash (or equivalent), it is at a fair market value, and a resolution of the board of directors is delivered to the trustee. The proceeds of any such sale must either be reinvested in the Company, or retained to the extent that the target reserves (as required under the Contribution Agreement) exceed the cash reserves, or the amounts not so invested or retained shall be used to redeem bonds, in accelerated decommissioning payments, and the payment of indebtedness ranking pari passu with the bonds.

The Company is also restricted with regard to the guarantees that it can make for indebtedness, sale and leaseback transactions, the sale or transfer of capital stock of a subsidiary, and encumbrances or restrictions on the ability of a subsidiary to pay dividends or any indebtedness owed to the Company.

F-26

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Receivables Facility

On August 25, 2004, British Energy Generation Limited, a wholly-owned subsidiary of the Company, entered into the Receivables Facility, a full-recourse three year trade receivables financing facility agreement. Under the Receivables Facility, a maximum aggregate principal amount of £60 million is available over the three year term of the facility. The amount of funding available on any Receivable Facility utilization is dependent upon the amount of eligible receivables then available. Following the Restructuring on January 14, 2005, a facility charge of 2 per cent above LIBOR is payable on any drawn amount. No amounts were drawn under the Receivables Facility at March 31, 2005. Following the transfer of the Company’s direct sales business from British Energy Generation Limited to British Energy Direct Limited (“BEDL”) on March 31, 2005, BEDL replaced British Energy Generation Limited in the Receivables Facility and British Energy Generation Limited became a guarantor.

Predecessor Debt

As described in Note 2, the 5.949 per cent Bond, 6.077 per cent Bond, 6.202 per cent Bond and Old Project Finance Loan (collectively, the “Predecessor Debt”) were settled during the Restructuring. Prior to the Restructuring, the Predecessor Debt was subject to standstill arrangements which had the effect of deferring the payments of certain amounts due. The current portion of debt at March 31, 2004 represents amounts due on the Predecessor Debt based on the maturity dates under the original contractual arrangements.

8.    ASSET RETIREMENT OBLIGATIONS

Back End Fuel Costs

Back end fuel costs comprise the estimated costs of reprocessing and storage of spent nuclear fuel and the long-term storage, treatment and eventual disposal of resulting waste products. The vast majority of these costs relate to reprocessing, treatment and storage services that are the subject of contracts with British Nuclear Fuels Limited (“BNFL.”) The other costs, which are not subject to fixed contractual arrangements, primarily represent estimated disposal costs and are based on long-term cost forecasts which are regularly reviewed and adjusted where necessary.

Prior to the adoption of SFAS 143, uncontracted back end fuel liabilities were recognized on an undiscounted basis, because the amount and timing of the related payments are not fixed or reliably determinable.

Upon adoption of SFAS 143, both contracted and uncontracted back end fuel liabilities are discounted at the Company’s credit adjusted risk free rate.

Decommissioning Costs

Prior to the adoption of SFAS 143, liabilities in respect of decommissioning were recognized on an undiscounted basis and the annual movement in current price levels was capitalized each year. Following the adoption of SFAS 143, the decommissioning liabilities are discounted at a credit adjusted risk free rate of return.

F-27

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes movements in the recorded asset retirement obligations:

	Successor		Predecessor
	January 15, through March 31, 2005		April 1, 2004 through January 14, 2005		Year ended March 31, 2004
	(In £ millions)
Balance at beginning of period	4,528		2,022		1,793
Liabilities incurred	1		38		45
Liabilities settled	(185	)	(122	)	(60	)
Accretion expense	52		247		244
Balance at end of period	4,396		2,185		2,022

The asset retirement obligation is discounted at 3.0 per cent, 12.2 per cent, and 12.2 per cent for the period from January 15, 2005 to March 31, 2005, the period from April 1, 2004 to January 14, 2005, and the year ended March 31, 2004, respectively. As described in Note 2, qualifying asset retirement obligation costs are indemnified by the Secretary of State subsequent to the Restructuring. As required by SFAS 143, the existence of the funding provision has been considered in the determination of the credit-adjusted risk-free rate used to discount the asset retirement obligation. Furthermore, the Company’s credit rating improved subsequent to the Restructuring. As a result these two factors, the Company’s credit-adjusted risk-free rate decreased significantly for the period January 15, 2005 through March 31, 2005. The Company had a higher credit-adjusted risk-free rate prior to the Restructuring, which resulted in a comparatively lower asset retirement obligation.

The current portion of the asset retirement obligation primarily represents amounts due to BNFL in connection with certain back end fuel obligations.

Accretion expense is included in operating and maintenance expense in the consolidated statements of operations.

As of March 31, 2005 and 2004, the aggregate fair value of assets that are legally restricted for the purpose of settling the nuclear decommissioning liabilities totaled £782 million and £440 million, respectively.

The favorable cumulative effect of the change in accounting principle, both for back end fuel costs and decommissioning costs, for the year ended March 31, 2004 amounted to £7,640 million (net of taxes of £273 million). Had SFAS 143 been adopted on April 1, 2002, the asset retirement obligation would have been as follows:

	March 31, 2003	April 1, 2002
	(In £ millions)
Decommissioning costs	263	228
Back end fuel costs	1,530	1,379
Total asset retirement obligation	1,793	1,607

F-28

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table sets out net (loss), adjusted as if SFAS 143 had been applied effective April 1, 2002.

	Year ended March 31,                 2003
	(In £ millions, except per share data)
Reported (loss) before adopting SFAS 143		(7,800	)
Earnings effect of adopting SFAS 143		3,140
Pro forma net (loss)		(4,660	)
Pro forma basic and diluted (loss) per share	£	(7.74	)

9.    OTHER LIABILITIES

The following table sets out the other components of the Company’s other liabilities:

	Successor	Predecessor
	March 31, 2005	March 31, 2004
	(In £ millions)
Current
Commodity contracts	207	74
Standstill creditor	—	316
Other	63	1
	270	391
Long term
Commodity contracts	211	20
Other	9	36
	220	56

10.    POST RETIREMENT BENEFIT OBLIGATIONS

UK Pension schemes

British Energy operates two separate pension arrangements in the UK within the Electricity Supply Pension Scheme (“ESPS”): the British Energy Generation Group (“BEGG”) for the majority of employees and the British Energy Combined Group (“BECG”) for the employees at Eggborough Power Station. In addition, eligible senior employees are provided additional retirement benefits. The pensions plans are defined benefit plans, which are externally funded and subject to annual actuarial valuation. Each pension group is financially independent from the other groups. Any deficiency disclosed in the pension plans following an actuarial valuation is the obligation of the Company.

The Restructuring which took effect on January 14, 2005, resulted in no changes to the number of pension plan participants or to the Company’s obligation to fund the pension plans.

F-29

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Bruce Power Pension Scheme

Following the disposal of British Energy’s interest in Bruce Power in 2003, the Company no longer operates the Bruce Power Pension Plan. As a result, disclosures are only made with regard to this scheme in relation to the prior year comparatives as applicable. The discontinued operations amounts in 2003 presented below relate entirely to Bruce Power (which was sold on February 14, 2003) and are set out on a 100 per cent holding basis. British Energy’s share in Bruce Power was 82.4 per cent prior to disposal.

Restructuring

As a result of the purchase accounting applied in connection with the Restructuring, the excess of the projected benefit obligation over the plan assets was recognized as an accrued pension liability. The recognition of the liability at the date of the Restructuring resulted in the elimination of the previously existing unrecognized net loss, unrecognized prior service cost and unrecognized net asset that existed at the date of initial application of SFAS 87.

F-30

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Successor		Predecessor
	January 15 through March 31, 2005		Year ended March 31, 2004
	(In £ millions)
Change in benefit obligation:
Projected benefit obligation at beginning of period	2,407		1,905
Service cost	9		34
Interest cost	27		103
Contributions by plan participants	3		10
SFAS 88 termination cost	—		1
Net actuarial (gain)/loss	(80	)	200
Benefits paid	(21	)	(81	)
Projected benefit obligation at end of period	2,345		2,172
Change in plan assets:
Fair value of plan assets at beginning of period	1,952		1,525
Actual return on plan assets	30		334
Employer contributions	7		34
Plan participants’ contributions	3		10
Benefits paid	(21	)	(81	)
Fair value of plan assets at end of period	1,971		1,822
Funded status:
Fair value of plan assets less the projected benefit obligation	(374	)	(350	)
Unrecognized transition asset	—		(35	)
Unrecognized prior service cost	—		38
Unrecognized net actuarial (gain)/loss	(82	)	541
Net amount recognized	(456	)	194
Amounts recognized in balance sheets:
Prepaid pension, included with pension obligation	—		201
Accrued pension, included with pension obligation	(456	)	—
Minimum pension liability, included with pension obligation	—		(353	)
Intangible asset, included with other assets	—		38
Accumulated other comprehensive income	—		308
Net amount recognized	(456	)	194

The accumulated benefit obligation for all defined benefit pension plans was £2,135 million and £1,967 million at March 31, 2005 and 2004 respectively.

F-31

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Successor		Predecessor
	January 15, through March 31, 2005		April 1, 2004 through January 14, 2005		Year ended March 31, 2004		Discontinued Canadian Operations 2003		Continuing Operations 2003		Total year ended March 31, 2003
	(In £ millions)
Net periodic pension cost:
Service cost	9		31		34		13		29		42
Interest cost	27		93		103		22		107		129
Expected return on plan assets	(28	)	(101	)	(105	)	(25	)	(131	)	(156	)
Amortization of transition asset	—		(9	)	(12	)	—		(12	)	(12	)
Amortization of prior service costs	—		2		3		—		3		3
Amortization of actuarial loss	—		15		24		—		—		—
Net periodic pension charge/(credit)	8		31		47		10		(4	)	6
SFAS 88 termination cost—current year	—		1		1		27		13		40
Net periodic pension cost	8		32		48		37		9		46

The above FASB Statement No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits (“SFAS 88”) termination cost refers to the cost of providing enhanced early retirement benefits to certain members following termination.

	Successor	Predecessor
	January 15, 2005 through March 31, 2005	April 1, 2004 through January 14, 2005	Year ended March 31, 2004	Year ended March 31, 2003
	%	%	%	%
Weighted average assumptions used to determine benefit obligations and net periodic pension costs were as follows:
UK
Discount rate	5.50	5.30	5.50	5.50
Expected return on plan assets	7.00	6.75	7.10	7.00
Rate of compensation increase	4.25	4.25	4.25	3.75
Pension increases	2.75	2.75	2.75	2.25
Canada
Discount rate	—	—	—	7.00
Expected return on plan assets	—	—	—	7.50
Rate of compensation increase	—	—	—	3.75 plus merit
Pension increases	—	—	—	2.75

F-32

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Measurement and valuation method

The measurement date of the most recent full actuarial valuation was March 31, 2004. The assets were valued using the market value method. The 10 per cent corridor for amortizing gains and losses has been utilized.

Plan assets

	Successor		Predecessor
	2005		2004
	Percentage of Plan assets	Expected return On assets	Percentage of Plan assets	Expected return On assets
	%	%	%	%
Asset category
Equity securities	57	8.20	61	8.25
Debt securities	25	4.70	26	4.75
Real estate	11	6.45	12	6.40
Other	7	5.90	1	3.75
Total	100	7.00	100	7.10

The overall expected return on asset assumption is derived from the weighted average of the expected returns from each of the main asset classes at the beginning of the period. The expected return for each asset class represents a combination of historical performance analysis, forward looking views of the financial markets (suggested by the yields available) and the views of investment organizations.

Description of investment policies

The Trustees of the BEGG pension scheme, which makes up 98 per cent of the total assets of the pension schemes, are responsible for the investment strategy of the Scheme, in consultation with the Company. The objective is to have sufficient assets, in normal market conditions, to meet the accrued benefits on an ongoing basis, as assessed by the Actuary to the Scheme. The Trustees have determined a long term benchmark which takes into account the relationship between the assets and liabilities in the Scheme, and is on the basis of approximately half of the assets being held in UK bonds, with the balance invested in long term higher return seeking assets such as equities and property. The Trustees believe this provides an adequate balance between maximizing the return on the assets and minimizing the risk of failing to meet the liabilities over the long term. The long term benchmark is being phased in gradually, with the timing being driven primarily by the relative movement between the yields on UK equities and bonds, with the aim of avoiding switching from equities into bonds in adverse market conditions. The assets are invested in a diversified range of asset classes and investment managers. A similar approach is adopted by the BECG, though the actual strategy differs as it takes into account the BECG liability profile.

The target allocation at March 31, 2005, for each major asset class is as follows:

Equities	44-64 per cent
Bonds	15-35 per cent
Property	7-17 per cent

F-33

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The employer’s contributions estimated to be made in the year ending March 31, 2006 is £60 million.

As at March 31, 2005 the following benefit payments, which reflect future service as appropriate, are expected to be paid:

	Pensions
	(In £ millions)
Year Ended March 31
2006	83
2007	84
2008	85
2009	87
2010	92
2011—2015	512

11.    TAXATION

The following details the components of income tax benefit/(charge) from continuing operations:

	Successor	Predecessor
(In £ millions)	January 15, 2005 through March 31, 2005	April 1, 2004 through January 14, 2005		Year ended March 31, 2004	Year ended March 31, 2003
Current	—	—		—	—
Deferred taxation on loss before tax	43	27		108	(30	)
Foreign Tax	—	(3	)	2	—
Total	43	24		110	(30	)

The Company’s 2005 current tax expense is £nil due to the availability of tax losses brought forward. The deferred tax expense relates to fixed asset timing differences, tax losses brought forward and provisions deductible when utilized for tax purposes.

As set out in the Group’s cash flow statement, the tax paid of £12 million in the year ended March 31, 2004 relates to the Company’s liability for its share of AmerGen’s taxable profits.

Income from discontinued operations in the year ended March 31, 2003 of £59 million is stated net of tax of £22 million.

F-34

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The components of the net deferred tax liability are as follows:

	Successor		Predecessor
(In £ millions)	March 31, 2005		March 31, 2004
Non-current assets:
Tax losses carried forward	312		348
Pensions	136		65
Tax depreciation in excess of book depreciation	—		30
Advanced corporation tax	77		—
Fair value of derivative contracts	128		—
Decommissioning asset	73		24
	726		467
Non-current liabilities:
Book depreciation in excess of tax depreciation	(783	)	—
Asset retirement obligations	—		(627	)
Capitalized interest	—		(16	)
Other	—		(3	)
	(783	)	(646	)
Net deferred liability	(57	)	(179	)

There is a deferred tax liability of £57 million and £179 million at March 31, 2005 and 2004 respectively. The full amount of the deferred tax provision in 2005 relates to continuing activities.

Deferred tax is provided for on a full liability basis. Deferred tax assets or liabilities are recognized for all differences between the financial and tax bases of assets and liabilities, and for tax losses carried forward at the statutory rate at which they are expected to be utilized. Valuation allowances are provided against deferred tax assets to the extent that it is considered more likely than not that some or all of the deferred tax asset will not be realized.

There are UK tax losses carried forward of £1,041 million and £1,162 million at March 31, 2005 and 2004 respectively, giving rise to potential undiscounted deferred tax assets of £312 million and £348 million. Tax losses arising in the United Kingdom are available for carry forward and utilization in future years. There is no expiry date. There are no overseas tax losses brought forward or carried forward.

A reconciliation of the effective tax rate for the income tax benefit/(charge) is set out below.

	Successor		Predecessor
	January 15, 2005 through March 31, 2005		April 1, 2004 through January 14, 2005		Year ended March 31, 2004		Year ended March 31, 2003
	%		%		%		%
Standard UK tax rate of 30%	30	%	30	%	(30	)%	30	%
Valuation allowance	—		—		27		(27	)%
(Expenses)/credits not (deductible)/chargeable for tax purposes:
Investment in joint ventures	—		—		1		—
Transaction costs not deductible	—		(13	)	—		—
Accretion of asset retirement obligation	—		(3	)	—		—
Non-qualifying fixed asset impairment	—		—		—		(2	)
Loss on sale of investments not deductible	—		—		(1	)	—
Other	(4	)	(4	)	1		(1	)
Income tax benefit/(charge) for the period	26	%	10	%	(2	)%	0	%

F-35

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

12.    SHAREHOLDERS’ EQUITY/(DEFICIT)

As described more fully in Note 2, the Restructuring resulted in the issuance of 561,016,515 shares of common stock, par value £0.10 per share, and 29,298,286 warrants in exchange for amounts owed to Significant Creditors and Bondholders and in exchange for all outstanding shares of common stock, par value £0.44 ²⁸/43 per share, and all outstanding “A” shares each in British Energy Ltd. In addition, 1 special rights redeemable preference share of £1 was issued in exchange for 1 special rights redeemable preference share of £1 in British Energy Ltd. The 50,000 shares of non-voting common stock that were outstanding prior to the Restructuring were cancelled.

The Company’s authorized and issued and outstanding capital stock is summarized below:

	March 31, 2005
	(In £ millions)
Authorized
2,800,000,000 shares common stock, par value £0.10	280
2,000,000,000 convertible shares, par value £0.10	200
One special rights redeemable preference share, par value £1	—
	480
Issued and outstanding
561,315,459 shares common stock, par value £0.10	56
One special rights redeemable preference share, par value £1	—
	56

Convertible Shares

As described in Note 2, the NLF has the right from time to time to convert all or part of its right to the NLF Cash Sweep Payment into Convertible Shares (the “NLF Conversion Right”). On a full conversion, the NLF would hold up to 65 per cent of the thereby enlarged equity share capital of the Company. The Secretary of State has confirmed that he has no current intention to direct the NLF to exercise the NLF Conversion Right but reserves the right to do so. At March 31, 2005, the NLF was eligible to receive approximately 1,042,000,000 convertible shares under the NLF Conversion Right.

The convertible shares may only be held by Nuclear Liabilities Fund Limited or its successor in title, a Minister of the Crown, the Treasury, a department, non-departmental body or other agency of the Crown, any body corporate established by statute some or all of the members of which are appointed by a Minister of the Crown or other UK government entity or any person directly or indirectly wholly owned by, or held on trust for, the Secretary of State or other Minister of the Crown.

Save in respect of voting rights, the convertible shares have the same rights, are subject to the same restrictions and rank pari passu with the common stock of the Company in all respects. The number of votes that the holder of the convertible shares is entitled to exercise in respect of its holding of convertible shares is the lesser of (i) 29.9 per cent (and, for this purpose, taking into account the voting rights attributable to any other ordinary shares held or acquired by any person acting in concert with the holder), and (ii) the number of convertible shares which the holder would otherwise be entitled to vote if the convertible shares were shares of common stock. The convertible shares will convert into common stock of the Company automatically on transfer to a third party by the holder but are not convertible at the election of the holder prior to such transfer.

F-36

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Special Rights Redeemable Preference Share

The special rights redeemable preference share is redeemable at par at any time after September 30, 2006 at the option of the Secretary of State, after consulting the Company. This share, which may only be held by and transferred to one or more of Her Majesty’s Secretaries of State, another Minister of the Crown, the Solicitor for the affairs of Her Majesty’s Treasury or any other person acting on behalf of the Crown, does not carry any rights to vote at general meetings, but entitles the holder to attend and speak at such meetings. The special share confers no rights to participate in the capital or profits of the Company beyond its nominal value. The consent of the holder of the special share is required for certain matters including the alteration or removal of the provisions in the Company’s articles of association relating to the special share and to the limitations on shareholdings.

In addition, consent of the holder of the special share is required in relation to, among others, certain amendments to the articles of association of British Energy Holdings plc, British Energy plc, British Energy Generation Ltd or British Energy Generation (UK) Ltd, or a disposal by the Company of its shares in these companies. However, the holder of the special share will only be entitled to withhold consent to such an amendment or disposal if, in the holder’s opinion, the matter in question would be contrary to the interests of national security.

Warrants

As described in Note 2, 29,298,286 warrants were issued in connection with the Restructuring. The warrants are exercisable into shares of common stock, par value £0.10. The warrants have an exercise price of £0.98 and are exercisable within five years of the Restructuring.

Between January 14, 2005 and March 31, 2005, 298,944 warrants were exercised in exchange for £0.3 million cash and 298,944 shares of common stock, par value £0.10.

Shares Reserved for Future Issuance

The Company has reserved shares of its authorized common stock for future issuance as follows:

	March 31, 2005
Outstanding stock options	24,402,307
Outstanding warrants	28,999,342
	53,401,649

13.    EMPLOYEE STOCK COMPENSATION

The Company has elected to account for its stock compensation plans in accordance with SFAS 123 using the Black-Scholes option-pricing model, under which a fair value is calculated for the share option plans as at the date of grant of the options. This fair value is charged to operations over the period from the date the options were granted to the date at which the options are expected to vest to the employees. The corresponding credit is included in Shareholders’ Equity. Compensation expense/(income) of £nil, £(1) million, £nil, and £nil was recognized in the period from January 15 to March 31, 2005, the period from April 1, 2004 to January 14, 2005, and the years ended March 31, 2004 and 2003, respectively.

Prior to the Restructuring described in Note 2, the Company had three stock compensation plans—a ShareSave Scheme, an Employee Share Option Plan, and an Executive Share Option Plan

F-37

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(collectively, the “Old Share Plans”). Upon exercise, options under the Old Share Plans convert to common stock of British Energy plc at a 1:1 ratio. No further grants will be made under the Old Share Plans. The options under the Old Share Plans are still capable of exercise; however, immediately on exercise they will be converted into shares in British Energy Group plc in the ratio of 50:1. Accordingly, the effective exercise price of the Old Share Plan options is significantly higher than the current share price and it is unlikely the options will be exercised.

Upon Restructuring, British Energy Group plc adopted six stock compensation plans—a Sharesave Scheme, an Employee Share Option Plan, an Executive Share Option Plan, an Interim Deferred Bonus Plan, a Long Term Deferred Bonus Plan, and a Share Incentive Plan (collectively, the “New Share Plans”). Terms of the Sharesave Scheme, Employee Share Option Plan, and the Executive Share Option Plan are not materially different from the Old Share Plans.

No shares or options have been granted under any of the New Share Plans as of March 31, 2005. Total awards granted under the New Share Plans cannot exceed 10 per cent of share capital over a rolling 10-year period. Of the total awards, grants under the Executive Plan cannot exceed 5 per cent of share capital over a rolling 10-year period.

A description of the employee stock compensation plans is below.

Sharesave Scheme

Under the Sharesave Scheme, options to purchase shares are granted to employees at a discount of up to 20 per cent to the market price at the date of grant. All employees (including executive directors) who are resident in the UK are eligible to participate. The term of options granted could be from three to seven years and any option is conditional on a commitment by the participant to make regular savings from pay.

Employee Share Option Plan (“Employee Plan”) and Executive Share Option Plan (“Executive Plan”)

Non-senior executives participate in the Employee Plan. Executive directors and a selected number of senior executives participate in the Executive Plan. Under both plans, participants are granted options over common stock but the proportion of those options which may be exercised is subject to the achievement of performance targets over a three-year performance period set by the Remuneration Committee of the Board of Directors. To the extent that an option or part of an option becomes capable of being exercised at the end of the three-year performance period, it will ordinarily remain exercisable between three and ten years from the date of grant.

Interim Deferred Bonus Plan

A deferred bonus in common stock and cash may be granted to executive directors and senior executives by the Remuneration Committee based on performance against targets in respect of the financial year ended March 31, 2005. Participants in the Interim Deferred Bonus Plan will not participate in the Executive Plan. Rewards for performance in subsequent financial years will be provided through the Long Term Deferred Bonus Plan.

Long Term Deferred Bonus Plan (“LT Plan”)

Certain executive directors and selected senior executives are eligible to receive conditionally awarded shares in the Company at no cost with the proportion of those shares which may vest subject to the achievement of performance targets over a three-year performance period. Participants in the LT Plan will not participate in the Executive Plan.

F-38

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Share Incentive Plan (“SIP”)

Employees (including executive directors) who are resident of the UK and meet service requirements are eligible for awards under the SIP. Awards under the SIP are limited each year by relevant tax legislation and may take the form of one or more of the following elements: (1) employees may be allocated shares of common stock at no cost; (2) employees may purchase shares out of pre-tax earnings; and (3) employees may be allocated matching shares at no cost following the purchase of shares out of pre-tax earnings.

A reconciliation of the options outstanding under the Old Share Plans is as follows:

	ShareSave Scheme				Employee Share Option Plan				Executive Share Option Plan
	Number of Options		Weighted Average Exercise Price per Share		Number of Options		Weighted Average Exercise Price per Share		Number of Options		Weighted Average Exercise Price per Share
Predecessor
Outstanding April 1, 2002	19,329,466		£	1.89	15,390,003		£	4.03	5,121,348		£	3.25
Options granted	9,194,761		£	1.36	—			—	—			—
Options exercised	(13,348	)	£	1.36	—			—	—			—
Options forfeited	(9,437,499	)	£	2.13	(512,400	)	£	4.04	(1,139,165	)	£	3.22
Outstanding March 31, 2003	19,073,380		£	1.52	14,877,603		£	4.03	3,982,183		£	3.26
Options granted	—			—	—			—	—			—
Options exercised	—			—	—			—	—			—
Options forfeited	(10,554,884	)	£	1.51	(340,599	)	£	4.08	(361,935	)	£	3.25
Outstanding March 31, 2004	8,518,496		£	1.52	14,537,004		£	4.03	3,620,248		£	3.26
Options granted	—			—	—			—	—			—
Options exercised	—			—	—			—	—			—
Options forfeited	(562,142	)	£	1.55	(254,910	)	£	4.12	(732,611	)	£	3.01
Outstanding January 14, 2005	7,956,354		£	1.52	14,282,094		£	4.03	2,887,637		£	3.32
Successor
Outstanding January 15, 2005	7,956,354		£	1.52	14,282,094		£	4.03	2,887,637		£	3.32
Options granted	—			—	—			—	—			—
Options exercised	—			—	—			—	—			—
Options forfeited	(580,682	)	£	2.70	(59,000	)	£	3.96	(84,096	)	£	2.98
Outstanding March 31, 2005	7,375,672		£	1.43	14,223,094		£	4.03	2,803,541		£	3.33
Options exercisable at:
Predecessor
March 31, 2003	—			—	6,940,000		£	2.71	1,122,066		£	2.63
March 31, 2004	—			—	6,785,530		£	2.71	1,046,205		£	2.63
January 14, 2005	479,203		£	2.96	6,673,930		£	2.71	565,481		£	2.60
Successor
March 31, 2005	—			—	6,645,930		£	2.71	545,481		£	2.61

F-39

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A summary of information about the Company’s stock options outstanding under the Old Share Plans at March 31, 2005 is as follows:

	Options Outstanding
	Number of Options Outstanding	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price
ShareSave Scheme
£1.36 to £2.29	6,990,327	1.65	£	1.36
£2.30 to £4.44	385,345	1.90	£	2.62
Employee Share Option Plan
£2.60 to £4.07	6,154,758	2.29	£	2.60
£4.08 to £5.29	8,068,336	3.68	£	5.12
Executive Share Option Plan
£2.41 to £3.17	1,813,144	2.53	£	2.47
£3.18 to £5.08	544,088	1.60	£	4.54
£5.09 to £6.67	446,309	1.47	£	5.36

Using the Black-Scholes option-pricing model, the weighted average fair value where the exercise price exceeded the market price on the date the options were granted in 2003 was £0.27 for the ShareSave Scheme. The exercise price exceeded the market price for all options granted in 2003. No options were granted for the Employee Share Option Plan or the Executive Share Options Plan in 2003.

No options were granted under any of the plans in the periods ending March 31, 2004, January 14, 2005 or March 31, 2005.

The following assumptions were used in the Black-Scholes option-pricing:

	Successor	Predecessor
	January 15, through March 31, 2005	April 1, 2004 through January 14, 2005	Year ended March 31, 2004	Year ended March 31, 2003
ShareSave Scheme
Risk free interest rate	—	—	—	4.5-4.7	%
Expected dividend yield	—	—	—	5.7	%
Expected volatility	—	—	—	55	%
Expected life (years)	—	—	—	3.1-5.1

The risk free rate is the yield on the date of grant of an UK government bond with the closest maturity to the expected term of the option.

F-40

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

14.    FINANCIAL INSTRUMENTS AND DERIVATIVES

Trading objectives

During the year the overriding concern of the Company was to reduce the Company’s exposure to potential falls in the market price of electricity. Therefore a prudent trading strategy was adopted to sell forward a high proportion of the Company’s output. As a result the Company has not fully benefited from the recent rises in market prices. The Company has continued with its trading strategy to reduce exposure to volatility in medium-term market prices, utilizing diverse routes to market while minimizing the amount of trading collateral required. The routes to market include direct sales to industrial and commercial customers, contracting in the wholesale market, and long-term contracts together with sales of balancing and ancillary services to National Grid. There are contracts in place for substantially all planned production in 2005/06. A large majority of these are fixed-price contracts. As of March 31, 2005, the average price of the fixed-price contracts for 2005/06 was £26.40/MWh.

Electricity Trading Risk Management

Electricity trading activities relate principally to supporting the 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 minimizing the market risk associated with the output of the power stations.

Under New Electricity Trading Arrangements in England and Wales (“NETA”) any mismatch between actual metered generation (or demand) and the notified contract position is settled through the balancing mechanism at generally unfavorable prices. The Company aims to sell all planned nuclear output forward and to minimize exposure to the balancing mechanism.

The risks in the wholesale market are managed through a contracting strategy that builds a portfolio of forward contracts of different lengths.

While operating primarily as a flexible mid-merit plant, the coal-powered Eggborough power station provides a flexible generation capability that fulfills three purposes designed to enhance profitability. Firstly, it provides a means for compensating for unplanned lost output from the Company’s nuclear units at short notice; secondly, it provides the capability to adjust in a cost effective manner the Company’s total generation to meet the requirements of both wholesale and Direct Sales Business (“DSB”) customers; and thirdly, it provides a capability that can be offered at short notice to the system operator via the balancing mechanism.

Credit risk

Credit risk represents the loss that the Company would incur if a counterparty failed to meet its contractual obligations. The Company sells and purchases electricity through a variety of routes to market, primarily the DSB bilateral structured contracts and other contracts covered by Grid Trade Master Agreements (“GTMA”).

Direct Sales Business

The DSB sells electricity to large Industrial and Commercial customers. These contracts are typically of 12 months’ duration, invoiced on a monthly basis. Normally there are no credit support

F-41

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

arrangements contained within these contracts. However, the Company has credit insurance in place to minimize losses from the failure of customers. At March 31, 2005, approximately 50 per cent, or approximately £70 million, of the accounts receivable from these customers was insured.

Grid Trade Master Agreements

Bilateral structured contracts are normally based upon GTMA terms and conditions. These can contain specific credit support requirements on both counterparties, which seek to minimize the Company’s exposure to credit default, while also, in certain contracts, seeking to limit the requirement of the Company to provide credit support.

The GTMA is an industry standard set of terms and conditions containing, among other terms, clauses stipulating credit support requirements. Counterparties with an Investment Grade rating (from Standard and Poor’s and/or Moody’s) are not required to provide credit support for trading activities. Those counterparties without an Investment Grade rating, however, are required to provide credit support in a form acceptable to the other counterparty. This normally takes the form of either a Parent Company Guarantee from an Investment Grade rated affiliate, a Letter of Credit from a bank, or cash. Where the Company transacts with a counterparty that does not have an Investment Grade rating, then one of these forms of credit support is obtained.

The Company’s policy is to manage credit exposure to trading counterparties within clearly defined limits. A sub-committee of the Executive Committee strictly monitors electricity trading activities which are controlled through delegated authorities and procedures, and which include specific criteria for the management of counterparty credit exposures. All of the Company’s counterparties are assigned an internal credit limit, based either upon the counterparty credit rating and net worth, or upon the limit of credit support provided by that counterparty. It is the Company’s policy never to trade above these limits without specific prior authority from the aforementioned sub committee. A daily report is produced detailing the credit exposure to each counterparty, which is reviewed by management. Specific trigger points dictate certain activities to ensure that credit limits are not breached.

As at March 31, 2005, the Company’s credit exposure, where there is no form of credit support, from GTMA counterparties is approximated in the following table:

Investment Grade	Gross credit exposure	Credit collateral	Net credit exposure
	(In £ millions)
A-AAA(1)	22	—	22
B-BBB	—	—	—
Unrated(2)	3	3	—
Total	25	3	22

⁽¹⁾ The 4 largest counterparties with A-AAA ratings represent 100 per cent of the gross credit exposure for this category.

⁽²⁾ This relates entirely to one unrated counterparty.

The Company is also exposed to credit risk from its cash balance. As at March 31, 2005, the Company has collateral backed by £155 million on deposit with one UK financial institution. The Company is looking to manage this risk by diversifying the number of institutions which will back its collateral. In addition to the cash on deposit for collateral, the Company holds cash with a number of other financial institutions.

F-42

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accounting for derivatives

Commodity contracts

The Company uses derivative instruments in the normal course of business to offset fluctuations in earnings and cash flows associated with movements in exchange rates, interest rates and commodity prices. Such derivatives are referred to as “trading derivatives.” “Non-trading derivatives” refer to interest rate swaps which are utilized by the Company’s treasury department in managing the Company’s debt. The Company generally does not hold derivatives for proprietary, or speculative purposes, although it does hold a speculative book.

The Company does not currently utilize hedge accounting and therefore no trading derivatives have been designated as hedging instruments.

The Company has evaluated all commodity contracts to determine if they meet the definition of a derivative and qualify as a Normal Purchase Normal Sale (“NPNS”). Commodity contracts which have been designated as NPNS are not marked to market each reporting period.

Trading derivatives for which the provisions of the NPNS exemptions do not apply (including derivatives held for proprietary purposes) are recognized as either assets or liabilities within “other assets” or “other liabilities” on the balance sheet and are marked to market each reporting period, with no associated cash flow impact. Subsequent movements in their fair value are reflected in the consolidated statements of operations. In compliance with both EITF 02-3 and EITF 03-11, the Company reports its gains and losses from derivative instruments held for trading purposes net in the consolidated statements of operations within the “Gain/(loss) from movements in derivative commodity contracts” line.

The Company also evaluates contracts for “embedded” derivatives, and considers whether any embedded derivatives have to be separated from the underlying host contract and accounted for separately in accordance with SFAS 133 requirements. Where embedded derivatives have terms that are not clearly and closely related to the terms of the host contract in which they are included, they are accounted for separately from the host contract as derivatives, with changes in the fair value recorded in earnings, to the extent that the hybrid instrument is not already accounted for at fair value.

Interest rate swaps

Interest rate swaps may be used to manage debt interest rate exposure. Amounts payable or receivable in respect of interest rate swaps are recognized as adjustments to the net interest charge over the term of the contracts in the “Interest expense” line of the consolidated statements of operations. Where derivatives used to manage interest rate risk or to hedge other anticipated cash flows are terminated before the underlying debt matures, the resulting gain or loss is deferred on the balance sheet and amortized to income to match the timing and accounting treatment of the underlying debt. If the debt is subsequently terminated any unamortized deferred gain or loss is recognized immediately in the statement of operations. Where interest rate swaps are no longer considered effective hedging instruments, any cumulative losses relating to the fair value of the derivatives are taken to the statements of operations.

No interest rate swaps have been designated as hedging instruments.

F-43

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Financial instruments

The carrying amount of cash and cash equivalents and restricted cash approximates fair value. The estimated fair value of commodity contracts was determined using discounted future cash flows and represents the amount by which the contracted commodity rates are favorable (resulting in an asset) or unfavorable (resulting in a liability) for the Company when compared to market rates. The market trading price at the balance sheet date was used to determine the fair value of the interest rate swap agreements.

The estimated fair values of the bonds are based on the quoted market prices. There is no open market information available for the Old Project Finance Loan, the fair value of which was severely affected by the Restructuring. Therefore, the fair value that has been attributed to the loan, £150 million, has been based on the Company’s best estimate of the net realizable value of the Eggborough Station upon which this loan is secured.

The fair value of financial instruments is summarized in the following table:

	Successor		Predecessor
	March 31, 2005		March 31, 2004
	Carrying Value	Fair Value	Carrying Value	Fair Value
	(In £ millions)
Assets
Cash and cash equivalents	230	230	276	276
Restricted cash	226	226	297	297
Commodity contracts	42	19	7	7
Liabilities
7.0 per cent Bonds	531	531	—	—
Project Finance Loan	145	145	—	—
5.949 per cent Bond	—	—	110	138
6.077 per cent Bond	—	—	155	204
6.202 per cent Bond	—	—	119	168
Old Project Finance Loan	—	—	475	150
Commodity contracts	418	442	94	217
Interest rate swap agreements	—	—	33	33

15.    DISPOSALS

Pursuant to the Restructuring plan, British Energy plc undertook a program to dispose of certain assets.

On December 22, 2003, British Energy plc completed the sale of its 50 per cent interest in AmerGen to Exelon for US$277 million in cash subject to certain post closing adjustments. The final adjustment to the AmerGen sale price was agreed on February 11, 2005, and resulted in a US$9.5 million reduction to the sale price. Taking account of the gain on disposal recorded in the year ended March 31, 2004 additional expense of £3 million was recognized in the period from April 1, 2004 to January 14, 2005.

On December 23, 2003, British Energy plc sold its 50 per cent interest in Offshore Wind Power Limited (“Offshore Wind”) to GB Gas Holdings Limited (a wholly owned subsidiary of Centrica plc) for £2 million in cash and £0.75 million in deferred consideration.

F-44

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On February 14, 2003, British Energy plc completed the sale of its 82.4 per cent interest in Bruce Power Limited Partnership and its 50 per cent share in Huron Wind Limited Partnership (collectively “Bruce”). Proceeds from the sale of Bruce recorded in the year ended March 31, 2003 totaled C$698 million, with additional proceeds received in the year ended March 31, 2004 of C$20 million. In addition, a further C$10 million was received on May 25, 2004 in partial consideration of the Bruce A units, resulting in additional gain on disposal of £4 million recorded in the period from April 1, 2004 through January 14, 2005. The Bruce disposal is reported as discontinued operations and the consolidated financial statements for all prior periods have been adjusted to reflect this presentation. For the year ended March 31, 2003, revenues from Bruce were £375 million, earnings before minority interests were £98 million, minority interests were £17 million and net income was £81 million.

16.    (LOSS)/EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted (loss)/earnings per share:

	Successor			Predecessor
	January 15, 2005 through March 31, 2005			April 1, 2004 through January 14, 2005			Year ended March 31, 2004			Year ended March 31, 2003
Loss from continuing operations (£ millions)		(122	)		(227	)		(78	)		(7,853	)
Discontinued operations		—			1			—			53
Cumulative effect of change in accounting principle		—			—			7,640			—
Net (loss)/income		(122	)		(226	)		7,562			(7,800	)
Basic and diluted shares (millions)
Average shares of common stock outstanding		561			602			602			602
(Loss)/earnings per share—basic and diluted
Loss from continuing operations	£	(0.22	)	£	(0.38	)	£	(0.13	)	£	(13.05	)
Discontinued operations		—			—			—		£	0.09
Cumulative effect of change in accounting principle		—			—		£	12.69			—
Net (loss)/income	£	(0.22	)	£	(0.38	)	£	12.56		£	(12.96	)

Stock options of 7,191,411, 7,718,614, 7,831,735 and 8,062,066 were outstanding during the period from January 15 through March 31, 2005, from the period April 1, 2004 through January 14, 2005 and the years ended March 31, 2004 and 2003, respectively, but were not included in diluted earnings/(loss) per share because the exercise price of all outstanding options, as converted, exceeded the average market price during each period presented and would have been anti-dilutive. During the period January 15, 2005 through March 31, 2005, the Company had 28,999,342 warrants and 1,042,000,000 convertible shares outstanding that were not included in diluted loss per share because, due to the Company’s net loss for the period, the effect would have been anti-dilutive.

17.    SEGMENTAL DISCLOSURES

The Company has determined that it has one business, being the generation and sale of electricity in the UK, resulting in one operating segment of Generation and Trading. The Company considers that

F-45

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

it has one geographical segment being the UK. In addition, it separately discloses certain financial information in respect of Bruce (disposed February 14, 2003) and AmerGen (disposed December 22, 2003). Following the disposals of Bruce and AmerGen, all ongoing Company operations are focused in the UK. All of the Company’s long-lived assets are located in UK.

Revenues and operating profits/(losses) are measured on a segmental basis in accordance with UK GAAP as this is the basis on which management information is prepared, and have been reconciled to the primary statements prepared in accordance with US GAAP. The chief operating decision maker evaluates segment performance and makes decisions on the basis of UK GAAP profit and loss information. Net asset information is not reviewed by the chief operating decision maker and so has not been presented in the segmental analysis.

The following table presents segment revenues and operating profit prepared under UK GAAP, together with operating profit as set out in the Consolidated Statement of Operations. All segment revenues arise from external customers:

	Successor		Predecessor
	January 15, 2005 through March 31, 2005		April 1, 2004 through January 14, 2005		Year ended March 31, 2004		Year ended March 31, 2003
	(In £ millions)
Segmental analysis
Generation and Trading revenues	476		1,198		1,341		1,284
Other revenues
North America (including £375 million of discontinued operations: 2003)	—		—		144		587
Miscellaneous revenue	6		24		31		32
Consolidated revenues	482		1,222		1,516		1,903
Operating profit/(loss) before interest, discontinued activities and taxes (UK GAAP)	63		(138	)	340		(3,899	)
Operating profit/(loss) before interest, discontinued activities and taxes (US GAAP)	(160	)	(187	)	(190	)	(7,624	)
Included within segmental operating profit/(loss) before interest and taxes (UK GAAP):
Depreciation	41		59		50		280
Settlement of Siemens claim	—		—		18		—

In the period January 15 to March 31, 2005 there were three customers who each accounted for more than 10 per cent of Company revenue. The largest customer accounted for 21 per cent of revenue, the second largest accounted for 16 per cent of revenue and the third largest accounted for 11 per cent.

In the period April 1, 2004 to January 15, 2005 there were three customers who each accounted for more than 10 per cent of Company revenue. The two largest customers each accounted for 21 per cent of revenue, and the other accounted for 19 per cent.

In the year ended March 31, 2004 there were three UK customers who each accounted for more than 10 per cent of Company revenue. The two largest customers each accounted for 19 per cent of revenue, and the other accounted for 16 per cent.

F-46

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In the year ended March 31, 2003 there were two UK customers who each accounted for more than 10 per cent of Company revenue. The largest customer accounted for 14 per cent of revenue, and the other accounted for 11 per cent.

In Canada all the output from Bruce Power was sold to Ontario Power Generation Inc (“OPG”) prior to the market opening on May 1, 2002. These sales totaled £375 million or 20 per cent of Company revenue in the year ended March 31, 2003.

18.    SEVERANCE COSTS

In the period prior to Restructuring, charges of £12 million were recorded in respect of severance costs for approximately 100 people in relation to the Company’s Restructuring. This accrual comprised the costs to the Company of employees who receive redundancy under the Company’s Restructuring plans.

Severance costs are accounted for through staff costs. Accruals for the severance liabilities are included in “Accrued expenses” on the consolidated balance sheets. Activity in accrued severance costs is presented below.

	Successor		Predecessor
	January 15, 2005 through March 31, 2005		April 1, 2004 through January 14, 2005		Year ended March 31, 2004	Year ended March 31, 2003
	(In £ millions)
Balance at beginning of period	9		—		—	—
Charges	19		12		—	—
Payments	(2	)	(3	)	—	—
Balance at end of period	26		9		—	—

Substantially all remaining severance accruals will be settled through cash payments by the end of financial year 2006.

19.    COMMITMENTS AND CONTINGENCIES

The Company enters into certain contractual commitments in the course of its operations. The following is a summary of material commitments and contractual obligations as of March 31, 2005:

	Capital Commitments	Operating Leases	Fuel Purchase Commitments	Total
	(In £ millions)
Year Ended March 31
2006	15	3	198	216
2007	1	3	95	99
2008	—	3	70	73
2009	—	4	63	67
2010	—	—	73	73
Thereafter	—	—	818	818
	16	13	1,317	1,346

F-47

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

At March 31, 2005, the estimated minimum commitment for the supply of coal was 4 million tonnes, which, at contract prices on March 31, 2005, equates to approximately £162 million. The estimated minimum commitment for the supply of coal at contract prices on March 31, 2004 was £82 million. The Company also entered into commitments to purchase and sell electricity in the normal course of business.

In addition to the liabilities and provisions recognized and described in the notes to the financial statements, the Company has made certain commitments in respect of capital expenditure by Eggborough Power Limited.

The Company has a commitment to make the Cash Sweep Payment as described more fully in Note 2 to the Financial Statements.

In addition to the consideration payable by the consortium under the master purchase agreement, up to a further C$100m was payable to British Energy contingent upon the restart of two of the Bruce A units under a trust agreement (the “Trust Agreement”) entered into on the same date. Had the first unit restarted by June 15, 2003, C$50m would have been released to British Energy and an additional C$50m would have been released to British Energy had the second unit restarted by August 1, 2003. An amount of C$5m was to be deducted from the C$50m payable in respect of each unit for its failure to restart by the scheduled restart date or by the first day of each successive calendar month following the scheduled restart date. The Company received C$20m on March 22, 2004 and C$10m on May 25, 2004 in partial consideration under the Trust Agreement. British Energy commenced arbitration proceedings in Ontario against the Ontario Provincial Government (“the Province”) in December 2004 seeking the payment of additional consideration under the Trust Agreement on the basis that Bruce A Units 3 and 4 restarted earlier than the dates claimed by the Province. No amounts receivable have been recorded at March 31, 2005 because of uncertainties regarding their realization. The amounts recoverable in respect of the restarted units will be substantially lower than the maximum C$100m but the amounts and timing of the payments have still to be confirmed.

The Company is involved in a number of other claims and disputes arising in the normal course of business which are not expected to have a material effect on the Company’s financial position, results of operations, or cash flows.

20.    GUARANTEES AND INDEMNITIES

On February 12, 2004 British Energy plc received a notice of warranty claims from the consortium which purchased the Group’s 82.4 per cent 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.

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 claims that the alleged erosion may reduce the operating life of the unit and/or result in further repairs involving further losses. British Energy has rejected the claim and expects to defend it if it is pursued further.

The principal tax claim relates to the treatment of expenditure at the Bruce Power Station during the period of the Company’s ownership which is currently being considered by the Canadian tax

F-48

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

authorities. The treatment proposed by British Energy could result in a rebate of a material amount of tax to the Company 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 has rejected the claim and expects to defend it if it is pursued further. On the basis of legal advice received, management believes that the amount of the claim, even if determined against us, should not in any event, materially exceed the amount of the rebate, and that the claim should have no material impact on the Company’s results of operations, cashflow or financial position.

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. The Company has accrued no further amounts in respect of these claims.

The Company has given certain indemnities and guarantees in respect of warranties and representations relating to the disposal of its investment in AmerGen. Such indemnities and guarantees are customary for transactions of this type. Generally, claims must be made within 24 months of the sale date; however, a number of warranties and representations continue for longer periods and in some cases indefinitely.

The Company has given certain indemnities and guarantees in respect of its subsidiary undertakings. No losses are anticipated to arise under these indemnities and guarantees, provided relevant subsidiary undertakings continue on a going concern basis.

21.    RELATED PARTY TRANSACTIONS

Her Majesty’s Government

The Company considers Her Majesty’s Government (“HMG”) to be a related party due to the significant influence exercised by the HMG in the Company’s Restructuring. The following transactions took place during the period with HMG and sponsored bodies under its control:

As part of the Restructuring the following related party transactions have occurred:

• HMG undertook to meet the Company’s historic contracted nuclear liabilities to British Nuclear Fuels Limited (“BNFL”), a government controlled body. This undertaking resulted in an asset of £2,467 million being recognized in the Company’s financial statements on January 14, 2005.

• The Nuclear Liabilities Fund Limited (“NLF”), a government controlled company, was issued with 7.0 percent Bonds of £275 million by British Energy Holdings plc. Interest paid on these bonds during the period from January 15, 2005 to March 31, 2005 amounted to £4 million, and £9 million of the bonds were repaid during the period leaving a balance of bonds payable to the NLF of £266 million as at March 31, 2005.

• The Company made decommissioning funding contributions to the NLF of £5 million during the period from January 15, 2005 to March 31, 2005.

• The Company made payments to BNFL of £77 million during the period from January 15, 2005 to March 31, 2005 in respect of front and back end fuel costs. The Company also incurred interest costs of £1 million in respect of deferred payments and stock financing. The balance outstanding due to BNFL at March 31, 2005 was £nil. Amounts due to the Company by BNFL at March 31, 2005 under the Historic Liabilities Funds Agreement amounted to £2,312 million.

F-49

BRITISH ENERGY GROUP PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company has also had a number of material transactions in its normal course of business with other sponsored bodies and departments of HMG including HM Revenue and Customs and the UK Atomic Energy Authority.

Officers and Directors

A payroll systems error was identified and subsequently rectified during the year ended March 31, 2004. As a result of this error, personal retirement benefit contributions were not deducted in full from the salary of some higher paid employees. Following detailed investigation, the individuals concerned, including several directors and officers of the Company, were granted up until March 31, 2008 by the Company’s Remuneration Committee to repay salary overpayments. No interest was payable on the overpayments during the extended period. After further consideration, the Company recognized that this extended time period might constitute an unintentional breach of Section 402 of the Sarbanes-Oxley Act of 2002 and, consequently, the directors and officers involved were asked to repay all outstanding amounts. Mike Alexander had repaid £13,600 up to the end of July 2005. The balance will be recovered from him as part of any payment of compensation for loss of office. David Gilchrist, Sally Smedley and Robert Armour have repaid the amounts in full. The directors and officers who received the overpayment and the maximum amounts outstanding were as follows:

Mike Alexander	£	26,820
David Gilchrist	£	15,483
Sally Smedley	£	12,870
Robert Armour	£	7,302

The Company operates a car ownership scheme (the “COS Scheme”) under which employees who satisfy certain criteria are entitled to be provided with a car for business and personal use. Under the COS Scheme, eligible employees are entitled to be provided with, among other things, both interest-bearing and interest-free loans to fund the purchase of a car. Two Executive Officers, Robert Armour and Sally Smedley, currently participate in the COS Scheme. Following a review of these arrangements, the Company considered that the loan element of the COS Scheme may constitute a personal loan to each of the relevant executive officers under Section 402 of the Sarbanes-Oxley Act of 2002. As a consequence, the Company is taking steps to terminate the participation of these executive officers in the COS Scheme.

Dr. Pascal Colombani, who is an independent Non-Executive Director of the Company, is also a director of Alstom SA (since July 2004). As part of normal operations, the Company purchases goods and services from members of the Alstom group. Although none of these contracts for goods or services is considered to be material, over the three year period ending on March 31, 2005, the Company purchased goods and services from Alstom with a total value of around £45 million.

22.    SUBSEQUENT EVENTS

To meet the commitments made as part of the Restructuring, the Company transferred its Direct Supply Business from its subsidiary British Energy Generation Limited to a new subsidiary British Energy Direct Limited with effect from April 1, 2005.

British Energy Generation (UK) Limited transferred its trade and assets to British Energy Generation Limited again as a commitment made as part of the Restructuring with effect from July 1, 2005.

F-50

EX-1.1

Exhibit 1.01

Company No. SC270184

THE COMPANIES ACTS 1985 AND 1989

PUBLIC COMPANY LIMITED BY SHARES

ARTICLES OF ASSOCIATION

OF

BRITISH ENERGY GROUP PLC

Company Number SC270184

Incorporated in Scotland on 2 July 2004

CONTENTS

PRELIMINARY		1
1.	Table A not to apply	1
2.	Interpretation	1
SHARE CAPITAL		7
3.	Share capital	7
4.	Rights attached to shares	12
5.	Uncertificated shares	13
6.	Unissued shares	14
7.	Authority to allot relevant securities	14
8.	Disapplication of pre-emption rights	15
9.	Power to pay commission and brokerage	16
10.	Power to increase, consolidate, sub-divide and cancel shares	16
11.	Power to issue redeemable shares	17
12.	Power to purchase own shares	17
13.	Power to reduce capital	17
14.	Trusts not bound to be recognised	18
VARIATION OF RIGHTS		18
15.	Variation of rights	18
THE SPECIAL SHARE		19
16.	The Special Share	19
17.	Limitations on shareholdings	21
SHARE CERTIFICATES		27
18.	Issue of certificates	27
19.	Charges for and replacement of certificates	28
20.	Other methods of recording title	28
LIEN ON SHARES		28
21.	Lien on partly paid shares	28
22.	Enforcement of lien	28
CALLS ON SHARES		29
23.	Calls	29
24.	Interest on calls	29
25.	Amounts due on allotment or issue treated as calls	30

26.	Power to differentiate	30
27.	Payment of calls in advance	30
FORFEITURE OF SHARES		30
28.	Notice of unpaid calls	30
29.	Forfeiture on non-compliance with notice	30
30.	Power to annul forfeiture or surrender	31
31.	Disposal of forfeited or surrendered shares	31
32.	Arrears to be paid notwithstanding forfeiture or surrender	31
UNTRACED MEMBERS		32
33.	Sale of shares of untraced members	32
34.	Application of proceeds of sale	33
TRANSFER OF SHARES		33
35.	Form of transfer	33
36.	Right to refuse to register transfers	33
37.	No fee payable	35
38.	Retention of instruments	35
39.	Power to suspend registration of transfers	35
40.	Renunciations and other methods of transfer	35
TRANSMISSION OF SHARES		35
41.	Transmission on death	35
42.	Election of person entitled by transmission	36
43.	Rights of person entitled by transmission	36
DISCLOSURE OF INTERESTS IN SHARES		37
44.	Disclosure of interests in shares	37
GENERAL MEETINGS		40
45.	Annual general meetings	40
46.	Extraordinary general meetings	40
47.	Convening of extraordinary general meetings	40
NOTICE OF GENERAL MEETINGS		41
48.	Length and form of notice	41
49.	Omission or non-receipt of notice and irregularities in publication of notices	42
50.	Special business	42
PROCEEDINGS AT GENERAL MEETINGS		43
51.	Quorum	43

52.	Chairman	43
53.	Security and order at meetings	43
54.	Directors and other persons entitled to attend and speak	44
55.	Adjournment	44
56.	Accommodation of persons at meeting	45
57.	Method of voting and demand for poll	45
58.	How a poll is to be taken	46
59.	Chairman’s casting vote	46
60.	Amendments to resolutions	47
VOTES OF MEMBERS		47
61.	Voting rights	47
62.	Corporate representatives	47
63.	Voting rights of joint holders	48
64.	Voting rights of members incapable of managing their affairs	48
65.	Voting rights suspended where sums overdue	48
66.	Objections to admissibility of votes	49
PROXIES		49
67.	Proxies	49
68.	Form of proxy	49
69.	Deposit of proxy	50
70.	Notice of revocation of proxy	51
MEMBERS’ WRITTEN RESOLUTIONS		52
71.	Members’ written resolutions	52
DIRECTORS		52
72.	Number of directors	52
73.	Directors need not be members	52
74.	Age of directors	52
APPOINTMENT, RETIREMENT AND REMOVAL OF DIRECTORS		52
75.	Appointment of directors by the Company	52
76.	Separate resolutions for appointment of each director	53
77.	The board’s power to appoint directors	53
78.	Retirement of directors	53
79.	Selection of directors to retire by rotation	53
80.	Removal of directors	54

81.	Vacation of office of director	55
82.	Executive directors	56
ALTERNATE DIRECTORS		56
83.	Power to appoint alternate directors	56
REMUNERATION, EXPENSES AND PENSIONS		57
84.	Remuneration of directors	57
85.	Additional remuneration	58
86.	Expenses	58
87.	Pensions and other benefits	58
POWERS AND DUTIES OF THE BOARD		59
88.	General powers of the board to manage the Company’s business	59
89.	Power to act notwithstanding vacancy	59
90.	Provisions for employees	59
91.	Power to borrow money	59
92.	Register of charges	64
93.	Nuclear Installations Act 1965	64
DELEGATION OF BOARD’S POWERS		64
94.	Delegation to executive directors	64
95.	Committees	64
96.	Local boards	65
97.	Powers of attorney	65
98.	Associate directors	65
99.	Exercise of voting powers	65
100.	Registers	66
DIRECTORS’ INTERESTS		66
101.	Directors’ interests and voting	66
PROCEEDINGS OF THE BOARD		69
102.	Board meetings	69
103.	Notice of board meetings	69
104.	Quorum	69
105.	Chairman or deputy chairman to preside	69
106.	Competence of meetings	70
107.	Voting	70
108.	Telephone meetings	70

109.	Resolutions in writing	70
110.	Validity of acts of directors in spite of formal defect	71
111.	Minutes	71
SECRETARY		71
112.	Secretary	71
113.	Authentication of documents	71
SEAL		72
114.	Seal	72
DIVIDENDS		72
115.	Declaration of dividends by the Company	72
116.	Fixed and interim dividends	72
117.	Calculation and currency of dividends	73
118.	Method of payment	73
119.	Dividends not to bear interest	75
120.	Calls or debts may be deducted from dividends	75
121.	Unclaimed dividends etc.	75
122.	Uncashed dividends	75
123.	Dividends in specie	75
124.	Scrip dividends	76
CAPITALISATION OF RESERVES		78
125.	Capitalisation of reserves	78
126.	Capitalisation of reserves - employees’ share schemes	79
RECORD DATES		80
127.	Fixing of record dates	80
ACCOUNTS		80
128.	Accounting records	80
NOTICES		82
129.	Notices to be in writing or in electronic communication	82
130.	Service of notices	82
131.	Notice by advertisement	83
132.	Evidence of service	84
133.	Record date for service	84
134.	Service of notice on person entitled by transmission	85
DESTRUCTION OF DOCUMENTS		85
135.	Destruction of documents	85

WINDING UP		86
136.	Powers to distribute in specie	86
INDEMNITY		87
137.	Indemnity of officers	87

Company No. SC270184

THE COMPANIES ACTS 1985 AND 1989

PUBLIC COMPANY LIMITED BY SHARES

ARTICLES OF ASSOCIATION

OF

BRITISH ENERGY GROUP PLC

PRELIMINARY

1. Table A not to apply

No regulations contained in any statute or subordinate legislation, including the regulations contained in Table A in the schedule to the Companies (Tables A to F) Regulations 1985 (as amended) apply as the regulations or articles of association of the Company.

2. Interpretation

(1) In these articles, unless the contrary intention appears:

(a) The following definitions apply:

“Act” means the Companies Act 1985;

“Additional Interest” shall have the meaning attributed to it in article 17(2);

“address” means, in relation to electronic communications, any number or address used for the purposes of such communications;

“ADR Depositary” means a custodian or depositary or its nominee, approved by the board, acting under contractual arrangements with the Company by which it or that nominee holds shares in the Company and issues American Depositary Receipts, but shall not include any such custodian or other person whose approval by the board is withdrawn by the board by notice given to such custodian or other person in consequence of a breach of its obligations under such arrangements;

- 1 -

“American Depositary Receipt” means an instrument issued by an ADR Depositary evidencing rights in relation to shares in the Company held by that ADR Depositary or a right to receive them;

“auditor” or “auditors” means the auditors from time to time of the Company;

“average quotation” shall have the meaning attributed to it in article 124(4);

“BEG” means British Energy Generation Limited, incorporated in England and Wales with registered number 3076445;

“BEG(UK)” means British Energy Generation (UK) Limited, incorporated in Scotland with registered number SC117121;

“board” means the board of directors for the time being of the Company or the directors present or deemed to be present at a duly convened meeting of the directors at which a quorum is present or a duly appointed committee thereof;

“British Energy” means British Energy plc, incorporated in Scotland with registered number SC162273;

“business day” means a day (not being a Saturday or a Sunday) on which clearing banks are open for business in London;

“cash deficiency” has the meaning attributed to it in article 126(2)(a);

“certificated” means, in relation to a share, a share which is not in uncertificated form;

“clear days” means, in relation to a period of notice, that period excluding the day when the notice is given or deemed to be given and the day for which it is given or on which it is to take effect;

“Clearing House” shall have the meaning attributed to it in article 17(2)(b);

“committee” means a duly appointed committee of the board;

“Company” means British Energy Group plc;

“company” means any body corporate (not being a corporation sole) or association or persons, whether or not a company within the meaning of the Act;

“Contribution Agreement” means the contribution agreement entered into pursuant to the Restructuring and made between the Company, Holdings Plc, BEG, BEG(UK), The Secretary of State for Trade and Industry and NLF;

“conversion date” shall have the meaning attributed to it in article 3(3)(c)(i);

- 2 -

“conversion rate” shall have the meaning attributed to it in article 3(3)(c)(i);

“Convertible Shareholder” means the holder from time to time of the Convertible Shares, being at the date of issue of the Convertible Shares, NLF (or its nominee) or a Permitted Assignee;

“Convertible Shares” shall have the meaning attributed to it in article 3(1)(b);

“Decommissioning Payments” means the payments to be made to NLF by BEG and BEG(UK) in connection with the costs of decommissioning the group’s power stations pursuant to, and in accordance with, the terms of the Contribution Agreement (including the Accelerated Decommissioning Payment and the Decommissioning Default Payment (each as defined in the Contribution Agreement));

“default share” shall have the meaning attributed to it in article 44(3);

“director” means a director for the time being of the Company;

“elected shares” shall have the meaning attributed to it in article 124(6);

“electronic communication” shall have the same meaning as in the Electronic Communications Act 2000;

“equity security” shall have the meaning attributed to it in article 8(2);

“executed” means, in relation to a document, execution under hand or under seal or by any other method permitted by law;

“holder” means, in relation to a share, the member whose name is entered in the Register as the holder of that share;

“Holder” shall have the meaning attributed to it in article 17(2);

“Holdings Plc” means British Energy Holdings plc, incorporated in Scotland with registered number SC270186;

“London Stock Exchange” means London Stock Exchange plc;

“market transfer” shall have the meaning attributed to it in article 44(8);

“member” means a member of the Company;

“new shares” shall, in relation to article 124 (Scrip dividends), have the meaning attributed to it in article 124(1);

“NLF” means Nuclear Generation Decommissioning Fund Limited of 16 Rothesay Place, Edinburgh EH3 7SQ (registered in Scotland No. SC164685) (to be renamed Nuclear Liabilities Fund Limited);

- 3 -

“Non-Voting Ordinary Shares” shall have the meaning attributed to it in article 3(1)(c);

“office” means the registered office for the time being of the Company;

“Ordinary Shares” shall have the meaning attributed to it in article 3(1)(a);

“Original Act” shall have the meaning attributed to it in article 17(2)(e);

“paid up” means paid or credited as paid;

“Permitted Assignee” means the NLF’s successor in title, a Minister of the Crown, the Treasury, a department, non-departmental body or other agency of the Crown, any body corporate established by statute some or all of the members of which are appointed by a Minister of the Crown or other UK government entity or any person directly or indirectly wholly owned by, or held on trust for, the Secretary of State or other Minister of the Crown;

“Permitted Person” shall have the meaning attributed to it in article 17(2)(f);

“person entitled by transmission” means a person whose entitlement to a share in consequence of the death or bankruptcy of a member or of any other event giving rise to its transmission by operation of law has been noted in the Register;

“recognised financial institution” means a recognised clearing house acting in relation to a recognised investment exchange or a nominee of a recognised clearing house acting in that way or of a recognised investment exchange which is designated for the purposes of section 185(4) of the Act;

“Register” means the register of members of the Company kept pursuant to section 352 of the Act or the issuer register of members maintained pursuant to Regulation 20 of the Regulations, and where the context requires, any register maintained by the Company or the Operator of persons holding any renounceable right of allotment of a share and cognate expressions shall be construed accordingly;

“registrars” shall have the meaning attributed to it in article 3(3)(c)(i);

“Regulations” means The Uncertificated Securities Regulations 2001, as amended from time to time, including any provisions of or under the Statutes which alter or replace such regulations;

“relevant company” shall have the meaning attributed to it in article 101(3)(d);

“relevant dividend” shall have the meaning attributed to it in article 124(4);

“Relevant Holder(s)” shall have the meaning attributed to it in article 17(4)(a);

- 4 -

“relevant period” shall have the meaning attributed to it in article 44(8)(b);

“Relevant Person” shall have the meaning attributed to it in article 17(2)(g);

“Relevant Purchaser(s)” shall have the meaning attributed to it in article 17(4);

“relevant securities” shall have the meaning attributed to it in article 7;

“Relevant Share Capital” shall have the meaning attributed to it in article 17(2)(h);

“Relevant Shares” shall have the meaning attributed to it in article 17(2)(i);

“representative” shall, in relation to article 62 (Corporate representatives), have the meaning attributed to it in article 62(1);

“Required Disposal” shall have the meaning attributed to it in article 17(2)(j);

“Restructuring” means the restructuring of the British Energy group as more particularly defined in the Scheme Document;

“rights issue” shall, in relation to article 8 (Disapplication of pre-emption rights), have the meaning attributed to it in article 8(2)(b);

“seal” means any common seal of the Company or any official or securities seal that the Company may have or may be permitted to have under the Statutes;

“secretary” means the secretary of the Company or, if there are joint secretaries, any of the joint secretaries and includes an assistant or deputy secretary and any person appointed by the board to perform any of the duties of the secretary of the Company;

“section 212 notice” shall have the meaning attributed to it in article 44(1);

“Scheme Document” means a circular sent to shareholders of British Energy dated 29 November 2004 setting out restructuring proposals in relation to a scheme of arrangement between British Energy and its shareholders or a disposal of the business and assets of British Energy;

“Special Share” shall have the meaning attributed to it in article 3(1)(d);

“Special Shareholder” means the holder for the time being of the Special Share;

“Statutes” means the Act and all statutes and subordinated legislation made thereunder, for the time being in force concerning companies and affecting the Company;

- 5 -

“these articles” means these articles of association as from time to time amended;

“treasury shares” means shares in the capital of the Company held by the Company as treasury shares pursuant to the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003;

“UK GAAP” means generally accepted accounting principles applicable in the United Kingdom including Financial Reporting Standards and Statements of Standard Accounting Practices issued by the Accounting Standards Board Limited as at 31 March 2004;

“UKLA” means the UK Listing Authority, a division of the Financial Services Authority acting in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000 or any successor enactment;

“uncertificated” means, in relation to a share, a share, title to which is recorded in the Register as being held in uncertificated form and title to which, by virtue of the Regulations, may be transferred by means of a relevant system; and

“United Kingdom” means Great Britain and Northern Ireland.

(b) Any other words or expressions defined in or for the purposes of the Act or any other of the Statutes (as in force, and subject to any statutory modifications in force, on the date of adoption of these articles) have the same meaning in these articles except that the word “company” includes any body corporate or association of persons, whether or not a company within the meaning of the Act.

(c) Any reference in these articles to any statute or statutory provision includes a reference to any modification or re-enactment of it for the time being in force.

(d) Words importing the singular number include the plural number and vice versa, words importing one gender include any gender and words importing persons include bodies corporate and unincorporated associations.

(e) Any reference to writing includes a reference to any method of representing or reproducing words in a legible and non-transitory form.

(f) Any reference to a document being sealed or executed under seal or under the common seal of any body corporate (including the Company) or any similar expression includes a reference to its being executed in any other manner which has the same effect as if it were executed under seal.

(g) Any reference to a meeting shall not be taken as requiring more than one person to be present in person if any quorum requirement can be satisfied by one person.

- 6 -

(h) The expressions “issuer register of members”, “Operator”, “Operator-instruction”, “Operator register of members”, “participating issuer”, “participating security” and “relevant system” have the same meanings as in the Regulations.

(2) Subject to the provisions of the Statutes, a special or extraordinary resolution shall be effective for any purpose for which an ordinary resolution is expressed to be required and a special resolution shall be effective for any purpose for which an extraordinary resolution is required under these articles.

(3) Headings to these articles are inserted for convenience only and shall not affect construction.

(4) All references in these articles to the giving of instructions by means of a relevant system shall be deemed to relate to a properly authenticated dematerialised instruction given in accordance with the Regulations. The giving of such instructions shall be subject to:

(a) the facilities and requirements of the relevant system;

(b) the Regulations; and

(c) the extent to which such instructions are permitted by or practicable under the rules and practices from time to time of the Operator of the relevant system.

SHARE CAPITAL

3. Share capital

(1) Authorised share capital

The authorised share capital of the Company is divided into:

(a) 2,800,000,000 ordinary shares of 10p each (the “Ordinary Shares”);

(b) 2,000,000,000 convertible shares of 10p each (the “Convertible Shares”);

(c) 50,000 non-voting ordinary shares of £1 each (the “Non-Voting Ordinary Shares”); and

(d) one special rights redeemable preference share of £1 (the “Special Share”).

(2) Rights and restrictions attaching to the Ordinary Shares

The rights and restrictions attaching to the Ordinary Shares shall be as follows:

(a) Income

Subject to the rights attached to any other share or class of share, the holders of Ordinary Shares shall be entitled to be paid any profits of the Company available for distribution and determined to be distributed.

- 7 -

(b) Capital

Subject to the rights attached to any other share or class of share, on a return of capital on a winding-up or otherwise (except on a redemption in accordance with the terms of issue of any share, or purchase by the Company of any share or on a capitalisation issue and subject to the rights of any other class of shares that may be issued) there shall be paid to the holders of the Ordinary Shares the nominal capital paid up or credited as paid up on such Ordinary Shares together with any further amounts available which shall be paid to the holders of the Ordinary Shares rateably according to the amounts paid up or credited as paid up in respect of each Ordinary Share.

(c) Attendance and voting in general meetings

The holders of Ordinary Shares shall be entitled in respect of their holding of such shares, to receive notice of general meetings and to attend, speak and vote at such meetings in accordance with these articles.

(3) Rights and restrictions attaching to the Convertible Shares

The rights and restrictions attaching to the Convertible Shares shall be as follows:

(a) General

(i) Save as provided in this article 3(3), the Convertible Shares shall have the same rights, be subject to the same restrictions and rank pari passu with the Ordinary Shares in all respects.

(ii) The nominal amount of each Convertible Share shall at all times be the same as the nominal amount of each Ordinary Share and if the Company proposes, without limitation, to take any of the actions set out in article 10(1) in respect of the Ordinary Shares, it shall propose that the same action be taken in relation to the Convertible Shares. If a resolution to approve such action is duly passed in general meeting, the Convertible Shareholder shall be deemed irrevocably to consent to and sanction any variation of the rights attaching to the Convertible Shares which may be involved in or deemed to be involved in the taking of such action and, if required in order to render such consent effective, shall, in accordance with the provisions of article 15, consent in writing or vote at a separate meeting of the Convertible Shareholder in favour of any extraordinary resolution to sanction such variation.

- 8 -

(b) Attendance and voting in general meetings

(i) The Convertible Shareholder, while it holds Convertible Shares, shall be entitled to receive notice of, and to attend and speak at, any general meeting of the Company, and, on a show of hands the Convertible Shareholder shall have one vote.

(ii) Subject to paragraph (b)(iii), on a poll the number of votes that the Convertible Shareholder is entitled to exercise in respect of its holding of Convertible Shares shall be the lesser of:

(I) the maximum percentage of voting rights attributable to the share capital of the Company which are exercisable at a general meeting of the Company and which may, from time to time, be held without triggering a mandatory offer for the Company under the City Code on Takeovers and Mergers (being, as at the date of adoption of these articles, 29.9 per cent. and, for this purpose, taking into account the voting rights attributable to any other Ordinary Shares held or acquired by any person acting in concert with the Convertible Shareholder); and

(II) the number of Convertible Shares which the Convertible Shareholder would otherwise be entitled to vote if the Convertible Shares were Ordinary Shares.

(iii) Notwithstanding the foregoing, on any resolution:

(I) for the winding up of the Company,

(II) to modify, vary or abrogate the rights attaching to the Ordinary Shares (other than any resolution proposed pursuant to paragraph (a)(ii)); or

(III) to modify, vary or abrogate the rights attaching to the Convertible Shares (other than any resolution proposed pursuant to paragraph (a)(ii)),

the restrictions in paragraph (b)(ii) on the number of votes that the Convertible Shareholder is entitled to exercise shall not apply and on a poll, the number of votes that the Convertible Shareholder is entitled to exercise in relation to any such resolution shall be equal to the number of Convertible Shares which the Convertible Shareholder would be entitled to vote if the Convertible Shares were Ordinary Shares.

(iv) On any resolution to modify, vary or abrogate the rights attaching to the Convertible Shares (other than any resolution proposed pursuant to paragraph (a)(ii)) the provisions of article 15 shall apply.

- 9 -

(c) Conversion

(i) Save for any transfer of Convertible Shares to a Permitted Assignee, on a transfer, sale or disposal of Convertible Shares by the Convertible Shareholder (or its nominee) to a third party, the relevant Convertible Shares shall convert into Ordinary Shares at the rate of one Ordinary Share for every one Convertible Share (the “conversion rate”) automatically upon, and contemporaneously with, registration by the Company or its registrar for the time being (the “registrars”) of the transfer in the Company’s register of members following receipt of a duly executed and stamped stock transfer form and the share certificates in respect of such Convertible Shares. The date on which the transfer is registered by the registrars shall be the “conversion date”.

(ii) Subject to paragraph (c)(i) neither the Convertible Shareholder nor, if applicable, its nominee shall be entitled at any time to convert all or any Convertible Shares.

(iii) Conversion of Convertible Shares pursuant to this article shall be effected by the board determining to re-designate the relevant Convertible Shares as Ordinary Shares or in any other manner that the board may in its absolute discretion from time to time decide, subject to the provisions of the articles and the Acts. In any such case, the Convertible Shareholder shall be deemed irrevocably to approve such re-designation of the relevant Convertible Shares and to consent to any variation or abrogation of its class rights as may be occasioned by such re-designation.

(iv) From the conversion date all entitlements to dividends and other distributions payable thereafter or to be made on Convertible Shares so converted shall cease and the relevant shareholder shall instead be entitled in respect of the Ordinary Shares arising on such conversion to all dividends and other distributions payable or to be made on Ordinary Shares thereafter, whether or not such dividends or distributions are in respect of any earlier financial year or accounting period.

(v) The new Ordinary Shares arising on conversion shall rank pari passu in all respects with the Ordinary Shares then in issue and fully paid.

(vi) The new Ordinary Shares arising on conversion shall, unless the board determines otherwise, be allotted and issued in uncertificated form and credited by the Operator (in accordance with the instructions of the Company and CREST Regulations) within two weeks of the conversion date to the CREST stock account of the relevant shareholder (or its nominee). Without prejudice and subject to the foregoing, within four weeks of the conversion date, the Company

- 10 -

shall where the directors have determined that the Ordinary Shares arising on conversion shall be issued in certificated form, forward to (a) the relevant shareholder, without charge, a certificate for the appropriate amount of Ordinary Shares and (b) to the Convertible Shareholder a new certificate for any balance of unconverted Convertible Shares comprised in the surrendered certificate. In the meantime transfers of certificated Ordinary Shares shall be certified against the register.

(d) Obligations

(i) For as long as there are Convertible Shares in issue the Company shall use all reasonable endeavours to ensure that any action taken in relation to, or any offer made by the Company to the holders of, Ordinary Shares, is taken in respect of, or the same offer is made to, the Convertible Shareholder. Without limiting the generality of the foregoing, if:

(I) the Company proposes to do any of those things set out in articles 123, 124 or 125 in respect of Ordinary Shares, it shall propose that the same action be taken in relation to the Convertible Shares save that in the case of the actions contemplated by articles 124 or 125 any allotment to the Convertible Shareholder shall be of Convertible Shares (rather than Ordinary Shares);

(II) Ordinary Shares are offered by the Company by way of rights to holders of Ordinary Shares or otherwise, that offer shall be extended to the Convertible Shareholder on the same terms save that the offer to the Convertible Shareholder shall be of Convertible Shares (rather than Ordinary Shares);

(III) (1) any offer (not being an offer falling within paragraph (d)(i)(II)) is made to (a) all (or as nearly as may be practicable all) the holders of Ordinary Shares or (b) all (or as nearly as may be practicable all) holders of Ordinary Shares other than the offeror and/or any associate of the offeror (as defined in section 430E(4) of the Act) to acquire the whole or any part of the issued ordinary share capital of the Company, or (2) if any person proposes a scheme with regard to such acquisition, the Company shall give notice of such offer or scheme to the Convertible Shareholder at the same time as any notice thereof is sent to the holders of Ordinary Shares (or as soon as practicable thereafter) and shall use reasonable endeavours to ensure that (x) the Convertible Shareholder is given the opportunity to transfer its Convertible Shares at the conversion rate prior to expiry of the offer and (y) the offer extends to any Ordinary Shares arising upon conversion of any Convertible Shares in accordance with paragraph (c)(i).

- 11 -

(ii) The Company shall use all reasonable endeavours to procure that any Ordinary Shares to be issued upon, or resulting from conversion of the Convertible Shares, are admitted to the Official List of the UKLA and to trading on the London Stock Exchange as soon as reasonably practicable (taking into account, without limitation, any requirement to produce listing particulars in respect of such Ordinary Shares) after the earlier of:

(I) the conversion date; and

(II) the date on which the Convertible Shareholder notifies the Company that it intends to dispose of Convertible Shares.

(iii) No admission to listing or admission to trading shall be sought for the Convertible Shares whilst they remain Convertible Shares.

(4) Rights and restrictions attaching to the Non-Voting Ordinary Shares

The rights and restrictions attaching to the Non-Voting Ordinary Shares shall be as follows:

(a) General

Save as provided in this article 3(4), the Non-Voting Ordinary Shares shall have the same rights, be subject to the same restrictions and rank pari passu with the Ordinary Shares in all respects.

(b) Attendance and voting in general meetings

The holders of the Non-Voting Ordinary Shares shall not be entitled, in their capacity as holders of such shares, to receive notice of or to attend and vote at any general meeting of the Company unless a resolution is to be proposed:

(i) to wind up the Company; or

(ii) which varies, modifies, alters or abrogates any of the rights attaching to the Non-Voting Ordinary Shares.

(5) Rights and restrictions attaching to the Special Share

The rights and restrictions attaching to the Special Share shall be as set out in article 16 (The Special Share) of these articles.

4. Rights attached to shares

Subject to the provisions of the Statutes and to the rights conferred on the holders of any other shares, any share may be issued with or have attached to it such rights and restrictions as the Company may by ordinary resolution decide or, if no such resolution has been passed or so far as the resolution does not make specific provision, as the board may decide.

- 12 -

5. Uncertificated shares

(1) Subject to the Statutes, the Regulations and the rules made and practices instituted by the Operator of any relevant system, the board may permit the holding and transfer of any class of shares in uncertificated form by means of a relevant system and, subject as aforesaid, the board may at any time determine that any class of shares shall become a participating security or that a class of shares shall cease to be a participating security.

(2) Where any class of shares is a participating security, any share in such class may be changed from an uncertificated share to a certificated share and from a certificated share to an uncertificated share in accordance with and subject to the provisions of the Regulations and the rules made and practices instituted by the Operator of the relevant system.

(3) Shares of a class shall not be treated as forming a separate class from other shares of that class merely because any of the following apply to them:

(a) they are enabled or permitted in accordance with the Regulations to become a participating security, or they cease to be a participating security; or

(b) any shares of that class are from time to time held in uncertificated form.

(4) In relation to any share which is, for the time being, held in uncertificated form:

(a) the Company may utilise the applicable relevant system to the fullest extent available from time to time in the exercise of any of its powers or functions under the Statutes or these articles or otherwise in effecting any actions and the directors may from time to time determine the manner in which such powers, functions and actions shall be so exercised or effected;

(b) any provisions of these articles which are for the time being inconsistent with:

(i) the holding of shares of that class in uncertificated form;

(ii) the transfer of title to shares of that class by means of a relevant system;

(iii) the exercise of any powers or functions by the Company or the effecting by the Company of any actions by means of a relevant system; and

(iv) the Regulations,

shall be disapplied.

(5) Where any class of shares in the capital of the Company is a participating security and the Company is entitled under any provisions of the Statutes or the rules made and practices instituted by the Operator of any relevant system or under these articles to

- 13 -

dispose of, forfeit, enforce a lien or sell or otherwise procure the sale of any shares which are held in uncertificated form, such entitlement (to the extent permitted by the Regulations and the rules made and practices instituted by the Operator of the relevant system) shall include the right to:

(a) require any holder of any uncertificated shares which are the subject of any exercise by the Company of any such entitlement, by notice in writing to the holder concerned, to change his holding of such uncertificated shares into certificated form within such period as may be specified in the notice, prior to completion of any disposal, sale or transfer of such shares or direct the holder to take such steps, by instructions given by means of a relevant system or otherwise, as may be necessary to sell or transfer such shares; and/or

(b) appoint any person to take such other steps, by instruction given by means of a relevant system or otherwise, in the name of the holder of such shares as may be required to effect transfer of such shares and such steps shall be as effective as if they had been taken by the registered holder of the uncertificated shares concerned; and/or

(c) transfer any uncertificated shares which are the subject of any exercise by the Company of any such entitlement by entering the name of the transferee in the Register in respect of that share as a transferred share; and/or

(d) otherwise rectify or change the Register in respect of that share in such manner as may be appropriate; and/or

(e) take such other action as may be necessary to enable those shares to be registered in the name of the person to whom the shares have been sold or disposed of or as directed by him.

6. Unissued shares

Subject to the provisions of the Statutes, these articles and relevant authority given by the Company in a general meeting, the board has general and unconditional authority to allot, grant options over, offer or otherwise deal with or dispose of any unissued shares (whether forming part of the original or any increased capital), or rights to subscribe for or convert any security into shares, to such persons, at such times and generally on such terms and conditions as the board may decide but no share may be issued at a discount.

7. Authority to allot relevant securities

The Company may from time to time pass an ordinary resolution referring to this article and authorising, in accordance with section 80 of the Act, the board to exercise all the powers of the Company to allot relevant securities and:

(a) on the passing of the resolution the board shall be generally and unconditionally authorised to allot relevant securities (as defined for the purposes of that section) up to the aggregate nominal amount specified in the resolution; and

- 14 -

(b) unless previously revoked the authority shall expire on the day specified in the resolution (not being more than five years after the date on which the resolution is passed),

but any authority given under this article shall allow the Company, before the authority expires, to make an offer or agreement which would or might require relevant securities to be allotted after it expires and to allot securities in pursuance of that offer or agreement.

For the purposes of this article:

“relevant securities” has the meaning given to it in section 80 of the Act.

8. Disapplication of pre-emption rights

(1) Subject to the board being generally authorised to allot relevant securities in accordance with section 80 of the Act, the Company may from time to time resolve by a special resolution referring to this article that the board be given power to allot equity securities for cash and, on the passing of the resolution, the board shall have power to allot (pursuant to that authority) equity securities for cash as if section 89(1) of the Act did not apply to the allotment but that power shall be limited to:

(a) allotments of equity securities in connection with a rights issue; and

(b) allotments other than pursuant to paragraph (a) up to an aggregate nominal amount equal to the amount stated in the relevant special resolution.

and unless previously revoked, that power shall (if so provided in the special resolution) expire on the date specified in the special resolution of the Company. The Company may before the power expires make an offer or agreement which would or might require equity securities to be allotted after it expires.

(2) For the purposes of this article:

(a) “equity security” has the meaning given to it in section 94 of the Act; and

(b) “rights issue” means an offer of equity securities, open for acceptance for a period fixed by the board, to holders of Ordinary Shares or other equity securities of any class made in proportion (as nearly as may be) to their respective existing holdings of Ordinary Shares or other equity securities of the class concerned (so that any offer to holders of other equity securities of any class shall be on the basis of their rights to receive that offer or, in the case of securities convertible into Ordinary Shares, proportionate to the number of Ordinary Shares which would be allotted upon the exercise in full of the attached conversion rights) but subject to the board having a right to make such exclusions or other arrangements in connection with that offering as it deems necessary or expedient:

(i) to deal with equity securities representing fractional entitlements; and

- 15 -

(ii) to deal with legal or practical problems arising in any territory or by virtue of shares being represented by depositary receipts, the requirements of any regulatory body or stock exchange in any territory, or any other matter whatsoever.

9. Power to pay commission and brokerage

The Company may exercise all powers of paying commission and brokerage conferred or permitted by the Statutes. The Company may also on any issue of shares pay such brokerage as may be lawful.

10. Power to increase, consolidate, sub-divide and cancel shares

(1) The Company may by ordinary resolution:

(a) increase its capital by the creation of new shares of such amount as the resolution prescribes;

(b) cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled;

(c) consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares; and

(d) subject to the Statutes, sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum of association of the Company or these articles, but so that the proportion between the amount paid up and the amount (if any) not paid up on each share resulting from the sub-division shall be the same as it was in the case of the share from which the share resulting from the sub-division is derived.

(2) A resolution by which any share is sub-divided may determine that, as between the holders of the shares resulting from the sub-division, one or more of the shares may have such preferred or other special rights, or may have such qualified or deferred rights or be subject to such restrictions, as compared with the other or others, as the Company has power to attach to unissued or new shares.

(3) If as a result of any consolidation and division or sub-division of shares any members would become entitled to fractions of a share, the board may on behalf of those members deal with the fractions as it thinks fit. In particular, the board may:

(a) sell the shares representing the fractions to any person (including, subject to the provisions of the Statutes, the Company) for the best price reasonably obtainable and distribute the net proceeds of sale in due proportion among those members or, if the board decides, some or all of the sum raised may be retained for the benefit of the Company. For the purpose of any such sale the board may authorise one or more persons to execute an instrument of transfer

- 16 -

of shares to or as directed by the purchaser, who shall not be bound to see to the application of the purchase money; nor shall his nor, if different, the transferee’s title to the shares be affected by any irregularity in or invalidity of the proceedings relating to the sale. For the purposes of this Article, any shares representing fractional entitlements to which any Member would, but for this Article, become entitled may be issued in certificated form or uncertificated form; or

(b) subject to the Statutes, issue to a member credited as fully paid by way of capitalisation the minimum number of shares required to round up his holding of shares to a number which, following consolidation and division or subdivision, leaves a whole number of shares (such issue being deemed to have been effected immediately before consolidation or subdivision, as the case may be). The amount required to pay up those shares may be capitalised as the board thinks fit out of amounts standing to the credit of reserves (including a share premium account, capital redemption reserve and profit and loss account), whether or not available for distribution, and applied in paying up in full the appropriate number of shares. A resolution of the board capitalising part of the reserves has the same effect as if the capitalisation had been declared by ordinary resolution of the Company pursuant to article 125 (Capitalisation of reserves). In relation to the capitalisation the board may exercise all the powers conferred on it by article 125 (Capitalisation of reserves) without an ordinary resolution of the Company.

11. Power to issue redeemable shares

Subject to the provisions of the Statutes and to any rights conferred on the holders of any class of shares, any share may be issued on terms that it is to be redeemed or is liable to be redeemed at the option of the Company or the shareholder.

12. Power to purchase own shares

Subject to the provisions of the Statutes and to any rights conferred on the holders of any class of shares, the Company may purchase all or any of its shares of any class, including any redeemable shares, in any way. If, at the date proposed for approval of a proposed purchase of equity share capital, there are in issue shares of a class entitling the holders to convert (whether or not upon the occurrence of particular events or in particular circumstances) into equity share capital of the class proposed to be purchased, no such purchase may take place unless it has been sanctioned by an extraordinary resolution passed at a separate meeting (or meetings if there are two or more classes) of the holders of that class of convertible shares, unless there are provisions in the relevant trust deed or terms of issue permitting the Company to purchase its own equity share capital without the approval of such meetings.

13. Power to reduce capital

Subject to the provisions of the Statutes and to any rights conferred on the holders of any class of shares, the Company may by special resolution reduce its share capital, any capital redemption reserve, any share premium account and any other undistributable reserve in any way.

- 17 -

14. Trusts not bound to be recognised

The Company may, but shall not be required to, recognise a person as holding a share on trust and shall not be bound by or otherwise compelled to recognise (even if it has notice of it) any interest (whether equitable, contingent, future or potential) in any share other than an absolute right in the holder to the whole of the share.

VARIATION OF RIGHTS

15. Variation of rights

(1) Subject to the provisions of the Statutes, whenever the capital of the Company is divided into different classes of shares, all or any of the rights for the time being attached to any class of shares in issue may from time to time (whether or not the Company is being wound up) be varied:

(a) in such manner (if any) as may be provided by those rights; or

(b) in the absence of such provision, either with the consent in writing of the holders of at least three-fourths of nominal value of the issued shares of that class or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders of those shares validly held in accordance with these articles, but not otherwise.

(2) Unless otherwise provided for in the rights attaching to a class of share, and subject to applicable sections of the Act, all the provisions of these articles relating to general meetings of the Company or to the proceedings at general meetings shall apply, mutatis mutandis, to every such separate general meeting, except that:

(a) no member, other than a director, is entitled to notice of it or to attend unless he is a holder of shares of that class;

(b) no vote may be given except in respect of a share of that class;

(c) the quorum at the meeting is two persons present in person holding or representing by proxy at least one-third in nominal value of the issued shares of that class;

(d) the quorum at an adjourned meeting is two persons holding shares of that class who are present in person or by proxy; and

(e) a poll may be demanded in writing by a member present in person or by proxy and entitled to vote at the meeting and on a poll each member has one vote for every share of that class of which he is the holder.

(3) Unless otherwise expressly provided by the terms of their issue, the rights attached to any class of shares shall not be deemed to be varied by:

(a) the creation or issue of further shares ranking pari passu with them or subsequent to them or by the purchase or redemption by the Company of its own shares or by any other reduction of capital, in each case in accordance with the Statutes and article 12 (Power to purchase own shares) or article 13 (Power to reduce capital); or

- 18 -

(b) the Company permitting, in accordance with the Regulations, the holding and transfer of shares of a class in uncertificated form by means of a relevant system or by any such shares being held from time to time as uncertificated shares.

THE SPECIAL SHARE

16. The Special Share

(1) The Special Share may only be issued to, held by and transferred to one or more of Her Majesty’s Secretaries of State, another Minister of the Crown, the Solicitor for the affairs of Her Majesty’s Treasury or any other person acting on behalf of the Crown.

(2) Notwithstanding any provision in these articles to the contrary, each of the following matters shall be deemed to be a variation of the rights attaching to the Special Share and shall accordingly be effective only with the consent in writing of the Special Shareholder (and the Special Shareholder shall only be entitled to withhold that consent to a matter set out in paragraphs (b), (c), (d), (e) or (f) below if, in the Special Shareholder’s opinion, the matter in question would be contrary to the interests of national security) and without such consent shall not be done or caused to be done:

(a) the amendment or removal or alteration of the effect of (which, for the avoidance of doubt, shall include the ratification of any breach of) all or any of the following:

(i) in article 2 (Interpretation), the definition of “Special Share” and “Special Shareholder”;

(ii) this article;

(iii) article 17 (Limitations on shareholdings);

(iv) in article 44 paragraphs (10) to (12) (inclusive) (Disclosure of interests in shares);

(b) the creation or issue of any shares in the Company with voting rights attached, other than those which are, or would on issue be:

(i) shares comprised in the relevant share capital (as defined in section 198(2) of the Act) of the Company; or

(ii) shares which do not constitute equity share capital (as defined in section 744 of the Act) and which, when aggregated with all other such shares, carry or on issue would carry the right to cast less than

- 19 -

15 per cent. of the maximum number of votes capable of being cast on a poll on any resolution at any general meeting of the Company (in whatever circumstances, and for whatever purpose, the same may have been convened);

(c) the variation of any voting rights attached to any shares in the Company (and, for the avoidance of doubt, the creation or issue of shares falling within paragraph (b) (i) or (ii) above shall not be regarded as a variation for the purposes of this paragraph);

(d) the giving by the Company of any consent or agreement to (including without limitation the casting of any vote in favour of) the amendment or removal or alteration of the effect of (which, for the avoidance of doubt shall include any ratification of the breach of) the articles of association of Holdings Plc, British Energy, BEG(UK) or BEG if the effect would be to enable the board of directors of Holdings Plc, British Energy, BEG(UK) or BEG to issue any shares (other than (i) in the case of Holdings Plc, to the Company, (ii) in the case of British Energy, to the Company or Holdings Plc, (iii) in the case of BEG(UK), to the Company or Holdings Plc, and (iv) in the case of BEG, to BEG(UK), Holdings Plc or the Company) without the consent in writing of the Special Shareholder (such consent only to be withheld if, in the Special Shareholder’s opinion, such issue would be contrary to the interests of national security);

(e) the giving by the Company of any consent or agreement to (including without limitation the casting of any vote in favour of) any issue of shares in Holdings Plc, British Energy, BEG(UK) or BEG, (other than (i) in the case of Holdings Plc, to the Company, (ii) in the case of British Energy, to the Company or Holdings Plc, (iii) in the case of BEG(UK), to the Company or Holdings Plc, and (iv) in the case of BEG, to the Company, Holdings Plc or BEG(UK)); and

(f) the disposal by the Company of any or all of the shares held (directly or indirectly) by it in Holdings Plc, British Energy, BEG(UK) or BEG or of any rights or interests therein or the entering into by the Company of any agreement or arrangement with respect to, or the exercise of any rights attaching to, such shares.

(3) For the purposes of this article, “disposal” shall include any sale, gift, mortgage, assignation, charge, or the grant of any other encumbrance or the permitting of any encumbrance to subsist or any other alienation or disposition to a third party.

(4) Notwithstanding any other provisions of these articles to the contrary, the Special Shareholder shall be entitled to receive notice of, and to attend and speak at, any general meeting or any separate meeting of the holders of any class of shares, but the Special Share shall carry no right to vote nor any other rights at any such meeting.

(5) In a distribution of capital on a winding up of the Company, the Special Shareholder shall be entitled to repayment of the capital paid on the Special Share in priority to any

- 20 -

repayment of capital to any other member. The Special Share shall confer no other right to participate in the capital, and no right to participate in the profits, of the Company.

(6) The Special Shareholder may, after consulting the Company and subject to the provisions of the Act, require the Company to redeem the Special Share at par at any time after 30th September, 2006 by giving notice to the Company and delivering to it the relevant share certificate. Upon redemption of the Special Share the provisions of this article shall cease to have effect.

LIMITATIONS ON SHAREHOLDINGS

17. Limitations on shareholdings

(1) This article shall remain in force until the date of redemption of the Special Share pursuant to article 16(6) notwithstanding any provision in these articles to the contrary. Thereafter this article shall be and shall be deemed to be of no effect, the separate register required under article 17(3) shall no longer be maintained by the Company and any notice calling for a Required Disposal (whether given before or after the date of redemption of the Special Share) and the obligations and powers of the board under this article in respect of a Required Disposal shall cease to have effect; but the validity of anything done under this article before that date shall not otherwise be affected and any actions taken hereunder before that date shall be conclusive.

(2) In this article:

(a) “Additional Interest” means any such interest as is referred to in paragraph (d)(ii) below;

(b) “Clearing House” means a pooled nominee service provided by an Operator of any relevant system, the Operator of any relevant system itself (in its capacity as such) or its nominee (of it in that capacity);

(c) “Holder” means a person who has an interest in shares of the Company evidenced by American Depository Receipts issued by an ADR Depository;

(d) “interest”, in relation to shares, means:

(i) any interest which would be taken into account in determining for the purposes of Part VI of the Original Act whether a person has a notifiable interest in a share (including any interest which he would be taken as having for those purposes); and

(ii) any interest which would have been included within section 208(4)(b) of the Original Act had the entitlements referred to in that provision extended to “entitlements” which could arise under an agreement or arrangement as defined in section 204(5) and (6) of the Original Act;

and “interested” shall be construed accordingly;

- 21 -

(e) “Original Act” means the Companies Act 1985 as in force at the date of adoption of this article and notwithstanding any repeal, modification or re-enactment thereof after that date (including, for the avoidance of doubt, any repeal, modification or re-enactment by regulations made by the Secretary of State pursuant to section 210A of that Act to the definition of “relevant share capital” in section 198(2) of that Act or to the provisions as to what is taken to be an interest in shares in section 208 or as to what interests are to be disregarded in section 209) but so that the percentages giving rise to a notifiable interest in section 199(2) (a) and (b) of that Act shall be three per cent. and ten per cent. respectively or such lesser percentages as may from time to time be prescribed in relation to section 199(2)(a) and (b) respectively);

(f) “Permitted Person” means:

(i) an ADR Depository, acting in its capacity as such;

(ii) a Clearing House, acting in its capacity as such;

(iii) the chairman of a meeting of the Company or of a meeting of the holders of Relevant Share Capital or of any class thereof when exercising the voting rights conferred on him under paragraph (7) below;

(iv) a trustee (acting in that capacity) of any employees’ share scheme of the Company;

(v) the Crown or one of Her Majesty’s Secretaries of State, another Minister of the Crown, the Solicitor for the affairs of Her Majesty’s Treasury and any other person acting on behalf of the Crown;

(vi) NLF or its nominee;

(vii) any person who has an interest but who, if the incidents of his interest were governed by the laws of England and Wales, would in the opinion of the board be regarded as a bare trustee of that interest, in respect of that interest only;

(viii) an underwriter in respect of interests in shares which exist only by virtue of a contingent obligation to purchase or subscribe for such shares pursuant to underwriting or sub-underwriting arrangements approved by the board or, for a period of three months, in respect of interests in shares purchased or subscribed for by it pursuant to such an obligation;

(ix) any other person who (under arrangements approved by the board) subscribes or otherwise acquires Relevant Share Capital (or interests therein) which has been allotted or issued with a view to that person (or purchasers from that person) offering the same to the public, for a period not exceeding three months from the date of the relevant allotment or issue (and in respect only of the shares so subscribed or otherwise acquired);

- 22 -

(x) Depository Trust Company and/or its nominee acting in the capacity of a clearing agency in respect of dealings in American Depository Receipts; or

(xi) any person who has an interest, and who shows to the satisfaction of the board that he has it, by virtue only of being entitled to exercise or control the exercise (within the meaning of section 203(4) of the Original Act) of one third or more of the voting power at general meetings of any company which is a Permitted Person within (i) to (x) above;

(g) “Relevant Person” means any person (whether or not identified) who has, or who appears to the board to have, at any time an interest in shares which carry the right to cast 15 per cent. or more of the total votes attaching to Relevant Share Capital of all classes (taken as a whole) and capable of being cast on a poll, or who is deemed for the purposes of this article to be a Relevant Person;

(h) “Relevant Share Capital” means the relevant share capital (as defined in section 198(2) of the Original Act) of the Company;

(i) “Relevant Shares” means all shares comprised in the Relevant Share Capital in which a Relevant Person has, or appears to the board to have, an interest or which are deemed for the purposes of this article to be Relevant Shares; and

(j) “Required Disposal” means a disposal or disposals of such a number of Relevant Shares or interests therein as will cause a Relevant Person to cease to be a Relevant Person, not being a disposal to another Relevant Person (other than a Permitted Person) or a disposal which constitutes any other person (other than a Permitted Person) a Relevant Person;

and, for the purposes of this article, where the board resolves that it has made reasonable enquiries and that it is unable to determine:

(i) whether or not a particular person has an interest in any particular shares comprised in Relevant Share Capital; or

(ii) who is interested in any particular shares so comprised,

the shares concerned shall be deemed to be Relevant Shares and all persons interested in them to be Relevant Persons.

(3) Subject to the provisions of this paragraph, and without prejudice to article 44, the provisions of Part VI of the Original Act shall apply in relation to the Company as if those provisions extended to Additional Interests and accordingly, the rights and obligations arising under that Part shall apply in relation to the Company, its members

- 23 -

and all persons interested in Relevant Share Capital, as extended by this paragraph; but so that there shall be entered in a register kept by the Company for that purpose all interests disclosed to the Company under this article which shall be separate and in addition to that register required by section 211 of the Act to be kept by the Company. The rights and obligations created by this paragraph in respect of interests in shares (including, but not limited to, Additional Interests) are in addition to and separate from those arising under Part VI of the Act. Sections 210(3) to (6), 211(10), 213(3) (so far as it relates to Section 211(10)), 214(5), 215(8), 216(1) to (4), 217(7), 218(3) and 219(3) and (4), 454, 455, 732 and 733 of the Original Act shall not apply in respect of Additional Interests.

(4) If, to the knowledge of the board, any person other than a Permitted Person is or becomes a Relevant Person (including, without limitation, by virtue of being deemed to be one), the board shall promptly give notice to the Special Shareholder. If the Special Shareholder gives notice to the board within 28 days of the receipt of the board’s notice that, in the Special Shareholder’s opinion, ownership or control of the Relevant Shares by the Relevant Person would be contrary to the interests of national security, the board shall give notice to all persons (other than persons referred to in paragraph (9) below) who appear to the board to have interests in the Relevant Shares and, if different, to the registered holders of those shares. The notice shall set out the restrictions referred to in paragraph (7) below and call for a Required Disposal to be made within 21 days of the giving of the notice to the registered holder or such longer period as the board considers reasonable. If the Relevant Shares are held by an ADR Depository, the notice shall state that:

(a) a specified purchaser or specified purchasers (the “Relevant Purchaser(s)”) or a specified Holder or specified Holders (the “Relevant Holder(s)”), as the case may be, is or are believed or deemed to be a Relevant Person or Persons or is or are persons through whom a Relevant Person or Persons is or are believed or deemed to be interested in shares of the Company in either case as specified in the notice; and

(b) the board believes that each Relevant Purchaser or Relevant Holder, or the Relevant Person or Persons as the case may be believed or deemed to be interested in shares in the Company, is or are deemed to be interested in the number of shares of the Company specified in relation to that person in the notice.

The board may extend the period in which any such notice is required to be complied with and may withdraw any such notice (whether before or after the expiration of the period referred to) if it appears to it that there is no Relevant Person in relation to the shares concerned. After the giving of such a notice, and save for the purpose of a Required Disposal under this or the following paragraph, no transfer of any of the Relevant Shares may be made or registered until either the notice is withdrawn or a Required Disposal has been made to the satisfaction of the board and registered.

- 24 -

(5) If a notice given under paragraph (4) above has not been complied with in all respects to the satisfaction of the board and has not been withdrawn, the board shall, so far as it is able, make a Required Disposal (or procure that a Required Disposal is made) and shall give written notice of the disposal to those persons on whom the notice was served. The Relevant Person(s) and the registered holder(s) of the shares duly disposed of shall be deemed irrevocably and unconditionally to have authorised the board to make such Required Disposal. The manner, timing and terms of any such Required Disposal made or sought to be made by the board (including but not limited to the price or prices at which the same is made and the extent to which assurance is obtained that no transferee, except a Permitted Person, is or would become a Relevant Person) shall be such as the board determines, based on advice from bankers, brokers, or other persons the board considers appropriate consulted by it for the purpose, to be reasonably practicable having regard to all the circumstances, including but not limited to the number of shares to be disposed of and the requirement that the disposal be made without delay; and the board shall not be liable to any person (whether or not a Relevant Person) for any of the consequences of reliance on such advice. If, in relation to a Required Disposal to be made by the board, Relevant Shares are held by more than one holder (treating joint holders of any Relevant Shares as a single holder) the board shall cause as nearly as practicable the same proportion of each holding (so far as known to it) of the Relevant Shares to be sold.

(6) For the purpose of effecting any Required Disposal, the board may authorise in writing any officer or employee of the Company to execute any necessary transfer on behalf of any holder and may enter the name of the transferee in the Register in respect of the transferred shares notwithstanding the absence of any share certificate and may issue a new certificate to the transferee and an instrument of transfer executed by such person shall be as effective as if it had been executed by the registered holder of the transferred shares and the title of the transferee shall not be affected by any irregularity or invalidity in the proceedings relating thereto. The net proceeds of the disposal shall be received by the Company whose receipt shall be a good discharge for the purchase money, and shall be paid (without any interest being payable in respect of it and after deduction of any expenses incurred by the board in the sale) to the former holder (or, in the case of joint holders, the first of them named in the Register) together with, if appropriate, a new certificate in respect of the balance of the Relevant Shares to which he is entitled upon surrender by him or on his behalf of any certificate in respect of the Relevant Shares sold and formerly held by him. For the purposes of effecting a Required Disposal of any shares held in uncertificated form the board may exercise any of the powers conferred on the Company by article 5(5).

(7) A holder of a Relevant Share to whom a notice has been given under (and complying with) paragraph (4) above shall not in respect of that share be entitled, until such time as the notice has been complied with to the satisfaction of the board or withdrawn, to attend or vote at any general meeting of the Company or meeting of the holders of Relevant Share Capital or of any class thereof, or to exercise any other right conferred by membership in relation to any such meeting; and the rights to attend (whether in person or by representative or proxy), to speak and to demand and vote on a poll

- 25 -

which would have attached to the Relevant Share had it been a Relevant Share shall vest in the chairman of any such meeting. The manner in which the chairman exercises or refrains from exercising any such rights shall be entirely at his discretion. The chairman of any such meeting shall be informed by the board of any share becoming or being deemed to be a Relevant Share.

(8) Without prejudice to the provisions of the Act and subject to the provisions of this article, the board may assume without enquiry that a person is not a Relevant Person unless the information contained in the registers kept by the Company under Part VI of the Original Act as applied and extended by this article to include the separate register to be kept under paragraph (3) above, appears to the board to indicate to the contrary or the board has reason to believe otherwise, in which circumstances the board shall make reasonable enquiries to discover whether any person is a Relevant Person.

(9) The board shall not be obliged to give any notice required under this article to be given to any person if it does not know either his identity or his address. The absence of such a notice in those circumstances and any accidental error in or failure to give any notice to any person to whom notice is required to be given under this article shall not prevent the implementation of, or invalidate, any procedure under this article.

(10) If any director has reason to believe that a person (not being a Permitted Person) is a Relevant Person, he shall inform the other directors.

(11) Save as otherwise provided in this paragraph, the provisions of these articles applying to the giving of notice of meetings to members shall apply to the giving to a member of any notice required by this article. Any notice required by this article to be given to a person who is not a member, or who is a member or, in the case of joint holders, who is the person first named in the Register, whose registered address is not within the United Kingdom and who has not given to the Company an address within the United Kingdom at which notices may be given to him, shall be deemed validly served if it is sent through the post in a pre-paid envelope addressed to that person at the address (or, if more than one, at one of the addresses), if any, at which the board believes him to be resident or carrying on business or to his last known address as shown on the Register or a register of Holders maintained by an ADR Depository. The notice shall in such a case be deemed to have been given on the day following that on which the envelope containing the same is posted, unless it was sent by second class post or there is only one class of post, in which case it shall be deemed to have been given on the day next but one after it was posted. Proof that the envelope was properly addressed, pre-paid and posted shall be conclusive evidence that the notice was given.

(12) Any resolution or determination of, or decision or exercise of any discretion or power by, the board or any director or by the chairman of any meeting under or pursuant to the provisions of this article (including without prejudice to the generality of the foregoing as to what constitutes reasonable enquiry or as to the manner, timing and terms of any Required Disposal made by the board under paragraph (5) above) shall be final and conclusive; and any disposal or transfer made, or other thing done, by or on behalf of, or on the authority of, the board or any director pursuant to the foregoing

- 26 -

provisions of this article shall be conclusive and binding on all persons concerned. The board shall not be required to give any reasons for any decision, determination or declaration taken or made in accordance with this article.

(13) Paragraph (3) of this article shall not apply to an ADR Depository or a Clearing House acting in each case in its capacity as such. Where in that capacity interests in shares in the Company are held by an ADR Depository or a Clearing House, for the purposes of this article:

(c) any person who has rights in relation to shares in the Company in which such an ADR Depository or Clearing House holds such an interest shall be deemed to be interested in the number of shares in the Company for which such an ADR Depository or Clearing House is or may become liable to account to him; and

(d) any interest which (by virtue of his being a tenant in common in relation to or holding as common property, interests in shares in the Company so held by such an ADR Depository or Clearing House) he would otherwise be treated for the purposes of this article as having in a larger number of shares in the Company shall (in the absence of any other reason why he should be so treated) be disregarded.

(14) This article shall apply notwithstanding any provision in any other of these articles which is inconsistent with or contrary to it.

SHARE CERTIFICATES

18. Issue of certificates

(1) Subject to the provisions of the Statutes and the requirements of the UKLA, a person (except a recognised financial institution in respect of whom the Company is not required by law to complete and have ready for delivery a certificate) whose name is entered in the Register as the holder of any certificated shares shall be entitled (unless the conditions of issue otherwise provide) to receive one certificate for those shares, or one certificate for each class of those shares and, if he transfers some but not all of the shares represented by a certificate in his name, to receive a new certificate for the balance of those certificated shares retained by him.

(2) In the case of joint holders of certificated shares, the Company shall not be bound to issue more than one certificate for all the shares in any particular class registered in their joint names, and delivery of a certificate for a share to any one of the joint holders shall be sufficient delivery to all.

(3) Every share certificate shall be signed by two Directors or by one Director and the Secretary or in such other manner as the board may approve having regard to the conditions of issue and the requirements of the UKLA and shall specify the number and class and distinguishing numbers (if any) of the shares to which it relates and the amount or respective amounts paid up on the shares.

- 27 -

19. Charges for and replacement of certificates

(1) Except as expressly provided to the contrary in these articles, no fee shall be charged for the issue of a share certificate.

(2) Any two or more certificates representing shares of any one class held by any member may at his request, on surrender of the original certificates, be cancelled and a single new certificate issued.

(3) If any member surrenders for cancellation a certificate representing shares held by him and requests the Company to issue two or more certificates representing those shares in such proportions as he may specify, the board may, if it thinks fit, comply with the request on payment of such fee (if any) as the board may decide.

(4) If a certificate is damaged, worn out or defaced or alleged to have been lost, stolen or destroyed, a new certificate representing the same shares may be issued on compliance with such conditions as to evidence and indemnity as the board may think fit and on payment of any exceptional expenses incurred by the Company in its investigation of the evidence and the preparation of the indemnity as the board may decide and, if damaged, worn out or defaced, on delivery up of the original certificate.

(5) In the case of joint holders of a certificated share, a request for a new certificate under paragraphs (2) and (3) of this article may be made by any one of the joint holders.

20. Other methods of recording title

Nothing in these articles shall preclude title to any securities of the Company being recorded other than in writing in accordance with such arrangements as may from time to time be permitted by the Statutes and approved by the board having regard to the requirements of the UKLA.

LIEN ON SHARES

21. Lien on partly paid shares

(1) The Company shall have a first and paramount lien on every partly paid share registered in the name of a member (whether solely or jointly with another person) for all amounts payable (whether or not due) in respect of that share. The lien shall extend to all dividends from time to time declared and every other amount payable in respect of that share.

(2) The board may at any time either generally or in any particular case declare any share to be wholly or partly exempt from the provisions of this article. Unless otherwise agreed with the transferee, the registration of a transfer of a share shall operate as a waiver of the Company’s lien (if any) on that share.

22. Enforcement of lien

(1) The Company may sell any share subject to a lien in such manner as the board may decide if an amount payable on the share is due and is not paid within fourteen clear

- 28 -

days after a notice has been served on the holder or any person entitled by transmission to the share demanding payment of that amount and giving notice of intention to sell in default.

(2) To give effect to any sale under this article, the board may authorise a person to transfer the share in the name and on behalf of the holder, or the person entitled to the share by transmission or by operation of law, or to cause the transfer of such share, to the purchaser or his nominee. The purchaser shall not be bound to see to the application of the purchase money and the title of the transferee is not affected by any irregularity in or invalidity of the proceedings connected with the sale.

(3) The net proceeds of the sale, after payment of the costs of the sale, shall be applied by the Company in or towards satisfaction of the amount currently due in respect of such lien. Any residue shall (subject to a like lien for any amounts not presently due as existed on the share before the sale), on surrender to the Company for cancellation of the certificate for the shares sold or the provision of an indemnity (with or without security) as to any lost or destroyed certificate as required by the board, be paid to the holder or person entitled by transmission to the share immediately before the sale.

CALLS ON SHARES

23. Calls

(1) Subject to the terms of issue, the board may make calls on members in respect of any amounts unpaid on the shares or a class of shares held by them respectively (whether in respect of nominal amount or premium) and not payable on a date fixed by or in accordance with the terms of issue. Each member shall (subject to his receiving at least fourteen clear days’ notice specifying when and where payment is to be made) pay to the Company as required by the notice the amount called on his shares. A call may be revoked or postponed as the board may decide.

(2) Any call may be made payable in one sum or by instalments and shall be deemed to be made at the time when the resolution of the board authorising that call is passed.

(3) A person on whom a call is made shall remain liable for it notwithstanding the subsequent transfer of the share in respect of which the call is made.

(4) The joint holders of a share shall be jointly and severally liable for the payment of all calls in respect of that share.

24. Interest on calls

If the whole amount of a call is not paid before or on the due date for payment, the person from whom it is due shall pay interest on the amount unpaid, from the due date for payment to the date of actual payment, at such rate as may be fixed by the terms of allotment or issue of the relevant share or, if no rate is fixed, at such rate as the board acting reasonably may decide, together with all costs, charges and expenses incurred by the Company by reason of the non-payment. The board may waive payment of the interest, costs, charges and expenses, wholly or in part.

- 29 -

25. Amounts due on allotment or issue treated as calls

A sum which by the terms of allotment of a share is payable on allotment or at a fixed time, or is payable as an instalment of a call, whether on account of the nominal value of the share or by way of premium, shall for all purposes of these articles be deemed to be a call duly made and payable on the date or dates fixed for payment and, in case of non-payment, the provisions of these articles shall apply as if that sum had become payable by virtue of a call.

26. Power to differentiate

On any allotment or issue of shares the board may make arrangements for a difference between the allottees or holders of the shares in the amounts and times of payment of calls on their shares.

27. Payment of calls in advance

The board may, if it thinks fit, receive all or any part of the amounts payable on a share beyond the sum actually called up on it if the holder is willing to make payment in advance and, on any amounts so paid in advance, may (until they would otherwise be due) pay interest at such rate as the board acting reasonably may decide.

FORFEITURE OF SHARES

28. Notice of unpaid calls

(1) If the whole or any part of any call or instalment remains unpaid on any share after the due date for payment, the board may serve a notice on the holder, or on a person entitled by transmission to the share in respect of which the call was made, requiring him to pay so much of the call or instalment as remains unpaid, together with any accrued interest and all costs, charges and expenses incurred by the Company by reason of the non-payment.

(2) The notice shall state a further day, being not less than fourteen clear days from the date of the notice, on or before which, and the place where, payment is to be made and shall state that, in the event of non-payment on or before the day and at the place appointed, the share in respect of which the call was made or instalment is payable will be liable to be forfeited.

(3) The board may accept a surrender of any share liable to be forfeited.

29. Forfeiture on non-compliance with notice

(1) If the requirements of a notice served under article 28 (Notice of unpaid calls) are not complied with, any share in respect of which it was given may, before the payment required by the notice is made, be forfeited by a resolution of the board. The forfeiture shall include all dividends declared and other amounts payable in respect of the forfeited share and not actually paid before the forfeiture. Forfeiture shall be deemed to occur at the time of the passing of the said resolution of the board. The board may accept a surrender of any share liable to be forfeited.

- 30 -

(2) If a share is forfeited, notice of the forfeiture shall be given by the Company to the person who was the holder of the share, or the person entitled to the share by transmission and an entry that notice of the forfeiture has been given and that the share has been forfeited, with the relevant date, shall be made in the Register; but no forfeiture shall be invalidated by any omission to give such notice or to make such entry.

30. Power to annul forfeiture or surrender

The board may, at any time before the forfeited or surrendered share has been cancelled, sold, re-allotted or otherwise disposed of, annul the forfeiture and/or acceptance of the surrender upon payment of all calls and interest due on or incurred in respect of the share and on such further conditions (if any) as it thinks fit.

31. Disposal of forfeited or surrendered shares

(1) Until cancelled in accordance with the Statutes, every share which is forfeited or surrendered and all rights attaching to it shall become the property of the Company and (subject to the provisions of the Statutes) may be sold, re-allotted or otherwise disposed of, upon such terms and in such manner as the board shall decide either to the person who was before the forfeiture or surrender the holder of the share or to any other person and whether with or without all or any part of the amount previously paid up on the share being credited as so paid up. Provided that the Company shall not exercise any voting rights in respect of such share and any such share not disposed of in accordance with the foregoing within a period of three years form the date of its forfeiture or surrender shall thereupon be cancelled in accordance with the provisions of the Statutes. The board may, for the purposes of a disposal, authorise a person to execute an instrument of transfer of the forfeited or surrendered share to, or in accordance with the directions of, any person to whom the same has been sold or disposed of. The Company may receive the consideration (if any) for the share on its disposal and may register the transferee as the holder of the share.

(2) A statutory declaration by a director or the secretary that a share has been forfeited or surrendered on a specified date shall, as against all persons claiming to be entitled to the share, be conclusive evidence of the facts stated in it and shall (subject to the execution of any necessary instrument of transfer) constitute good title to the share. The new holder of the share shall neither be bound to see to the application of the consideration for the disposal (if any) nor shall his title to the share be affected by any irregularity in or invalidity of the proceedings connected with the forfeiture, surrender, sale, re-allotment or disposal of the share.

32. Arrears to be paid notwithstanding forfeiture or surrender

A person whose share has been forfeited ceases on forfeiture to be a member in respect thereof and if that share is in certificated form, shall surrender to the Company for cancellation any certificate for the forfeited share. A person remains liable to pay all calls, interest, costs, charges and expenses owing in respect of such share at the time of forfeiture, with interest, from the time of forfeiture until payment, at such rate as

- 31 -

may be fixed by the terms of allotment or issue of such share or, if no rate is fixed, at such rate (not exceeding 20 per cent. per annum) as the board may decide. The board may if it thinks fit enforce payment without allowance for the value of such share at the time of forfeiture or for any consideration received on its disposal.

UNTRACED MEMBERS

33. Sale of shares of untraced members

(1) Subject to the Regulations, the Company may sell, at the best price reasonably obtainable at the time of the sale, any share of a member, or any share to which a person is entitled by transmission, if:

(a) during a period of twelve years at least three cash dividends (whether interim or final) have become payable in respect of the share to be sold;

(b) during that twelve year period no cash dividend payable in respect of the share has been claimed, no warrant, cheque or money order in respect of the share sent to the address of the member in the manner provided by these articles for sending such payments has been cashed and no communication has been received by the Company from the member or the person entitled by transmission to the share;

(c) on or after the expiry of that period of twelve years the Company has published advertisements both in a national newspaper and in a newspaper circulating in the area in which the address referred to in sub-paragraph (b) above is located, in each case giving notice of its intention to sell the share; and

(d) during the period of three months following the publication of those advertisements and after that period until the exercise of the power to sell the share, the Company has not, so far as the board is aware, received any communication from the member or the person entitled by transmission to the share (in his capacity as member or person entitled by transmission).

(2) The Company’s power of sale shall extend to any further share which, on or before the date of publication of the first of any advertisement pursuant to sub-paragraph (1)(c) above, is issued in right of a share to which paragraph (1) applies (or in right of any share to which this paragraph applies) if the conditions set out in sub-paragraphs (1)(b) to (d) are satisfied in relation to the further share (but as if the references to a period of twelve years were references to a period beginning on the date of allotment of the further share and ending on the date of publication of the first of the advertisements referred to above).

(3) To give effect to any sale, the board may authorise some person to execute an instrument of transfer of the share in the name and on behalf of the holder of, or the person entitled by transmission to, the share to, or in accordance with the directions of, the purchaser or his nominee, and in relation to an uncertificated share may require

- 32 -

an Operator to convert the share into certificated form in accordance with the Regulations. The purchaser shall not be bound to see to the application of the purchase money; nor shall his nor, if different, the transferee’s title to the share be affected by any irregularity in, or invalidity of, the proceedings relating to the sale.

(4) For the purpose of selling under this article shares of untraced members held in uncertificated form, the board may exercise any of the powers conferred on the Company by article 5(5).

34. Application of proceeds of sale

(1) The Company shall account to the person entitled to the share at the date of sale for a sum equal to the net proceeds of sale by carrying all amounts received on sale to a separate account and shall be deemed to be his debtor, and not a trustee for him, in respect of them.

(2) Pending payment of the net proceeds of sale to such person, the proceeds carried to the separate account may either be employed in the business of the Company or invested in such investments (other than shares of the Company or its holding company, if any) as the board may from time to time decide.

(3) No interest shall be payable in respect of the net proceeds and the Company shall not be required to account for any moneys earned on the net proceeds.

TRANSFER OF SHARES

35. Form of transfer

(1) Subject to the restrictions in these articles, any member may transfer all or any of his certificated shares by an instrument of transfer in any usual form or in any other form which the board may approve and any member may transfer all or any of his uncertificated shares in such manner as may be prescribed by or pursuant to the Regulations and the rules made and practices instituted by the Operator of the relevant system.

(2) The instrument of transfer of a certificated share shall be signed by or on behalf of the transferor and (except in the case of a fully paid share) by or on behalf of the transferee.

(3) Subject to the provisions of the Regulations, the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register in respect of the share.

36. Right to refuse to register transfers

(1) Subject to this article, article 3(3), article 16(1), and article 44 (Disclosure of interests in shares), shares of the Company are free from any restriction on transfer. In exceptional circumstances approved by the UKLA, the Board may refuse to register a transfer of certificated shares, provided that such refusal would not disturb the market in those shares.

- 33 -

(2) Subject to the requirements of the listing rules of the UKLA and not so as to prevent dealings on an open and proper basis, the board may, in its absolute discretion and without giving any reason for its decision, refuse to register any transfer of a certificated share not fully paid up (or renunciation of a renounceable letter of allotment in respect of such a share) or any transfer of a certificated share on which the Company has a lien (or renunciation of a renounceable letter of allotment in respect of such a share).

(3) The board may also in its absolute discretion and without giving a reason, refuse to register the transfer of a certificated share or the renunciation of a renouncable letter of allotment unless it is:

(a) in respect of only one class of shares;

(b) in favour of no more than four joint transferees (or renouncees);

(c) left at the office, or at such other place as the board may decide, for registration;

(d) accompanied by the certificate for each share to be transferred (except where the share is registered in the name of a recognised financial institution and no certificate has been issued for it or in the case of a renunciation) and such other evidence (if any) as the board may reasonably require to prove the title of the intending transferor (or person renouncing) or his right to transfer the shares and the due execution by him of the transfer (or renunciation) or, if the transfer (or renunciation) is executed by some other person on his behalf, the authority of that person to do so; and

(e) duly stamped (if required).

(4) If the board refuses to register the transfer of a certificated share it shall, within two months after the date on which the transfer was lodged with the Company, send notice of the refusal to the transferee.

(5) In accordance with and subject to the provisions of the Regulations, the Operator of the relevant system shall register a transfer of title to any uncertificated share or any renounceable right of allotment of a share which is a participating security held in uncertificated form unless the Regulations permit the Operator of the relevant system to refuse to register such a transfer in certain circumstances in which case the said Operator may refuse such registration.

(6) If the Operator of the relevant system refuses to register the transfer of an uncertificated share or of any such uncertificated renounceable right of allotment of a share it shall, within the time period stipulated by the Regulations, send notice of the refusal to the transferee.

(7) In accordance with and subject to the provisions of the Regulations, where title to an uncertificated share is transferred by means of a relevant system to a person who is to hold such share in certificated form thereafter, the Company as participating issuer

- 34 -

shall register the transfer in accordance with the relevant Operator-instruction, but so that the Company may refuse to register such a transfer in any circumstance permitted by the Regulations.

(8) In accordance with the Regulations, if the Company as participating issuer refuses to register the transfer of title to an uncertificated share transferred by means of a relevant system to a person who is to hold such share in certificated form thereafter, it shall, within two months after the date on which the Operator-instruction was received by the Company, send notice of the refusal to the transferee.

37. No fee payable

No fee shall be charged for registration of a transfer of a share or the renunciation of a renounceable letter of allotment or other document or instruction relating to or affecting the title to any share or for the right to transfer it or for making any other entry in the Register.

38. Retention of instruments

All instruments of transfer which are registered may, subject to article 135 (Destruction of documents), be retained by the Company, but any instrument of transfer which the board refuses to register shall (except in any case where fraud or any other crime involving dishonesty is suspected in relation to such transfer) be returned to the person presenting it.

39. Power to suspend registration of transfers

Subject to the Statutes, the registration of transfers of shares or of any class of shares may be suspended at such times and for such periods (not exceeding thirty days in any year) as the board may decide but, unless otherwise permitted by the Regulations, the Company shall not close any relevant register relating to a participating security without the consent of the Operator of the relevant system.

40. Renunciations and other methods of transfer

Nothing in these articles shall preclude, without prejudice to the provisions of article 36 (Right to refuse to register transfers), the board from recognising a renunciation of the allotment of any share by the allottee in favour of some other person.

TRANSMISSION OF SHARES

41. Transmission on death

If a member dies, the survivor, where the deceased was a joint holder, and his executors or personal representatives where he was a sole or the only surviving holder, shall be the only person or persons recognised by the Company as having any title to his shares; but nothing in these articles shall release the estate of a deceased holder from any liability in respect of any share held by him solely or jointly.

- 35 -

42. Election of person entitled by transmission

(1) A person becoming entitled to a share in consequence of the death or bankruptcy of a member or of any other event giving rise to a transmission by operation of law may, on producing such evidence as the board may require and subject as provided in this article, elect either to be registered himself as the holder of the share or to have some person nominated by him registered as the holder of the share.

(2) If he elects to be registered himself, he shall give notice to the Company to that effect. If he elects to have another person registered,

(a) if it is a certificated share, he shall execute a transfer of the share to that person; or

(b) if it is an uncertificated share, he shall execute such other document or take such other action as the board may require, including but not limited to procuring that the uncertificated share is changed to certificated form, to enable that person to be registered.

(3) All the provisions of these articles relating to the transfer of shares shall apply to the notice or instrument of transfer or instruction (as the case may be) as if it were an instrument of transfer signed or instruction given by the person from whom the title by transmission is derived and the event giving rise to such transmission had not occurred.

43. Rights of person entitled by transmission

(1) Where a person becomes entitled by transmission to a share, the rights of the holder in relation to that share cease. A person becoming entitled to a share in consequence of a death or bankruptcy or of any other event giving rise to a transmission by operation of law shall have the right to receive and give a discharge for any dividends or other moneys payable in respect of the share and, subject to the provisions of article 42 (Election of person entitled by transmission) and article 118 (Method of payment), shall have the same rights in relation to the share as he would have if he were the holder except that, until he becomes the holder, he shall not be entitled to receive notice of, attend or vote at any meeting of the Company or any separate general meeting of the holders of any class of shares in the Company.

(2) The board may at any time give notice requiring any such person to elect either to be registered himself or to transfer the share and, if after sixty days the notice has not been complied with, the board may withhold payment of all dividends or other moneys payable in respect of the share until the requirements of the notice have been complied with.

- 36 -

DISCLOSURE OF INTERESTS IN SHARES

44. Disclosure of interests in shares

(1) This article applies where the Company gives to the holder of a share or to any person appearing to be interested in a share a notice requiring any of the information mentioned in section 212 of the Act (a “section 212 notice”).

(2) If, on the basis of information obtained from a holder in respect of a share held by him, a section 212 notice is given by the Company to a person appearing to be interested in the share, a copy shall at the same time be given to the holder, but the accidental omission to do so or the non-receipt of the copy by the holder shall not prejudice the operation of the following provisions of this article.

(3) Having regard to the requirements of the listing rules of the UKLA, if the holder of, or any person appearing to be interested in, any share has been served with a section 212 notice and, in respect of that share (a “default share”), has been in default for the relevant period in supplying to the Company the information required by the section 212 notice, the restrictions referred to in paragraph (4) below shall apply. Those restrictions shall continue until the earliest of:

(a) the date seven days after the date on which the board is satisfied that the default is remedied; or

(b) the date seven days after the date on which the Company is notified that the default share is the subject of a market transfer; or

(c) the board decides to waive those restrictions, in whole or in part.

(4) The restrictions referred to in paragraph (3) above are as follows:

(a) if the default shares in which any one person is interested or appears to the Company to be interested represent less than 0.25 per cent. in nominal value of the issued shares of the class (calculated exclusive of treasury shares), the holders of the default shares shall not be entitled, in respect of those shares, to attend or to vote, either personally or by proxy, at any general meeting or at any separate general meeting of the holders of any class of shares in the Company or on a poll; or

(b) if the default shares in which any one person is interested or appears to the Company to be interested represent at least 0.25 per cent. in nominal value of the issued shares of the class (calculated exclusive of treasury shares), the holders of the default shares shall not be entitled, in respect of those shares:

(i) to attend or to vote, either personally or by proxy, at any general meeting or at any separate general meeting of the holders of any class of shares in the Company or on a poll; or

(ii) to receive any dividend (or any part of a dividend) or other distribution or amount payable in respect of the default shares; or

- 37 -

(iii) to transfer or agree to transfer any of those shares or any rights in them, unless:

(a) the holder is not himself in default in supplying the information required; and

(b) the holder proves to the satisfaction of the board that no person in default in supplying the information required is interested in any of the shares the subject of the transfer.

Provided that the restrictions in sub-paragraphs (a) and (b) above shall not prejudice the right of either the member holding the default shares or, if different, any person having a power of sale over those shares to sell or agree to sell those shares under a market transfer.

(5) For the purpose of enforcing the sanction in paragraph (4)(b)(iii), the board may give notice to the member requiring the member to change default shares held in uncertificated form to certificated form by the time stated in the notice. The notice may also state that the member may not change any default shares held in certificated form to uncertificated form. If the member does not comply with the notice, the board may require the Operator to convert default shares held in uncertificated form into certificated form in the name and on behalf of the member in accordance with the Regulations.

(6) If any dividend (or any part of a dividend) or other distribution or amount is withheld under paragraph (4)(b) above, the member shall be entitled to receive it as soon as practicable after the restrictions contained in paragraph (4)(b) cease to apply and prior to such time the Company shall have no obligation to pay interest on it and the holder of the default share in question shall not be entitled to elect, pursuant to article 124 (Scrip dividends), to receive shares instead of a dividend.

(7) If, while any of the restrictions referred to above apply to a share, another share is allotted in right of it (or in right of any share to which this paragraph applies), the same restrictions shall apply to that other share as if it were a default share. For this purpose, shares which the Company allots, or procures to be offered, pro rata (disregarding fractional entitlements and shares not offered to certain members by reason of legal or practical problems associated with issuing or offering shares outside the United Kingdom) to holders of shares of the same class as the default share shall be treated as shares allotted in right of existing shares from the date on which the allotment is unconditional or, in the case of shares so offered, the date of the acceptance of the offer.

(8) For the purposes of this article:

(a) a “market transfer” in relation to any share is a transfer pursuant to:

(i) a sale of the share on a recognised investment exchange (as defined in the Financial Services Act 2000) or on any stock exchange outside the United Kingdom on which shares of that class are listed or normally traded; or

- 38 -

(ii) a sale of the whole beneficial interest in the share to a person whom the board is satisfied is unconnected with the existing holder or with any other person appearing to be interested in the share; or

(iii) a takeover offer (as defined for the purposes of section 428(1) of the Act) which relates to the share;

(b) the “relevant period” shall be 14 days after the date of service of the section 212 notice;

(c) “interested” shall be construed as it is for the purpose of section 212 of the Act;

(d) the percentage of the issued shares of a class represented by a particular holding shall be calculated by reference to the shares in issue at the time when the section 212 notice is given;

(e) a person, other than the holder of the share, shall be treated as appearing to be interested in any share if the Company has given to the member holding such share a section 212 notice and either (i) the member has informed the Company that the person is or may be interested in the share or (ii) (after taking into account any response to any section 212 notice and any other relevant information) the Company knows or has reasonable cause to believe that the person in question is or may be interested in the share; and

(f) reference to a person having failed to give the Company the information required by a section 212 notice, or being in default in supplying such information, includes:

(i) reference to his having failed or refused to give all or any part of it; and

(ii) reference to his having given information which he knows to be false in a material particular or having recklessly given information which is false in a material particular.

(9) The provisions of this article are in addition and without prejudice to the provisions of the Statutes and in particular of section 216 of the Act, so that the Company may apply to the court under section 216(1) whether or not these provisions apply or have been applied.

(10) Where the person on whom a section 212 notice is served is an ADR Depositary acting in its capacity as such:

(a) the obligations of such ADR Depositary as a member pursuant to this article 44 shall be limited to disclosing to the Company such information relating to the shares in question as has in each such case been recorded, pursuant to the terms of any agreement entered into between the ADR Depositary and the Company; and

- 39 -

(b) the restrictions referred to in paragraph (4) above shall not be effective unless and until such ADR Depositary has been served with a notice specifying the person(s) (other than such ADR Depositary) having an interest in a specified number of the shares in question comprising the default shares.

Provided always that nothing in this paragraph (10) shall in any other way restrict the powers of the board under this article 44.

(11) For the purposes of this article 44, where any person has an interest in shares in the Company evidenced by an American Depositary Receipt or registered in the name of a Clearing House, article 17(13) shall apply for determining the number of shares in which that person is interested.

(12) Where such a person as is described in paragraph (11) of this article is in default of a section 212 notice and the restrictions set out in paragraph (4) of this article apply, the ADR Depositary or Clearing House (as the case may be) shall be subject to the restrictions set out in paragraph (4) of this article only in respect of such number of shares in which that person is determined, in accordance with paragraph (11) of this article, to have an interest.

GENERAL MEETINGS

45. Annual general meetings

The board shall convene and the Company shall hold annual general meetings in accordance with the requirements of the Statutes.

46. Extraordinary general meetings

All general meetings other than annual general meetings shall be called extraordinary general meetings.

47. Convening of extraordinary general meetings

(1) The board may convene an extraordinary general meeting whenever it thinks fit.

(2) An extraordinary general meeting may also be convened in accordance with article 89 (Power to act notwithstanding vacancy).

(3) An extraordinary general meeting shall also be convened by the board on the requisition of members pursuant to the provisions of the Statutes or, in default, may be convened by such requisitionists, as provided by the Statutes.

(4) The board shall comply with the provisions of the Statutes regarding the giving and the circulation, on the requisition of members, of notices of resolutions and of statements with respect to matters relating to any resolution to be proposed or business to be dealt with at any general meeting of the Company. At any meeting convened by or on the requisition of members no business may be transacted except that stated by the requisition or proposed by the board.

- 40 -

NOTICE OF GENERAL MEETINGS

48. Length and form of notice

(1) An annual general meeting and an extraordinary general meeting called for the passing of a special resolution or a resolution of which special notice is required by the Statutes, shall be called by not less than twenty-one clear days’ notice. All other extraordinary, general meetings shall be called by not less than fourteen clear days’ notice.

(2) Subject to the Statutes, and although called by shorter notice than that specified in paragraph (1) above, a general meeting shall be deemed to have been duly called if it is so agreed:

(a) in the case of an annual general meeting, by all the members entitled to attend and vote at the meeting; and

(b) in the case of another meeting, by a majority in number of the members having a right to attend and vote at the meeting, being a majority together holding not less than ninety-five per cent. in nominal value of the shares giving that right.

(3) The notice of meeting shall specify:

(a) whether the meeting is an annual general meeting or an extraordinary general meeting;

(b) the place, the date and the time of the meeting;

(c) the general nature of the business to be transacted;

(d) if the meeting is convened to consider a special or an extraordinary resolution, the intention to propose the resolution as such; and

(e) with reasonable prominence, that a member entitled to attend and vote may appoint one or more proxies to attend and, on a poll, vote instead of him and that a proxy need not also be a member.

(4) Subject to the Act and as provided in paragraph (5) of this article 48, notice of every general meeting shall be given to all members (other than any who, under the provisions of these articles or the terms of issue of the shares they hold, are not entitled to receive such notices from the Company), to the auditors (or, if more than one, each of them) and to each director.

(5) For the purposes of serving notices of meetings, whether under section 370(2) of the Act or any other enactment or under these articles, the board may determine that persons entitled to receive such notices are those persons entered on the Register at the

- 41 -

close of business on a day determined by the board, provided that, the day determined by the board may not be more than twenty-one days before the day that the relevant notice of meeting is being sent.

(6) For the purposes of determining which persons are entitled to attend or vote at any general meeting and how many votes such persons may cast, the notice may also specify a time (which shall not be more than forty-eight hours before the time fixed for the meeting) by which a person must be entered on the register in order to have the right to attend or vote at the meeting. Changes to entries on the Register after that time shall be disregarded in determining the rights of any person to attend or vote at the meeting, notwithstanding any provisions in these articles, any enactment or any other instrument to the contrary.

(7) Where the notice of meeting is published on a web-site in accordance with article 130(2), it shall continue to be published in the same place on that web-site from the date of the notification given under article 130(2)(b) until the conclusion of the meeting to which the notice relates.

49. Omission or non-receipt of notice and irregularities in publication of notices

(1) The accidental omission to give notice of a meeting (or, in cases where it is sent out with the notice, a form of appointment of a proxy) to, or the non-receipt of notice (or a form of appointment of a proxy) by, any person entitled to receive the notice (or form of appointment of a proxy) shall not invalidate the proceedings of that meeting.

(2) Where a notice of meeting published on a web-site in accordance with article 130(2) is by accident published in different places on the web-site or published for part, but not all, of the period from the date of the notification given under article 130(2)(b) until the conclusion of the meeting to which the notice relates, the proceedings at such meeting are not thereby invalidated.

50. Special business

All business transacted at a general meeting shall be deemed special except the following business at an annual general meeting:

(a) the receipt and consideration of the annual accounts, the directors’ report, the auditors’ report on those accounts and, where required by law, the directors’ remuneration report and the auditor’s report on the auditable part of the remuneration report;

(b) the appointment of directors and other officers in place of those retiring by rotation or otherwise ceasing to hold office (including the reappointment of directors appointed since the last annual general meeting);

(c) the declaration of dividends; and

- 42 -

(d) the appointment of the auditors (when special notice of the resolution for appointment is not required by the Statutes) and the fixing, or determination of the manner of the fixing, of their remuneration.

PROCEEDINGS AT GENERAL MEETINGS

51. Quorum

(1) No business shall be transacted at any general meeting unless the requisite quorum is present when the meeting proceeds to business. The absence of a quorum shall not prevent the appointment of a chairman in accordance with these articles, which shall not be treated as part of the business of the meeting.

(2) Two members present in person or by proxy and entitled to vote shall be a quorum for all purposes.

(3) If within fifteen minutes (or such longer time as the chairman of the meeting decides to wait) from the time appointed for the holding of a general meeting a quorum is not present, the meeting, if convened by or on the requisition of members, shall be dissolved. In any other case, it shall stand adjourned to such time (being not less than seven days nor more than twenty-eight days later) and place as the chairman of the meeting (or in default, the board) may decide.

(4) If at an adjourned meeting a quorum is not present within fifteen minutes from the time fixed for holding the meeting (or such longer period as the chairman of the meeting decides to wait) the meeting shall be dissolved.

(5) The Company shall give not less than seven clear days’ notice of any meeting adjourned for the lack of a quorum and the notice shall state the quorum requirement.

52. Chairman

At each general meeting, the chairman (if any) of the board or, if he is absent or unwilling, the deputy chairman (if any) of the board or (if more than one deputy chairman is present and willing) the deputy chairman who has been longest in such office or, if no deputy chairman is present and willing, that one of the other directors who is appointed for the purpose by the board or (failing appointment by the board) by the members present, shall preside as chairman of the meeting but if no director is present within fifteen minutes after the time fixed for holding the meeting or if none of the directors present is willing to preside, the members present in person and entitled to vote shall choose one of their number to preside as chairman of the meeting.

53. Security and order at meetings

(1) The board may both prior to and during any general meeting make any arrangements and impose any restrictions which it considers appropriate to ensure the security and/or the orderly conduct of a general meeting of the Company or a separate general meeting of the holders of any class of shares of the Company, including, without limitation, arranging for any person attending a meeting to be searched, for items of personal

- 43 -

property which may be taken into a meeting to be restricted and for any person (whether or not a member of the Company) who refuses to comply with any such arrangements or restrictions to be refused entry to or excluded from a meeting.

(2) The chairman of any general meeting or separate general meeting of the holders of any class of shares of the Company shall take such action as he thinks fit to promote the orderly conduct of the business of the meeting as laid down in the notice of the meeting, including without limitation asking any person or persons (whether or not a member or members of the Company) to leave the meeting and if necessary to have such person or persons excluded from the meeting. The decision of the chairman on matters relating to the orderly conduct of a meeting and on any other matters of procedure or arising incidentally from the business of the meeting shall be final as shall be his determination, acting in good faith, as to whether any matter is of such nature.

54. Directors and other persons entitled to attend and speak

(1) Whether or not he is a member, a director shall be entitled to attend and speak at any general meeting of the Company and at any separate general meeting of the holders of any class of shares of the Company.

(2) The chairman of the meeting may, in his absolute discretion, invite any person, whom the chairman considers to be equipped with knowledge or experience of the Company’s business, to attend and speak at any general meeting to assist in the deliberations of the meeting.

55. Adjournment

(1) With the consent of any meeting at which a quorum is present the chairman of the meeting may (and shall if so directed by the meeting) adjourn the meeting from time to time and from place to place.

(2) In addition, the chairman of the meeting may at any time without the consent of the meeting interrupt or adjourn the meeting (whether or not it has commenced or a quorum is present) to another time and/or place and/or for an indefinite period if he decides that it has become necessary to do so (whether as a result of the conduct or behaviour of any person or persons, whether or not a member or members of the Company, present) in order to:

(a) secure the proper and orderly conduct of the meeting; or

(b) give all persons entitled to do so a reasonable opportunity of speaking and voting at the meeting; or

(c) ensure that the business of the meeting is properly disposed of.

(3) Nothing in this article shall limit any other power vested in the chairman (whether under the provisions of these articles, at common law or otherwise) to adjourn the meeting.

- 44 -

(4) Without prejudice to the provisions of article 51(5), whenever a meeting is adjourned for twenty-eight days or more or for an indefinite period, at least seven clear days’ notice of the adjourned meeting shall be given in the same manner as in the case of the original meeting but otherwise no person shall be entitled to any notice of an adjourned meeting or of the business to be transacted at an adjourned meeting.

(5) No business shall be transacted at any adjourned meeting other than the business which might properly have been transacted at the meeting from which the adjournment took place.

56. Accommodation of persons at meeting

If it appears to the chairman that the place of the meeting specified in the notice convening the meeting is inadequate to accommodate all persons entitled and wishing to attend, the meeting is duly constituted and its proceedings are valid if the chairman is satisfied that adequate facilities are available to ensure that each such person who is unable to be accommodated is able:

(a) to participate in the business for which the meeting has been convened; and

(b) to hear and see all persons present who speak, whether by the use of microphones, loudspeakers, audio-visual communications equipment or otherwise, (whether or not in use when these articles are adopted) whether in the meeting place or elsewhere.

57. Method of voting and demand for poll

(1) At a general meeting a resolution put to the vote of the meeting shall be decided on a show of hands, unless (before, or immediately after the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded by (subject to the provisions of the Statutes):

(a) the chairman of the meeting; or

(b) at least five members present in person or by proxy having the right to vote on the resolution; or

(c) a member or members present in person or by proxy representing in aggregate not less than one tenth of the total voting rights of all the members having the right to vote on the resolution; or

(d) a member or members present in person or by proxy holding shares conferring the right to vote on the resolution on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right,

a demand for a poll by a person as proxy for a member shall be as valid as if the demand were made by the member himself.

- 45 -

(2) A demand for a poll may, before the poll is taken, be withdrawn but only with the consent of the chairman of the meeting and the demand so withdrawn shall not be taken to have invalidated the result of a show of hands declared before the demand was made. If a poll is demanded before the declaration of the result of a show of hands and the demand is duly withdrawn, the meeting shall continue as if the demand had not been made.

(3) Unless a poll is demanded (and the demand is not withdrawn), a declaration by the chairman of the meeting that a resolution has been carried, or carried unanimously, or has been carried by a particular majority, or lost, or not carried by a particular majority, shall be conclusive, and an entry to that effect in the minutes of the meeting shall be conclusive evidence of that fact, without proof of the number or proportion of the votes recorded in favour of or against the resolution.

(4) The demand for a poll other than on the election of the chairman or on a question of adjournment shall not prevent the continuance of a meeting for the transaction of any business other than the question on which a poll has been demanded.

58. How a poll is to be taken

(1) If a poll is properly demanded (and the demand is not withdrawn), it shall be taken, and the result of the poll declared, at such time (either at the meeting at which the poll is demanded or within thirty clear days after the meeting), at such place and in such manner as the chairman of the meeting shall direct and he may appoint scrutineers (who need not be members).

(2) A poll demanded on the election of a chairman or on a question of adjournment shall be taken, and the result of the poll declared, at the meeting without adjournment.

(3) No notice need be given of a poll not taken immediately if the time and place at which it is to be taken are announced at the meeting at which it is demanded. In any other case at least seven clear days’ notice shall be given specifying the time and place at which the poll is to be taken.

(4) On a poll votes may be given either in person or by proxy and a member entitled to more than one vote need not, if he votes, use all his votes or cast all the votes he uses in the same way.

(5) The result of the poll shall be deemed to be a resolution of the meeting at which the poll was demanded.

59. Chairman’s casting vote

In the case of an equality of votes, either on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place, or at which the poll is demanded, as the case may be, shall be entitled to a further or casting vote in addition to any other vote or votes to which he may be entitled.

- 46 -

60. Amendments to resolutions

No amendment to a resolution duly proposed as a special or extraordinary resolution may be considered or voted on, other than an amendment to correct a patent error. No amendment to a resolution duly proposed as an ordinary resolution may be considered or voted on, other than an amendment to correct a patent error, unless either:

(a) at least forty-eight hours before the time appointed for holding the meeting or adjourned meeting at which the ordinary resolution is to be considered, notice of the terms of the amendment and intention to move it has been lodged at the office; or

(b) the chairman of the meeting in his absolute discretion decides that the amendment may be considered or voted on.

If an amendment proposed to a resolution under consideration is ruled out of order by the chairman the proceedings on the substantive resolution are not invalidated by an error in his ruling.

VOTES OF MEMBERS

61. Voting rights

Subject to the provisions of these articles and to any special rights or restrictions as to voting for the time being attached to any shares:

(a) on a show of hands, every member who (being an individual) is present in person or (being a company) is present by a duly authorised representative not being himself a member, shall have one vote; and

(b) on a poll, every member who (being an individual) is present in person or (being a company) is present by a duly authorised representative not being himself a member, or who is present by proxy shall have one vote for every share of which he is the holder.

62. Corporate representatives

(1) Any company which is a member of the Company may by resolution of its directors or other governing body whether or not expressed to be pursuant to any provision of the Statutes, authorise one or more persons to act as its representatives at any meeting of the Company or of any class of members of the Company (a “representative”).

(2) Each representative shall be entitled to exercise the same powers on behalf of the company (in respect of that part of the company’s holding of shares to which the authorisation relates) as that company could exercise if it were an individual member present at the meeting in person, including (without limitation) power to vote on a show of hands or on a poll and to demand or concur in demanding a poll. The company shall for the purpose of these articles be deemed to be present in person at a meeting if a representative is present. All references to attendance and voting in person shall be construed accordingly.

- 47 -

(3) A director, the secretary or some other person authorised for the purpose by the secretary may require the representative of any such company (not being a corporation sole) to produce a certified copy of the resolution of authorisation before permitting him to exercise his powers.

(4) In relation to any meeting of the Company or any class of members of the Company, a person authorised under section 3 of the Treasury Solicitor Act 1876 shall be treated for the purpose of this article 62 as if his authority had been granted by the Solicitor for the affairs of Her Majesty’s Treasury and in these articles references to a duly authorised representative of a corporation shall include, in relation to the Solicitor for the affairs of Her Majesty’s Treasury, references to a person authorised under that section.

63. Voting rights of joint holders

If more than one of the joint holders of a share tenders a vote on the same resolution, whether in person or by proxy, the vote of the senior who tenders a vote shall be accepted to the exclusion of the vote(s) of the other joint holder(s); and for this purpose seniority shall be determined by the order in which the names stand in the Register in respect of the relevant share.

64. Voting rights of members incapable of managing their affairs

A member in respect of whom an order has been made by any court or official having jurisdiction (whether in the United Kingdom or elsewhere) that he is or may be suffering from mental disorder or is otherwise incapable of running his affairs may vote, whether on a show of hands or on a poll, by his guardian, receiver, curator bonis or other person authorised for that purpose and appointed by that court or official, and the guardian, receiver, curator bonis or other person may, on a poll, vote by proxy. Evidence to the satisfaction of the board of the authority of the person claiming the right to vote shall be received at the office (or at such other place as may be specified in accordance with these articles for the delivery or receipt of forms of appointment of a proxy) or in any other manner specified in these articles for the appointment of a proxy not later than the last time as prescribed by these articles by which an appointment of a proxy must be deposited or received in order to be valid for use at the meeting or adjourned meeting or on the holding of the poll at or on which that person proposes to vote and, in default, the right to vote shall not be exercisable.

65. Voting rights suspended where sums overdue

Unless the board otherwise decides, a member shall not be entitled to be present or to vote, either in person or by proxy, at any general meeting or at any separate general meeting of the holders of any class of shares in the Company or on a poll, in respect of any share held by him unless all calls and other sums presently payable by him in respect of that share have been paid. This restriction shall cease on payment of the amount outstanding and all costs, charges and expenses incurred by the Company by reason of the non-payment.

- 48 -

66. Objections to admissibility of votes

No objection shall be raised as to the qualification of a voter or to the counting of, or failure to count, any vote except at the meeting or adjourned meeting or poll at which the vote objected to is tendered or at which the error occurs, and every vote not disallowed at such meeting or poll shall be valid for all purposes. An objection properly made shall be referred to the chairman of the meeting and shall only invalidate the result of the voting if, in the opinion of the chairman, it is of sufficient magnitude to affect the decision of the meeting. The decision of the chairman shall be conclusive and binding on all concerned.

PROXIES

67. Proxies

(1) A proxy need not be a member of the Company and a member may appoint more than one proxy to attend on the same occasion.

(2) Delivery or receipt of an appointment of proxy shall not preclude a member from attending and voting in person at the meeting or an adjournment of the meeting or on the poll concerned.

(3) No appointment of proxy shall be valid (unless the contrary is stated in it) except for the meeting mentioned in it and any adjournment of that meeting (including on any poll demanded at the meeting or any adjourned meeting). An appointment of proxy is valid for twelve months from the date of execution or, in the case of an appointment of proxy delivered in an electronic communication, for the duration specified by the board.

(4) The appointment of a proxy is deemed (unless the contrary is stated in it) to confer authority to demand or join in demanding a poll (but shall not confer any further right to speak at the meeting except with the permission of the chairman) and to vote on a resolution or amendment of a resolution put to, or other business which may properly come before, the meeting or meetings for which it is given, as the proxy thinks fit.

(5) Subject to the Statutes and the requirements of the listing rules of the UKLA, the Company may send a form of appointment of proxy to all or none of the persons entitled to receive notice of and to vote at a meeting. If sent, the form shall provide for two-way voting (without prejudice to a right to abstain) on all resolutions set out in the notice of meeting.

68. Form of proxy

(1) An instrument appointing a proxy shall be in any usual or common form or any other form which the board shall from time to time approve or accept. Subject to the Statutes, the board may accept the appointment of a proxy received in an electronic communication on such terms and subject to such conditions as it considers fit. The appointment of a proxy received in an electronic communication is not subject to the requirements of article 68(2).

- 49 -

(2) Subject to the provisions of article 68(1), an instrument appointing a proxy shall be in writing signed by the appointor, or his agent duly authorised in writing, or, if the appointor is a company, shall either be executed under its common seal or be signed by some agent or officer or other person authorised for that purpose. The board may, but shall not be bound to, require evidence of the authority of any such agent, officer or other person.

(3) The signature on the instrument of proxy need not be witnessed.

69. Deposit of proxy

(1) The form of appointment of a proxy:

(a) in the case of an instrument in writing, shall be deposited at the office (or at such other place in the United Kingdom as may be specified in the notice convening the meeting or in the form of appointment of proxy or other accompanying document sent out by the Company in relation to the meeting) at least forty-eight hours before the time for holding the meeting or adjourned meeting or the taking of a poll at or on which the person named in the form of appointment of proxy proposes to vote; or

(b) in the case of an appointment of a proxy contained in an electronic communication, where an address has been specified for the purpose of receiving electronic communications:

(i) in the notice convening the meeting; or

(ii) in any form of appointment of a proxy sent out by the Company in relation to the meeting; or

(iii) in any invitation contained in an electronic communication to appoint a proxy issued by the Company in relation to the meeting,

received at such address not less than forty-eight hours before the time for holding the meeting at which the person named in the form of appointment of proxy proposes to vote; or

(c) in the case of a poll taken more than forty-eight hours after it is demanded or in the case of an adjourned meeting to be held more than forty-eight hours but less than twenty-eight days after the time fixed for holding the original meeting, shall be delivered or received as required by paragraphs (a) or (b) at least twenty-four hours before the time appointed for the taking of the poll or, as the case may be, the time fixed for holding the adjourned meeting; or

(d) in the case of a poll which is not taken at the meeting at which it is demanded but is taken forty-eight hours or less after it is demanded, or in the case of an adjourned meeting to be held forty-eight hours or less after the time fixed for holding the original meeting, shall be delivered at the meeting at which the poll is demanded or, as the case may be, at the adjourned meeting or the original meeting, to the chairman of the meeting or to the secretary or to any director or as directed at the meeting by the chairman of the meeting.

- 50 -

(2) Without limiting the foregoing, in relation to any shares which are held in uncertificated form, the board may from time to time permit appointments of a proxy to be made by means of an electronic communication in the form of an uncertificated proxy instruction and may in a similar manner permit supplements to, or amendments or revocations of, any such uncertificated proxy instruction to be made by like means. The board may in addition prescribe the method of determining the time at which any such uncertificated proxy instruction (and/or other instruction or notification) is to be treated as received by the Company or a participant acting on its behalf. The board may treat any such uncertificated proxy instruction which purports to be or is expressed to be sent on behalf of a holder of a share as sufficient evidence of the authority of the person sending that instruction to send it on behalf of that holder.

(3) In the case of an instrument signed by an agent of a member who is not a company, there shall also be deposited, in the manner set out in paragraph (1) above, the authority under which the instrument is signed or an office copy of it or a copy of it certified in accordance with section 3 of the Powers of Attorney Act 1971 or certified in some other way as approved by the board.

(4) In the case of an instrument signed by an officer or agent of a company the board may also require there to be deposited, in the manner set out in paragraph (1) above, the authority under which the instrument is signed, or a notarially certified copy of it, or such other authorities or documents as shall be specified in the notice of the relevant meeting or in any instrument of proxy issued by the Company in connection with the relevant meeting.

(5) If the appointment of proxy and any of the documents required under paragraph (3) or (4) above are not deposited or delivered in the manner required above, the person named in the appointment of proxy shall not be entitled to vote in respect of the shares in question.

(6) If two or more valid but differing appointments of proxy are deposited in respect of the same share for use at the same meeting or on the same poll, the one which is last deposited (regardless of its date or of the date of its execution) shall be treated as replacing and revoking the others as regards that share and if the Company is unable to determine which was last deposited, none of them shall be treated as valid in respect of that share.

70. Notice of revocation of proxy

A vote given or poll demanded in accordance with the terms of an appointment of proxy or by an authorised representative of a company or corporation sole shall be valid notwithstanding the previous death or insanity of the principal, or revocation of the proxy or authorisation or the authority under which the proxy was made or (until entered in the Register) the transfer of the share in respect of which the vote is given, provided no intimation in writing of the death, insanity, revocation or transfer was

- 51 -

received at the office (or other place specified for depositing or receiving the form of appointment of proxy or, where the appointment of proxy was contained in an electronic communication, at the address at which the form of appointment was received) up to one hour before the time fixed for holding the meeting or adjourned meeting (or, in the case of a poll, before the time appointed for the taking of the poll) at which the vote was given.

MEMBERS’ WRITTEN RESOLUTIONS

71. Members’ written resolutions

A resolution in writing executed by or on behalf of each member who would have been entitled to vote upon it if it had been proposed at a general meeting at which he was present shall be as effective as if it had been passed at a general meeting duly convened and held. The resolution in writing may consist of several instruments in the same form each duly executed by or on behalf of one or more members. If the resolution in writing is described as a special resolution or as an extraordinary resolution, it shall have effect accordingly.

DIRECTORS

72. Number of directors

The directors (other than alternate directors) shall not, unless and until otherwise determined by an ordinary resolution of the Company, be less than four nor more than fifteen in number.

73. Directors need not be members

A director need not be a member of the Company.

74. Age of directors

Section 293 of the Act shall apply to the Company as if the age mentioned in that Section were sixty-six years.

APPOINTMENT, RETIREMENT AND REMOVAL OF DIRECTORS

75. Appointment of directors by the Company

(1) Subject to the provisions of these articles, the Company may by ordinary resolution appoint any person who is willing to act to be a director, either to fill a vacancy or as an additional director, but so that the total number of directors shall not exceed any maximum number fixed by or in accordance with these articles.

(2) No person (other than a director retiring by rotation or otherwise) shall be appointed a director at any general meeting unless:

(a) he is recommended by the board; or

- 52 -

(b) not less than seven nor more than forty-two days before the date appointed for the meeting there has been given to the Company (and lodged at the office), by a member (other than the person to be proposed) entitled to vote at the meeting, notice of his intention to propose a resolution for the appointment of that person, stating the particulars which would, if he were so appointed, be required to be included in the Company’s register of directors and a notice executed by that person of his willingness to be appointed.

76. Separate resolutions for appointment of each director

Every resolution of a general meeting for the appointment of a director shall relate to one named person and a single resolution for the appointment of two or more persons shall be void, unless an ordinary resolution that it shall be so proposed has been first agreed to by the meeting without any vote being cast against it.

77. The board’s power to appoint directors

Without prejudice to the power of the Company to appoint a person to be a director pursuant to these articles, the board may appoint any person who is willing to act to be a director, either to fill a vacancy or by way of addition to their number but so that the total number of directors shall not exceed any maximum number fixed by or in accordance with these articles. Any director so appointed shall retire from office at the next annual general meeting of the Company, but shall then be eligible for re-appointment. Such a director is not taken into account in determining the number of directors who are to retire by rotation at the meeting.

78. Retirement of directors

(1) At each annual general meeting any director who has been appointed by the board since the previous annual general meeting and any director selected to retire by rotation shall retire from office.

(2) A retiring director shall be eligible for re-appointment and (unless he is removed from office or his office is vacated in accordance with these articles) shall retain office until the close of the meeting at which he retires or (if earlier) when a resolution is passed at that meeting not to fill the vacancy or to appoint another person in his place or the resolution to re-appoint him is put to the meeting and lost.

(3) If at any meeting at which the appointment of a director ought to take place the office vacated by a retiring director is not filled, the retiring director, if willing to act, shall be deemed to be re-appointed, unless at the meeting a resolution is passed not to fill the vacancy or to appoint another person in his place or unless a resolution to re-appoint him is put to the meeting and lost.

79. Selection of directors to retire by rotation

(1) Subject to paragraph (2) below, at each annual general meeting one third of the directors or, if their number is not an integral multiple of three, the number nearest to one-third but not less than one-third, shall retire from office. If there are fewer than

- 53 -

three directors who are subject to retirement by rotation, one shall retire. For these purposes, directors who are obliged to retire by reason of having been appointed by the board since the previous annual general meeting in accordance with article 78(1), shall be included in the calculation of the number of directors required to satisfy the provisions of this paragraph 1.

(2) If any one or more directors:

(a) were last appointed or re-appointed three years or more prior to the meeting;

(b) were last appointed or re-appointed at the third immediately preceding annual general meeting; or

(c) at the time of the meeting will have served more than eight years as non-executive director,

he or they shall retire from office and shall be counted in obtaining the number required to retire at the meeting, provided that the number of directors required to retire under paragraph (1) above shall be increased to the extent necessary to comply with paragraph (1) above.

(3) The directors to retire by rotation at each annual general meeting shall include (so far as is necessary to obtain the number required) any director who wishes to retire and not to offer himself for re-appointment and otherwise shall be the directors who, at the date of the notice of the meeting, have been longest in office since their last appointment or re-appointment, but as between persons who became or were last re-appointed directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot.

(4) The names of the directors to retire by rotation shall be stated in the notice of the annual general meeting or in any document accompanying the notice. The directors to retire on each occasion (both as to number and identity) shall be determined by the composition of the board at the start of business on the date of the notice convening the annual general meeting and no director shall be required to retire or be relieved from retiring by reason of any change in the number or identity of the directors after that time but before the close of the meeting.

80. Removal of directors

(1) In addition to any power of removal conferred by the Statutes, the Company may by ordinary resolution remove any director before his period of office has expired notwithstanding anything in these articles or in any agreement between him and the Company and any person appointed (subject to the provisions of these articles) by ordinary resolution to replace such a director shall be treated, for the purposes of determining the time at which he or another director is to retire, as if he had become a director on the date on which the person in whose place he is appointed was last appointed or reappointed a director.

- 54 -

(2) Any removal of a director under this article shall be without prejudice to any claim which such director may have for damages for breach of any agreement between him and the Company.

81. Vacation of office of director

(1) Without prejudice to the provisions of these articles for retirement or removal, the office of a director shall be vacated if:

(a) he resigns by notice delivered to the secretary at the office or tendered at a board meeting in which event he shall vacate that office on the service of that notice on the Company or at such later time as is specified in the notice;

(b) where he has been appointed for a fixed term, the term expires;

(c) he ceases to be a director by virtue of a provision of the Statutes, is removed from office pursuant to these articles or becomes prohibited by law from being a director;

(d) he becomes bankrupt, has an interim receiving order made against him, makes an arrangement or compounds with his creditors generally or applies to the court for an interim order under section 253 of the Insolvency Act 1986 in connection with a voluntary arrangement under that Act;

(e) an order is made by a court of competent jurisdiction on the ground (however formulated) of mental disorder for his detention or for the appointment of a guardian, receiver, curator bonis or other person to exercise powers with respect to his affairs or he is admitted to hospital in pursuance of an application for admission for treatment under the Mental Health Act 1983 or, in Scotland, under the Mental Health (Scotland) Act 1984 and the board resolves that his office be vacated;

(f) he is removed from office by notice addressed to him at his last-known address and signed by at least three-fourths in number of his co-directors (without prejudice to any claim for damages for breach of contract); or

(g) for more than six months he is absent (whether or not an alternate director attends in his place), without special leave of absence from the board, from meetings of the board held during that period and the board resolves that his office be vacated; or

(2) A resolution of the board declaring a director to have vacated office under the terms of this article is conclusive as to the fact and grounds of vacation stated in the resolution.

(3) If the office of a director is vacated for any reason he shall cease to be a member of any committee of the board.

- 55 -

82. Executive directors

(1) Subject to the provisions of the Statutes the board may appoint one or more directors to hold any employment or executive office with the Company (including that of chairman, chief executive, finance director or managing director) for such period (subject to the provisions of the Statutes) and on such terms as it may decide and may revoke or terminate any appointment so made without prejudice to any claim for damages for breach of any contract of service between the director and the Company or otherwise.

(2) The remuneration of a director appointed to hold any employment or executive office shall be fixed by the board and may be by way of salary, commission, participation in profits or otherwise and either in addition to or inclusive of his remuneration as a director.

(3) A director appointed as executive chairman, chief executive officer, finance director or managing director shall automatically cease to hold that office if he ceases to be a director but without prejudice to any claim for damages for breach of any contract of service between him and the Company. A director appointed to any other executive office shall not automatically cease to hold that office if he ceases to be a director unless the contract or any resolution under which he holds office expressly states that he shall, in which case that cessation shall be without prejudice to any claim for damages for breach of any contract of service between him and the Company.

(4) Subject to the Statutes, the Board may enter into an agreement or arrangement with any director for the provision of any services outside the scope of the ordinary duties of a director. Any such agreement or arrangement may be made on such terms and conditions as (subject to the Statutes) the board thinks fit and (without prejudice to any other provision of the articles) it may remunerate any such director for such services as it thinks fit.

ALTERNATE DIRECTORS

83. Power to appoint alternate directors

(1) Each director (other than an alternate director) may appoint another director or any other person who is willing to act as his alternate and may remove him from that office. The appointment as an alternate director of any person who is not himself a director shall be subject to the approval of a majority of the directors or a resolution of the board.

(2) An alternate director shall, provided he gives the Company an address at which notices may be served on him by either post or by electronic communications, be entitled to receive notice of all meetings of the board and of all meetings of committees of which the director appointing him is a member, to attend and vote at any such meeting at which the director appointing him is not personally present and at the meeting to exercise and discharge all the functions, powers, rights, authorities and duties of his appointor as a director and for the purposes of the proceedings at the meeting the provisions of these articles shall apply as if he were a director.

- 56 -

(3) Every person acting as an alternate director shall (except as regards power to appoint an alternate and remuneration) be subject in all respects to the provisions of these articles relating to directors and shall alone be responsible to the Company for his acts and defaults and shall not be deemed to be the agent of the director appointing him. An alternate director may be paid expenses and shall be entitled to be indemnified by the Company to the same extent as if he were a director but shall not be entitled to receive from the Company any fee in his capacity as an alternate director. Any fee payable by a director to his alternate director shall be payable out of the fee payable to that director.

(4) Every person acting as an alternate director shall have one vote for each director for whom he acts as alternate, in addition to his own vote if he is also a director, but he shall count as only one for the purpose of determining whether a quorum is present.

(5) Any person appointed as an alternate director shall automatically vacate his office as alternate director if the director by whom he has been appointed vacates his office as director (otherwise than by retirement at a general meeting of the Company at which he is reappointed) or dies or removes him by notice to the Company or on the happening of any event which, if he is or were a director, causes or would cause him to vacate that office.

(6) Every appointment or removal of an alternate director shall be by notice in writing signed by the appointor (or in any other manner approved by the board) and shall be effective (subject to paragraph (1) above) on delivery at the office, to the secretary or at a meeting of the board together with the alternate director’s consent to act as a director in the form prescribed by the Statutes.

(7) An alternate director need not be a member and shall not be counted in reckoning the number of directors for the purpose of article 72 (Number of directors).

REMUNERATION, EXPENSES AND PENSIONS

84. Remuneration of directors

(1) The directors (other than an alternate director or any director who for the time being holds an executive office or employment with the Company or a subsidiary of the Company) shall be paid out of the funds of the Company by way of remuneration for their services as directors such fees not exceeding in aggregate £1,000,000 per annum (or such larger sum as the Company may, by ordinary resolution, determine) as the directors may decide to be divided among them in such proportion and manner as the board decides or, if no decision is made, equally. Any fee payable under this article shall be distinct from any remuneration or other amounts payable to a director under other provisions of these articles and shall accrue from day to day.

- 57 -

(2) Subject to the Statutes, the articles and the requirements of the listing rules of the UKLA, the board may arrange for part of a fee payable to a director under this article to be provided in the form of fully paid shares in the capital of the Company. The amount of the fee payable in this way shall be at the discretion of the board and shall be applied in the purchase or subscription of shares on behalf of the relevant director. In the case of a subscription of shares, the subscription price per share shall be deemed to be the closing middle market quotation for a fully paid share of the Company of that class as published in the Daily Official List of the London Stock Exchange (or such other quotation derived from such other source as the board may deem appropriate) on the day of subscription.

85. Additional remuneration

A director who, at the request of the board, goes or resides abroad, makes a special journey or performs a special service on behalf of the Company may be paid such reasonable additional remuneration (whether by way of salary, percentage of profits or otherwise) and expenses as the board may decide.

86. Expenses

A director shall be paid out of the funds of the Company all reasonable travelling, hotel and other expenses properly incurred by him in and about the discharge of his duties as director, including his expenses of travelling to and from meetings of the board, committee meetings, general meetings and separate meetings of the holders of any class of securities of the Company. A director may also be paid out of the funds of the Company all reasonable expenses properly incurred by him in obtaining professional advice in connection with the affairs of the Company or the discharge of his duties as a director.

87. Pensions and other benefits

(1) The board may exercise all the powers of the Company to provide pensions or other retirement or superannuation benefits and to provide death or disability benefits or other allowances or gratuities (by insurance or otherwise) for a person who is or has at any time been a director of

(a) the Company; or

(b) a company which is or was a subsidiary undertaking of the Company; or

(c) a company which is or was allied to or associated with the Company or a subsidiary undertaking of the Company; or

(d) a predecessor in business of the Company or of a subsidiary undertaking of the Company,

(or, in each case, for any member of his family, including a spouse or former spouse, or a person who is or was dependent on him). For this purpose the board may establish, maintain, subscribe and contribute to any scheme, trust or fund and pay premiums. The board may arrange for this to be done by the Company alone or in conjunction with another person.

- 58 -

(2) A director or former director is entitled to receive and retain for his own benefit a pension or other benefit provided under paragraph (1) above and is not obliged to account for it to the Company.

POWERS AND DUTIES OF THE BOARD

88. General powers of the board to manage the Company’s business

(1) The business of the Company shall be managed by the board which may exercise all the powers of the Company whether relating to the management of the business or not, subject to the provisions of the Statutes, the memorandum of association of the Company, these articles and any directions given by special resolution of the Company. No alteration of the memorandum of association of the Company or of these articles and no direction given by the Company shall invalidate any prior act of the board which would have been valid if the alteration had not been made or the direction had not been given.

(2) The powers given by this article shall not be limited by any special authority or power given to the board by any other article or any resolution or direction of the Company.

89. Power to act notwithstanding vacancy

The continuing directors or the sole continuing director at any time may act notwithstanding any vacancy in their number; if the number of directors is less than the minimum number fixed by or in accordance with these articles, they or he may act for the purpose of filling up vacancies or calling a general meeting of the Company for the purpose of making any such appointment, but not for any other purpose. If no director is able or willing to act, then any two members may summon a general meeting for the purpose of appointing directors. An additional director appointed in this way shall hold office (subject to the provisions of these articles) only until the dissolution of the next annual general meeting after his appointment unless he is reappointed or deemed reappointed during the meeting.

90. Provisions for employees

The board may exercise any of the powers conferred on the Company by the Statutes to make provision for the benefit of any persons employed or formerly employed by the Company or any of its subsidiary undertakings (or any member of his family, including a spouse or former spouse, or any person who is or was dependent on him) in connection with the cessation or the transfer to any person of the whole or part of the undertaking of the Company or any of its subsidiary undertakings.

91. Power to borrow money

(1) Subject to the following provisions of this article, the board may exercise all the powers of the Company to borrow money and to mortgage or charge all or part of the

- 59 -

undertaking, property and assets (present or future) and uncalled capital of the Company and, subject to the Statutes, to issue debentures and other securities, whether outright or as collateral security for a debt, liability or obligation of the Company or of a third party.

(2) The board shall restrict the borrowings of the Company and shall exercise all voting and other rights or powers of control exercisable by the Company in relation to its subsidiary undertakings so as to ensure (as regards subsidiary undertakings, to the extent possible) that the aggregate principal amount outstanding in respect of moneys borrowed by the group does not without the previous sanction of an ordinary resolution of the Company at any time exceed the higher of £1,200,000,000 and a sum equal to two times the adjusted capital and reserves.

(3) In this article:

(a) “adjusted capital and reserves” means a sum equal to the aggregate of:

(i) the amount paid up on the allotted share capital of the Company; and

(ii) the amount standing to the credit or debit of the consolidated reserves;

all as shown in the relevant balance sheet, but after:

(iii) making all adjustments which are, in the opinion of the board, necessary or appropriate to take account of a variation in the amounts referred to in paragraphs (i) and (ii) since the date of the relevant balance sheet arising out of the allotment of shares in the capital of the Company; for this purpose if a proposed allotment of shares by the Company for cash has been underwritten, those shares are deemed to have been allotted and the amount (including any premium) of the subscription moneys payable in respect of those shares (not being moneys payable later than six months after the date of allotment) are deemed to have been paid up to the extent underwritten on the date on which the issue of those shares was underwritten (or, if the underwriting was conditional, the date on which it became unconditional); and

(iv) deducting (so far as not already deducted or provided for) the amount of a distribution declared, recommended or paid by a group undertaking to a person other than a group undertaking out of profits accrued up to and including the date of, but not provided for in, the relevant balance sheet;

(b) “group” means:

(i) the Company;

(ii) all undertakings which are included in the consolidated group accounts in which the relevant balance sheet is comprised and which would be so included if group accounts were prepared at the relevant time (and if that time were the end of the Company’s financial year); and

- 60 -

(iii) all undertakings which are not included in the consolidated group accounts in which the relevant balance sheet is comprised but which would be so included if group accounts were prepared at the relevant time (and if that time were the end of the Company’s financial year);

(c) “group undertaking” means the Company or another undertaking in the group;

(d) “moneys borrowed” means all moneys borrowed including, without limitation:

(i) the nominal amount of and the amount of any premium paid in respect of any allotted share capital (not being equity share capital) of a group undertaking other than the Company not beneficially owned, directly or indirectly, by another group undertaking;

(ii) any amount raised by acceptance under an acceptance credit facility;

(iii) any amount raised under a note purchase facility;

(iv) the amount of any liability in respect of a lease or hire purchase contract which would, in accordance with UK GAAP, be treated as a finance or capital lease; and

(v) any amount raised under another transaction (including, without limitation, a forward sale or purchase agreement) treated as borrowing under UK GAAP;

but excluding:

(vi) borrowings by one group undertaking from another, including the principal amount of any loan capital (whether secured or unsecured), the nominal amount of any allotted or issued share capital (not being equity share capital) of a group undertaking beneficially owned, directly or indirectly, by another group undertaking and, for the avoidance of doubt, the amount of any obligation of a group undertaking, the performance of which is guaranteed by another group undertaking;

(vii) borrowings for the purpose of financing a contract to the extent that the price receivable under the contract is guaranteed or insured by the Export Credits Guarantee Department of the Department of Trade and Industry or by another person fulfilling a similar function;

(viii) borrowings for the purpose of, and to be applied within six months of being made in, repaying the whole or part of borrowings that constitute moneys borrowed for the purposes of this article, pending their application for that purpose within that period; and

- 61 -

(ix) any amount payable in respect of the Decommissioning Payments;

and in calculating moneys borrowed for the purposes of this article, there shall be deducted:

(x) an amount equal to the aggregate of:

(a) all cash in hand and cash deposits freely remittable with any bank or financial institution (not itself a group undertaking); and

(b) investments which are readily convertible into known amounts of cash with notice of forty-eight hours or less;

(in each case beneficially owned, directly or indirectly, by a group undertaking and whether denominated in sterling or in a currency other than sterling); and

(c) the amount of any cash securing the repayment by the group of any moneys borrowed by the group;

(e) “relevant balance sheet” means the consolidated balance sheet dealing with the state of affairs of the Company and its subsidiary undertakings comprised in the latest group accounts of the Company prepared and approved by the board and on which the auditors have made their report pursuant to the Statutes.

(4) When the amount of moneys borrowed to be taken into account for the purposes of this article on a particular day is being calculated, moneys denominated or repayable in a currency other than sterling shall be converted for the purpose of calculating the sterling equivalent either:

(a) at the rate of exchange specified in a forward purchase contract, currency option, back-to-back loan, swap or other arrangement taken out or entered into to reduce the risk associated with fluctuations in rates of exchange in respect of repayment of those moneys (a “hedging agreement”); or

(b) if those moneys were borrowed on or before the date of the relevant balance sheet and repayment of those moneys has not been covered by a hedging agreement, at the more favourable to the Company of:

(i) the rate of exchange used for the conversion of that currency in the relevant balance sheet; or

(ii) the middle-market rate of exchange quoted by The Royal Bank of Scotland plc at 11.00 a.m. in London on the business day immediately preceding the day on which the calculation falls to be made; or

- 62 -

(c) if those moneys were borrowed after the date of the relevant balance sheet and repayment of those moneys has not been covered by a hedging agreement, at the more favourable to the Company of:

(i) the middle-market rate of exchange quoted by The Royal Bank of Scotland plc at the close of business in London on the date of the relevant balance sheet; or

(ii) the middle-market rate of exchange quoted by The Royal Bank of Scotland plc at 11.00 a.m. in London on the business day immediately preceding the day on which the calculation falls to be made.

(5) When calculating moneys borrowed for the purposes of this article, where a group undertaking has issued and paid-up equity share capital that is not owned, directly or indirectly, by a group undertaking (“external capital”):

(a) the relevant percentage of any borrowings from that group undertaking by another group undertaking shall not be excluded pursuant to paragraph (3)(d)(vi);

(b) the relevant percentage of any borrowings made by that group undertaking that constitute moneys borrowed for the purposes of this article shall be deducted; and

(c) the relevant percentage of any items falling within paragraph (3)(d)(ix) beneficially owned, directly or indirectly, by that group undertaking shall not be deducted;

and for the purpose of this paragraph “relevant percentage” means a percentage equal to the percentage that the external capital forms of the whole of the issued and paid-up equity share capital of that group undertaking.

(6) A report of the auditors or an independent firm of accountants as to the amount of the adjusted capital and reserves or the aggregate amount of moneys borrowed for the purposes of this article is conclusive and binding on all concerned. Nevertheless the board may at any time act in reliance on a bona fide estimate of the amount of the adjusted capital and reserves or the aggregate amount of moneys borrowed. If in consequence the limit on moneys borrowed set out in this article is inadvertently exceeded, the amount of moneys borrowed equal to the excess may be disregarded for ninety days after the date on which by reason of a determination of the auditors or otherwise the board becomes aware that this situation has or may have arisen.

(7) No debt incurred or security given in respect of moneys borrowed in excess of the limit imposed by this article is invalid or ineffectual except where express notice that the limit has been or will be exceeded has been given to the lender or recipient of the security at the time when the debt is incurred or security given. No lender or other person dealing with the Company is concerned to see or enquire whether the limit is observed.

- 63 -

92. Register of charges

The Company shall keep a register of charges in accordance with the Statutes and the fee to be paid by a person other than a creditor or member for each inspection of the register of charges is the maximum sum prescribed by the Statutes or, failing which, decided by the board.

93. Nuclear Installations Act 1965

The directors shall seek to ensure, insofar as this is consistent with their duties to the Company, that any subsidiary of the Company which is the holder of any nuclear site licence under the Nuclear Installations Act 1965 is able to comply with the conditions of such licence.

DELEGATION OF BOARD’S POWERS

94. Delegation to executive directors

The board may delegate to any director holding executive office (including a managing director) any of its powers, authorities and discretions for such time and on such terms and conditions as it thinks fit. In particular, the board may grant the power to sub-delegate, and may retain or exclude the right of the board to exercise the delegated powers, authorities or discretions collaterally with that director. The board may at any time revoke or vary the delegation or alter its terms and conditions, but no person dealing in good faith shall be affected by any revocation or variation.

95. Committees

(1) The board may delegate any of its powers, authorities and discretions for such time and on such terms and conditions as it thinks fit to a committee consisting of one or more directors and (if thought fit) one or more other persons. In particular, the board may grant the power to sub-delegate, and may retain or exclude the right of the board to exercise the delegated powers, authorities or discretions collaterally with the committee. The board may at any time revoke the delegation or alter its terms and conditions or discharge the committee in whole or in part but no person dealing in good faith shall be affected by any revocation or variation. Where a provision of these articles refers to the exercise of a power, authority or discretion by the board and that power, authority or discretion has been delegated by the board to a committee, the provision shall be construed as permitting the exercise of the power, authority or discretion by the committee. Any committee so formed shall, in the exercise of the powers, authorities and discretions so delegated, conform to any regulations that may be imposed on it by the board.

(2) The proceedings of a committee with two or more members shall be governed by any regulations imposed on it by the board and (subject to such regulations) by the provisions of these articles regulating the proceedings of the board so far as they are capable of applying.

- 64 -

(3) Notwithstanding the provisions of paragraph (2) above, where the board resolves to delegate any of its powers, authorities and discretions to a committee and that resolution states that the committee shall consist of any one or more unnamed directors, it shall not be necessary to give notice of a meeting of that committee to directors other than the director or directors who form the committee.

96. Local boards

(1) The board may establish any local or divisional board or agency for managing any of the affairs of the Company in a specified locality, whether in the United Kingdom or elsewhere, and may appoint any persons to be members of a local or divisional board, or to be managers or agents, and may fix their remuneration.

(2) The board may delegate to a local or divisional board or agency any of its powers, authorities and discretions for such time and on such terms and conditions as it thinks fit. In particular, the board may grant the power to sub-delegate, may retain or exclude the right of such local or divisional board or agency to exercise the delegated powers, authorities or discretions collaterally with the local or divisional board or agency and may authorise the members of a local or divisional board or agency (or any of them) to fill a vacancy or to act despite a vacancy. The board may at any time revoke or alter the terms and conditions of the appointment or delegation. Subject to terms and conditions imposed by the board, the proceedings of a local or divisional board or agency with two or more members shall be governed by those articles that regulate the proceedings of the board, so far as applicable.

97. Powers of attorney

The board may by power of attorney or otherwise appoint a person to be the agent of the Company and may delegate to that person any of its powers, authorities and discretions for such purposes, for such time and on such terms and conditions (including as to remuneration) as it thinks fit. In particular, the board may grant the power to sub-delegate and may retain or exclude the right of the board to exercise the delegated powers, authorities or discretions collaterally with the agent. The board may at any time revoke or alter the terms and conditions of the appointment or delegation.

98. Associate directors

The board may appoint a person (not being a director) to an office or employment having a designation or title including the word “director” or attach to an existing office or employment that designation or title and may terminate the appointment or use of that designation or title. The inclusion of the word “director” in the designation or title of an office or employment shall not imply that the person is, or is deemed to be, or is empowered to act as, a director for any of the purposes of the Statutes or these articles.

99. Exercise of voting powers

Subject to article 91 (Power to borrow money), the board may exercise or cause to be exercised the voting powers conferred by shares in the capital of another company held

- 65 -

or owned by the Company, or a power of appointment to be exercised by the Company, in any manner it thinks fit (including the exercise of the voting power or power of appointment in favour of the appointment of a director as an officer or employee of that company or in favour of the payment of remuneration to the officers or employees of that company).

100. Registers

(1) Subject to the Statutes, the Company shall enter on the Register how many shares each member holds in uncertificated form and certificated form respectively.

(2) Subject to the Statutes, the board may exercise the powers conferred on the Company with regard to the keeping of an overseas, local or other register and may make and vary regulations as it thinks fit concerning the keeping of a register, provided however that those members who hold shares in uncertificated form may not be entered as holders of those shares on an overseas branch register.

DIRECTORS’ INTERESTS

101. Directors’ interests and voting

(1) Subject to the Statutes and paragraph (2) below, a director, notwithstanding his office:

(a) may enter into or otherwise be interested in a contract, arrangement, transaction or proposal with the Company or in which the Company is otherwise interested either in connection with his tenure of an office or place of profit or as seller, buyer or otherwise;

(b) may hold another office or place of profit with the Company (except that of auditor or auditor of a subsidiary of the Company) in conjunction with the office of director and may act by himself or through his firm in a professional capacity to the Company, and in that case on such terms as to remuneration and otherwise as the board may decide either in addition to or instead of remuneration provided for by another article;

(c) may be a director or other officer of, or employed by, or a party to a contract, arrangement, transaction or proposal with or otherwise interested in, a company promoted by the Company or in which the Company is otherwise interested or as regards which the Company has a power of appointment; and

(d) shall not be liable to account to the Company for a profit, remuneration or other benefit realised by such office, employment, contract, arrangement, transaction or proposal and no such contract, arrangement, transaction or proposal shall be avoided on the grounds of any such interest or benefit.

(2) A director who, to his knowledge, is in any way (directly or indirectly) interested in a contract, arrangement, transaction or proposal with the Company shall declare the nature of his interest at the meeting of the board at which the question of entering into the contract, arrangement, transaction or proposal is first considered, if he then knows

- 66 -

his interest then exists or, in any other case, at the first meeting of the board after he knows that he is or has become interested. For the purposes of this article:

(a) a general notice given to the board by a director that he is to be regarded as having an interest (of the nature and extent specified in the notice) in a contract, arrangement, transaction or proposal in which a specified person or class of persons is interested shall be a sufficient disclosure under this article in relation to that contract, arrangement, transaction or proposal; and

(b) an interest of which a director has no knowledge and of which it is unreasonable to expect him to have knowledge shall not be treated as his interest.

(3) A director may not vote on a resolution of the board or of a committee of the board concerning a contract, arrangement, transaction or proposal to which the Company is or is to be a party and in which he has an interest which is, to his knowledge, a material interest (otherwise than by virtue of his interest in shares or debentures or other securities of or otherwise in or through the Company), but this prohibition shall not apply to a resolution concerning any of the following matters:

(a) the giving of a guarantee, security or indemnity in respect of money lent or obligations incurred by him or any other person at the request of or for the benefit of the Company or any of its subsidiary undertakings;

(b) the giving of a guarantee, security or indemnity in respect of a debt or obligation of the Company or any of its subsidiary undertakings for which he himself has assumed responsibility in whole or in part, either alone or jointly with others, under a guarantee or indemnity or by the giving of security;

(c) a contract, arrangement, transaction or proposal concerning an offer of shares, debentures or other securities of or by the Company or any of its subsidiary undertakings, in which offer he is or may be entitled to participate as a holder of securities or in the underwriting or sub-underwriting of which he is to participate;

(d) a contract, arrangement, transaction or proposal to which the Company is or is to be a party concerning another company (including a subsidiary undertaking of the Company) in which he is interested (directly or indirectly) whether as an officer, shareholder, creditor or otherwise (a “relevant company”), if he does not to his knowledge hold an interest in shares (as that term is used in sections 198 to 211 of the Act) representing one per cent. or more of any class of the equity share capital of, or the voting rights in, the relevant company;

(e) a contract, arrangement, transaction or proposal for the benefit of the employees of the Company or any of its subsidiary undertakings (including any pension fund or retirement, death or disability scheme) which does not award him a privilege or benefit not generally awarded to the employees to whom it relates; and

- 67 -

(f) a contract, arrangement, transaction or proposal concerning the purchase or maintenance of any insurance policy for the benefit of directors or for the benefit of persons including directors.

(4) A director may not vote or be counted in the quorum on a resolution of the board or committee of the board concerning his own appointment (including, without limitation, fixing or varying the terms of his appointment or its termination) as the holder of an office or place of profit with the Company or any company in which the Company is interested. Where proposals are under consideration concerning the appointment (including, without limitation, fixing or varying the terms of appointment or its termination) of two or more directors to offices or places of profit with the Company or a company in which the Company is interested, such proposals shall be divided and a separate resolution considered in relation to each director. In such case each of the directors concerned (if not otherwise debarred from voting under this article) shall be entitled to vote (and be counted in the quorum) in respect of each resolution except that concerning his own appointment or its termination.

(5) If a question arises at a meeting as to the materiality of a director’s interest (other than the interest of the chairman of the meeting) or as to the entitlement of a director (other than the chairman) to vote or be counted in a quorum and the question is not resolved by his voluntarily agreeing to abstain from voting or being counted in the quorum, the question shall be referred to the chairman and his ruling in relation to the director concerned shall be conclusive and binding on all concerned except in a case where the nature or extent of the interests of the director concerned have not been fairly disclosed.

(6) If a question arises at a meeting as to the materiality of the interest of the chairman of the meeting or as to the entitlement of the chairman to vote or be counted in a quorum and the question is not resolved by his voluntarily agreeing to abstain from voting or being counted in the quorum, the question shall be decided by resolution of the directors or committee members present at the meeting (excluding the chairman) whose majority vote shall be conclusive and binding on all concerned.

(7) For the purposes of this article, the interest of a person who is for the purposes of the Statutes connected with (within the meaning of section 346 of the Act) a director shall be treated as the interest of the director and, in relation to an alternate director, the interest of his appointor shall be treated as the interest of the alternate director in addition to an interest which the alternate director otherwise has. This article applies to an alternate director as if he were a director otherwise appointed.

(8) Subject to the Statutes, the Company may by ordinary resolution suspend or relax the provisions of this article to any extent or ratify any contract, arrangement, transaction or proposal not properly authorised by reason of a contravention of this article.

- 68 -

PROCEEDINGS OF THE BOARD

102. Board meetings

Subject to the provisions of these articles, the board may meet for the despatch of business, adjourn and otherwise regulate its meetings as it thinks fit. A director may at any time, and the secretary at the request of a director shall at any time, summon a board meeting.

103. Notice of board meetings

Notice of a board meeting shall be deemed to be properly given to a director if it is given to him personally or by word of mouth or by electronic communication to an address given by him to the Company for that purpose or sent in writing to him at his last-known address or any other address given by him to the Company for this purpose. A director absent or intending to be absent from the United Kingdom may request the board that notices of board meetings shall during his absence be sent in writing or by electronic communication to him (or to his alternate) to an address given by him to the Company for this purpose, but if no such request is made it shall not be necessary to give notice of a board meeting to any director who is for the time being absent from the United Kingdom. A director may waive notice of any meeting either prospectively or retrospectively.

104. Quorum

The quorum necessary for the transaction of the business of the board may be fixed by the board and, unless so fixed at any other number, shall be two persons present, each being either a director or an alternate director.

105. Chairman or deputy chairman to preside

(1) The board may appoint from its body for such period as it may decide a chairman and one or more deputy chairman or chairmen and may at any time revoke any such appointment.

(2) The chairman, or failing him, any deputy chairman, shall, if present and willing, preside at all meetings of the directors but, if no chairman or deputy chairman has been appointed, or if he is not present within five minutes after the time fixed for holding the meeting or is unwilling to act as chairman of the meeting, the directors and alternate directors (in the absence of their appointors) present shall choose one of their number to act as chairman of the meeting. If two or more deputy chairmen are present, the senior of them shall act as chairman, seniority being determined by length of office since their last appointment or reappointment. As between two or more who have held office for an equal length of time, the deputy chairman to act as chairman shall be decided by those directors and alternate directors (in the absence of their appointors) present. A chairman or deputy chairman may hold executive office or employment with the Company.

- 69 -

106. Competence of meetings

A meeting of the board at which a quorum is present shall be competent to exercise all the powers, authorities and discretions for the time being vested in or exercisable by the board.

107. Voting

Questions arising at any meeting of the board shall be determined by a majority of votes. In the case of an equality of votes the chairman of the meeting shall have a second or casting vote.

108. Telephone meetings

(1) A meeting of the board or of a committee of the board may consist of a conference between directors and any alternate directors or other members of a committee (as the case may be) some or all of whom are in different places provided that each person who participates is able:

(a) to hear each of the other participating persons addressing the meeting; and

(b) if he so wishes, to address all of the other participating persons simultaneously,

whether directly, by conference telephone or by any other form of communications equipment (whether or not in use when these articles are adopted) or by a combination of such methods.

(2) A quorum is deemed to be present if those conditions are satisfied in respect of at least the number of persons required to form a quorum. Subject to the provisions of the Statutes, all business transacted in this way by the board or committee of the board is for the purposes of these articles deemed to be validly and effectively transacted at a meeting of the board or committee of the board even though fewer than two directors or alternate directors or other members of the committee may be physically present at the same place.

(3) A meeting held in this way is deemed to take place at the place where the largest group of participating persons is assembled or, if no such group is readily identifiable, at the place from where the chairman of the meeting participates.

109. Resolutions in writing

A resolution in writing signed or approved by letter, facsimile, telegram, telex or electronic communication by all the directors or all the members of a committee of the board entitled to notice of a meeting of the directors or committee (as the case may be) and not being less than a quorum shall be as valid and effectual as if it had been passed at a meeting of the directors or committee (as the case may be) duly called and constituted. The resolution may be contained in one document or in several documents in like form, each signed or approved by one or more of the directors or members of the committee (as the case may be) concerned. For the purpose of this article the

- 70 -

signature or approval of an alternate director (if any) entitled to notice of a meeting of directors or of a committee (as the case may be) shall suffice in place of the signature of the director appointing him.

110. Validity of acts of directors in spite of formal defect

All acts done by a meeting of the board, or of a committee, or by any person acting as a director, alternate director or a member of a committee, shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any member of the board or committee or of the person so acting, or that they or any of them were disqualified or had vacated office or were not entitled to vote, be as valid as if every such person had been duly appointed and was duly qualified and had continued to be a director, alternate director or member of the committee and had been entitled to vote.

111. Minutes

(1) The board shall cause minutes to be made in books kept for the purpose:

(a) of all appointments of officers and committees made by the board and of any remuneration fixed by the board or any of its committees;

(b) of the names of all the directors present at each meeting of the board, committees of the board, the Company or the holders of a class of shares or debentures; and

(c) of all orders, resolutions and proceedings of all such meetings.

(2) If purporting to be signed by the chairman of the meeting at which the proceedings were held or by the chairman of the next succeeding meeting, minutes are receivable as prima facie evidence of the matters stated in them.

SECRETARY

112. Secretary

(1) Subject to the provisions of the Statutes, the board shall appoint a secretary or joint secretaries and may also appoint one or more persons to be an assistant or deputy secretary for such term, at such remuneration and on such conditions as it thinks fit, and the board may remove from office any person so appointed (without prejudice to any claim for damages for breach of any contract between him and the Company).

(2) Any provision of the Statutes or of these articles requiring or authorising a thing to be done by or to a director and the secretary is not satisfied by its being done by or to the same person acting both as director and as, or in the place of, the secretary.

113. Authentication of documents

A director or the secretary or another person appointed by the board for the purpose may authenticate documents comprising the constitution of the Company (including the memorandum of association of the Company and these articles) and resolutions passed

- 71 -

by the Company or holders of a class of shares or the board or a committee of the board and books, records, documents and accounts relating to the business of the Company, and to certify copies or extracts as true copies or extracts.

SEAL

114. Seal

(1) The Company may exercise the powers conferred by the Statutes with regard to having official seals and those powers shall be vested in the board.

(2) The board shall provide for the safe custody of every seal (if any) of the Company.

(3) A seal shall be used only by the authority of the board or a committee but that authority may consist of an instruction or approval given by letter, facsimile, telegram, telex or telephone by a majority of the directors or of the members of a committee.

(4) The board may determine who shall sign any instrument to which a seal is affixed either generally or in relation to a particular instrument or type of instrument, and may also determine, either generally or in any particular case, that such signatures shall be dispensed with or affixed by some mechanical means.

(5) Unless otherwise decided by the board:

(a) certificates for shares, debentures or other securities of the Company issued under seal need not (subject to the provisions of the relevant instrument) be signed or, if signed (whether issued under seal or otherwise), a signature may be applied by mechanical or other means or may be printed; and

(b) every other instrument to which a seal is affixed shall be signed by at least one director and the secretary or by at least two directors.

(6) The Company may exercise the powers conferred by the Statutes with regard to having an official seal for use abroad, and those powers shall be vested in the Board.

DIVIDENDS

115. Declaration of dividends by the Company

Subject to the provisions of the Statutes and these articles, the Company may, by ordinary resolution, declare a dividend to be paid to the members, according to their respective rights and interests, and may fix the time for payment of such dividend, but no dividend shall exceed the amount recommended by the board.

116. Fixed and interim dividends

Subject to the provisions of the Statutes, the board may declare and pay such interim dividends as appear to the board to be justified by the profits of the Company available for distribution and may also pay any dividend payable at a fixed rate at intervals settled by the board whenever the profits of the Company available for distribution justify its payment. If the Company’s share capital is divided into different classes, the

- 72 -

board may pay interim dividends on shares which rank after shares conferring preferred rights with regard to dividend as well as on shares with preferred rights, unless at the time of payment a preferential dividend is in arrear. If the board acts in good faith, none of the directors shall incur any liability to the holders of shares conferring preferred rights for any loss they may suffer in consequence of the lawful payment of an interim dividend on shares ranking after those with preferred rights.

117. Calculation and currency of dividends

(1) Except insofar as the rights attaching to, or the terms of issue of, any share otherwise provide:

(a) all dividends shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is declared and paid, but no amount paid up on a share in advance of calls shall be treated for the purposes of this article as paid up on the share;

(b) all dividends shall be apportioned and paid pro rata according to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid; and

(c) dividends may be declared or paid in any currency.

(2) The board may agree with any member that dividends which may at any time or from time to time be declared or become due on his shares in one currency shall be paid or satisfied in another, and may agree the basis of conversion to be applied and how and when the amount to be paid in the other currency shall be calculated and paid and for the Company or any other person to bear any costs involved.

118. Method of payment

(1) The Company may pay any dividend, interest or other amount payable in respect of a share:

(a) in cash;

(b) by cheque, warrant or money order made payable to or to the order of the person entitled to the payment (which may, at the Company’s option, be crossed “account payee” where appropriate);

(c) by a bank or other funds transfer system to an account designated in writing by the person entitled to the payment;

(d) by such other method as the board may in its absolute discretion think fit including but not limited to payments in respect of uncertificated shares being made through the relevant system (subject always to the facilities and requirements of the relevant system); or

(e) by such other method as the person or persons entitled to the payment may in writing direct and the board may agree.

- 73 -

(2) The Company may send a cheque, warrant or money order by post:

(a) in the case of a sole holder, to his registered address;

(b) in the case of joint holders, to the registered address of the person whose name stands first in the Register;

(c) in the case of a person or persons entitled by transmission to a share, as if it were a notice given in accordance with article 134 (Service of notice on person entitled by transmission); or

(d) in any case to a person and address that the person or persons entitled to the payment may in writing direct.

(3) Where a share is held jointly or two or more persons are jointly entitled by transmission to a share:

(a) the Company may pay any dividend, interest or other amount payable in respect of that share to any one joint holder, or any one person entitled by transmission to the share, and in either case that holder or person may give an effective receipt for the payment; and

(b) for any of the purposes of this article 118, the Company may rely in relation to a share on the written direction or designation of any one joint holder of the share, or any one person entitled by transmission to the share.

(4) Every cheque, warrant or money order sent by post is sent at the risk of the person entitled to the payment. If payment is made by bank or other funds transfer, by means of a relevant system or by any other method at the direction of the person entitled to payment, the Company is not responsible for amounts lost or delayed in the course of transfer or in the course of making that payment.

(5) Notwithstanding any other provision of these articles relating to payments in respect of shares:

(a) where the board determines to make payments in respect of uncertificated shares through the relevant system, they may also enable any holder of uncertificated shares to elect not to so receive dividends through the relevant system and, in such event, establish procedures to enable such holder to make, vary or revoke any such election; and

(b) where the Company receives an authority to make such payments through the relevant system in a form satisfactory to it from a holder of any share (whether such authority is given in writing or by means of the relevant system or otherwise), the Company may make, or procure the making of, such payments in accordance with such authority and any payment made in accordance with such authority shall constitute a good discharge of the payment.

- 74 -

(6) Without prejudice to article 21 (Lien on partly paid shares) and article 44 (Disclosure of interests in shares), the board may withhold payment of a dividend (or part of a dividend) payable to a person entitled by transmission to a share until he has provided any evidence of his right that the board may reasonably require.

119. Dividends not to bear interest

No dividend or other moneys payable by the Company on or in respect of any share shall bear interest as against the Company unless otherwise provided by the rights attached to the share.

120. Calls or debts may be deducted from dividends

The board may deduct from any dividend or other amounts payable to any person (either alone or jointly with another) on or in respect of a share all such amounts as may be due from him (either alone or jointly with another) to the Company on account of calls or otherwise in relation to shares of the Company.

121. Unclaimed dividends etc.

All unclaimed dividends, interest or other amounts payable by the Company in respect of a share may be invested or otherwise made use of by the board for the benefit of the Company until claimed. All dividends unclaimed for a period of twelve years after having been declared or become due for payment shall be forfeited and cease to remain owing by the Company. The payment of any unclaimed dividend, interest or other sum payable by the Company on or in respect of any share into a separate account shall not constitute the Company a trustee in respect of it.

122. Uncashed dividends

If a cheque, warrant or order for a dividend or other amount payable in respect of a share sent by the Company to the person entitled to it is returned to the Company or left uncashed on any one occasion, or a transfer made by a bank or other funds transfer system in respect of a dividend or other amount payable in respect of a share is not accepted on any one occasion and, after reasonable enquiries, the Company is unable to establish any other address or account of the person entitled to the payment or if such a cheque, warrant or order is returned to the Company or left uncashed, or such transfer is not accepted on two consecutive occasions, the Company shall not be obliged to send or transfer any dividends or other amounts payable in respect of that share due to that person until he notifies the Company of an address or account to be used for the purpose.

123. Dividends in specie

(1) Without prejudice to the provisions of article 21 (Lien on partly paid shares) and article 44 (Disclosure of interests in shares), with the sanction of an ordinary resolution of the Company and on the recommendation of the board payment of any dividend may be satisfied wholly or in part by the distribution of specific assets and in particular of paid up shares or debentures of any other company.

- 75 -

(2) Where any difficulty arises in regard to the distribution, the board may settle the difficulty as it thinks fit and in particular, without limitation, may:

(a) issue fractional certificates or ignore fractions;

(b) may fix the value for distribution of the specific assets or any part of them;

(c) may determine that cash payments be made to any members on the basis of the value so fixed in order to secure equality of distribution; and

(d) may vest any of the specific assets in trustees upon such trusts for the persons entitled to the dividend as the board may think fit.

124. Scrip dividends

(1) Subject to the Statutes, but without prejudice to article 21 (Lien on partly paid shares) and article 44 (Disclosure of interests in shares), the board may, with the prior authority of an ordinary resolution of the Company, allot to those holders of a particular class of shares who have elected to receive them further shares of that class or Ordinary Shares, in either case credited as fully paid, (“new shares”) instead of cash in respect of all or part of a dividend or dividends specified by the resolution, subject to any exclusions, restrictions or other arrangements the board may in its absolute discretion deem necessary or expedient to deal with legal or practical problems under the laws of, or the requirements of a recognised regulatory body or a stock exchange in, any territory.

(2) Where a resolution under paragraph (1) above is to be proposed at a general meeting and the resolution relates in whole or in part to a dividend to be declared at that meeting, then the resolution declaring the dividend is deemed to take effect at the end of that meeting.

(3) A resolution under paragraph (1) above may relate to a particular dividend or to all or any dividends declared or paid within a specified period, but that period may not end later than the beginning of the fifth annual general meeting following the date of the meeting at which the resolution is passed.

(4) The board shall determine the basis of allotment of new shares so that, as nearly as may be considered convenient without involving rounding up of fractions, the value of the new shares (including a fractional entitlement) to be allotted (calculated by reference to the average quotation, or the nominal value of the new shares, if greater) equals (disregarding any associated tax credit) the amount of the dividend which would otherwise have been received by the holder (the “relevant dividend”). For this purpose the “average quotation” of each of the new shares is the average of the middle-market quotations for a fully-paid share of the Company of that class derived from the Daily Official List of the London Stock Exchange on the business day on which the relevant class of shares is first quoted “ex” the relevant dividend (or such other date as the board may deem appropriate to take account of any subsequent issue of shares by the Company) and the four subsequent business days or shall be as determined by or in accordance with the resolution under paragraph (1) above. A certificate or report by the auditors as to the value of the new shares to be allotted in respect of any dividends shall be conclusive evidence of that amount.

- 76 -

(5) The board may make any provision it considers appropriate in relation to an allotment made or to be made pursuant to this article (whether before or after the passing of the resolution under paragraph (1) above), including but not limited to:

(a) the giving of notice to holders of the right of election offered to them;

(b) the provision of forms of election (whether in respect of a particular dividend or dividends generally);

(c) determination of the procedure for making and revoking elections;

(d) the place at which, and the latest time by which, forms of election and other relevant documents must be lodged in order to be effective;

(e) the disregarding or rounding up or down or carrying forward of fractional entitlements, in whole or in part, or the accrual of the benefit of fractional entitlements to the Company (rather than to the holders concerned); and

(f) to the extent that the entitlement of any holder in respect of any dividend is less than the value of one new share (as determined in accordance with paragraph (4) above), establishing or varying a procedure for such entitlement to be accrued and aggregated with any similar entitlement for the purposes of any subsequent scrip dividend.

(6) The dividend (or that part of the dividend in respect of which a right of election has been offered) shall not be declared or payable on shares in respect of which an election has been duly made (the “elected shares”); instead new shares shall be allotted to the holders of the elected shares on the basis of allotment calculated as in paragraph (4) above. For that purpose, the board may resolve to capitalise out of amounts standing to the credit of reserves (including a share premium account, capital redemption reserve and profit and loss account), whether or not available for distribution, a sum equal to the aggregate nominal amount of the new shares to be allotted and apply it in paying up in full the appropriate number of new shares for allotment and distribution to the holders of the elected shares. A resolution of the board capitalising part of the reserves shall have the same effect as if the capitalisation had been declared by ordinary resolution of the Company pursuant to article 125 (Capitalisation of reserves). In relation to the capitalisation the board may exercise all the powers conferred on it by article 125 (Capitalisation of reserves) without an ordinary resolution of the Company.

(7) The new shares shall rank pari passu in all respects with each other and with the fully-paid shares of the same class in issue on the record date for the dividend in respect of which the right of election has been offered, but they will not rank for a dividend or other distribution or entitlement which has been declared or paid by reference to that record date.

- 77 -

(8) The board shall not make a scrip dividend available unless the Company has sufficient unissued shares and undistributed profits or reserves to give effect to elections which could be made to receive that scrip dividend.

(9) In relation to any particular proposed dividend, the board may in its absolute discretion decide:

(a) that shareholders shall not be entitled to make any election in respect thereof and that any election previously made shall not extend to such dividend; or

(b) at any time prior to the allotment of the new shares which would otherwise be allotted in lieu thereof, that all elections to take ordinary shares in lieu of such dividend shall be treated as not applying to that dividend, and if so the dividend shall be paid in cash as if no elections had been made in respect of it.

CAPITALISATION OF RESERVES

125. Capitalisation of reserves

(1) Subject to the Statutes, the board may, with the authority of an ordinary resolution of the Company:

(a) resolve to capitalise any sum standing to the credit of any reserve account of the Company (including share premium account and capital redemption reserve) or any sum standing to the credit of profit and loss account not required for the payment of any preferential dividend (whether or not it is available for distribution);

(b) appropriate that sum as capital to the members or any class of members on the record date specified in the relevant resolution who would have been entitled to it if it were distributed by way of dividend in proportion to the nominal amount of the relevant share capital (whether or not fully paid) held by them respectively; and

(c) apply that sum on their behalf in paying up in full any unissued shares or debentures of the Company of a nominal amount equal to that sum and allot the shares or debentures credited as fully paid to those members, or as they may direct, in those proportions or in paying up the whole or part of any amounts which are unpaid in respect of any issued shares in the Company held by them respectively, or partly in one way and partly in the other, or otherwise deal with such sum as directed by the resolution provided that the share premium account and the capital redemption reserve and any sum not available for distribution in accordance with the Statutes may only be applied in paying up unissued shares to be allotted credited as fully paid up.

(2) Where any difficulty arises in respect of any distribution of any capitalised reserve or other sum, the board may settle the difficulty as it thinks fit and in particular may make such provisions as it thinks fit in the case of shares or debentures becoming distributable in fractions (including provisions under which, in whole or in part, the

- 78 -

benefit of fractional entitlements accrues to the Company rather than the members concerned, issuing fractional certificates or selling shares or debentures representing fractions to a person for the best price reasonably obtainable and distributing the net proceeds of the sale in due proportion amongst the members, except that if the amount due to a member is less than £3, the sum may be retained for the benefit of the Company) or may ignore fractions and may fix the value for distribution of any fully paid up shares or debentures and may determine that cash payments be made to any members on the footing of the value so fixed in order to secure equality of distribution, and may vest any shares or debentures in trustees upon such trusts for the persons entitled to share in the distribution as the board may think fit.

(3) The board may also authorise any person to sign on behalf of the persons entitled to share in the distribution a contract for the acceptance by those persons of the shares or debentures to be allotted to them credited as fully paid under a capitalisation or of the payment by the Company on behalf of those persons (by the application of their respective proportions of the reserves resolved to be capitalised) of the amounts remaining unpaid on their existing shares and any such contract shall be binding on all those persons.

(4) Without prejudice to the preceding provisions of this article, the board may generally do all acts and things required to give effect to any ordinary resolution pursuant to paragraph (1) above.

126. Capitalisation of reserves - employees’ share schemes

(1) This article (which is without prejudice to the generality of the provisions of the immediately preceding article) applies:

(a) where a person is granted pursuant to an employees’ share scheme a right to subscribe for shares in the Company; and

(b) where, pursuant to the employees’ share scheme, the terms on which any person is entitled to subscribe in cash for shares in the Company are adjusted as a result of a capitalisation issue, rights issue or other variation of capital so that the subscription price is less than their nominal value.

(2) In any such case the board:

(a) shall transfer to a reserve account a sum equal to the deficiency between the subscription price and the nominal value of the shares (the “cash deficiency”) from the profits or reserves of the Company which are available for distribution and not required for the payment of any preferential dividend; and

(b) subject to paragraph (4) below, shall not apply that reserve account for any purpose other than paying up the cash deficiency upon the allotment of those shares.

(3) Whenever the Company is required to allot shares pursuant to such a right to subscribe, the board shall, subject to the Statutes,

- 79 -

(a) capitalise out of the reserve account an amount equal to the cash deficiency applicable to those shares;

(b) apply that amount in paying up the deficiency on the nominal value of those shares; and

(c) allot those shares credited as fully paid to the person entitled to them.

(4) If any person ceases to be entitled to subscribe for shares as described above, the restrictions on the reserve account shall cease to apply in relation to such part of the account as is equal to the amount of the cash deficiency applicable to those shares.

(5) No adjustment shall be made as mentioned in paragraph (1)(b) above unless at that time there are sufficient profits or reserves of the Company available for distribution and not required for the payment of any preferential dividend to permit the transfer to a reserve account in accordance with this article of an amount sufficient to pay up the cash deficiency applicable to the shares concerned.

RECORD DATES

127. Fixing of record dates

(1) Notwithstanding any other provision of these articles, but subject to the Statutes and without prejudice to any rights attached to any shares, the Company or the board may fix a date as the record date by reference to which a dividend will be declared or paid or a distribution, allotment or issue made, and that date may be before, on or after the date on which the dividend, distribution, allotment or issue is declared, paid or made.

(2) In the absence of a record date being fixed, entitlement to any dividend, distribution, allotment or issue shall be determined by reference to the date on which the dividend is declared or the distribution, allotment or issue is made.

ACCOUNTS

128. Accounting records

(1) The board shall cause accounting records of the Company to be kept in accordance with the provisions of the Statutes.

(2) The accounting records shall be kept at the office or, subject to the Statutes, at another place decided by the board and shall be available during business hours for the inspection of the directors and other officers of the Company. No member (in his capacity as such) shall have any right to inspect any account, book or document of the Company, except as conferred by law or authorised by the board or by any ordinary resolution of the Company.

(3) In respect of each financial year, a copy of the Company’s annual accounts, the directors’ report, the directors’ remuneration report, the auditors’ report on those accounts and on the auditable part of the directors’ remuneration report shall be sent by post or delivered to:

(a) every member (whether or not entitled to receive notices of general meetings);

- 80 -

(b) every holder of debentures (whether or not entitled to receive notices of general meetings);

(c) the auditors; and

(d) every other person who is entitled to receive notices of general meetings,

not less than 21 clear days before the date of the meeting at which copies of those documents are to be laid in accordance with the Statutes.

(4) This article does not require copies of the documents to which it applies to be sent or delivered to:

(a) a member or holder of debentures of whose address the Company is unaware; or

(b) more than one of the joint holders of shares or debentures.

(5) The board may determine that persons entitled to receive a copy of the documents listed in paragraph (3) above are those persons entered on the register at the close of business on a day determined by the board, provided that, if the Company is a participating issuer, the day determined by the board may not be more than 21 days before the day that the relevant copies are being sent.

(6) Where permitted by the Statutes, a summary financial statement derived from the Company’s annual accounts, the directors’ report and the directors’ remuneration report in the form and containing the information prescribed by the Statutes may be sent by post or delivered to a person in place of the documents required to be sent or delivered by paragraph (3) above.

(7) Any documents required or permitted to be sent by the Company to a person pursuant to this article 128 shall be treated as sent if:

(a) sent by electronic communication to an address for the time being notified to the Company by that person for that purpose; or

(b) published on a web-site, provided that the following conditions are met:

(i) the Company and that person have agreed that such documents may be accessed by him on a web-site (instead of their being sent by post or otherwise delivered to him); and

(ii) that person is notified, in a manner for the time being agreed for the purpose between him and the Company, of:

(a) the publication of the documents on a web-site;

(b) the address of that web-site;

- 81 -

(c) the place on that web-site where the documents may be accessed; and

(d) how they may be accessed.

(8) Documents treated in accordance with sub-paragraph (7)(b) of this article as sent to any person are to be treated as sent to him not less than twenty-one clear days before the date of a meeting if, and only if:

(a) the documents are published on the web-site throughout a period beginning at least twenty-one clear days before the date of the meeting and ending with the conclusion of the meeting; and

(b) the notification given for the purposes of sub-paragraph (7)(b)(ii) of this article 128 is given not less than twenty-one clear days before the date of the meeting.

(9) Nothing in paragraph (8) of this article 128 shall invalidate the proceedings of a meeting where any documents that are required to be published as mentioned in sub-paragraph (8)(a) of this article are by accident published in different places on the web-site or published for a part, but not all, of the period mentioned in that sub-paragraph.

NOTICES

129. Notices to be in writing or in electronic communication

Any notice to be served on or given to any person or by any person pursuant to these articles (other than a notice convening a meeting of the board or of a committee of the board or as may otherwise be expressly stated in these articles) shall be in writing or in an electronic communication to an address for the time being notified for that purpose to the person giving the notice. The signature (if applicable) on any notice given by the Company may be printed or reproduced by mechanical means.

130. Service of notices

(1) A notice or other document may be served by the Company on any member

(a) personally;

(b) by sending it through the post in a pre-paid envelope addressed to the member at his registered address (or at another address notified for the purpose);

(c) by leaving it at that address in an envelope addressed to the member;

(d) by giving it by electronic communication to an address for the time being notified to the Company by the member for that purpose; or

(e) by any other means authorised by the member concerned.

- 82 -

(2) A notice of general meeting may, instead of being sent to the member in any of the ways specified in paragraph (1) above, be given to a member by the Company by publishing the notice on a web-site, provided that the following conditions are met:

(a) the member and the Company have agreed that notices of general meetings may be accessed by him on a web-site instead of being sent to the member in one of the ways specified in paragraph (1) above; and

(b) the member is given a notification, in the manner agreed for the time being between the member and the Company, containing the following information:

(i) the fact that the notice has been published on the web-site;

(ii) the address of the web-site;

(iii) the place on the web-site where the notice may be accessed and how it may be accessed;

(iv) a statement that it concerns a notice of general meeting served in accordance with the Act;

(v) the place, date and time of the general meeting; and

(vi) whether the general meeting is to be an annual or extraordinary general meeting.

A notice given under paragraph (2) above is deemed to be given at the time of the notification under sub-paragraph (2)(b) above.

(3) In the case of joint holders of a share service or delivery of any notice or other document on or to the joint holder who is named first in the Register in respect of the joint holders shall be sufficient service on or delivery to all the holders of the share.

(4) A member (meaning, for this purpose, in the case of joint holders the person first named in the Register) whose registered address is not within the United Kingdom and who gives to the Company an address within the United Kingdom at which notices or other documents may be served on him, or an address to which notices may be given by electronic communication, shall be entitled to have notices or other documents served on him at that address but, unless he does so, shall not be entitled to receive any notice or other document from the Company.

131. Notice by advertisement

If at any time by reason of the suspension or curtailment of postal services within the United Kingdom the Company is unable effectively to convene a general meeting by notices sent through the post to those members who have not notified an address for electronic communications pursuant to article 130(1), a general meeting may be convened by the board in its absolute discretion, and as an alternative to any other method of service permitted by these articles, by a notice advertised in at least one United Kingdom national newspaper. In any such case the Company shall send

- 83 -

confirmatory copies of the notice to those members by post if at least seven clear days before the meeting the posting of notices to addresses throughout the United Kingdom again becomes practicable.

132. Evidence of service

(1) Any notice or other document, if served by first class post, shall be deemed to have been served on the day following that on which the envelope containing it is put into the post, or, if served otherwise by post, shall be deemed to have been served on the second day following that on which the envelope containing it was put into the post and in proving such service it shall be sufficient to prove that the letter, envelope or wrapper containing the notice or document was properly addressed, prepaid and put into the post.

(2) Proof that a notice contained in an electronic communication was sent in accordance with guidance issued by the Institute of Chartered Secretaries and Administrators shall be conclusive evidence that the notice was given.

(3) A notice contained in an electronic communication sent in accordance with the articles other than a notice given under article 130(2) (to which the provisions of that article apply) is deemed to be given at the expiration of forty-eight hours after the time it was sent.

(4) Any notice or document not sent by post but left at a registered address or address for service in the United Kingdom shall be deemed to have been served or delivered on the day it was so left.

(5) Where notice is given by way of newspaper advertisement, such notice shall be deemed to have been duly served on each member or person entitled to receive it at noon on the day when the advertisement appears or, if it appears on different days, at noon on the last of the days when the advertisement appears.

(6) A member present, either in person or by proxy, at any meeting of the Company or class of members of the Company shall be deemed to have received notice of the meeting and, where requisite, of the purposes for which the meeting was convened.

(7) Every person who becomes entitled to a share by transmission, transfer or otherwise shall be bound by every notice (other than a notice in accordance with section 212 of the Act) in respect of that share which before his name is entered in the Register was properly given to the person from whom he derives his title to the share.

(8) A notice or other document served or delivered by the Company by any other means authorised in writing by the member concerned is deemed to be served when the Company has taken the action it has been authorised to take for that purpose.

133. Record date for service

Any notice or other document may be served or delivered by the Company by reference to the Register as it stands at any time not more than fifteen days before the date of service or delivery. No change in the Register after that time shall invalidate that service or delivery.

- 84 -

134. Service of notice on person entitled by transmission

Where a person is entitled by transmission to a share, any notice or other document shall be served upon or delivered to him by addressing it to him by name or by the title of representative of the deceased or trustee of the bankrupt member (or similar designation), as if he were the holder of that share and his address noted in the Register were his registered address. In any other case, any notice or other document served on or delivered to any member pursuant to these articles shall, notwithstanding that the member is then dead or bankrupt or that any other event giving rise to the transmission of the share by operation of law has occurred and whether or not the Company has notice of the death, bankruptcy or other event, be deemed to have been properly served or delivered in respect of any share registered in the name of that member as sole or joint holder. The giving of notice in accordance with this article shall be sufficient notice to all other persons interested in the share.

DESTRUCTION OF DOCUMENTS

135. Destruction of documents

(1) The board may authorise or arrange the destruction of documents held by the Company as follows:

(a) at any time after the expiration of six years from the date of registration, all instruments of transfer of shares (including a document constituting the renunciation of an allotment of shares) and all other documents transferring or purporting to transfer shares or representing or purporting to represent the right to be registered as the holder of shares on the faith of which entries have been made in the Register;

(b) at any time after the expiration of one year from the date of cancellation, all registered share certificates which have been cancelled;

(c) at any time after the expiration of two years from the date of recording them, all mandates for the payment of dividends or other amounts or a variation or a cancellation of a mandate and notifications of change of name or address; and

(d) any other document on the basis of which any entry in the register is made at any time after six years from the date an entry in the register was first made in respect of it.

(2) It shall conclusively be presumed in favour of the Company that:

(a) every entry in the Register purporting to have been made on the basis of an instrument of transfer or other document so destroyed was duly and properly made;

- 85 -

(b) every instrument of transfer so destroyed was a valid and effective instrument duly and properly registered;

(c) every share certificate so destroyed was a valid certificate duly and properly cancelled; and

(d) every other document mentioned in paragraph (1) above so destroyed was a valid and effective document in accordance with the particulars of it recorded in the books and records of the Company.

(3) The provisions of paragraph (2) above shall apply only to the destruction of a document in good faith and without express notice to the Company of any claim (regardless of the parties to it) to which the document might be relevant.

(4) Nothing in this article shall be construed as imposing on the Company or the board any liability in respect of the destruction of any document earlier than as stated in paragraph (1) above or in any other circumstances in which liability would not attach to the Company or the board in the absence of this article.

(5) References in this article to the destruction of any document include references to its disposal in any manner.

WINDING UP

136. Powers to distribute in specie

(1) If the Company is in voluntary liquidation, the liquidator may, with the sanction of an extraordinary resolution of the Company and any other sanction required by the Statutes:

(a) divide among the members in specie the whole or any part of the assets of the Company, whether or not the assets consist of property of one kind or of different kinds; and

(b) vest the whole or any part of the assets or class of assets in trustees upon such trusts for the benefit of members as the liquidator shall determine.

(2) For the purposes of paragraph (1) above, the liquidator may set the value he deems fair on a class or classes of property, and may determine on the basis of that valuation and in accordance with the then existing rights of members how the division is to be carried out between members or classes of members.

(3) The liquidator may not, however, distribute to a member without his consent an asset to which there is attached a liability or potential liability for the owner.

- 86 -

INDEMNITY

137. Indemnity of officers

(1) Subject to the Statutes, but without prejudice to any indemnity to which he may otherwise be entitled, every person who is or was a director, alternate director or secretary of the Company shall be and shall be kept indemnified out of the assets of the Company against all costs, charges, losses and liabilities incurred by him in the proper execution of his duties or the proper exercise of his powers, authorities and discretions including, without limitation, a liability incurred:

(a) defending proceedings (whether civil or criminal) in which judgment is given in his favour or in which he is acquitted, or which are otherwise disposed of without a finding or admission of material breach of duty on his part; or

(b) in connection with any application in which relief is granted to him by the court from liability for negligence, default, breach of duty or breach of trust in relation to the affairs of the Company.

(2) Subject to the Statutes, the board may exercise all the powers of the Company to purchase and maintain insurance for the benefit of a person who is or was:

(a) a director, alternate director or secretary of the Company or of a company which is or was a subsidiary undertaking of the Company or in which the Company has or had an interest (whether direct or indirect); or

(b) trustee of a retirement benefits scheme or other trust in which a person referred to in paragraph (a) above is or has been interested,

indemnifying him and keeping him indemnified against liability for negligence, default, breach of duty or breach of trust or other liability which may lawfully be insured against by the Company.

- 87 -

EX-1.2

Exhibit 1.02

THE COMPANIES ACTS 1985 AND 1989

COMPANY LIMITED BY SHARES

MEMORANDUM OF ASSOCIATION

of

BRITISH ENERGY GROUP PLC

1. The Company’s name is “British Energy Group plc”.

2. The Company is to be a public company.

3. The Company’s registered office is to be situated in Scotland.

4. The Company’s objects are:

(A) To carry on the business of a holding company, to co-ordinate the policy, management and administration of any companies, corporations or undertakings in which the Company is a member or participant or otherwise interested whether directly or indirectly, or which are controlled directly or indirectly by or associated with the Company in any manner, or all or any part of the businesses or operations of any such companies, corporations or undertakings, to guarantee, assist financially, subsidise or otherwise support any such companies, corporations or undertakings, and, for any such companies, corporations or undertakings, to provide administrative, executive, managerial, secretarial, accountancy, treasury, personnel, corporate communications or any other services of a similar nature or staff, office accommodation or social or welfare services facilities, to act as secretaries, directors, registrars, managers and agents thereof and to do anything which will or may promote the efficiency and profitability of the businesses carried on by any such companies, corporations or undertakings.

(B) To acquire (whether by original subscription, tender, purchase, exchange or otherwise) the whole or any part of the stock, shares, debentures, debenture stocks, bonds and other securities issued or guaranteed by any company, corporation or undertaking constituted or carrying on businesses in any part of the world or by any government, sovereign ruler, commissioners, public body or authority and to hold the same as investments, and to sell, exchange, carry and dispose of the same.

(C) To carry on all or any of the businesses of procurers, generators, suppliers, distributors, transformers, converters, transmitters, producers, manufacturers, processors, developers, storers, carriers, importers and exporters of, and dealers in, electricity, derived from whatever source including without limitation heat, solar, wind, hydro, wave, tidal, geothermal, biological and nuclear energy, or any other forms of energy, and any products derived from or connected with any of these activities, and in any manner whatsoever in the United Kingdom or elsewhere and for all purposes, and acquirers or suppliers of electricity or other sources or forms of energy from, and providers of bulk or other supplies thereof to, any person for own use, supply, distribution, transformation, conversion, transmission, processing, development, storing, carrying, importing and exporting, dealing or otherwise in the United Kingdom or elsewhere.

(D) To plan, locate, design, establish, build, construct, equip, operate, make, use, administer, manage and maintain, improve, enlarge, alter, repair, refurbish, replace and remove, shut down, decommission, make safe, dispose of in a safe manner, and carry out works in respect of, any generating station (including, without limitation to the generality of the foregoing, any nuclear power station or station powered by renewable sources of energy), sub-station, transformer station, pumping station, building, plant, equipment, electric main works and any facilities ancillary to the operation or use of any such station.

(E) To construct, lay, place, operate, use, inspect, maintain, improve, enlarge, alter, protect, repair, replace and remove, and to carry on works in respect of, electric wires (including those overhead and underground), cables, lines, plant and equipment and facilities ancillary to the operation or use of a transmission network or distribution network, and to acquire, operate and maintain the consents, authorisations, wayleaves, easements and other rights capable or possibly capable of facilitating the aforesaid.

(F) To acquire (whether by purchase, lease, concession, grant, hire or otherwise), establish, develop, exploit, operate and maintain land, airspace, foreshore, claims, wells, mines, licences, consents or authorisations, concessions, drilling and mining rights, exploration and production rights, and rights and interests of all descriptions in or relating to the same, which may seem to the Company capable or possibly capable of facilitating the procurement, generation, supply, distribution, transformation, conversion, transmission, production, manufacture, processing, development, storing, carrying, import and export of, or dealing in, electricity and any products derived from or connected with any of those activities, or of affording a supply of natural or other gas, petroleum or other hydro-carbons, coal and other minerals or uranium and other nuclear fuels, heat, solar, tidal, hydro, wind, wave, geothermal, biological and all other forms of energy, or of chemicals.

(G) To install in any premises or place and to operate, use, inspect, maintain, repair, replace and remove heaters or other devices for assessing the quantity and/or quality of supplies of electricity, gas and other substances and forms of energy and for other purposes connected with such supplies.

(H) To do anything that an electricity generator, electricity distributor, electricity supplier or electricity transmitter is empowered, permitted, authorised or required to do under or by virtue of, or under or by virtue of any licence granted under, any enactment and to apply for, hold and exploit any other licence or authorisation which may be granted to the Company pursuant to any statute or statutory instrument and to do any and all things which the Company is empowered, permitted, authorised or required to do thereunder.

(I) To plan, locate, design, establish, build, construct, equip, operate, make, use, administer, manage and maintain, improve, enlarge, alter, repair, refurbish, replace and remove, shut down, decommission, make safe, dispose of in a safe manner, and carry out works in respect of, all assets employed on any electricity generation or transmission system and on any distribution or supply system, all facilities, including production, treatment, processing, conversion, loading and storing facilities (including nuclear processing plants, enrichment facilities and waste-storage facilities and underground and offshore storage facilities), refineries, buildings (including those which are part of combined heat and power schemes), offices, factories, works, warehouses, plants, platforms, derricks, transmission towers or pylons, rigs, wind structures, dams and

associated structures, testing sites, offshore wave structures, installations (including without limitation solar power and geothermal installations), depots, distribution stations and sub-stations, pumping stations, compressor stations, laboratories, research stations, wharves, jetties, terminals, transport facilities, canals, roads, railways, tunnels, airports and structures of all kinds, whether for the purposes of the Company or for sale or hire to, or in return for any consideration from, any person, and to purchase or otherwise acquire, lease, charter and take or let on hire any of the same, and contribute to, or assist in, or carry out any part of, any operation in respect of the same.

(J) To carry on all or any of the businesses of suppliers, distributors, designers, developers, manufacturers, installers, fitters, repairers, maintainers, importers and exporters of and dealers in, electrical plant and machinery and all kinds of goods, equipment, fittings, machinery, materials and installations connected with the generation, transformation, transmission, supply, and use of electricity for domestic, industrial, commercial or other purposes, or for the conservation of electricity or other forms of energy.

(K) To carry on all or any of the businesses of inspectors, maintainers, repairers, reconditioners, services, coaters, designers, developers, manufacturers, constructors, installers, layers, fitters, hirers, letters on hire, suppliers, distributors, importers and exporters of, and dealers in, generating station, sub-station and transformer station plant and equipment (including without limitation nuclear plant and equipment), transmission lines and cables, distribution lines and cables, pipes and pipe lines, equipment ancillary to the operation and use of generating stations, transmission and distribution lines and cables, pipes, pipe lines and any other conducting media, pylons, platforms, tunnels, overhead wires and electricity poles, dams and associated structures, wind stations (including wind “farms”), solar power and geothermal structures, tidal and wave power structures, platforms, derricks, rigs, terminals, and facilities of all kinds, tools and machinery, technical, engineering and other equipment, plant, components, accessories and supplies of every description.

(L) To carry on all or any of the businesses of procurers, suppliers, distributors, producers, developers, manufacturers, purchasers, refiners, distillers, processors, converters, storers, carriers, importers and exporters, explorers, miners and prospectors for, and dealers in petroleum and other hydrocarbons, natural and other gases, coal and other minerals, uranium and other nuclear fuel raw materials, and any other energy raw materials, chemicals, and products derived from or connected with any of them (including processing and re-processing, irradiating, and storing and disposing of nuclear fuel, whether radioactive or not).

(M) To carry on all or any of the businesses of consultants, advisers and suppliers of management, personnel, and training, design, construction, technical, scientific, engineering, environmental, decommissioning and any other services, whether generally or in respect of one or more of the types of business or activity which the Company or its subsidiaries has power to carry on, and to provide training and educational courses, instruction and materials, of every description for employees of the Company or its subsidiaries and for other persons.

(N) To carry on all or any of the businesses of, and provide services associated with, engineers (including, without limitation, electrical, gas, petroleum, environmental, drilling, construction, mechanical, heating, ventilation, civil, nuclear, chemical, telecommunications, computer and data information engineers), environmental biologists, physicists (including without limitation nuclear and health physicists), chemists, physicians and specialists in medicine, mechanics, technicians, geologists, draftsmen, designers, surveyors, architects and builders.

(O) To carry on business as inventors, researchers and developers and to conduct, promote and commission, research and/or development of all kinds, whether related to the generation, production, transmission, supply or distribution of electricity or any form of energy or otherwise or the decommissioning, shut down or disposal in a safe manner of any type of plant, machinery, buildings and equipment used in connection with the generation, production, transmission, supply or distribution of electricity or any other form of energy, and to exploit and turn to account the results of any such research or research and development carried out by or for the Company.

(P) To carry on all or any of the businesses of running, operating, managing or co-operating in projects or works designed to restore, preserve, improve and protect the environment and/or conserve energy.

(Q) Subject to such terms and conditions as the directors may think fit, to enter into, carry on and participate in financial transactions and operations of all kinds including, without limitation, swaps, options (including traded options), swap option contracts, forward exchange contracts, futures contracts, forward rate agreements, contracts for differences, caps, collars, floors and any other financial instruments (including hedging agreements of any kind) or any combination thereof or any option with respect to any such financial transaction or operation all or any of which may be on a fixed and floating basis and/or in respect of Sterling (and any other currency or basket of currencies including but not limited to European Currency Units (as the same may from time to time be designated or constituted)) or commodities of any kind and in the case of such financial transactions and operations they may be undertaken by the Company on a speculative basis or in connection with the management of financial risks relating to the Company or any other company, firm or person or otherwise on such terms as the directors may think fit and with or without security, and to undertake, carry on and execute all kinds of financial, commercial, trading, trust, agency and other operations.

(R) To carry on any other trade or business which can in the opinion of the directors be advantageously carried on by the Company in connection with or ancillary to any of the businesses of the Company.

(S) To buy, sell, manufacture, repair, alter, improve, manipulate, prepare for market, let on hire, and generally deal in all kinds of plant, machinery, apparatus, tools, utensils, materials, produce, substances, articles and things for the purpose of any of the businesses specified in this clause 4, or which may be required by persons having, or about to have, dealings with the Company.

(T) To build, construct, maintain, alter, enlarge, pull down, remove and replace any buildings, shops, factories, offices, works, machinery and engines, and to work, manage and control these things.

(U) To enter into contracts, agreements and arrangements with any person for the carrying out by that person on behalf of the Company of any object for which the Company is formed.

(V) To acquire, undertake and carry on the whole or any part of the business, property and liabilities of any person carrying on any business which may in the opinion of the directors be capable of being conveniently carried on, or calculated directly or indirectly to enhance the value of or make profitable any of the Company’s property or rights, or any property suitable for the purposes of the Company.

(W) To enter into any arrangement with a government or authority, whether national, international, supreme, municipal, local or otherwise, that may in the opinion of the directors be conducive to any object of the Company, and to obtain from that government or authority any right, privilege or concession which in the opinion of the directors is desirable, and to carry out, exercise and comply with that arrangement, right, privilege or concession.

(X) To apply for, purchase and by other means acquire, protect, prolong and renew any patent, patent right, brevet d’invention, licence, secret process, invention, trade mark, service mark, copyright, registered design, protection, concession and right of the same or similar effect or nature, and to use, turn to account, manufacture under and grant licences and privileges in respect of those things, and to spend money in experimenting with, testing, researching, improving and seeking to improve any of those things.

(Y) To acquire an interest in, amalgamate with and enter into partnership or any arrangement for the sharing of profits, union of interests, co-operation, joint venture, reciprocal concession or otherwise with any person, or with any employees of the Company. To lend money to, guarantee the contracts of, and otherwise assist that person or those employees, and to take and otherwise acquire an interest in that person’s shares or other securities and to sell, hold, re-issue, with or without guarantee, and otherwise deal with those shares or other securities.

(Z) To lend money to, subsidise and assist any person, to act as agents for the collection, receipt and payment of money and generally to act as agents and brokers for and perform services for any person, and to undertake and perform sub-contracts.

(AA) To enter into any guarantee or contract of indemnity or suretyship, and to provide security, including, without limitation, the guarantee and provision of security for the performance of the obligations of or the payment of any money (including, without limitation, capital, principal, premiums, dividends, interest, commissions, charges, discount and any related costs or expenses whether on shares or other securities) by any person including, without limitation, any body corporate which is for the time being the Company’s holding company, the Company’s subsidiary undertaking, a subsidiary undertaking of the Company’s holding company or any person which is for the time being a member or otherwise has an interest in the Company or is associated with the Company in any business or venture, with or without the Company receiving any consideration or advantage (whether direct or indirect), and whether by personal covenant or mortgage, charge or lien over all or part of the Company’s undertaking, property, assets or uncalled capital (present and future) or by other means. For the purposes of this paragraph (AA) “guarantee” includes any obligation, however described, to pay, satisfy, provide funds for the payment or satisfaction of (including, without limitation, by advance of money, purchase of or subscription for shares or other securities and purchase of assets or services), indemnify against the consequences of default in the payment of, or otherwise be responsible for, any indebtedness of any other person.

(BB) To promote, finance and assist any person for the purpose of acquiring all or any of the property, rights and undertaking or assuming the liabilities of the Company, or for any other purpose which may in the opinion of the directors directly or indirectly benefit the Company, and in that connection to place, guarantee the placing of, underwrite, subscribe for and otherwise acquire all or any part of the shares or other securities of a body corporate.

(CC) To pay out of the funds of the Company all or any expenses which the Company may lawfully pay of or incidental to the formation, registration, promotion and advertising of and raising money for the Company and the issue of its shares or other securities, including, without limitation, those incurred in connection with the advertising and offering of its shares or other securities for sale or subscription, brokerage and commissions for obtaining applications for and taking, placing, underwriting or procuring the underwriting of its shares or other securities.

(DD) To remunerate any person for services rendered or to be rendered to the Company, including without limitation by cash payment or by the allotment of shares or other securities of the Company, credited as paid up in full or in part.

(EE) To purchase, take on lease, exchange, hire and otherwise acquire any real or personal property and any right or privilege over or in respect of it.

(FF) To receive money on deposit on any terms the directors think fit.

(GG) To invest and deal with the Company’s money and funds in any way the directors think fit.

(HH) To lend money and give credit with or without security.

(II) To borrow, raise and secure the payment of money in any way the directors think fit, including, without limitation, by the issue of debentures and other securities, perpetual or otherwise, charged on all or any of the Company’s property (present and future) or its uncalled capital, and to purchase, redeem and pay off those securities.

(JJ) To remunerate any person for services rendered or to be rendered in placing, assisting and guaranteeing the placing and procuring the underwriting of any share or other security of the Company or of any person in which the Company may be interested or proposes to be interested, or in connection with the conduct of the business of the Company, including, without limitation, by cash payment or by the allotment of shares or other securities of the Company, credited as paid up in full or in part.

(KK) To draw, make, accept, endorse, discount, execute and issue promissory notes, bills of exchange, bills of lading, warrants, debentures and other negotiable or transferable instruments.

(LL) To sell, lease, exchange, let on hire and dispose of any real or personal property and the whole or part of the undertaking of the Company, for such consideration as the directors think fit, including, without limitation, for shares, debentures or other securities, whether fully or partly paid up, of any person, whether or not having objects (altogether or in part) similar to those of the Company. To hold any shares, debentures and other securities so acquired, and to improve, manage, develop, sell, exchange, lease, mortgage, dispose of, grant options over, turn to account or otherwise deal with all or any part of the property or rights of the Company.

(MM) To adopt any means of publicising and making known the businesses, services and products of the Company as the directors think fit, including, without limitation, advertisement, publication and distribution of notices, circulars, books and periodicals, purchase and exhibition of works of art and interest and granting and making of prizes, rewards and donations.

(NN) To support, subscribe to and contribute to any charitable or public object and any institution, society and club which may be for the benefit of the Company or persons who are or were directors, officers or employees of the Company, its predecessor in business, any subsidiary of the Company or any person allied to or associated with the Company, or which may be connected with any town or place where the Company carries on business. To subsidise and assist any association of employers or employees and any trade association. To grant pensions, gratuities, annuities and charitable aid and to provide advantages, facilities and services to any person (including any director or former director) who may have been employed by or provided services to the Company, its predecessor in business, any subsidiary of the Company or any person allied to or associated with the Company and to the spouses, children, dependants and relatives of those persons and to make advance provision for the payment of those pensions, gratuities and annuities by establishing or acceding to any trust, scheme or arrangement (whether or not capable of approval by the Commissioners of Inland Revenue under any relevant legislation) the directors think fit, to appoint trustees and to act as trustee of any trust, scheme or arrangement, and to make payments towards insurance for the benefit of those persons and their spouses, children, dependants and relatives.

(OO) To establish and contribute to any scheme for the purchase or subscription by trustees of shares or other securities of the Company to be held for the benefit of the employees of the Company, any subsidiary undertaking of the Company or any person allied to or associated with the Company, to lend money to those employees or to trustees on their behalf to enable them to purchase or subscribe for shares or other securities of the Company and to formulate and carry into effect any scheme for sharing the profits of the Company with employees.

(PP) To apply for, promote and obtain any Act of Parliament and any order or licence of any government department or authority (including, without limitation, the Department of Trade and Industry) to enable the Company to carry any of its objects into effect, to effect any modification of the Company’s constitution and for any other purpose which the directors think fit, and to oppose any proceeding or application which may in the opinion of the directors directly or indirectly prejudice the Company’s interests.

(QQ) To establish, grant and take up agencies, and to do all other things the directors may deem conducive to the carrying on of the Company’s business as principal or agent, and to remunerate any person in connection with the establishment or granting of an agency on the terms and conditions the directors think fit.

(RR) To distribute among the shareholders in specie any of the Company’s property and any proceeds of sale or disposal of any of the Company’s property and for that purpose to distinguish and separate capital from profits, but no distribution amounting to a reduction of capital may be made without any sanction required by law.

(SS) To purchase and maintain insurance for the benefit of any person who is or was an officer or employee of the Company, a subsidiary undertaking of the Company or a company in which the Company has or had an interest (whether direct or indirect) or who is or was trustee of any retirement benefits scheme or any other trust in which any officer or employee or former officer or employee is or has been interested, indemnifying that person against liability for negligence, default, breach of duty or breach of trust or any other liability which may lawfully be insured against.

(TT) To amalgamate with any other person and to procure the Company to be registered or recognised in any part of the world.

(UU) Subject to the Act, to give (whether directly or indirectly) any kind of financial assistance (as defined in section 152(1)(a) of the Act) for any purpose specified in section 151(1) or section 151(2) of the Act.

(VV) To do all or any of the things provided in any paragraph of this clause 4:

(i) in any part of the world;

(ii) as principal, agent, contractor, trustee or otherwise;

(iii) by or through trustees, agents, sub-contractors or otherwise; and

(iv) alone or with another person or persons.

(WW) To do all things that are in the opinion of the directors incidental or conducive to the attainment of all or any of the Company’s objects, or the exercise of all or any of its powers.

The objects specified in each paragraph of this clause 4 shall, except where otherwise provided in that paragraph, be regarded as independent objects, and are not limited or restricted by reference to or inference from the terms of any other paragraph or the name of the Company. None of the paragraphs of this clause 4 or the objects or powers specified or conferred in or by them is deemed subsidiary or ancillary to the objects or powers mentioned in any other paragraph. The Company has as full a power to exercise all or any of the objects and powers provided in each such paragraph as if each paragraph contained the objects of a separate company.

In this clause 4, a reference to:

(i) a “person” includes a reference to a body corporate, association or partnership whether domiciled in the United Kingdom or elsewhere and whether incorporated or unincorporated;

(ii) the “Act” is, unless the context otherwise requires, a reference to the Companies Act 1985, as modified or re-enacted or both from time to time;

(iii) a “subsidiary undertaking” is to be construed in accordance with section 258 of the Act; and

(iv) a “holding company” is to be construed in accordance with section 736 of the Act.

5. The liability of each member is limited.

6. The authorised share capital of the Company is £50,000 divided into 50,000 ordinary shares of £1 each.

WE, the subscribers to this memorandum of association wish to be formed into a company pursuant to this memorandum and we agree to take the number of shares in the capital of the company shown opposite our respective names.

NAME AND ADDRESS OF SUBSCRIBERS	NUMBER OF SHARES
Robert Malcolm Armour 88 Ravelston Dykes Edinburgh EH12 6HE	49,999
Jean MacDonald 32 Hills Road Strathaven ML10 6LQ	1

Name and Address of Subscribers

Robert Malcolm Armour

88 Ravelston Dykes

Edinburgh

EH16 6HE

Robert Malcolm Armour            

Dated the day          of                      2004

WITNESS to the above signature: -

Full Name: -

Address: -

Witness

Jean Elizabeth MacDonald

32 Hills Road

Strathaven

ML10 6LQ

Jean Elizabeth MacDonald            

Dated the day          of                      2004

WITNESS to the above signature: -

Full Name: -

Address: -

Witness

EX-4.5

Exhibit 4.05

SCHEME MADE PURSUANT TO PARAGRAPH 18 OF SCHEDULE 7 TO THE UTILITIES ACT

2000 IN RESPECT OF THE ELECTRICITY GENERATION LICENCE OF BRITISH ENERGY

GENERATION LIMITED

MADE ON 28^TH SEPTEMBER 2001

Clause	Subject matter	Page
1.	Interpretation	1
2.	Amendment and restatement	2
3.	New standard conditions	2
4.	Continuing effect	2
Annex	The Electricity Generation Licence	3
	Part I: The Terms of the licence	4
	Part II: The Standard Conditions	5
	Part III: Amendments to the Standard Conditions	6
	Part IV: The Special Conditions	7
	Schedule 1: Specified Area	8
	Schedule 2: Revocation	9

i

THE SCHEME

Pursuant to paragraph 18 of Schedule 7 to the Utilities Act 2000 (“the 2000 Act”), the Secretary of State hereby makes the following Scheme:

RECITALS

WHEREAS:

1. British Energy Generation Limited (company registered no. 03076445)(the “Company”) holds an electricity generation licence under section 6(1)(a) of the Electricity Act 1989 (the “Existing Generation Licence”).

2. Paragraph 18 of Schedule 7 to the Utilities Act 2000 (“Schedule 7”) applies to the Company as the holder of the licence referred to in recital 1 above.

3. The purpose of this Scheme which is made by the Secretary of State pursuant to paragraph 18 of Schedule 7 is to provide for the Existing Generation Licence to be amended and as so amended to have effect on and after the determination day as an electricity generation licence granted under section 6(1)(a) of the Electricity Act 1989 on the terms of this Scheme held by the Company (“the Electricity Generation Licence”).

1. INTERPRETATION

1.1 In this Scheme, unless the context otherwise requires, the following expressions shall bear the meanings ascribed to them below:

“the Authority”	means the Gas and Electricity Markets Authority established pursuant to section 1 of the 2000 Act;
“determination day”	means the date on which the standard conditions of electricity generation licences (determined by virtue of section 33(1) of the 2000 Act) take effect.

1.2 Without prejudice to sections 11 and 23(1) of the Interpretation Act 1978, this Scheme shall be interpreted and construed in like manner as an Act of Parliament passed after the commencement of the Interpretation Act 1978.

1.3 Unless the context otherwise requires, words and expressions used in Part I of the Electricity Act 1989 (as in force immediately before the determination day, or as the context requires, as in force from the determination day) shall bear the same meaning in this Scheme.

1

2. AMENDMENT AND RESTATEMENT

On the determination day, the Existing Generation Licence shall be amended and restated as set out in the Annex hereto.

3. NEW STANDARD CONDITIONS

Each condition of the standard conditions determined and published by the Secretary of State under section 33(1) of the 2000 Act as standard conditions for the purposes of electricity generation licences under section 6(1)(a) of the Electricity Act 1989 shall on the determination day be incorporated in Part II of the Electricity Generation Licence in substitution for the licence conditions in the Existing Generation Licence immediately prior to the determination day.

4. CONTINUING EFFECT

4.1 Anything done under or by virtue of the Existing Generation Licence which is in effect immediately before the determination day shall have continuing effect under or by virtue of the Electricity Generation Licence in so far as it is permitted by or in pursuance of the new standard conditions (as amended by part III of the Electricity Generation Licence).

4.2 Without prejudice to the generality of sub-clause 4.1 above,

(a) every statement, code or other document prepared pursuant to an obligation in the Existing Generation Licence; and

(b) every direction, consent, determination or other instrument made by the Authority in relation to the Existing Generation Licence,

which in each case is in effect immediately before the determination day, shall have continuing effect pursuant to or under the Electricity Generation Licence in so far as it is permitted by or in pursuance of the new standard conditions (as amended by part III of the Electricity Generation Licence).

4.3 For the purpose of paragraph 1 of standard condition 14 (Compulsory Acquisition of Land etc) of electricity generation licences, as incorporated and in effect in the Electricity Generation Licence, the specified date shall be 1 April 2002.

On this the 28th day of September 2001

An official of the Department of Trade and Industry authorised to act on behalf of the Secretary of State.

2

ANNEX

ELECTRICITY ACT 1989

SECTION 6(1)(a)

ELECTRICITY GENERATION LICENCE

FOR

BRITISH ENERGY GENERATION LIMITED

3

PART 1. TERMS OF THE LICENCE

1. This licence, treated as granted under section 6(1)(a) of the Electricity Act 1989 (“the Act”), authorises British Energy Generation Limited (a company registered in England and Wales under company number 03076445) (“the licensee”) whose registered office is situated at Barnett Way, Barnwood, Gloucester, GL4 3RS to generate electricity for the purpose of giving a supply to any premises in the area specified in Schedule 1 or enabling a supply to be so given during the period specified in paragraph 3 below, subject to -

(a) the standard conditions of electricity generation licences referred to in -

(i) paragraph 1 of Part II below, which shall have effect in the licence; and

(ii) paragraph 2 of Part II below which shall only have effect in the licence if brought into effect in accordance with the provisions of the standard conditions,

subject to such amendments to those conditions, if any, as are set out in Part III below (together “the conditions”);

(b) the special conditions, if any, set out in Part IV below (“the special conditions”);

(c) Such Schedules hereto, if any, as may be referenced in the conditions, the special conditions or the terms of the licence.

2. This licence is subject to transfer, modification or amendment in accordance with the provisions of the Act, the special conditions or the conditions.

3. This licence, unless revoked in accordance with the terms of Schedule 2, shall continue until determined by not less than 25 years’ notice in writing given by the Authority to the licensee such notice not be served earlier than 19 March 2006.

4. The provisions of section 109(1) of the Act (Service of documents) shall have effect as if set out herein and as if for the words “this Act” there were substituted the words “this licence”.

5. Without prejudice to sections 11 and 23(1) of the Interpretation Act 1978, Parts I to IV inclusive of, and the Schedule to this licence shall be interpreted and construed in like manner as an Act of Parliament passed after the commencement of the Interpretation Act 1978.

6. References in this licence to a provision of any enactment, where after the date of this licence -

(a) the enactment has been replaced or supplemented by another enactment, and

(b) such enactment incorporates a corresponding provision in relation to fundamentally the same subject matter,

shall be construed, so far as the context permits, as including a reference to the corresponding provision of that other enactment.

This licence was amended and restated by a licensing scheme made by the Secretary of State on 28^th September 2001.

4

PART II. THE STANDARD CONDITIONS

1.     Standard conditions in effect in this licence

Section A	Section B	Section D
Standard condition 1	Standard condition 5	Standard condition D1
Standard condition 2	Standard condition 6	Standard condition D2
Standard condition 3	Standard condition 7	Standard condition D3
Standard condition 4	Standard condition 8	Standard condition D4
	Standard condition 9	Standard condition D5
	Standard condition 10
	Standard condition 11
	Standard condition 12
	Standard condition 13
	Standard condition 14
	Standard condition 15
	Standard condition 16
	Standard condition 16A
	Standard condition 18
	Standard condition 19
2.      Standard conditions not in effect in this licence
Section B	Section C
	Standard condition C1
Standard condition 17	Standard condition C2
Standard condition 17A	Standard condition C3
	Standard condition C4

Note: A copy of the current standard conditions of electricity generation licences can be inspected at the principal office of the Authority. The above lists are correct at the date of this licence but may be changed by subsequent amendments or modifications to the licence. The authoritative up-to-date version of this licence is available for public inspection at the principal office of the Authority.

5

PART III. AMENDED STANDARD CONDITIONS

There are no amendments to the standard conditions⁽¹⁾

⁽¹⁾ Bright Energy Generation Limited’s Generation licence was amended and restated by a licensing scheme made by the Secretary of State on 28 September 2001. The Standard conditions of electricity generation licenses determined by the Secretary of State at that time also forms part of this exhibit. All Subsequent amendments or modifications to the Standard conditions can be found on the Ofgem website (www.ofgem.gov.uk).

6

PART IV. SPECIAL CONDITIONS

There are no special conditions

7

SCHEDULE 1

SPECIFIED AREA

Great Britain

8

SCHEDULE 2

REVOCATION

1. The Authority may at any time revoke the licence by giving no less than 30 days’ notice (24 hours’ notice, in the case of a revocation under sub-paragraph 1(f)) in writing to the licensee:

(a) if the licensee agrees in writing with the Authority that the licence should be revoked;

(b) if any amount payable under standard condition 4 (Payments by the Licensee to the Authority) is unpaid 30 days after it has become due and remains unpaid for a period of 14 days after the Authority has given the licensee notice that the payment is overdue - provided that no such notice shall be given earlier than the sixteenth day after the day on which the amount payable became due;

(c) if the licensee fails:

(i) to comply with a final order (within the meaning of section 25 of the Act) or with a provisional order (within the meaning of that section) which has been confirmed under that section and (in either case) such failure is not rectified to the satisfaction of the Authority within three months after the Authority has given notice in writing of such failure to the licensee - provided that no such notice shall be given by the Authority before the expiration of the period within which an application under section 27 of the Act could be made questioning the validity of the final or provisional order or before the proceedings relating to any such application are finally determined; or

(ii) to pay any financial penalty (within the meaning of section 27A of the Act) by the due date for such payment and such payment is not made to the Authority within three months after the Authority has given notice in writing of such failure to the licensee - provided that no such notice shall be given by the Authority before the expiration of the period within which an application under section 27E of the Act could be made questioning the validity or effect of the financial penalty or before the proceedings relating to any such application are finally determined;

(d) if the licensee fails to comply with:

(i) an order made by the Secretary of State under section 56, 73, 74 or 89 of the Fair Trading Act 1973; or

(ii) an order made by the court under section 34 of the Competition Act 1998.

(e) if the licensee:

(i) has ceased to carry on the generation business;

(ii) has not commenced carrying on the generation business within 5 years of the date on which the licence comes into force;

9

(f) if the licensee:

(i) is unable to pay its debts (within the meaning of section 123(1) or (2) of the Insolvency Act 1986, but subject to paragraphs 2 and 3 of this schedule) or has any voluntary arrangement proposed in relation to it under section 1 of that Act or enters into any scheme of arrangement (other than for the purpose of reconstruction or amalgamation upon terms and within such period as may previously have been approved in writing by the Authority);

(ii) has a receiver (which expression shall include an administrative receiver within the meaning of section 251 of the Insolvency Act 1986) of the whole or any material part of its assets or undertaking appointed;

(iii) has an administration order under section 8 of the Insolvency Act 1986 made in relation to it;

(iv) passes any resolution for winding-up other than a resolution previously approved in writing by the Authority; or

(v) becomes subject to an order for winding-up by a court of competent jurisdiction; or

(g) if the licensee is convicted of having committed an offence under section 59 of the Act in making its application for the licence.

2. For the purposes of sub-paragraph 1(f)(i), section 123(1)(a) of the Insolvency Act 1986 shall have effect as if for “£750” there was substituted “£100,000” or such higher figure as the Authority may from time to time determine by notice in writing to the licensee.

3. The licensee shall not be deemed to be unable to pay its debts for the purposes of sub-paragraph 1(f)(i) if any such demand as is mentioned in section 123(1)(a) of the Insolvency Act 1986 is being contested in good faith by the licensee with recourse to all appropriate measures and procedures or if any such demand is satisfied before the expiration of such period as may be stated in any notice given by the Authority under paragraph 1.

10

Department of Trade and Industry

ELECTRICITY GENERATION LICENCE:

STANDARD CONDITIONS

Utilities Act 2000

Determination of Standard Licence Conditions for

Electricity Generation Licences

The Secretary of State, in exercise of the powers conferred on her by section 33(1) and (2) of the Utilities Act 2000 (“the Act”) hereby determines that the attached conditions shall be standard conditions for the purpose of electricity generation licences.

The standard conditions shall be incorporated into generation licences as standard conditions with effect from the commencement of section 33(3) of the Act.

Nigel Peace

An official of the Department of Trade and Industry authorised to act on behalf of the Secretary of State

27 September 2001

Electricity Generation Standard Licence Conditions 1 September 2001        

Department of Trade and Industry

TABLE OF CONTENTS – GENERATION LICENCE

PART II - THE STANDARD CONDITIONS		1
SECTION A: INTERPRETATION, APPLICATION AND PAYMENTS		1
Condition 1	Definitions and Interpretation	1
Condition 2	Application of Section C (Supplementary Conditions for Scotland)	21
Condition 3	Application of Section D (Supplementary Conditions for Nuclear Generators)	23
Condition 4	Payments by the Licensee to the Authority	25
PART II - SECTION B: GENERAL		27
Condition 5	Compliance with Grid Codes	27
Condition 6	Compliance with Distribution Codes	28
Condition 7	Security Arrangements (England and Wales)	29
Condition 8	Pooling and Settlement Agreement Run-Off	30
Condition 9	Balancing and Settlement Code and NETA Implementation	31
Condition 10	Change Co-ordination for NETA	35
Condition 11	Ancillary Services	36
Condition 12	Change Co-ordination for the Utilities Act 2000	37
Condition 13	Provision of Information to the Authority	39
Condition 14	Compulsory Acquisition of Land etc	41
Condition 15	Other Powers etc	43

Electricity Generation Standard Licence Conditions 2 September 2001        

Department of Trade and Industry

Condition 16	Regulatory Accounts	46
Condition 16A	Change of Financial Year	54
Condition 17	Prohibition of Discrimination in Selling Electricity	57
Condition 17A	Prohibition of Cross Subsidies	61
Condition 18	Generating Unit Availability	65
Condition 19	Compliance with CUSC	73
PART II - SECTION C: SUPPLEMENTARY STANDARD CONDITIONS FOR SCOTLAND		76
Condition C1	Definitions	76
Condition C2	Compliance with Trading Code	77
Condition C3	Security Arrangements (Scotland)	78
Condition C4	Compliance with Settlement Agreement in Scotland	79
PART II - SECTION D: SUPPLEMENTARY STANDARD CONDITIONS FOR NUCLEAR GENERATORS		80
Condition D1	Definitions	80
Condition D2	Consultation with the Nuclear Installations Inspectorate	82
Condition D3	Compulsory Acquisition of Land etc	83
Condition D4	Other Powers etc	84
Condition D5	Ancillary Services	85

Electricity Generation Standard Licence Conditions 3 September 2001        

Department of Trade and Industry

PART II : THE STANDARD CONDITIONS OF LICENCE

SECTION A. INTERPRETATION, APPLICATION AND PAYMENTS

Condition 1. Definitions and Interpretation

1. In the standard conditions unless the context otherwise requires:

the “Act”	means the Electricity Act 1989.
“affiliate”	in relation to any person means any holding company of such person, any subsidiary of such person or any subsidiary of a holding company of such person, in each case within the meaning of sections 736, 736A and 736B of the Companies Act 1985.
“alternative accounting rules”	for the purposes of standard condition 16 (Regulatory Accounts) only, has the meaning given in that condition.
“ancillary services”	means: (a)    such services as the licensee may be required to have available in association with any generation set pursuant to any Grid Codes; and

Electricity Generation Standard Licence Conditions 1 September 2001        

Department of Trade and Industry

	(b)    such services as the licensee may have agreed to have available in association with any generation set pursuant to any agreement made with a transmission company,
	and which may be offered for sale to a transmission company for the purpose of securing stability of operation on a transmission system and/or a distribution system of any authorised electricity operator.
“auditors”	means the licensee’s auditors for the time being holding office in accordance with the requirements of the Companies Act 1985.
“authorised”	in relation to any business or activity means authorised by licence granted or treated as granted under section 6 or exemption granted under section 5 of the Act.

Electricity Generation Standard Licence Conditions 2 September 2001        

Department of Trade and Industry

“authorised activities”	for the purposes of standard condition 15 (Other Powers etc) only, has the meaning given in that condition.
“authorised electricity operator”	means any person (other than the licensee) who is authorised to generate, transmit, distribute or supply electricity and, for the purposes of the standard conditions shall include any person who has made an application to be so authorised which application has not been refused and any person lawfully transferring electricity to or from or across Great Britain or any part thereof or to or from across an interconnector or Scottish interconnection (or who has made application for use of an interconnector or Scottish interconnection which has not been refused).
“the Authority”	means the Gas and Electricity Markets Authority established under section 1 of the Utilities Act 2000.

Electricity Generation Standard Licence Conditions 3 September 2001        

Department of Trade and Industry

“BSC”	for the purposes of Section B only, has the meaning given in standard condition 9 (Balancing and Settlement Code and NETA implementation)
“BSC Framework Agreement”	for the purposes of standard condition 9 (Balancing and Settlement Code and NETA implementation) only, has the meaning given in that condition.
“bilateral agreement”	for the purposes of standard condition 19 (Compliance with CUSC) only, has the meaning given in that condition.
“construction agreement”	for the purposes of standard condition 19 (Compliance with CUSC) only, has the meaning given in that condition.

Electricity Generation Standard Licence Conditions 4 September 2001        

Department of Trade and Industry

“Consumer Council”	means the Gas and Electricity Consumer Council established by section 2 of the Utilities Act 2000.
“core industry documents”	for the purposes of standard conditions 9 (Balancing and Settlement Code and NETA Implementation) and 10 (Change Co-ordination for NETA) only, has the meaning given in standard condition 9; and for the purposes of standard condition 19 (Compliance with CUSC) only, has the meaning given in that condition.

Electricity Generation Standard Licence Conditions 5 September 2001        

Department of Trade and Industry

“current costs assets”	for the purposes of standard condition 16 (Regulatory Accounts) only, has the meaning given in that condition.
“CUSC”	for the purposes of standard condition 19 (Compliance with CUSC) only, has the meaning given in that condition.
“CUSC Framework Agreement”	for the purposes of standard condition 19 (Compliance with CUSC) only, has the meaning given in that condition.
“customer”	means any person supplied or requiring to be supplied with electricity at any premises in Great Britain but shall not include any authorised electricity operator in its capacity as such.

Electricity Generation Standard Licence Conditions 6 September 2001        

Department of Trade and Industry

“Distribution Code”	means a Distribution Code required to be prepared by a licensed distributor pursuant to standard condition 9 (Distribution Code) of a distribution licence and approved by the Authority and revised from time to time with the approval of the Authority.
“distribution licence”	means a distribution licence granted or treated as granted under section 6 (1) (c) of the Act.

Electricity Generation Standard Licence Conditions 7 September 2001        

Department of Trade and Industry

“distribution system”	means the system consisting (wholly or mainly) of electric lines owned or operated by an authorised distributor and used for the distribution of electricity from grid supply points or generation sets or other entry points (and bulk supply points in Scotland) to the point of delivery to customers or authorised electricity operators or any transmission company within Great Britain in its capacity as operator of a transmission system and includes any remote transmission assets (owned by a transmission licensee within England and Wales) operated by such distributor and any electrical plant, meters and metering equipment owned or operated by such distributor in connection with the distribution of electricity, but shall not include any part of a transmission system.
“effective time”	for the purposes of standard condition 8 (Pooling and Settlement Agreement Run-Off) and standard condition 9 (Balancing and Settlement Code and NETA Implementation) only, has the meaning given in standard condition 8 (Pooling and Settlement Agreement Run-Off).
“electricity supplier”	means any person authorised to supply electricity.

Electricity Generation Standard Licence Conditions 8 September 2001        

Department of Trade and Industry

“estimated costs”	for the purposes of standard condition 4 (Payments by the Licensee to the Authority) only, has the meaning given in that condition.
“extension”	shall be construed in accordance with standard condition 14 (Compulsory Acquisition of Land etc).
“financial year”	means subject to standard condition 16A (Change of Financial Year) (where applicable) a period of 12 months beginning on 1st April of each year and ending on 31st March of the following calendar year.
“Fuel Security Code”	for the purposes of Section B only, has the meaning given in standard condition 7 (Security Arrangements).
“generating station”	shall be construed in accordance with standard condition 14 (Compulsory Acquisition of Land etc).
“generation business”	means the authorised business of the licensee or any affiliate or related undertaking of the licensee in the generation of electricity and the provision of ancillary services.

Electricity Generation Standard Licence Conditions 9 September 2001        

Department of Trade and Industry

“generation licence”	means a generation licence granted or treated as granted under section 6(1)(a) of the Act.
“generation set”	means any plant or apparatus for the production of electricity and shall where appropriate include a generating station comprising more than one generation set.
“generating unit”	for the purposes of standard condition 18 (Generating Unit Availability) only, has the meaning given in that condition.
“Grid Code”	means the grid code which each transmission company is required to prepare and have approved by the Authority as from time to time revised with the approval of the Authority.
“grid supply point”	means any point at which electricity is delivered from a transmission system to any distribution system.
“the handbook”	for the purposes of standard condition 16 (Regulatory Accounts) only, has the meaning given in that condition.
“holding company”	means a holding company within the meaning of sections 736, 736A and 736B of the Companies Act 1985.

Electricity Generation Standard Licence Conditions 10 September 2001        

Department of Trade and Industry

“information”	shall include any documents, accounts, estimates, returns or reports, records and any data in verbal, written or electronic form and information in any form or medium whatsoever.
“interconnector”	means the electric lines and electrical plant and meters owned or operated by a transmission company solely for the transfer of electricity to or from a transmission system into or out of England and Wales.
“interconnection”	means: the 275 kV and 400 kV circuits between and including the associated switchgear at Harker sub-station in Cumbria and the associated switchgear at Strathaven sub-station in Lanarkshire;
	the 275kV transmission circuit between and including the associated switchgear at Cockenzie in East Lothian and the associated switchgear at Stella in Tyne and Wear; and

Electricity Generation Standard Licence Conditions 11 September 2001        

Department of Trade and Industry

the 400kV transmission circuit between and including the associated switchgear at Torness in East Lothian and the associated switchgear at Stella in Tyne and Wear

all as existing at the date on which the transmission licence comes into force as from time to time maintained, repaired or renewed, together with any alteration, modification or addition (other than maintenance, repair or renewal) which is primarily designed to effect a permanent increase in one or more particular interconnection capacities as they exist immediately prior to such alteration, modification or addition and as from time to time maintained, repaired or renewed; and

the 132kV transmission circuit between and including (and directly connecting) the associated switchgear at Chapelcross and the associated switchgear at Harker sub-station in Cumbria; and

the 132kV transmission circuit between and including (and connecting, via Junction V) the associated switchgear at Chapelcross and the associated switchgear at Harker sub-station in Cumbria

Electricity Generation Standard Licence Conditions 12 September 2001        

Department of Trade and Industry

	all as existing at the date on which the transmission licence comes into force and as from time to time maintained, repaired or renewed.
“licensed distributor”	means any holder of a distribution licence.
“participating interest”	has the meaning given by section 260 of the Companies Act 1985, as amended by section 22 of the Companies Act 1989.
“planned availability period”	for the purposes of standard condition 18 (Generating Unit Availability) only, has the meaning given in that condition.
“Pooling and Settlement Agreement”	means the agreement of that title approved by the Secretary of State as from time to time amended.
“related undertaking”	in relation to any person means any undertaking in which such person has a participating interest.
“relevant proportion”	for the purposes of standard condition 4 (Payments by the Licensee to the Authority) only, has the meaning given in that condition.
“relevant year”	for the purposes of standard condition 4 (Payments by the Licensee to the Authority) only, has the meaning given in that condition.

Electricity Generation Standard Licence Conditions 13 September 2001        

Department of Trade and Industry

“remote transmission assets”	means any electric lines, electrical plant or meters in England and Wales owned by a transmission company (the “owner transmission company”) which
	(a)    are embedded in a distribution system of any authorised distributor, and are not directly connected by lines or plant owned by the owner transmission company to a sub-station owned by the owner transmission company; and
	(b)    are by agreement between the owner transmission company and such authorised distributor operated under the direction and control of such authorised distributor.
“run–off”	for the purposes of standard condition 8 (Pooling and Settlement Agreement Run-Off) only, has the meaning given in that condition.
“Scottish interconnection”	means such part of the interconnection as is situated in Scotland.

Electricity Generation Standard Licence Conditions 14 September 2001        

Department of Trade and Industry

“separate business”	means each and any of
	(a)    the generation business of the licensee;
	(b)    the supply business of the licensee;
	(c)    any distribution business of an affiliate or related undertaking of the licensee; and
	(d)    any transmission business of an affiliate or related undertaking of the licensee
	taken separately from one another (but so that where all or any part of such business is carried on by an affiliate or related undertaking of the licensee, such part of the business as is carried on by that affiliate or related undertaking shall be consolidated with any such other business of the licensee and of any other affiliate or related undertaking of the licensee so as to form a single separate business).
“statutory accounts”	means the accounts that the licensee prepares under the Companies Act 1985 (as amended by the Companies Act 1989).
“subsidiary”	has the meaning given in sections 736, 736A and 736B of the Companies Act 1985.

Electricity Generation Standard Licence Conditions 15 September 2001        

Department of Trade and Industry

“supply licence”	means a supply licence granted or treated as granted under section 6(1)(d) of the Act.
“terms”	means the terms contained in Part I of this licence and in any provisions in a Schedule referred to in such terms.
“transmission company”	means the holder for the time being of a transmission licence.
“transmission licence”	means a transmission licence granted or treated as granted under section 6(1)(b) of the Act.
“transmission system”	means a system consisting (wholly or mainly) of high voltage electric lines owned or operated by the holder of a transmission licence in its authorised area and used for the transmission of electricity from one generating station to a sub-station or to another generating station or between sub-stations or to or from any interconnector or Scottish interconnection in question and in relation to Scotland including any interconnector and Scottish interconnection, and includes any electrical plant and meters owned or operated by such transmission company in connection with the transmission of electricity but shall not include any remote transmission assets.

Electricity Generation Standard Licence Conditions 16 September 2001        

Department of Trade and Industry

“undertaking” has the meaning given by section 259 of the Companies Act 1985 as amended by section 22 of the Companies Act 1989.

2. Any words or expressions used in the Utilities Act 2000 or Part I of the Act shall, unless the contrary intention appears, have the same meaning when used in the standard conditions.

3. Except where the context otherwise requires, any reference to a numbered standard condition (with or without a letter) or Schedule is a reference to the standard condition or Schedule (with or without a letter) bearing that number in this licence, and any reference to a numbered paragraph (with or without a letter) is a reference to the paragraph bearing that number in the standard condition or Schedule in which the reference occurs, and reference to a Section is a reference to that Section in these standard conditions.

4. These standard conditions shall have effect as if in relation to references to a licence holder who is a natural person, the words “it”, “its” and “which” there are substituted the words “he”, “him”, “his” and “whom”, and cognate expressions shall be construed accordingly.

5. Except where the context otherwise requires, a reference in a standard condition to a paragraph is a reference to a paragraph of that condition and a reference in a paragraph to a sub-paragraph is a reference to a sub-paragraph of that paragraph.

Electricity Generation Standard Licence Conditions 17 September 2001        

Department of Trade and Industry

6. Any reference in these standard conditions to:

(a) a provision thereof;

(b) a provision of the standard conditions of electricity supply licences, or

(c) a provision of the standard conditions of electricity distribution licences, or

(d) a provision of the standard conditions of electricity transmission licences,

shall, if these standard conditions or the standard conditions in question come to be modified, be construed, so far as the context permits, as a reference to the corresponding provision of these standard conditions or the other standard conditions in question as modified.

7. In construing the standard conditions, the heading or title of any standard condition or paragraph shall be disregarded.

8. Any reference in a standard condition to the purposes of that condition generally is a reference to the purposes of that condition as incorporated in this licence and as incorporated in each other licence under section 6(1)(a) of the Act (whenever granted) which incorporates it.

9. Where any obligation under in or pursuant to the licence is required to be performed by a specified date or within a specified period, and where the licensee has failed so to perform by such date or within such period, such obligation shall continue to be binding and enforceable after the specified date or after the expiry of the specified period (but without prejudice to all rights and remedies available against the licensee by reason of the licensee’s failure to perform by that date or within that period).

Electricity Generation Standard Licence Conditions 18 September 2001        

Department of Trade and Industry

10. Anything required by or under these standard conditions to be done in writing may be done by facsimile transmission of the instrument in question or by other electronic means and, in such case:

(a) the original instrument or other confirmation in writing shall be delivered or sent by pre-paid first-class post as soon as is reasonably practicable, and

(b) where the means of transmission had been agreed in advance between the parties concerned, in the absence of and pending such confirmation, there shall be a rebuttable presumption that what was received duly represented the original instrument.

11. The definitions referred to in this condition may include some definitions which are not used or not used exclusively in Sections A and B (which Sections are incorporated in all generation licences). Where:

(a) any definition is not used in Sections A and B, that definition shall, for the purposes of this licence, be treated:

(i) as part of the standard condition or conditions (and the Section) in which it is used;

(ii) as not having effect in the licence until such time as the standard condition in which the definition is used has effect within the licence in pursuance of standard condition 2 (Application of Section C (Supplementary Conditions for Scotland)) or standard condition 3 (Application of Section D (Supplementary Conditions for Nuclear Generators));

(iii) as not having effect in the licence until such time as the standard condition in which the definition is used has effect within the licence in pursuance of that standard condition;

Electricity Generation Standard Licence Conditions 19 September 2001        

Department of Trade and Industry

(b) any definition which is used in Sections A and B is also used in one or more other Sections:

(i) that definition shall only be modifiable in accordance with the modification process applicable to each of the standard conditions in which it is used; and

(ii) if any such standard condition is modified so as to omit that definition, then the reference to that definition in this condition shall automatically cease to have effect.

Electricity Generation Standard Licence Conditions 20 September 2001        

Department of Trade and Industry

Condition 2. Application of Section C (Supplementary Conditions for Scotland)

1. Where the Secretary of State provides, by a scheme made under Schedule 7 to the Utilities Act 2000, for Section C (in whole or in part) to have effect within this licence:

(a) paragraphs 4 to 8 shall cease to be suspended and shall have effect in the licensee’s licence; and

(b) the licensee shall be obliged to comply with the requirements of Section C (in whole or, as the case may be, in part) of this licence,

from the date the said scheme takes effect.

2. Until -

(a) the Secretary of State provides, by a scheme made under Schedule 7 to the Utilities Act 2000, for Section C (in whole or in part) to have effect within this licence; or

(b) the Authority has issued to the licensee a direction pursuant to paragraph 4,

the standard conditions in Section C (in whole or, as the case may be, in part) shall not have effect within this licence; and the licensee shall not be obliged to comply with any of the requirements of Section C (in whole or, as the case may be, in part) of this licence.

3. Except where paragraph 1 applies to the licensee, paragraphs 4 to 8 of this condition shall be suspended and shall have no effect in this licence until such time as the Authority issues to the licensee a notice in writing ending the suspension and providing for those paragraphs to have effect in this licence with effect from the date specified in the notice.

Electricity Generation Standard Licence Conditions 21 September 2001        

Department of Trade and Industry

4. The Authority may issue a direction (a “Section C Direction”). Where the Authority has issued to the licensee a Section C Direction the standard conditions in Section C (in whole or, as the case may be, in part) shall have effect within this licence from the date specified in the direction; and the licensee shall be obliged to comply with the requirements of Section C (in whole or, as the case may be, in part) to the extent and subject to the terms specified in such direction.

5. A Section C Direction may specify that the standard conditions in Section C (in whole or in part) have effect in this licence.

6. The Authority may, with the consent of the licensee:

(a) vary the terms (as set out in the Section C Direction or elsewhere) under which Section C (or part or parts thereof) has effect in this licence; or

(b) provide for Section C (or part or parts thereof) to cease to have effect in this licence.

7 The variation or cessation provided for in paragraph 6 shall take effect from the date specified in the variation or cessation notice given to the licensee by the Authority.

8 With effect from the date of cessation referred to in paragraph 7, paragraphs 4 to 7 of this condition shall be suspended and shall cease to have effect in this licence, but the Authority may at any time thereafter give to the licensee a notice ending the suspension and providing for those paragraphs to have effect again in this licence with effect from the date specified in the notice.

Electricity Generation Standard Licence Conditions 22 September 2001        

Department of Trade and Industry

Condition 3. Application of Section D (Supplementary Conditions for Nuclear Generators)

1. Where the Secretary of State provides, by a scheme made under Schedule 7 to the Utilities Act 2000, for Section D (in whole or in part) to have effect within this licence:

(a) paragraphs 4 to 8 shall cease to be suspended and shall have effect in the licensee’s licence; and

(b) the licensee shall be obliged to comply with the requirements of Section D (in whole or, as the case may be, in part) of this licence,

from the date the said scheme takes effect.

2. Until -

(a) the Secretary of State provides, by a scheme made under Schedule 7 to the Utilities Act 2000, for Section D (in whole or in part) to have effect within this licence; or

(b) the Authority has issued to the licensee a direction pursuant to paragraph 4,

the standard conditions in Section D (in whole or, as the case may be, in part) shall not have effect within this licence; and the licensee shall not be obliged to comply with any of the requirements of Section D (in whole or, as the case may be, in part) of this licence.

Electricity Generation Standard Licence Conditions 23 September 2001        

Department of Trade and Industry

3. Except where paragraph 1 applies to the licensee, paragraphs 4 to 8 of this condition shall be suspended and shall have no effect in this licence until such time as the Authority issues to the licensee a notice in writing ending the suspension and providing for those paragraphs to have effect in this licence with effect from the date specified in the notice.

4. The Authority may issue a direction (a “Section D Direction”). Where the Authority has issued to the licensee a Section D Direction the standard conditions in Section D (in whole or, as the case may be, in part) shall have effect within this licence from the date specified in the direction; and the licensee shall be obliged to comply with the requirements of Section D (in whole or, as the case may be, in part) to the extent and subject to the terms specified in such direction.

5. A Section D Direction may specify that the conditions in Section D (in whole or in part) are to have effect in this licence.

6. The Authority may, with the consent of the licensee:

(a) vary the terms (as set out in the Section D Direction or elsewhere) under which Section D (or part or parts thereof) has effect in this licence; or

(b) provide for Section D (or part or parts thereof) to cease to have effect in this licence.

7 The variation or cessation provided for in paragraph 6 shall take effect from the date specified in the variation or cessation notice given to the licensee by the Authority.

8. With effect from the date of cessation referred to in paragraph 7, paragraphs 4 to 7 of this condition shall be suspended and shall cease to have effect in this licence, but the Authority may at any time thereafter give to the licensee a notice ending the suspension and providing for those paragraphs to have effect again in this licence with effect from the date specified in the notice.

Electricity Generation Standard Licence Conditions 24 September 2001        

Department of Trade and Industry

Condition 4. Payments by the Licensee to the Authority

1. The licensee shall, at the times stated, pay to the Authority such amounts as are determined by or under this condition.

2. In respect of each relevant year at the beginning of which the licensee holds this licence, the licensee shall pay to the Authority the aggregate of:

(a) an amount which is the relevant proportion of the estimated costs incurred by the Competition Commission in the previous relevant year in connection with any reference made to it with respect to the licence or any other electricity generation licence; and

(b) an amount which is the relevant proportion of the difference (being a positive or negative amount), if any, between:

(aa) any costs estimated by the Authority in the previous relevant year under sub-paragraph 2(a); and

(bb) the actual costs of the Competition Commission (in connection with that reference) for the relevant year prior to the previous relevant year.

3. The amounts determined in accordance with paragraph 2 shall be paid by the licensee to the Authority in one instalment being due for payment by 31 October in each year, provided that if the Authority has not given notice of the amount of the instalment at least 30 days before the payment date stated above, the licensee shall pay the amount due within 30 days from the actual giving of notice by the Authority to the licensee (whenever notice is given).

Electricity Generation Standard Licence Conditions 25 September 2001        

Department of Trade and Industry

4. When the licensee fails to pay the amount determined in accordance with paragraph 2 within 30 days of the due date set out in paragraph 3, it shall pay simple interest on the amount at the rate which is from time to time equivalent to the base rate of NatWest Bank plc or, if there is no such base rate, such base rate as the Authority may designate for the purposes hereof.

5. In this condition:

“estimated costs”	means costs estimated by the Authority as likely to be the costs incurred by the Competition Commission, such estimate having regard to the views of the Competition Commission.
“relevant proportion”	means the proportion of the costs attributable to the licensee in accordance with principles determined by the authority for the purposes of this condition generally and notified to the licensee.
“relevant year”	means a year beginning on 1 April of each calendar year and ending on 31 March of the following calendar year.

Electricity Generation Standard Licence Conditions 26 September 2001        

Department of Trade and Industry

PART II – SECTION B : GENERAL

Condition 5. Compliance with Grid Codes

1. The licensee shall comply with the requirements of every Grid Code in so far as applicable to it.

2. The Authority may (following consultation with the transmission company responsible for the relevant Grid Code) issue directions relieving the licensee of its obligation under paragraph 1 in respect of such parts of the relevant Grid Code and to such extent and subject to such conditions as may be specified in those directions.

Electricity Generation Standard Licence Conditions 27 September 2001        

Department of Trade and Industry

Condition 6. Compliance with Distribution Codes

1. The licensee shall comply with the provisions of every Distribution Code in so far as applicable to it.

2. The Authority may (following consultation with the licensed distributor responsible for any relevant Distribution Code and any authorised electricity operator directly affected thereby) issue directions relieving the licensee of its obligation under paragraph 1 in respect of such parts of any relevant Distribution Code and to such extent and subject to such conditions as may be specified in those directions.

Electricity Generation Standard Licence Conditions 28 September 2001        

Department of Trade and Industry

Condition 7. Security Arrangements

1. Insofar as the licensee shall construct or operate a generating station in England and Wales, the licensee shall comply with the provisions of the Fuel Security Code and such provisions shall have effect as if they were set out in this licence.

2. In this condition:

“Fuel Security Code” means the document of that title designated as such by the Secretary of State as from time to time amended.

Electricity Generation Standard Licence Conditions 29 September 2001        

Department of Trade and Industry

Condition 8. Pooling and Settlement Agreement Run-Off

1. Insofar as the licensee shall construct or operate a generating station in England and Wales, the licensee shall continue to be a party to and a pool member under, and shall comply with, the Pooling and Settlement Agreement for the purposes of run-off until the provisions of the BSC relating to run-off become effective.

2. This condition shall apply to the extent that the licensee was party to and a pool member under the Pooling and Settlement Agreement immediately prior to the effective time.

3. In this condition:

“effective time”	means the start of the first period for trading under the BSC as determined by the Secretary of State.
“run-off”	means the determination and settlement (including by way of reconciliation) of amounts due arising under or in connection with the Pooling and Settlement Agreement in relation to settlement periods up to and including the settlement period immediately prior to the effective time (including the resolution of disputes in respect thereof).

Electricity Generation Standard Licence Conditions 30 September 2001        

Department of Trade and Industry

Condition 9. Balancing and Settlement Code and NETA Implementation

1. Insofar as the licensee shall construct or operate a generating station in England and Wales, the licensee shall be a party to the BSC Framework Agreement and shall comply with the BSC.

2. The licensee shall comply with the programme implementation scheme established in accordance with paragraph 3, as modified from time to time in accordance with paragraph 5.

3. The programme implementation scheme is a scheme designated by the Secretary of State setting out the steps, including without limitation steps as to the matters referred to in paragraph 4, to be taken (or procured) by the licensee (and/or by authorised electricity operators) which are, in the Secretary of State’s opinion, appropriate in order to give full and timely effect to:

(a) any modifications made to this licence and to the licences of authorised electricity operators by the Secretary of State pursuant to the power vested in him under section 15A of the Act;

(b) any conditions imposed by any exemption from the requirement to hold any such licence; and

(c) the matters envisaged by such modifications and conditions.

4. The programme implementation scheme may include provisions, inter alia,

(a) to secure or facilitate the amendment of any of the core industry documents;

Electricity Generation Standard Licence Conditions 31 September 2001        

Department of Trade and Industry

(b) to secure that any systems, persons or other resources employed in the implementation of the Pooling and Settlement Agreement may be employed in the implementation of the BSC;

(c) for the giving of the indemnities against liabilities to which parties to the Pooling and Settlement Agreement may be exposed;

(d) for securing the co-ordinated and effective commencement of implementation of and operations under the BSC, including the testing, trialling and start-up of the systems, processes and procedures employed in such implementation and employed by authorised electricity operators and others in connection with such operations;

(e) for co-ordinating the administration and implementation of the BSC and the administration of the Pooling and Settlement Agreement;

(f) for the licensee to refer to the Authority for determination, whether of its own motion or as provided in the programme implementation scheme, disputes, as to matters covered by the scheme, between persons who are required (by conditions of their licences or exemptions) or who have agreed to comply with the scheme or any part of it; and

(g) for the Authority, in the circumstances set out in the scheme, to require that consideration be given to the making of a proposal to modify the BSC and, if so, to require the making of such proposal in the manner set out in the scheme, such power to be exercisable at any time within the period of 12 months after the effective time (as defined in standard condition 8 (Pooling and Settlement Run-Off)).

Electricity Generation Standard Licence Conditions 32 September 2001        

Department of Trade and Industry

5. The Secretary of State:

(a) may at any time direct, in accordance with the provisions of the programme implementation scheme, that the programme implementation scheme be modified in the manner set out in such direction, in order to give (or continue to give) full and timely effect to the matters described in paragraph 3.

(b) shall serve a copy of any such direction on the licensee, and thereupon the licensee shall comply with the scheme as modified by the direction.

6. If there is any conflict between the requirements contained in the programme implementation scheme pursuant to paragraph 4(a) and/or imposed on the licensee by paragraphs 2 and 5 of this condition, and those imposed on the licensee by any other condition, the provisions of paragraphs 4(a), 2 and/or 5 (as appropriate) shall prevail.

7. Without prejudice to paragraph 2, the licensee shall use all reasonable endeavours to do such things as may be requisite and necessary in order to give full and timely effect to the modifications made to this licence as determined by the Secretary of State pursuant to the power vested in him under section 15A of the Act (and to give full and timely effect to the matters envisaged by such modifications).

8. In this condition:

“BSC”	means the Balancing and Settlement Code required to be in place, pursuant to the transmission licence granted to the transmission company in England and Wales, as from time to time modified.
“BSC Framework Agreement”	means the agreement of that title, in the form approved by the Secretary of State, by which the BSC is made contractually binding between the parties to that agreement, as from time to time amended with the consent of the Secretary of State.

Electricity Generation Standard Licence Conditions 33 September 2001        

Department of Trade and Industry

“core industry documents”	mean those documents which:
	(a)	in the Secretary of State’s opinion are central industry documents associated with the activities of the licensee and authorised electricity operators, the subject matter of which relates to or is connected with the BSC or the Balancing and Settlement arrangements, and
	(b)	have been so designated by the Secretary of State.

Electricity Generation Standard Licence Conditions 34 September 2001        

Department of Trade and Industry

Condition 10. Change Co-ordination for NETA

1. Insofar as the licensee shall construct or operate a generating station in England and Wales, the licensee shall take all reasonable measures to secure and implement (consistently with the procedures applicable under or in relation to the core industry documents to which it is party (or in relation to which it holds rights in respect of amendment), as modified or replaced from time to time), and shall not take any steps to prevent or unduly delay, changes to those documents, such changes being changes which are appropriate in order to give full and timely effect to and/or in consequence of any modification which has been made to the BSC.

2. For the purposes of paragraph 1, core industry documents has the meaning given in paragraph 8 of standard condition 9 (Balancing and Settlement Code and NETA Implementation).

Electricity Generation Standard Licence Conditions 35 September 2001        

Department of Trade and Industry

Condition 11. Ancillary Services

1. The licensee shall from time to time upon request by any transmission company offer terms for the provision by the licensee of ancillary services from any operating generation set of the licensee.

2. The licensee shall at any time upon request of the Authority provide to the Authority a report containing details of:

(a) prices offered pursuant to paragraph 1 for the provision of ancillary services from each generation set of the licensee; and

(b) an explanation of the factors justifying the prices offered including (without limitation) details of the licensee’s costs associated with making available such ancillary services in conformity with the applicable Grid Code and of providing the same to the transmission company responsible for the relevant Grid Code.

Electricity Generation Standard Licence Conditions 36 September 2001        

Department of Trade and Industry

Condition 12. Change Co-ordination for the Utilities Act 2000

1. The licensee shall take all reasonable measures to secure and implement, and shall not take any steps to prevent or unduly delay, such changes to the industry framework documents as are necessary or expedient to give full and timely effect to the provisions of the Utilities Act 2000.

2. In complying with paragraph 1, the licensee shall act in the case of each industry framework document consistently with the change procedures currently applicable to that document, except where to do so would be inconsistent with any provision of the Utilities Act 2000, in which event that provision shall take precedence.

3. For the purposes of this condition, “industry framework document” means, subject to paragraph 4, any of the following documents to which the licensee is a party, or in relation to which it holds rights in respect of amendment or termination, together with any documents which are supplemental or ancillary thereto:

(a) the Pooling and Settlement Agreement;

(b) the Balancing and Settlement Code;

(c) the Master Connection and Use of System Agreement or the Connection and Use of System Code;

(d) the Settlement Agreement for Scotland;

(e) the Master Registration Agreement;

(f) the Data Transfer Services Agreement;

(g) the Radio Teleswitch Agreement;

(h) any Grid Code;

(i) any Distribution Code;

(j) the Trading Code;

Electricity Generation Standard Licence Conditions 37 September 2001        

Department of Trade and Industry

(k) the Fuel Security Code;

(l) any agreement for use of an interconnector or Scottish interconnection; and

(m) any agreement for the provision of distribution use of system, meter provision services, meter maintenance services, data retrieval services, data processing services, data aggregation services, or prepayment meter services.

4. Where the Authority considers that the list of industry framework documents set out in paragraph 3 should be modified for the purposes of this condition generally, the licensee shall discuss any proposed modification (including addition) to the list in good faith and use all reasonable endeavours to agree such modification with the Authority.

5. This condition shall cease to have effect on 30 June 2002 or such earlier date as the Authority may specify in a direction given for the purposes of this condition generally.

Electricity Generation Standard Licence Conditions 38 September 2001        

Department of Trade and Industry

Condition 13. Provision of Information to the Authority

1. Subject to paragraphs 2 and 4, the licensee shall furnish to the Authority, in such manner and at such times as the Authority may reasonably require, such information and shall procure and furnish to it such reports, as the Authority may reasonably require or as may be necessary for the purpose of performing:

(a) the functions conferred on it by or under the Act; and

(b) any functions transferred to or conferred on it by or under the Utilities Act 2000.

2. The licensee shall not be required by the Authority to furnish it under this condition with information for the purpose of the exercise of its functions under section 47 of the Act.

3. The licensee shall, if so requested by the Authority, give reasoned comments on the accuracy and text of any information or advice (so far as relating to its activities as holder of an electricity generation licence) which the Authority proposes to publish pursuant to section 48 of the Act.

4. This condition shall not require the licensee to produce any documents or give any information which it could not be compelled to produce or give in evidence in civil proceedings before a court.

5. The power of the Authority to call for information under paragraph 1 is in addition to the power of the Authority to call for information under or pursuant to any other condition. There shall be a presumption that the provision of information in accordance with any other condition is sufficient for the purposes of that condition, but that

Electricity Generation Standard Licence Conditions 39 September 2001        

Department of Trade and Industry

presumption shall be rebutted, if the Authority states in writing that in its opinion such further information is, or is likely to be, necessary to enable it to exercise functions under the condition in question.

6. Except where the licensee has Section C in effect in its licence, prior to the licensee commencing:

(a) the construction or operation of a generating station in Scotland; or

(b) the construction or operation of a nuclear generating station;

the licensee shall notify the Authority in writing of such proposed construction or operation, such notification to include the size and location of the proposed construction or operation.

Electricity Generation Standard Licence Conditions 40 September 2001        

Department of Trade and Industry

Condition 14. Compulsory Acquisition of Land etc

1. Where the Secretary of State provides, by a scheme made under Schedule 7 to the Utilities Act 2000, for this condition to have effect within this licence, the provisions contained in paragraphs 5 to 7 shall apply to the licensee from the date the said scheme takes effect until such date as may be specified for that purpose in the said scheme. The Authority may from time to time direct that such a period is extended.

2. The Authority may issue a direction providing that the provisions of paragraphs 5 to 7 shall have effect in this licence. Where the Authority has issued to the licensee a direction, paragraphs 5 to 7 shall have effect within the licence from the date specified in the Authority’s direction until the end of the period specified in the Authority’s direction (unless extended by a direction of the Authority).

3. Until:

(a) the Secretary of State provides, by a scheme made under Schedule 7 to the Utilities Act 2000, for this condition to have effect within this licence; or

(b) the Authority has issued to the licensee a direction for the purposes of this condition,

the provisions contained in paragraphs 5 to 7 shall not have effect within this licence.

4. A direction pursuant to paragraph 1 or 2 may be issued at any time from the date the Secretary of State determines these standard conditions pursuant to sub-section 33(1) of the Utilities Act 2000.

5. The powers and rights conferred by or under the provisions of Schedule 3 to the Act (Compulsory Acquisition of Land etc. by Licence Holders) shall have effect (in respect of the licensee) for the purposes set out in paragraph 6 below.

Electricity Generation Standard Licence Conditions 41 September 2001        

Department of Trade and Industry

6. The purposes referred to in paragraph 5 above are:

(a) the construction or extension of a generating station;

(b) activities connected with the construction or extension of a generating station or connected with the operation of a generating station; and

(c) the installation, maintenance, removal or replacement of electric lines, and electrical plant associated with them, connecting a generating station with:

(i) a transmission system; or

(ii) a distribution system.

7. In paragraph 6 above:

(a) the references to “generating station” are to an electricity generating station which

(i) has, or will have when its construction or extension is completed, a capacity of not less than 50 megawatts or such other capacity as may be specified in relation thereto by order of the Secretary of State under section 36(3) of the Act; and

(ii) is, or will be when its extension or construction is completed, operated by or for the licensee; and

(b) “extension” in relation to a generating station includes the use by the person operating the station of any land (wherever situated) for a purpose directly related to the generation of electricity by that station.

Electricity Generation Standard Licence Conditions 42 September 2001        

Department of Trade and Industry

Condition 15. Other Powers etc.

1. Where the Secretary of State provides, by a scheme made under Schedule 7 to the Utilities Act 2000, for this condition to have effect within this licence, the provisions contained in paragraphs 5 to 8 shall apply to the licensee from the date the said scheme takes effect until such date as may be specified for that purpose in the said scheme. The Authority may from time to time direct that such a period is extended.

2. The Authority may issue a direction providing that the provisions of paragraphs 5 to 8 shall have effect in this licence. Where the Authority has issued to the licensee a direction, paragraphs 5 to 8 shall have effect within the licence from the date specified in the Authority’s direction until the end of the period specified in the Authority’s direction (unless extended by a direction of the Authority).

3. Until:

(a) the Secretary of State provides, by a scheme made under Schedule 7 to the Utilities Act 2000, for this condition to have effect within this licence; or

(b) the Authority has issued to the licensee a direction for the purposes of this condition,

the provisions contained in paragraphs 5 to 8 shall not have effect within this licence.

4. A direction pursuant to paragraph 1 or 2 may be issued at any time from the date the Secretary of State determines these standard conditions pursuant to sub-section 33(1) of the Utilities Act 2000.

5. The powers and rights conferred by or under the provisions of Schedule 4 to the Act (Other Powers etc. of Licence Holders) shall, subject to paragraph 6 below, have effect to enable the licensee to carry on its authorised activities:

Electricity Generation Standard Licence Conditions 43 September 2001        

Department of Trade and Industry

(a) in relation to, or in pursuance of, the installation, inspection, maintenance, adjustment, repair, alteration, replacement and removal of:

(i) electric lines specified in paragraph 6 below;

(ii) electrical plant associated with such lines; and

(iii) any structures for housing or covering such lines or plant;

(b) in relation to the installation of electrical plant to be used in connection with a generating station or the operation thereof;

(c) in relation to electric lines or electrical plant as if the references to them in Schedule 4 to the Act included pipes for conveying directly to consumers’ premises heat produced in association with electricity and steam produced from air and water heated by such heat and associated works in relation to such pipes and as if “associated works” had the meaning given in section 10(3) of the Act.

6. Electric lines are specified for the purposes of sub-paragraph (a) of paragraph 5 above:

(a) if they connect, or will connect when installed, a generating station with:

a transmission system; or

any distribution system

(b) where “electric lines” has the extended meaning given by paragraph 5(c) above, if they connect a generating station with any premises.

Electricity Generation Standard Licence Conditions 44 September 2001        

Department of Trade and Industry

7. Paragraph 10 of Schedule 4 to the Act shall apply to the licensee if:

(a) it wishes to exercise its rights of entry on land for the purpose of establishing whether or not the land is suitable for the construction or extension of a generating station; and

(b) it obtains the consent of the Authority before exercising those rights.

8. In this condition:

“authorised activities”	means the activities which the licensee is authorised by the licence to carry on, and shall include any purpose connected with the supply to any premises of heat produced in association with electricity and steam produced from air and water heated by such heat.
“generating station”	has the meaning given in paragraph 7 of standard condition 14 (Compulsory Acquisition of Land etc).
“extension”	in relation to a generating station, has the meaning given in paragraph 7 of standard condition 14 (Compulsory Acquisition of Land etc).

Electricity Generation Standard Licence Conditions 45 September 2001        

Department of Trade and Industry

Condition 16. Regulatory Accounts

1. Where the Secretary of State provides, by a scheme made under Schedule 7 to the Utilities Act 2000, for this condition to have effect within this licence, the licensee shall be obliged to comply with the requirements of the provisions contained in paragraphs 5 to 14 from the date the said scheme takes effect.

2. The Authority may issue a direction providing that the provisions of paragraphs 5 to 13 shall have effect in this licence. Where the Authority has issued to the licensee a direction, paragraphs 5 to 14 shall have effect within the licence from the date specified in the Authority’s direction and the licensee shall be obliged to comply with the requirements of the provisions contained in those paragraphs from the date specified in the Authority’s direction.

3. Until:

(a) the Secretary of State provides, by a scheme made under Schedule 7 to the Utilities Act 2000, for this condition to have effect within this licence; or

(b) the Authority has issued to the licensee a direction for the purposes of this condition,

the provisions contained in paragraphs 5 to 14 shall not have effect within this licence and the licensee shall not be obliged to comply with any of the requirements of such paragraphs.

4. A direction pursuant to paragraph 2 may be issued at any time from the date the Secretary of State determines these standard conditions pursuant to sub-section 33(1) of the Utilities Act 2000.

Electricity Generation Standard Licence Conditions 46 September 2001        

Department of Trade and Industry

5. The following paragraphs of this condition apply for the purpose of ensuring that the licensee (and any affiliate or related undertaking) maintains accounting and reporting arrangements which enable regulatory accounts to be prepared for each separate business and showing the financial affairs of each such separate business.

6. Unless the Authority otherwise consents (such consent may be given in relation to some or all of the obligations in this condition and may be given subject to such conditions as the Authority considers appropriate), the licensee shall in respect of each separate business:

(a) keep or cause to be kept for the period referred to in section 222(5)(b) of the Companies Act 1985 and in the manner referred to in that section such accounting records in respect of each separate business as would by section 221 of the Companies Act 1985 be required to be kept in respect of each such business if it were carried on by a separate company, so that the revenues, costs, assets, liabilities, reserves and provisions of, or reasonably attributable to, each separate business are separately identifiable in the accounting records of the licensee (and any affiliate or related undertaking) from those of any other business of the licensee; and

(b) prepare on a consistent basis from such accounting records in respect of:

(i) each financial year, accounting statements comprising a profit and loss account, a statement of total recognised gains and losses, a balance sheet, and a cash flow statement, together with notes thereto, and showing separately in respect of each separate business and in appropriate detail the amounts of any revenue, cost, asset, liability, reserve or provision which has been either:

(aa) charged from or to any other business (whether or not a separate business) together with a description of the basis of that charge; or

Electricity Generation Standard Licence Conditions 47 September 2001        

Department of Trade and Industry

(bb) determined by apportionment or allocation between any separate business and any other business (whether or not a separate business) together with a description of the basis of the apportionment or allocation;

(ii) the first six months of each financial year, an interim profit and loss account; and

(iii) each financial year, sufficient accounting information in respect of each separate business to allow the preparation of consolidated accounting statements for each separate business of the licensee or, where applicable, the ultimate holding company of the licensee. Such information shall include a profit and loss account, a statement of total recognised gains and losses, a balance sheet, and a cash flow statement together with notes thereto;

(c) procure, in respect of the accounting statements prepared in accordance with this condition in respect of each financial year, a report by the auditors and addressed to the Authority stating whether in their opinion those statements have been properly prepared in accordance with this condition and give a true and fair view of the revenues, costs, assets, liabilities, reserves and provisions of, or reasonably attributable to, the separate business to which the statements relate; and

(d) deliver to the Authority a copy of the account referred to in sub-paragraph (b)(ii), the auditors’ report referred to in sub-paragraph (c), the accounting statements referred to in sub-paragraph (b)(i) and accounting information

Electricity Generation Standard Licence Conditions 48 September 2001        

Department of Trade and Industry

referred to in sub-paragraph b(iii), as soon as reasonably practicable, and in any event not later than three months after the end of the period to which it relates in the case of the account referred to in sub-paragraph (b)(ii) and six months after the end of the financial year to which they relate in the case of the accounting statements, auditors’ report and accounting information referred to in sub-paragraphs (b)(i), b(iii) and (c),

provided always that the obligations set out in this paragraph shall not apply where they have already been discharged by the licensee in respect of each separate business pursuant to any other licence.

7. Unless the Authority so specifies in directions issued for the purposes of this condition, or with the Authority’s prior written approval, the licensee shall not in relation to the accounting statements in respect of a financial year change the bases of charge or apportionment or allocation referred to in sub-paragraph 6(b)(i) from those applied in respect of the previous financial year.

8. Where, in relation to the accounting statements in respect of a financial year, the licensee has changed such bases of charge or apportionment or allocation from those adopted for the immediately preceding financial year, the licensee shall, if so directed in directions issued by the Authority, in addition to preparing accounting statements on those bases which it has adopted, prepare such accounting statements on the bases which applied in respect of the immediately preceding financial year.

9. Accounting statements and information in respect of a financial year prepared under sub-paragraphs 6(b)(i) and 6(b)(iii) shall, so far as reasonably practicable and unless otherwise approved by the Authority having regard to the purposes of this condition:

(a) have the same content and format (in relation to each separate business) as the statutory accounts of the licensee prepared under section 226 and, where appropriate, section 227 of the Companies Act 1985 and conform to the best commercial

Electricity Generation Standard Licence Conditions 49 September 2001        

Department of Trade and Industry

accounting practices including all relevant accounting standards issued or adopted by the Accounting Standards Board currently in force;

(b) state the accounting policies adopted; and

(c) with the exception of the part of such statements and information which shows separately the amounts charged, apportioned or allocated and describes the bases of charge or apportionment or allocation respectively, be published with the statutory accounts of the licensee.

10. Unless the accounting statements and information prepared under sub-paragraph 6(b)(i) and 6(b)(iii) are prepared on the current cost basis as provided by the alternative accounting rules, the licensee shall, unless otherwise agreed by the Authority, in addition to preparing those accounting statements under that paragraph, prepare accounting statements for each separate business covering the same period, which shall comprise and show separately:

(a) a profit and loss account, a statement of total recognised gains and losses, a balance sheet, and a cash flow statement together with notes thereto, which shall:

(i) include in respect of current costs assets amounts determined on the current cost basis as provided by the alternative accounting rules; and

Electricity Generation Standard Licence Conditions 50 September 2001        

Department of Trade and Industry

(ii) show or disclose the information and other matters required by the alternative accounting rules to be shown or disclosed in accounts where the amounts included in respect of assets covered by any items shown in those accounts have been determined on any basis mentioned in paragraph 31 of section C of Part II of Schedule 4 to the Companies Act 1985;

(b) in respect of each separate business the adjusted amount of any such provision for depreciation as is referred to in paragraph 32(2) of section C of Part II of Schedule 4 to the Companies Act 1985 and the items shown in the profit and loss account of the separate business for the relevant period which are affected by the determination of amounts on the current cost basis as provided by the alternative accounting rules, including the profit (or loss) before taxation; and

(c) such other current cost information as is referred to in the handbook as the Authority may reasonably require;

and shall deliver the same, together with an auditors’ report prepared in relation to the current cost basis accounting statements in the form referred to in sub-paragraph 6(c), to the Authority within the time limit referred to in sub-paragraph 6(d), and shall (with the exception of the part of such statements and information which shows separately the amounts charged, apportioned or allocated and describes the bases of charge or apportionment or allocation respectively) publish the same with the statutory accounts of the licensee.

11. References in this condition to costs or liabilities of, or reasonably attributable to, any separate business shall be construed as excluding taxation and capital liabilities which do not relate principally to a particular separate business, and interest thereon; and references to any profit and loss account shall be construed accordingly.

Electricity Generation Standard Licence Conditions 51 September 2001        

Department of Trade and Industry

12. Without prejudice to paragraph 5 of the terms of this licence, references in this condition to sections of the Companies Act 1985 are references to those provisions as amended, substituted or inserted by the relevant provisions of the Companies Act 1989 and if such provisions of the Companies Act 1989 are not in force at the date of the grant of this licence shall be construed as if such provisions were in force at such date.

13. For the purposes of paragraph 10:

“alternative accounting rules”	means the rules set out in section C of Part II of Schedule 4 to the Companies Act 1985.
“current costs assets”	means assets of any description mentioned in paragraph 31 of section C of Part II of Schedule 4 to the Companies Act 1985.
“the handbook”	means the handbook issued by the Accounting Standards Committee of the Consultative Committee of Accounting Bodies (CCAB Limited) or any successor body entitled “Accounting for the effects of changing prices: a handbook” in its current edition for the time being or in the event that no such handbook shall be in issue such guidance or publication as may be issued in replacement or substitution therefor.

Electricity Generation Standard Licence Conditions 52 September 2001        

Department of Trade and Industry

14. For the purposes of this condition:

“regulatory accounts” means the accounts required to be prepared by the licensee pursuant to this condition.

Electricity Generation Standard Licence Conditions 53 September 2001        

Department of Trade and Industry

Condition 16A. Change of Financial Year

1. The application of this condition is subject to the provisions of paragraphs 1 to 5 of standard condition 16 (Regulatory Accounts). Until the issue of a direction by the Authority under paragraphs 2 to 4 of standard condition 16 (Regulatory Accounts), paragraphs 2 to 7 of this condition shall not have effect within the licence.

2. The definition of “financial year” in standard condition 1 (Definitions and Interpretation) shall, for the purpose only of the statutory accounts of the licensee, cease to apply to the licensee from the date the licensee sends a notice to the Authority for that purpose.

3. Such notice:

(a) shall specify the date from which, for the purpose set out at paragraph 1, the current and subsequent financial years of the licensee shall run; and

(b) shall continue in effect until revoked by the licensee issuing a further notice.

4. While the notice continues in effect the licensee shall procure the preparation of and shall deliver to the Authority audited group accounts for its group of companies for each financial year.

5. Audited group accounts produced in accordance with paragraph 4:

(a) shall comprise consolidated group accounts in respect of the group of companies;

(b) shall, save insofar as is necessary to reflect a different financial year, have the same form and content as the statutory accounts of the licensee;

Electricity Generation Standard Licence Conditions 54 September 2001        

Department of Trade and Industry

(c) shall be accompanied by a report by the auditors and addressed to the Authority stating whether in their opinion the audited group accounts have been properly prepared in accordance with this condition and give a true and fair view of the state of affairs of the group of companies and of its profits or losses, total recognised gains or losses and cash flows during the financial year;

(d) may, with the prior written consent of the Authority, omit or provide in a different form, specified in the consent, such information as may be specified in the consent; and

(e) shall clearly disclose any differences between the accounting policies underlying the preparation of the statutory accounts of the licensee and the accounting policies underlying the preparation of the audited group accounts.

6. The licensee may, for the purpose only of its statutory accounts, change its financial year from that previously notified by sending to the Authority a new notice pursuant to paragraph 2. Where the licensee sends the Authority a new notice the previous notice shall be revoked, as provided by sub-paragraph 3(b). The licensee’s financial year-end will change with effect from the date specified in the new notice. The new notice shall specify the licensee’s new financial year-end.

Electricity Generation Standard Licence Conditions 55 September 2001        

Department of Trade and Industry

7. No provisions of this condition shall apply to the financial year of the licensee as defined in standard condition 1 (Definitions and Interpretation) for the purpose of accounts produced in compliance with standard condition 16 (Regulatory Accounts). No provisions of this condition shall affect the licensee’s obligations in respect of payment of licence fees under standard condition 4 (Payments by the Licensee to the Authority).

Electricity Generation Standard Licence Conditions 56 September 2001        

Department of Trade and Industry

Condition 17. Prohibition of Discrimination in Selling Electricity

1. Where the Secretary of State provides, by a scheme made under Schedule 7 to the Utilities Act 2000, for this condition to have effect within this licence, the licensee shall be obliged to comply with the requirements of the provisions contained in paragraphs 6 to 13 from the date the said scheme takes effect.

2. Subject to paragraph 3, the Authority may issue a direction providing that paragraphs 6 to 13 shall have effect in this licence. Where the Authority has issued to the licensee a direction, paragraphs 6 to 13 shall have effect within the licence from the date specified in the Authority’s direction and the licensee shall be obliged to comply with the requirements of the provisions contained in those paragraphs from that date.

3. Where -

(a) the Authority has consented to a disapplication request pursuant to paragraph 10; or

(b) the licensee has issued a termination notice pursuant to paragraph 12 or 13,

the Authority shall not thereafter issue a direction pursuant to paragraph 2 to the licensee in respect of the paragraphs to which the termination notice relates until -

(i) at least 12 months have elapsed since the date of the termination notice, and

(ii) the Authority is of the opinion that circumstances have changed in a material respect.

Electricity Generation Standard Licence Conditions 57 September 2001        

Department of Trade and Industry

4. Until:

(a) the Secretary of State provides, by a scheme made under Schedule 7 to the Utilities Act 2000, for this condition to have effect within this licence; or

(b) the Authority has issued to the licensee a direction pursuant to paragraph 2,

the provisions contained in paragraphs 6 to 13 shall not have effect within this licence and the licensee shall not be obliged to comply with any of the requirements of those paragraphs.

5. A direction pursuant to paragraph 2 may be issued at any time from the date the Secretary of State determines these standard conditions pursuant to sub-section 33(1) of the Utilities Act 2000.

6. The licensee shall not, and shall procure that any affiliate or related undertaking of the licensee shall not, sell or offer to sell electricity to any one purchaser or person seeking to become a purchaser on terms as to price which are materially more or less favourable than those on which it sells or offers to sell electricity to comparable wholesale purchasers. For these purposes regard shall be had to the circumstances of the sale to such purchasers including (without limitation) volumes, load factors, conditions of interruptibility and the dates and duration of the relevant agreements.

7. For the purposes of paragraph 6, references to selling or sale of electricity

(a) do not include sale by way of supply to premises; and

(b) include entering into or disposing of the benefit of a contract, which has (or taken together with any other arrangement has) the commercial effect of selling electricity, by conferring rights or obligations (including rights or obligations by way of

Electricity Generation Standard Licence Conditions 58 September 2001        

Department of Trade and Industry

option) in relation to or by reference to the sale, purchase or delivery of electricity at any time or the price at which electricity is sold or purchased at any time, and purchaser, purchasing and purchase shall be construed accordingly.

8. For the purposes of paragraph 6 of this condition, there shall be disregarded:

(a) NFFO qualifying arrangements and Scottish Renewables Obligation; and

(b) any contract for the supply of electricity (as from time to time amended on or before 30 September 1990 in accordance with its terms or to reflect changed circumstances involving the restructuring of the industry) vested in the licensee under the transfer scheme.

9. A licensee, in whose licence this condition has effect, may make a disapplication request in writing to the Authority. The disapplication request shall specify the paragraphs of this condition to which the request relates and shall state the date (“the disapplication date”, being a date not less than 18 months after the date of delivery of the request) from which the licensee wishes the Authority to agree that the specified paragraphs (or the specified part or parts thereof) shall cease to have effect.

10. Paragraphs 6 to 13 of this condition shall cease to have effect from the date specified in the disapplication request or such later date as may be agreed, if the licensee delivers to the Authority a disapplication request made in accordance with paragraph 9 and the Authority agrees in writing to the disapplication request.

11. Save where the Authority otherwise agrees, no further disapplication request pursuant to paragraph 9 may be served within the 12 months following the date on which a report is delivered by the Competition Commission following a reference under paragraph 12 where the report of the Competition Commission did not entitle the licensee to deliver a notice to the Authority under paragraph 13.

Electricity Generation Standard Licence Conditions 59 September 2001        

Department of Trade and Industry

12. If the Authority has not made a reference to the Competition Commission in respect of this licence under section 12 of the Act relating to the modification of this licence by the removal of the paragraphs specified in the disapplication request before the beginning of the period of 12 months which will end with the disapplication date, the licensee may deliver a termination notice to the Authority. Following the service of a termination notice, with effect from the disapplication date or such later date as may be specified in the termination notice such of the paragraphs as are specified in the disapplication request shall cease to have effect in this licence.

13. If the Competition Commission makes a report on a reference in respect of this licence made by the Authority relating to the modification of this licence by the removal of the paragraphs specified in the disapplication request and such report does not include a conclusion that the removal of such paragraphs operates or may be expected to operate against the public interest, the licensee may within 30 days after the publication of the report by the Authority in accordance with section 13 of the Act deliver a termination notice to the Authority. With effect from the disapplication date or such later date as may be specified in the termination notice such paragraphs as are specified in the disapplication request and in respect of which the Competition Commission report does not include the aforementioned conclusion shall cease to have effect in this licence.

Electricity Generation Standard Licence Conditions 60 September 2001        

Department of Trade and Industry

Condition 17A. Prohibition of Cross-Subsidies

1. Where the Secretary of State provides, by a scheme made under Schedule 7 to the Utilities Act 2000, for this condition to have effect within this licence, the licensee shall be obliged to comply with the requirements of the provisions contained in paragraphs 6 to 12 from the date the said scheme takes effect.

2. Subject to paragraph 3, the Authority may issue a direction providing that paragraphs 6 to 12 shall have effect in this licence. Where the Authority has issued to the licensee a direction, paragraphs 6 to 12 shall have effect within the licence from the date specified in the Authority’s direction and the licensee shall be obliged to comply with the requirements of the provisions contained in those paragraphs from that date.

3. Where -

(a) the Authority has consented to a disapplication request pursuant to paragraph 9; or

(b) the licensee has issued a termination notice pursuant to paragraph 11 or 12,

the Authority shall not thereafter issue a direction pursuant to paragraph 2 to the licensee in respect of the paragraphs to which the termination notice relates until -

(i) at least 12 months have elapsed since the date of the termination notice, and

(ii) the Authority is of the opinion that circumstances have changed in a material respect.

Electricity Generation Standard Licence Conditions 61 September 2001        

Department of Trade and Industry

4. Until:

(a) the Secretary of State provides, by a scheme made under Schedule 7 to the Utilities Act 2000, for this condition to have effect within this licence; or

(b) the Authority has issued to the licensee a direction pursuant to paragraph 2,

the provisions contained in paragraphs 6 to 12 shall not have effect within this licence and the licensee shall not be obliged to comply with any of the requirements of those paragraphs.

5. A direction pursuant to paragraph 2 may be issued at any time from the date the Secretary of State determines these standard conditions pursuant to sub-section 33(1) of the Utilities Act 2000.

6. The licensee shall procure that the generation business shall not give any cross-subsidy to, or receive any cross-subsidy from, any other business of the licensee or an affiliate or related undertaking of the licensee.

7. For the purposes of paragraphs 6 of this condition, there shall be disregarded:

(a) NFFO qualifying arrangements and Scottish Renewables Obligations; and

(b) any contract for the supply of electricity (as from time to time amended on or before 30 September 1990 in accordance with its terms or to reflect changed circumstances involving the restructuring of the industry) vested in the licensee under the transfer scheme.

8. A licensee, in whose licence this condition has effect, may make a disapplication request in writing to the Authority.

Electricity Generation Standard Licence Conditions 62 September 2001        

Department of Trade and Industry

The disapplication request shall specify the paragraphs of this condition to which the request relates and shall state the date (“the disapplication date”, being a date not less than 18 months after the date of delivery of the request) from which the licensee wishes the Authority to agree that the specified paragraphs shall cease to have effect.

9. Paragraphs 6 to 12 of this condition shall cease to have effect from the date specified in the disapplication request or such later date as may be agreed, if the licensee delivers to the Authority a disapplication request made in accordance with paragraph 8 and the Authority agrees in writing to the disapplication request.

10. Save where the Authority otherwise agrees, no further disapplication request pursuant to paragraph 8 may be served within the 12 months following the date on which a report is delivered by the Competition Commission following a reference under paragraph 11 where the report of the Competition Commission did not entitle the licensee to deliver a notice to the Authority under paragraph 12.

11 If the Authority has not made a reference to the Competition Commission in respect of this licence under section 12 of the Act relating to the modification of this licence by the removal of the paragraphs specified in the disapplication request before the beginning of the period of 12 months which will end with the disapplication date, the licensee may deliver a termination notice to the Authority. Following the service of a termination notice, with effect from the disapplication date or such later date as may be specified in the termination notice such of the paragraphs as are specified in the disapplication request shall cease to have effect in this licence.

12 If the Competition Commission makes a report on a reference in respect of this licence made by the Authority relating to the modification of this licence by the removal of the paragraphs specified in the disapplication request and such report does not include a conclusion that the removal of such paragraphs operates or may be

Electricity Generation Standard Licence Conditions 63 September 2001        

Department of Trade and Industry

expected to operate against the public interest, the licensee may within 30 days after the publication of the report by the Authority in accordance with section 13 of the Act deliver a termination notice to the Authority. With effect from the disapplication date or such later date as may be specified in the termination notice such paragraphs as are specified in the disapplication request and in respect of which the Competition Commission report does not include the aforementioned conclusion shall cease to have effect in this licence.

Electricity Generation Standard Licence Conditions 64 September 2001        

Department of Trade and Industry

Condition 18. Generating Unit Availability

1. Where the Secretary of State provides, by a scheme made under Schedule 7 to the Utilities Act 2000, for this condition to have effect within this licence, the licensee shall be obliged to comply with the requirements of the provisions contained in paragraph 7 to 17 from the date the said scheme takes effect.

2. Subject to paragraph 3, the Authority may issue a direction providing that paragraphs 7 to 17 shall have effect in this licence. Where the Authority has issued to the licensee a direction, paragraphs 7 to 17 shall have effect within the licence from the date specified in the Authority’s direction and the licensee shall be obliged to comply with the requirements of the provisions contained in those paragraphs from that date.

3. Where -

(a) the Authority has consented to a disapplication request pursuant to paragraph 13; or

(b) the licensee has issued a termination notice pursuant to paragraph 15 or 16,

the Authority shall not thereafter issue a direction pursuant to paragraph 2 to the licensee in respect of the paragraphs (or any part or parts thereof) to which the termination notice relates until -

(i) at least 12 months have elapsed since the date of the termination notice, and

(ii) the Authority is of the opinion that circumstances have changed in a material respect.

Electricity Generation Standard Licence Conditions 65 September 2001        

Department of Trade and Industry

4. Until:

(a) the Secretary of State provides, by a scheme made under Schedule 7 to the Utilities Act 2000, for this condition to have effect within this licence; or

(b) the Authority has issued to the licensee a direction for the purposes of this condition,

the provisions contained in paragraphs 7 to 17 shall not have effect within this licence and the licensee shall not be obliged to comply with any of the requirements of such paragraphs.

5. Where the Authority has issued to the licensee a direction pursuant to paragraph 2, the provisions contained in paragraphs 7 to 17 shall be deemed to have effect within the licence and shall apply to the licensee from the date specified in the Authority’s direction.

6. A direction pursuant to paragraph 2 may be issued at any time from the date the Secretary of State determines these standard conditions pursuant to sub-section 33(1) of the Utilities Act 2000.

7. The purpose of this condition is to enable the Authority to keep under review the behaviour of the licensee to ascertain whether the licensee is pursuing a course of conduct in making or declining (whether temporarily or permanently) to make available generating units owned or operated by the licensee which is intended to have or is likely to have the effect of restricting, distorting or preventing competition in the generation or supply of electricity.

8. The licensee shall within 2 months of the Authority’s direction under paragraph 2 prepare a statement, for approval

Electricity Generation Standard Licence Conditions 66 September 2001        

Department of Trade and Industry

as to form by the Authority, specifying in reasonable detail the criteria upon which the licensee will, for the purpose of planning the availability of generating units:

(a) determine its policy regarding the closure, whether permanent or temporary, of any generating units; and

(b) determine its policy regarding the reduction in capacity of any generating units,

9. (a)  Where the licensee is required, pursuant to any Grid Code, to provide information to a transmission company relating to planned availability of any generating unit operated by the licensee, then, where applicable, in respect of each planned availability period, as soon as is reasonably practicable and in any event no later than 2 months from the end of the planned availability period in question, the licensee shall provide the Authority with a statement setting out in reasonable detail the information specified in sub-paragraph (b).

(b) The information referred to in sub-paragraph (a) shall, in respect of each generating unit involved, comprise the following:

(i) details of any material differences between the actual availability and the information specified in sub-paragraph (a) relating to planned availability, such information to include the date and duration of any unavailability; and

(ii) an explanation (with appropriate supporting technical information) as to how each such difference has arisen.

Electricity Generation Standard Licence Conditions 67 September 2001        

Department of Trade and Industry

10. (a)  The licensee shall give notice to the Authority of the date upon which it is intended:

(i) to close permanently or close temporarily any power station; or

(ii) to make a material reduction in the registered capacity of any power station,

and shall use its reasonable endeavours to give that notice not less than six months prior to the date of the intended closure or reduction in capacity.

(b) A notice under sub-paragraph (a) shall specify the power station to which it relates, the intended date of closure or reduction in capacity and, if in respect of sub-paragraph (a)(ii), shall also specify:

(i) the existing and proposed registered capacity;

(ii) the expected duration of the reduction in capacity;

(iii) the reasons for the reduction in capacity; and

(iv) (if the reduction is as a result of the cessation of operation of a generating unit or units) whether it would be practicable for that generating unit or those units (on the assumption, if not the case, that it or they were operational) to be operated separately from the other unit or units of that station and, if not, the reasons therefor.

(c) For the purpose of this paragraph:

(i) a reduction of more than 10 per cent in the registered capacity of an open cycle gas turbine generating unit is material;

Electricity Generation Standard Licence Conditions 68 September 2001        

Department of Trade and Industry

(ii) subject to (c)(i), a reduction in capacity is material if it will reduce the registered capacity of a power station by more than 25 megawatts or more than 10 per cent whichever is the lesser; and

(iii) “close temporarily” means to close or not to make available for a period greater than one year but not permanently.

11. (a)    Within one month of delivery of a notice under paragraph 10(a)(i), the licensee shall provide to the Authority a statement setting out in reasonable detail:

(i) (if in relation to any closure of a power station) the reasons for the decision referred to in the notice;

(ii) (if in respect of a temporary closure of a power station) the circumstances in which the licensee expects to recommence operating the power station; and

(iii) (if in respect of a permanent closure of a power station) the licensee’s proposals for use or disposal of the site and the plant, and alternative proposals considered and the reason for adopting the chosen proposal.

(b) The licensee shall provide to such independent and competent assessor (if any) as may be appointed by the Authority with the approval of the licensee (such approval not to be unreasonably withheld) such information (in addition to that contained in any notice under paragraph 10(a)(i) or the statement under paragraph 11(a)) as the assessor may reasonably require to enable him to provide to the Authority and the licensee within two months of his appointment (or such longer period as the Authority may approve) an assessment of whether the above decision process and result were reasonable,

Electricity Generation Standard Licence Conditions 69 September 2001        

Department of Trade and Industry

taking into account all the relevant circumstances and opportunities, identifying the direct and indirect financial implications for the licensee, and the amounts if any which third parties have offered or would be likely to pay to purchase or lease the plant or site and associated facilities whether or not for use as an operating power station.

12. A licensee, in whose licence this condition has effect, may make a disapplication request in writing to the Authority. The disapplication request shall specify the paragraphs of this condition (or any part or parts thereof) to which the request relates and shall state the date (“the disapplication date”, being a date not less than 18 months after the date of delivery of the request) from which the licensee wishes the Authority to agree that the specified paragraphs (or the specified part or parts thereof) shall cease to have effect.

13. Paragraphs 7 to 17 of this condition (or any part or parts thereof) shall cease to have effect from the date specified in the disapplication request or such later date as may be agreed, if the licensee delivers to the Authority a disapplication request made in accordance with paragraph 12 and the Authority agrees in writing to the disapplication request.

14. Save where the Authority otherwise agrees, no further disapplication request pursuant to paragraph 12 may be served within 12 months following the date on which a report is delivered by the Competition Commission following a reference under paragraph 15 where the report of the Competition Commission did not entitle the licensee to deliver a notice to the Authority under paragraph 16.

15. If the Authority has not made a reference to the Competition Commission in respect of this licence under section 12 of the Act relating to the modification of this licence by the removal of the paragraphs (or any part or parts thereof) specified in the

Electricity Generation Standard Licence Conditions 70 September 2001        

Department of Trade and Industry

disapplication request before the beginning of the period of 12 months which will end with the disapplication date, the licensee may deliver a termination notice to the Authority. Following the service of a termination notice, with effect from the disapplication date or such later date as may be specified in the termination notice such of the paragraphs (or any part or parts thereof) as are specified in the disapplication request shall cease to have effect in this licence.

16. If the Competition Commission makes a report on a reference in respect of this licence made by the Authority relating to the modification of this licence by the removal of the paragraphs (or any part or parts thereof) specified in the disapplication request and such report does not include a conclusion that the removal of such paragraphs (or any part or parts thereof) operates or may be expected to operate against the public interest, the licensee may within 30 days after the publication of the report by the Authority in accordance with section 13 of the Act deliver a termination notice to the Authority. With effect from the disapplication date or such later date as may be specified in the termination notice such paragraphs (or any part or parts thereof) as are specified in the disapplication request and in respect of which the Competition Commission report does not include the aforementioned conclusion shall cease to have effect in this licence.

Electricity Generation Standard Licence Conditions 71 September 2001        

Department of Trade and Industry

17. In this condition:

“registered capacity”; “generating unit”, “power station” and “settlement period”	each shall have the same meaning as in the Grid Code, but as if in relation to a power station the registered capacity means the aggregate of the registered capacity of the generating units forming part of that power station;
“planned availability period”	means each period of 4 successive weeks, the first such period to begin on the first date in respect of which the licensee is required, pursuant to any Grid Code, to provide the information specified in sub-paragraph 9(a) of this condition.

(a) This condition does not apply to any generating unit having a registered capacity of [10] megawatts or less.

(b) Unless the Authority otherwise directs, any reference to generating unit or power station shall mean, respectively, each generating unit owned or operated by the licensee forming part of a power station owned or operated by the licensee which is capable of providing 100 megawatts or more to the total system being the transmission and distribution systems of all authorised electricity operators which are located in Great Britain.

Electricity Generation Standard Licence Conditions 72 September 2001        

Department of Trade and Industry

Condition 19. Compliance with CUSC

1. Insofar as the licensee shall construct or operate a generating station in England and Wales, the licensee shall be a party to the CUSC Framework Agreement and shall comply with the CUSC and, if it is party to the agreement known as the Master Connection and Use of System Agreement (“MCUSA”), execute such other documents as shall be stated as required to be made in any direction issued by the Authority to enable the MCUSA and its supplemental agreements and ancillary service agreements (as defined or referred to in MCUSA) and any associated agreements derived from MCUSA to be amended appropriately into the CUSC Framework Agreement, CUSC, bilateral agreements, construction agreements and, so far as is appropriate, associated agreements derived from CUSC so as to maintain continuity of contractual relationships.

2. The licensee shall take all reasonable steps to secure and implement (consistently with the procedures applicable under or in relation to core industry documents to which it is a party (or in relation to which it holds rights in respect of amendment), as modified or replaced from time to time), and shall not take any steps to prevent or unduly delay, changes to the those documents, such changes being changes which are appropriate in order to give full and timely effect to and/or in consequence of any modification which has been made to the CUSC.

3. For the avoidance of doubt, paragraph 2 is without prejudice to any rights of approval, veto or direction in respect of proposed changes to the core industry documents which the Authority may have.

Electricity Generation Standard Licence Conditions 73 September 2001        

Department of Trade and Industry

4. In this condition:

“bilateral agreement”	means an agreement between the holder of a transmission licence in England and Wales and a CUSC user supplemental to the CUSC relating to a direct connection to that transmission system identifying the relevant connection site and setting out other site specific details in relation to that connection to the transmission system, including provisions relating to payment of connection charges.
“construction agreement”	means an agreement between the holder of a transmission licence in England and Wales and a CUSC user in respect of construction works required on that transmission system and the associated construction works of the CUSC user in relation to a connection to the transmission system or in relation to a generating station connected to a distribution system in England and Wales, whether for the initial connection or a modification of the connection.
“core industry documents”	means those documents which:
		(a)	in the Secretary of State’s opinion are central industry documents associated with the activities of the licensee and authorised electricity operators, the subject matter of which relates to or is connected with the CUSC or connection and use of system arrangements; and

Electricity Generation Standard Licence Conditions 74 September 2001        

Department of Trade and Industry

		(b)	have been so designated by the Secretary of State.
“CUSC”	means the connection and use of system code required to be in place pursuant to the transmission licence granted to the transmission company in England and Wales, as from time to time modified.
“CUSC Framework Agreement”	means the agreement of that title, in the form approved by the Secretary of State, by which the CUSC is made contractually binding between the parties to that agreement, as amended from time to time with the approval of the Secretary of State.

Electricity Generation Standard Licence Conditions 75 September 2001        

Department of Trade and Industry

PART II – SECTION C: SUPPLEMENTARY STANDARD CONDITIONS FOR SCOTLAND

Condition C1. Definitions

In this Section:

“Settlement Agreement for Scotland”

means the agreement of that title, as nominated by the Authority for the purposes of this Section, prepared in accordance with, and comprising such matters as are set out in special condition I (The Settlement Agreement for Scotland) of each of the electricity distribution licences of SP Distribution Limited, Southern Electric Power Distribution plc, and Scottish Hydro-Electric Power Distribution Limited (and any other name by which any of these companies come to be known).

“Trading Code”

means the trading code required to be adopted pursuant to standard condition D2 (Trading Code for Scotland) of the transmission licences granted in respect of an authorised area in Scotland and approved by the Authority as from time to time revised with the approval of the Authority.

Electricity Generation Standard Licence Conditions 76 September 2001        

Department of Trade and Industry

Condition C2. Compliance with Trading Code

1.	(a	)	The licensee shall comply with the provisions of the Trading Code insofar as applicable to it during any period that the licensee is a member of the trading system established by the Trading Code, including any requirements thereunder for the Authority’s approval or consent, for compliance with directions issued by the Authority or relating to determinations made by the Authority.
	(b	)	The Authority may (following consultation with such other members of such trading system as the Authority shall consider appropriate) issue directions relieving the licensee of its obligation under sub-paragraph (a) above in respect of such parts of the Trading Code and to such extent as may be specified in those directions.

Electricity Generation Standard Licence Conditions 77 September 2001        

Department of Trade and Industry

Condition C3. Security Arrangements (Scotland)

1.	(a	)	If so directed in directions issued by the Authority for the purposes of this Section, the licensee shall, not later than such date as may be specified in such directions, enter into an agreement designated by the Secretary of State for the purposes of this Section relating to compliance with directions issued by the Secretary of State under section 34 and/or section 35 of the Act.
	(b	)	The licensee shall comply with and perform its obligations under any agreement which it enters into pursuant to sub-paragraph (a) above.

Electricity Generation Standard Licence Conditions 78 September 2001        

Department of Trade and Industry

Condition C4. Compliance with Settlement Agreement for Scotland

1. The licensee shall when this condition comes into force be a party to and thereafter comply with the provisions of the Settlement Agreement for Scotland.

Electricity Generation Standard Licence Conditions 79 September 2001        

Department of Trade and Industry

PART II - SECTION D: SUPPLEMENTARY STANDARD CONDITIONS FOR NUCLEAR GENERATORS

Condition D1. Definitions

In this Section:

“nuclear generation business”	means the authorised business of the licensee in:
	(a)	the generation of electricity:
		(i)	from any one or more of the nuclear generation sets situated on a site in respect of which a licence has been issued and is in force under the Nuclear Installations Act; or
		(ii)	from generation sets situated on or adjacent to such sites and the generation from which is required by the relevant safety case to be used wholly (except during testing periods required by such safety case) for the purpose of, or in conjunction with, the generation of electricity from nuclear generation sets or for any related nuclear activities;
	(b)	the provision of ancillary services from such generation sets;

Electricity Generation Standard Licence Conditions 80 September 2001        

Department of Trade and Industry

	(c)	related nuclear activities; and
	(d)	related nuclear research activities.
“related nuclear activities”	means in relation to any nuclear generation plant of the licensee or any affiliate or related undertaking of the licensee, the storage, treatment or reprocessing of nuclear fuel, the treatment, storage or disposal of radioactive waste and the decommissioning of nuclear installations whether such activities are carried out by or on behalf of the licensee or any affiliate or related undertaking of the licensee.
“related nuclear research activities”	means research or consultancy work done wholly or mainly on behalf of the nuclear generation business the results of which are intended to be available for the purposes of that business, whether or not the results of that research or consultancy are also sold or made available to third parties or to any other business of the licensee, but shall not include research or consultancy work commissioned by and for the benefit of a third party.

Electricity Generation Standard Licence Conditions 81 September 2001        

Department of Trade and Industry

Condition D2.Consultation with the Nuclear Installations Inspectorate

1. Where the Authority may issue directions under paragraph 2 of each of the following standard conditions:

Condition 5 (Compliance with Grid Codes), or

Condition 6 (Compliance with Distribution Codes)

following consultation by the Authority as referred to in those standard conditions (respectively), the Authority’s consultation will include consultation with the Nuclear Installations Inspectorate.

Electricity Generation Standard Licence Conditions 82 September 2001        

Department of Trade and Industry

Condition D3. Compulsory Acquisition of Land etc

1. Where the Authority has issued a direction under standard condition 14 (Compulsory Acquisition of Land etc), the powers and rights conferred by or under the provisions of Schedule 3 to the Act shall have effect for the purposes set out in paragraph 7 of that standard condition in respect of the licensee’s nuclear generation business for the following additional purposes:

(a) the construction or extension of facilities for the storage treatment or despatch of nuclear fuel or radioactive waste (together with the operational discharge of liquid or gaseous radioactive waste) which arises from generation sets of the licensee; and

(b) activities connected with the construction or extension or operation of facilities for the storage, treatment or despatch of nuclear fuel or radioactive waste (together with the operational discharge of liquid or gaseous radioactive waste) which arises from generation sets of the licensee.

Electricity Generation Standard Licence Conditions 83 September 2001        

Department of Trade and Industry

Condition D4. Other Powers etc

1. Where the Authority has issued a direction under standard condition 15 (Other Powers etc), the powers and rights conferred by or under the provisions of Schedule 4 to the Act, shall (subject to paragraphs 8 ) of that standard condition, have effect in respect of the licensee’s nuclear generation business and may be exercised by the licensee carrying out works relating to the installation of electrical plant to be used:

(a) in connection with a generating station or facilities for the storage, treatment or despatch of nuclear fuel or radioactive waste (together with the operational discharge of liquid or gaseous radioactive waste) which arises from generation sets of the licensee; or

(b) in connection with the operation of such station or facilities.

2. Paragraph 10 of Schedule 4 to the Act shall apply to the licensee if it wishes to exercise its rights of entry on land for the purpose of establishing whether or not the land is suitable for the construction or extension of a generating station or of facilities for the storage, treatment or despatch of nuclear fuel or radioactive waste (together with the operational discharge of liquid or gaseous radioactive waste) which arises from generation sets of the licensee or for use in connection with the decommissioning of a generating station.

Electricity Generation Standard Licence Conditions 84 September 2001        

Department of Trade and Industry

Condition D5. Ancillary Services

The obligation under paragraph 1 of standard condition 11 (Ancillary Services) shall not apply to the extent that the licensee is unable to provide ancillary services from a particular generation set without being in breach of the terms of any licence issued under the Nuclear Installations Act 1965.

Department of Trade and Industry

September 2001

Electricity Generation Standard Licence Conditions 85 September 2001        

EX-4.10

Exhibit 4.10

THE BRITISH ENERGY GROUP PLC

INTERIM DEFERRED BONUS PLAN 2005

Date adopted by the Company: 28 November 2004

CONTENTS

Rule		Page
1.	Definitions And Interpretation	1
2.	Grant Of Awards	2
3.	Issue Of Shares And Plan Limits	5
4.	Vesting Of Share Awards	6
5.	Takeovers And Other Corporate Events	9
6.	Variation Of Capital	10
7.	Shareholding Requirement	11
8.	Alterations	11
9.	Miscellaneous	12

THE BRITISH ENERGY GROUP PLC INTERIM DEFERRED BONUS PLAN 2005

1. DEFINITIONS AND INTERPRETATION

1.1 In this Plan, unless the context otherwise requires:

“Award” means a Share Award and, where applicable, a Cash Award made under Rule 2.2;

“Award Date” means the date on which an Award has been granted to a Participant under the Plan;

“the Board” means the board of directors of the Company or a committee appointed by the board of directors of the Company;

“Cash Award” means an award of cash made by the Remuneration Committee under Rule 2.2;

“the Company” means British Energy Group plc (registered in Scotland with registered number SC270184);

“Deferred Shares” means the number of shares in the Company subject to a Share Award;

“Financial Year 2005” means the financial year of the Company (within the meaning of section 742 of the Companies Act 1985) ending on 31 March 2005;

“Group 1 Employee” means each of the Chief Executive Officer, the Finance Director and the Chief Nuclear Officer of the Company;

“Group 2 Employee” means each of the Trading Director, the Human Resources Director and the Company Secretary of the Company;

“Independent Non-Executive Directors” means those directors of the Company who are identified as independent non-executive directors for the purposes of the Company’s annual report;

“the London Stock Exchange” means London Stock Exchange plc;

“Model Code” means the model code on directors’ dealings in securities as set out in the Listing Rules published by the UKLA;

“Participant” means a person who holds an Award granted under the Plan;

“Participating Company” means the Company or any Subsidiary;

“Performance Conditions” means the conditions set by the Remuneration Committee for Financial Year 2005;

“the Plan” means The British Group plc Interim Deferred Bonus Plan 2005 as set out in these rules but subject to any alterations or additions made under Rule 7 below;

- 1 -

“Release Dates” means the dates on which Deferred Shares become capable of release in accordance with Rule 4.1 below;

“the Remuneration Committee” means the committee established by the Company as the remuneration committee of the board of directors of the Company;

“Share Award” means an award of shares in the Company in the manner determined by the Remuneration Committee under Rule 2.2;

“Subsidiary” means a body corporate which is a subsidiary of the Company (within the meaning of section 736 of the Companies Act 1985);

“the Trust” means the British Energy Employees’ Share Ownership Plan Trust established by deed on 17 June 1996 or any other employees’ trust established by the Company for this purpose;

“the Trustees” means the trustee or trustees for the time being of the Trust;

“UKLA” means the United Kingdom Listing Authority.

1.2 Any reference in the Plan to any enactment includes a reference to that enactment as from time to time modified extended or re-enacted.

2. GRANT OF AWARDS

2.1 Selection to participate in the Plan

The Remuneration Committee shall invite every Group 1 Employee and Group 2 Employee, and such other employees of a Participating Company as it shall select, to participate in the Plan on the following terms:

2.1.1 the Performance Conditions which the Remuneration Committee has set for that employee shall be notified to that employee when invited to participate; and

2.1.2 each participant in the Plan must agree not to participate in the British Energy Group Plc Executive Share Option Plan.

2.2 Grant of Awards

Following the end of the Financial Year 2005 and to the extent that the Performance Conditions have been satisfied, the Remuneration Committee may, subject to Rules 2.3 and 2.4 below, grant an Award to an employee, provided either:

2.2.1 the employee is still an employee of a Participating Company on the date of grant; or

2.2.2 Rule 2.10 is satisfied

- 2 -

PROVIDED THAT:

2.2.3 Where the Remuneration Committee grants an Award to a Group 1 Employee, the Award shall be provided only in the form of a Share Award, and

2.2.4 Where the Remuneration Committee grants an Award to a Group 2 Employee, the Award shall be satisfied as to 75% of its value in the form of a Share Award and as to 25% of its value in the form of a Cash Award.

2.2.5 Where the Remuneration Committee grants a Cash Award to a Group 2 Employee, the Remuneration Committee shall procure that payment shall be made to the relevant Participant as soon as practicable (subject to the deduction of applicable income tax and social security contributions).

2.2.6 Where the Remuneration Committee grants an Award to a person who is not a Group 1 Employee or Group 2 Employee, the Award shall be split between a Cash Award and a Share Award in such proportion as the Remuneration Committee may decide.

2.3 Type of Share Award

The Remuneration Committee shall determine the form in which the Share Award is made and its full terms. In particular, the Share Award may take the form of any one or more of the following, provided that the terms of the Share Award are consistent with the Plan:

2.3.1 a promise to receive Deferred Shares at a future date at no cost;

2.3.2 an option to acquire Deferred Shares exercisable for a nil or a nominal consideration;

2.3.3 an immediate award of Deferred Shares, subject to forfeiture if certain specified conditions are not met;

2.3.4 such other form of equity award which the Remuneration Committee considers has substantially the same economic effect.

2.4 Timing of grant

An Award may only be granted under the Plan:

2.4.1 within the period of 6 weeks beginning with the business day immediately following the date on which the Company announces its results for the 2005 Financial Year; or

2.4.2 at any other time when the circumstances are considered by the Remuneration Committee to be sufficiently exceptional to justify the grant of an Award.

- 3 -

2.5 Number of shares

In determining the number of shares which will be the subject of a Share Award, the Remuneration Committee shall convert the monetary amount of the Cash Award determined by the Performance Conditions into a number based on the average of the middle market quotations of shares in the Company for each of the last 60 business days prior to the Award Date.

2.6 Approvals and consents

The grant of any Award under the Plan shall be subject to obtaining any approval or consent required under the document “The Listing Rules” published by the UKLA (including the Model Code), of The City Code on Takeovers and Mergers, or of any regulation or enactment.

2.7 Non-transferability and bankruptcy

A Share Award granted under the Plan to any person shall not, except in the case of death as provided in Rule 4.2 below, be capable of being transferred by him and shall lapse immediately if he is adjudged bankrupt.

2.8 Individual limit on Award

The following limits apply:

2.8.1 the maximum value of an Award which may be granted to any employee shall be 1.5 x that employee’s salary (except that the maximum value of an Award granted to the Chief Nuclear Officer shall be 1.67 x 1.5 times his salary), and

2.8.2 the number of shares which may be subject of a Share Award shall not exceed such number as has a market value equal to the percentage of the value of his Award as shall be satisfied in shares (as specified in Rule 2.2.3 and 2.2.4).

For the purposes of this Rule 2.8, “market value” and “salary” have the meanings set out in Rule 2.9 below.

2.9 Individual limit: interpretation

For the purposes of Rule 2.8 above:

2.9.1 the market value of the shares subject to a Share Award shall, at the time when the shares in the Company are quoted in the London Stock Exchange Daily Official List, be taken to be an amount equal to the average of the middle market quotations of such shares for each of the 60 business days ending on the day immediately preceding the Award Date;

2.9.2 a person’s salary shall be taken to be his basic annual salary expressed as an annual rate, payable by the Participating Companies to him on the date of publication of the prospectus relating to the initial admission to listing of shares in the Company (expected to be 29 November 2004).

- 4 -

2.10 Cessation of employment before Award Date

In the case of an employee who has been notified of Performance Conditions for the Financial Year 2005 and has ceased to be a director or employee of a Participating Company prior to the Award Date, then if he so ceased:

2.10.1 by reason of injury, disability, death; or

2.10.2 by reason of retirement on reaching the age at which he is bound to retire in accordance with the terms of his contract; or

2.10.3 by reason only that his office or employment is in a company which ceases to be a Participating Company, or relates to a business or part of a business which is transferred to a person who is not a Participating Company;

then, once the Independent Non-Executive Directors have determined, on the basis of the results for the Financial Year 2005, to what extent the Performance Conditions have been met, the Independent Non-Executive Directors shall have a discretion whether or not to grant an Award to such a person. If the Independent Non-Executive Directors exercise their discretion to grant an Award, then, unless the Independent Non-Executive Directors otherwise decide, the number of Deferred Shares (and, in the case of employees who are not Group 1 employees, the amount of a Cash Award) shall be reduced by such proportion as the proportion from the date of cessation of employment to the end of the Financial Year 2005 bears to the whole of the Financial Year 2005, but any Deferred Shares shall be capable of release immediately on the Award Date.

3. ISSUE OF SHARES AND PLAN LIMITS

3.1 Method of satisfying Share Awards

Subject to Rules 3.3 to 3.5 below, the Company may:

3.1.1 grant to the Trustees an option to subscribe for shares in the Company;

3.1.2 issue shares in the Company to the Trustees.

3.2 Subscription by the Trustees: subscription price

The Board shall determine the price at which shares may be acquired by the Trustees under Rule 3.1 before the grant of the relevant option or, in the case of shares issued otherwise than in pursuance of an option, before the issue of those shares.

3.3 5 per cent. in 10 year limit

No Share Awards shall be granted, or shares issued otherwise than pursuant to a Share Award, under the Plan in any year which would, at the time of the grant or issue, cause the number of shares in the Company:

3.3.1 which shall have been or may be issued in pursuance of awards or options granted in the period of 10 calendar years ending with that year, or

- 5 -

3.3.2 which shall have been issued in that period otherwise than in pursuance of awards or options,

under the Plan, the British Energy Group plc Long Term Deferred Bonus Plan or under any executive share scheme adopted by the Company to exceed such number as represents 5 per cent of the ordinary share capital of the Company in issue at that time.

3.4 10 per cent. in 10 year limit

No Share Awards shall be granted, or shares issued otherwise than pursuant to a Share Award, under the Plan in any year which would, at the time of the grant or issue, cause the number of shares in the Company:

3.4.1 which shall have been or may be issued in pursuance of awards or options granted in the period of 10 calendar years ending with that year, or

3.4.2 which shall have been issued in that period otherwise than in pursuance of awards or options,

under the Plan, the British Energy Group plc Long Term Deferred Bonus Plan or under any other employees’ share scheme adopted by the Company to exceed such number as represents 10 per cent of the ordinary share capital of the Company in issue at that time.

3.5 Release or lapse of Share Awards

Where any Share Award is released or lapses, the shares concerned will be ignored when calculating the limits in Rules 3.3 and 3.4.

4. VESTING OF SHARE AWARDS

4.1 Vesting timetable

Subject to Rule 2.10 above and to Rule 4.2 and Rule 5 below, a Share Award shall vest, and Deferred Shares shall then become capable of release, as follows:

4.1.1 one-third of the number of Deferred Shares originally subject to a Share Award on its Award Date,

4.1.2 a further one-third of the number of Deferred Shares originally subject to a Share Award on the first anniversary of the Award Date, and

4.1.3 the final one-third of the number of Deferred Shares originally subject to a Share Award on the second anniversary of the Award Date

- 6 -

PROVIDED THAT:

(a) if a Participant is a director or employee of a Participating Company but is under formal disciplinary action or investigation at the time at which a Share Award would otherwise vest, the vesting and release of the Deferred Shares shall not take place at that time, but after the disciplinary action or investigation is completed the Remuneration Committee shall determine whether the Share Award shall lapse or whether the vesting and release of the Deferred Shares may take place, and if so, on what terms;

(b) if the date on which a Share Award would vest and Deferred Shares would become capable of release would fall within a prohibited period under the Model Code, the date shall be deferred until the first business day after such prohibited period ends; and

(c) if the Remuneration Committee makes any adjustments to the number of Deferred Shares to reflect a variation of capital pursuant to Rule 6 below, it shall make a corresponding adjustment to the number of Deferred Shares treated as being originally subject to a Share Award for the purposes of this Rule.

4.2 Cessation of employment

If a Participant ceases to be a director or employee of a Participating Company before the vesting of Deferred Shares, the following provisions apply in relation to any Share Award granted to him under the Plan:

4.2.1 if he so ceases:

(a) by reason of injury, disability, death,

(b) by reason of retirement on reaching the age at which he is bound to retire in accordance with the terms of his contract of employment, or

(c) by reason only that his office or employment is in a company which ceases to be a Participating Company, or relates to a business or part of a business which is transferred to a person who is not a Participating Company,

the Remuneration Committee has an absolute discretion whether or not to release Deferred Shares which have not already vested (and, if the Share Award takes the form of an option, whether or not the option shall become exercisable), and shall exercise such discretion as soon as reasonably practicable after the date of his so ceasing;

4.2.2 if he so ceases by reason of resignation and he is not under formal disciplinary action or investigation at the time of his resignation, the Independent Non-Executive Directors may, if they so decide, permit that some or all of the Deferred Shares which have not already vested shall be released within six months after the date of his so ceasing, but otherwise the Share Award shall lapse;

- 7 -

4.2.3 if he so ceases for any other reason, the Share Award shall lapse.

For the avoidance of doubt, the cessation of employment of a Participant shall not revoke the vesting of any part of a Share Award which has already vested nor shall it prevent the release of shares in respect of any part of a Share Award which has already vested (provided that, if the Share Award takes the form of an option, the option must be exercised, if at all, within six months after the date of his so ceasing).

4.3 Dividends

The number of Deferred Shares shall be increased by the Remuneration Committee by such number as the Remuneration Committee determines is appropriate to take account of any dividends paid on the number of shares in the Company which comprised the Deferred Shares from the date of the Share Award to the date of release and assuming such dividends were reinvested in shares in the Company.

4.4 Final date for exercise of Share Awards structured as options

If a Share Award takes the form of an option, it shall not be capable of exercise after the tenth anniversary of the Award Date.

4.5 Meaning of cessation of employment

A Participant shall not be treated for the purposes of Rule 4.2 as ceasing to be a director or employee of a Participating Company until such time as he is no longer a director or employee of any of the Participating Companies, and a female Participant who ceases to be such a director or employee by reason of pregnancy or confinement and who exercises her right to return to work under the Employment Rights Act 1996 before Deferred Shares are transferred or released under the Plan shall be treated for those purposes as not having ceased to be such a director or employee.

4.6 Approvals and consents

The transfer of any shares under the Plan shall be subject to obtaining any such approval or consent as is mentioned in Rule 2.6 above.

4.7 Tax liabilities

In a case where a Participating Company is obliged (in any jurisdiction) to account for any tax for which a person who becomes entitled to have Deferred Shares released to him is liable and/or for any social security or similar contributions recoverable from that person (together, the “Tax Liability”), the Company shall, unless it has (or a Participating Company has) received on or prior to the date of transfer of Deferred Shares payment from that person of an amount not less than the Tax Liability, not be obliged to transfer or release the shares unless that person has given irrevocable instructions to the Company’s brokers for (i) the sale of sufficient shares to realise the Tax Liability and (ii) the payment of such amount to the Company (or, as the case may be, to the relevant Participating Company).

- 8 -

5. TAKEOVERS AND OTHER CORPORATE EVENTS

5.1 Change of control, scheme of arrangement and winding up

In the event that:

5.1.1 any person obtains control of the Company (within the meaning of section 719 of the Income Tax (Earnings and Pensions) Act 2003) as a result of making a general offer to acquire shares in the Company, or having obtained such control makes such an offer, or

5.1.2 under section 425 of the Companies Act 1985 the Court sanctions a compromise or arrangement proposed for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies, or

5.1.3 the Company passes a resolution for voluntary winding up, or

5.1.4 an order is made for the compulsory winding up of the Company,

the Remuneration Committee shall within 7 days of becoming aware of the relevant event notify every Participant of that event, and:

(a) subject to Rule 4.2 above and Rule 5.4 below, the Remuneration Committee shall have absolute discretion whether to release some or all of the Deferred Shares subject to a Share Award, and

(b) to the extent Deferred Shares are not released (or, in the case of an option, the option is not exercised) within one month of such notification, the Share Award shall lapse.

5.2 Change of control before Award granted

If an event referred to in Rule 5.1 above occurs, and an employee has been notified of the Performance Conditions that apply to him in respect of the Financial Year 2005 but no Award has yet been made to him in respect of the Financial Year 2005, the Remuneration Committee shall have absolute discretion whether to make a Share Award (or, in the case of employees who are not Group 1 Employees, a Cash Award) to that employee for that Financial Year.

5.3 Meaning of change of control

For the purposes of Rule 5.1 above, a person shall be deemed to have obtained control of the Company if he and others acting in concert with him have together obtained control of it.

- 9 -

5.4 Internal reorganisations

In the event that:

5.4.1 an offer (as referred to in Rule 5.1) is made or a compromise or arrangement (as referred to in Rule 5.1) is proposed which, if accepted or approved by the Court (as the case may be), will result in the Company being controlled by a new company;

5.4.2 at least 75% of the shares in the new company will be held by persons who immediately before the offer or proposal was made were shareholders in the Company; and

5.4.3 before Share Awards vest under Rule 5.1, an offer is made to Participants to release their Share Awards in consideration of the grant of equivalent new Share Awards

the old Share Awards shall not vest under Rule 5.1 and, if the offer to release the old Share Awards in consideration for the grant of new Share Awards is not accepted within the period specified in such offer by the Participant in respect of any old Share Award, that old Share Award shall lapse on the expiry of that period.

6. VARIATION OF CAPITAL

6.1 Variation of capital: adjustments to Share Awards

Subject to Rule 6.3 below, in the event of any increase or variation of the share capital of the Company or a demerger, special dividend or other similar event (whenever effected), the Remuneration Committee may make such adjustments as they consider appropriate to the number of Deferred Shares (and, if the Share Award takes the form of an option, the amount, if any, payable on exercise of such option).

6.2 Notification to Participants of adjustments to Share Awards

As soon as reasonably practicable after making any adjustment under Rule 6.1 above, the Company shall give notice in writing of the adjustment to any Participant affected by it.

6.3 Nuclear Liabilities Fund Limited Conversion

The exercise by the Nuclear Liabilities Fund Limited of its right to convert all or part of the annual payment to be made to it pursuant to the terms of the contribution agreement into convertible ordinary shares in the Company or the conversion of such convertible ordinary shares shall not be grounds for making an adjustment under Rule 6.1.

- 10 -

7. SHAREHOLDING REQUIREMENT

7.1 Guidelines

The Remuneration Committee shall set guidelines to require Group 1 Employees and Group 2 Employees to hold shares in the Company. For a Participant who is a director of the Company, this will require him to hold shares equal in value to 50 per cent of his gross salary by such date as the Remuneration Committee shall determine.

7.2 Shares which are “held”

For the purposes of Rule 7.1, shares beneficially owned by the Participant, his immediate family or family trusts, or shares subject to an Award which takes the form of an option where the option is capable of exercise following release, shall be treated as being held by a Participant.

8. ALTERATIONS

8.1 General rule on alterations

Subject to Rule 8.2 below, the Remuneration Committee may at any time alter or add to all or any of the provisions of the Plan, or the terms of any Award granted under it, in any respect.

8.2 Shareholder approval

Subject to Rule 8.3 below, no alteration to the advantage of Participants shall be made to the provisions concerning:

8.2.1 eligibility;

8.2.2 the individual limit on participation;

8.2.3 the overall limits on the issue of shares or the transfer of treasury shares under this Plan;

8.2.4 the basis for determining how many shares Participants receive; and

8.2.5 the adjustments that may be made following a variation of capital

without the prior approval by ordinary resolution of the members of the Company in general meeting.

8.3 Minor alterations

Rule 8.2 above shall not apply to any minor alteration to benefit the administration of the Plan to take account of a change in legislation or to obtain or to maintain favourable tax, exchange controls or regulatory treatment for Participants, any Participating Company or the Trustees.

- 11 -

8.4 Participant consent

No alteration or addition to the disadvantage of any existing rights of a Participant shall be made under Rule 8.1 above unless:

8.4.1 the Company shall have invited every such Participant to give an indication as to whether or not he approves the alteration or addition, and

8.4.2 the alteration or addition is approved by a majority of those Participants who have given such an indication.

8.5 Notification of alteration or addition

As soon as reasonably practicable after making any alteration or addition under Rule 8.1 above, the Company shall give notice of it to any Participant affected by it.

9. MISCELLANEOUS

9.1 Employment

The rights and obligations of any individual under the terms of his office or employment with any Participating Company shall not be affected by his participation in the Plan or any right which he may have to participate in the Plan. An individual who participates in the Plan shall waive any and all rights to compensation or damages in consequence of the termination of his office or employment for any reason whatsoever insofar as those rights arise or may arise from his ceasing to have rights under any Award under the Plan as a result of such termination.

9.2 Disputes

In the event of any dispute or disagreement as to the interpretation of the Plan, or as to any question or right arising from or related to the Plan, the decision of the Remuneration Committee shall be final and binding upon all persons.

9.3 Financial assistance

The Company and any Subsidiary may provide money to the trustees of any trust or any other person to enable them or him to acquire shares to be held for the purposes of the Plan, or enter into any guarantee or indemnity for those purposes, to the extent permitted by section 153(4) of the Companies Act 1985 and, where applicable, section 154 of that Act.

9.4 Notices

Any notice or other communication under or in connection with the Plan may be given by either:

9.4.1 personal delivery or by sending the same by post, in the case of a company to its registered office, and in the case of an individual to his last known address, or, where he is a director or employee of a Participating Company, either to his last known address or to the address of the place of business at which he performs the whole or substantially the whole of the duties of his office or employment;

- 12 -

9.4.2 in an electronic communication to their usual business address or such other address for the time being notified for the purpose to the person giving the notice; or

9.4.3 by such other method as the Remuneration Committee determines.

9.5 Third parties

No third party has any rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of the Plan.

9.6 Governing law

The rules of the Plan and the rights and obligations of any individual under the Plan shall be governed by and construed in accordance with the law of England and Wales.

- 13 -

EX-4.11

Exhibit 4.11

THE BRITISH ENERGY GROUP PLC

LONG TERM DEFERRED BONUS PLAN

Date adopted by the Company: 28 November 2004

CONTENTS

Rule			Page
1.	Definitions And Interpretation		1
2.	Grant Of Awards		2
3.	Issue Of Shares And Plan Limits		4
4.	Vesting Of Awards		5
5.	Takeovers And Other Corporate Events		8
6.	Variation Of Capital		10
7.	Shareholding Requirement		10
8.	Alterations		11
9.	Miscellaneous		12
Appendix		PERFORMANCE CONDITIONS AND INDIVIDUAL LIMITS FOR THE FIRST THREE YEAR CYCLE	14

THE BRITISH ENERGY GROUP PLC LONG TERM DEFERRED BONUS PLAN

1. DEFINITIONS AND INTERPRETATION

1.1 In this Plan, unless the context otherwise requires:

“Award” means an award of shares in the Company in the manner determined by the Remuneration Committee under Rule 2.2;

“Award Date” means the date on which an Award has been granted to a Participant under the Plan;

“the Board” means the board of directors of the Company or a committee appointed by the board of directors of the Company;

“the Company” means British Energy Group plc (registered in Scotland with registered number SC270184);

“Deferred Shares” means the number of shares in the Company subject to an Award;

“Equity Market Capitalisation Target” in relation to a Financial Year means the target set by the Remuneration Committee for the equity market capitalisation of British Energy Group before the impact of NLF converting the NLF Cash Sweep Payment into shares averaged over the final 90 business days of the Financial Year;

“Executive Team” means the Company’s Chief Executive, Finance Director, Chief Nuclear Officer, Trading Director, Human Resources Director, Company Secretary and Technical Director;

“Financial Year” means a financial year of the Company within the meaning of section 742 of the Companies Act 1985;

“Independent Non-Executive Directors” means those directors of the Company who are identified as independent non-executive directors for the purposes of the Company’s annual report;

“the London Stock Exchange” means London Stock Exchange plc;

“Model Code” means the model code on directors’ dealings in securities as set out in the Listing Rules published by the UKLA;

“Participant” means a person who holds an Award granted under the Plan;

“Participating Company” means the Company or any Subsidiary;

“Performance Conditions” means the conditions set by the Remuneration Committee for any Financial Year;

“the Plan” means The British Energy Group plc Long Term Deferred Bonus Plan as set out in these rules but subject to any alterations or additions made under Rule 8 below;

- 1 -

“Release Dates” means the dates on which Deferred Shares become capable of release in accordance with Rule 4.1 below;

“the Remuneration Committee” means the committee established by the Company as the remuneration committee of the board of directors of the Company;

“Subsidiary” means a body corporate which is a subsidiary of the Company (within the meaning of section 736 of the Companies Act 1985);

“Three Year Cycle” means each of the three Financial Years beginning on 1 April 2005, 1 April 2008 and 1 April 2011;

“the Trust” means the British Energy Employee Share Trust established by deed on 17 June 1996 or any other employees’ trust established by the Company for this purpose;

“the Trustees” means the trustee or trustees for the time being of the Trust;

“UKLA” means the United Kingdom Listing Authority.

1.2 Any reference in the Plan to any enactment includes a reference to that enactment as from time to time modified extended or re-enacted.

2. GRANT OF AWARDS

2.1 Selection to participate in the Plan

The Remuneration Committee shall invite the Executive Team and such other employees of a Participating Company as it shall select to participate in the Plan on the following terms:

2.1.1 the Performance Conditions which the Remuneration Committee has set for an employee for a Financial Year shall be notified to that employee when invited to participate (and details of the Performance Conditions for each of the Financial Years in the first Three Year Cycle are set out in the Appendix to these Rules); and

2.1.2 the Executive Team must, as a condition of participating in the Plan, agree not to participate in any other employee share scheme operated by the Company or cash based bonus scheme (other than Inland Revenue approved employee share schemes that are required by law to be open to all UK employees). All participants in the Plan will not participate in the British Energy Group Plc Executive Share Option Plan.

2.2 Award grant

Following the end of the Financial Year to the extent that the Performance Conditions for that Financial Year have been satisfied, the Remuneration Committee may, subject to Rules 2.3 and 2.4 below, grant an Award to that employee, provided either:

2.2.1 the employee is still an employee of a Participating Company on the date of grant; or

- 2 -

2.2.2 Rule 2.9 is satisfied.

2.3 Type of Award

The Remuneration Committee shall determine the form in which the Award is made and its full terms. In particular, the Award may take the form of any one or more of the following, provided that the terms of the Award are consistent with the Plan:

2.3.1 a promise to receive Deferred Shares at a future date at no cost;

2.3.2 an option to acquire Deferred Shares exercisable for a nil or a nominal consideration;

2.3.3 an immediate award of Deferred Shares, subject to forfeiture if certain specified conditions are not met;

2.3.4 such other form of equity award which the Remuneration Committee considers has substantially the same economic effect.

2.4 Timing of grant

An Award may only be granted under the Plan:

2.4.1 within the period of 6 weeks beginning with the business day immediately following the date on which the Company announces its results for the relevant Financial Year; or

2.4.2 at any other time when the circumstances are considered by the Remuneration Committee to be sufficiently exceptional to justify the grant of an Award; and

2.4.3 within the period of 10 years beginning with the date on which the Plan is adopted by the Company.

2.5 Number of shares

In determining the number of shares which will be the subject of an Award, the Remuneration Committee shall convert the monetary amount of the Award determined by the Performance Conditions into a number based on the average of the middle market quotations of shares in the Company for each of the last 60 business days prior to the Award Date.

2.6 Approvals and consents

The grant of any Award under the Plan shall be subject to obtaining any approval or consent required under the document “The Listing Rules” published by the UKLA (including the Model Code), of The City Code on Takeovers and Mergers, or of any regulation or enactment.

- 3 -

2.7 Non-transferability and bankruptcy

An Award granted under the Plan to any person shall not, except in the case of death as provided in Rule 4.2 below, be capable of being transferred by him and shall lapse immediately if he is adjudged bankrupt.

2.8 Individual limit on shares placed under Award

The Appendix to these Rules contains an individual limit for awards relating to Financial Years in the first Three Year Cycle.

2.9 Cessation of employment before Award Date

In the case of an employee who has been notified of Performance Conditions for a Financial Year and has ceased to be a director or employee of a Participating Company prior to the relevant Award Date, then if he so ceased:

2.9.1 by reason of injury, disability, death; or

2.9.2 by reason of retirement on reaching the age at which he is bound to retire in accordance with the terms of his contract; or

2.9.3 by reason only that his office or employment is in a company which ceases to be a Participating Company, or relates to a business or part of a business which is transferred to a person who is not a Participating Company;

then, once the Independent Non-Executive Directors have determined, on the basis of the results for the relevant Financial Year, to what extent the Performance Conditions have been met, the Independent Non-Executive Directors shall have a discretion whether or not to grant an Award to such a person in respect of that Financial Year. If the Independent Non-Executive Directors exercise their discretion to grant an Award, then, unless the Remuneration Committee otherwise decide, the number of Deferred Shares shall be reduced by such proportion as the proportion from the date of cessation of employment to the end of the Financial Year bears to the whole of the Financial Year, but any Deferred Shares shall be capable of release immediately on the Award Date.

3. ISSUE OF SHARES AND PLAN LIMITS

3.1 Method of satisfying Awards

Subject to Rules 3.3 to 3.5 below, the Company may:

3.1.1 grant to the Trustees an option to subscribe for shares in the Company;

3.1.2 issue shares in the Company to the Trustees;

and shall not fund the Trustees to acquire shares in the Company other than by way of subscription.

- 4 -

3.2 Subscription by the Trustees: subscription price

The Board shall determine the price at which shares may be acquired by the Trustees under Rule 3.1 before the grant of the relevant option or, in the case of shares issued otherwise than in pursuance of an option, before the issue of those shares.

3.3 5 per cent. in 10 year limit

No Awards shall be granted, or shares issued otherwise than pursuant to an Award, under the Plan in any year which would, at the time of the grant or issue, cause the number of shares in the Company:

3.3.1 which shall have been or may be issued in pursuance of awards or options granted in the period of 10 calendar years ending with that year, or

3.3.2 which shall have been issued in that period otherwise than in pursuance of awards or options,

under the Plan, the British Energy Group plc Interim Deferred Bonus Plan 2005 or under any executive share scheme adopted by the Company to exceed such number as represents 5 per cent of the ordinary share capital of the Company in issue at that time.

3.4 10 per cent. in 10 year limit

No Awards shall be granted, or shares issued otherwise than pursuant to an Award, under the Plan in any year which would, at the time of the grant or issue, cause the number of shares in the Company:

3.4.1 which shall have been or may be issued in pursuance of awards or options granted in the period of 10 calendar years ending with that year, or

3.4.2 which shall have been issued in that period otherwise than in pursuance of awards or options,

under the Plan, the British Energy Group plc Interim Deferred Bonus Plan 2005 or under any other employees’ share scheme adopted by the Company to exceed such number as represents 10 per cent of the ordinary share capital of the Company in issue at that time.

3.5 Release or lapse of Awards

Where any Award is released or lapses, the shares concerned will be ignored when calculating the limits in Rules 3.3 and 3.4.

4. VESTING OF AWARDS

4.1 Vesting timetable

Subject to Rule 2.9 above and to Rule 4.2 and Rule 5 below, an Award shall vest, and Deferred Shares shall then become capable of release, as follows:

4.1.1 one-third of the number of Deferred Shares originally subject to an Award on its Award Date,

- 5 -

4.1.2 a further one-third of the number of Deferred Shares originally subject to an Award on the first anniversary of the Award Date, and

4.1.3 the final one-third of the number of Deferred Shares originally subject to an Award on the second anniversary of the Award Date

PROVIDED THAT

(a) if a Participant is a director or employee of a Participating Company but is under formal disciplinary action or investigation at the time at which an Award would otherwise vest, the vesting and release of the Deferred Shares shall not take place at that time, but after the disciplinary action or investigation is completed the Remuneration Committee shall determine whether the Award shall lapse or whether the vesting and release of the Deferred Shares may take place, and if so, on what terms;

(b) in the case of Awards for Financial Years in the second or third Three Year Cycle, the Remuneration Committee may determine before it grants such Awards that the Awards shall vest, and Deferred Shares shall then become capable of release, on a different basis to that set out in Rules 4.1.1 to 4.1.3 above;

(c) if the date on which an Award would vest and Deferred Shares would become capable of release would fall within a prohibited period under the Model Code, the date shall be deferred until the first business day after such prohibited period ends; and

(d) if the Remuneration Committee makes any adjustments to the number of Deferred Shares to reflect a variation of capital pursuant to Rule 6 below, it shall make a corresponding adjustment to the number of Deferred Shares treated as being originally subject to an Award for the purposes of this Rule.

4.2 Cessation of employment

If a Participant ceases to be a director or employee of a Participating Company before the vesting of Deferred Shares, the following provisions apply in relation to any Award granted to him under the Plan:

4.2.1 if he so ceases:

(a) by reason of injury, disability, death,

(b) by reason of retirement on reaching the age at which he is bound to retire in accordance with the terms of his contract of employment, or

(c) by reason only that his office or employment is in a company which ceases to be a Participating Company, or relates to a business or part of a business which is transferred to a person who is not a Participating Company,

- 6 -

the Remuneration Committee has an absolute discretion whether or not to release Deferred Shares which have not already vested (and, if the Award takes the form of an option, whether or not the option shall become exercisable), and shall exercise such discretion as soon as reasonably practicable after the date of his so ceasing;

4.2.2 if he so ceases by reason of resignation and he is not under formal disciplinary action or investigation at the time of his resignation, the Independent Non-Executive Directors may, if they so decide, permit that some or all of the Deferred Shares which have not already vested shall be released within six months after the date of his so ceasing, but otherwise the Award shall lapse;

4.2.3 if he so ceases for any other reason, the Award shall lapse.

For the avoidance of doubt, the cessation of employment of a Participant shall not revoke the vesting of any part of an Award which has already vested nor shall it prevent the release of shares in respect of any part of an Award which has already vested (provided that, if the Award takes the form of an option, the option must be exercised, if at all, within six months after the date of his so ceasing).

4.3 Dividends

The number of Deferred Shares shall be increased by the Remuneration Committee by such number as the Remuneration Committee determines is appropriate to take account of any dividends paid on the number of shares in the Company which comprised the Deferred Shares from the date of the Award to the date of release and assuming such dividends were reinvested in shares in the Company.

4.4 Final date for exercise of Awards structured as options

If an Award takes the form of an option, it shall not be capable of exercise after the tenth anniversary of the Award Date.

4.5 Meaning of cessation of employment

A Participant shall not be treated for the purposes of Rule 4.2 as ceasing to be a director or employee of a Participating Company until such time as he is no longer a director or employee of any of the Participating Companies, and a female Participant who ceases to be such a director or employee by reason of pregnancy or confinement and who exercises her right to return to work under the Employment Rights Act 1996 before Deferred Shares are transferred or released under the Plan shall be treated for those purposes as not having ceased to be such a director or employee.

4.6 Approvals and consents

The transfer of any shares under the Plan shall be subject to obtaining any such approval or consent as is mentioned in Rule 2.6 above.

- 7 -

4.7 Tax liabilities

In a case where a Participating Company is obliged (in any jurisdiction) to account for any tax for which a person who becomes entitled to have Deferred Shares released to him is liable and/or for any social security or similar contributions recoverable from that person (together, the “Tax Liability”), the Company shall, unless it has (or a Participating Company has) received on or prior to the date of transfer of Deferred Shares payment from that person of an amount not less than the Tax Liability, not be obliged to transfer or release the shares unless that person has given irrevocable instructions to the Company’s brokers for (i) the sale of sufficient shares to realise the Tax Liability and (ii) the payment of such amount to the Company (or, as the case may be, to the relevant Participating Company).

5. TAKEOVERS AND OTHER CORPORATE EVENTS

5.1 Change of control, scheme of arrangement and winding up

In the event that:

5.1.1 any person obtains control of the Company (within the meaning of section 719 of the Income Tax (Earnings and Pensions) Act 2003) as a result of making a general offer to acquire shares in the Company, or having obtained such control makes such an offer, or

5.1.2 under section 425 of the Companies Act 1985 the Court sanctions a compromise or arrangement proposed for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies, or

5.1.3 the Company passes a resolution for voluntary winding up, or

5.1.4 an order is made for the compulsory winding up of the Company,

the Remuneration Committee shall within 7 days of becoming aware of the relevant event notify every Participant of that event and all Deferred Shares shall, subject to Rule 5.5 below, become capable of release thereupon, but to the extent that Deferred Shares are not released (or in the case of an option, the option is not exercised) within one month of such notification, the Awards shall lapse.

5.2 Change of control before Award Date

If an employee has been notified of Performance Conditions for a Financial Year and before the relevant Award Date an event referred to in Rule 5.1 occurs:

5.2.1 the Remuneration Committee may make an Award in respect of that Financial Year to that employee of Deferred Shares, all of which may be released immediately (and to the extent that the Deferred Shares are not released, or in the case of an option the option is not exercised, within one month of the event occurring, the Award shall lapse) PROVIDED THAT the Equity Market Capitalisation Target for that Financial Year has been met, with the

- 8 -

equity market capitalisation of the Company based on the offer price being compared to the Equity Market Capitalisation Target (subject to a discretion on the part of the Remuneration Committee to adjust the Equity Market Capitalisation Target if it so determines to reflect the benefit to shareholders of the early release of funds);

5.2.2 the Remuneration Committee shall have a discretion to reduce the number of Deferred Shares by such proportion as the proportion from the date of the event referred to in Rule 5.1 above to the end of the Financial Year bears to the whole of that Financial Year.

5.3 Change of control prior to notification of Performance Conditions

If an employee is a Participant, or has been notified of Performance Conditions for a Financial Year in a Three Year Cycle and before all the Financial Years of that Three Year Cycle have ended an event referred to in Rule 5.1 occurs:

5.3.1 the Remuneration Committee may make Awards to the employee in respect of the subsequent Financial Years of that Three Year Cycle;

5.3.2 in determining the number of Deferred Shares subject to an Award, the Remuneration Committee shall determine this in the light of the equity market capitalisation of the Company based on the offer price being compared to the Equity Market Capitalisation Target either for the Financial Year in which the event occurs or for the last Financial Year of the Three Year Cycle;

5.3.3 the Remuneration Committee shall have a discretion to reduce the number of Deferred Shares as it considers appropriate to take account of the making of the Award before the normal date; and

5.3.4 if an Award is made pursuant to this Rule, all the Deferred Shares shall be capable of being released immediately (and to the extent that Deferred Shares are not released, or in the case of an option the option is not exercised, within one month of the making of such Award, the Award shall lapse).

5.4 Meaning of change of control

For the purposes of Rule 5.1 above, a person shall be deemed to have obtained control of the Company if he and others acting in concert with him have together obtained control of it.

5.5 Internal reorganisations

In the event that:

5.5.1 an offer (as referred to in Rule 5.1) is made or a compromise or arrangement (as referred to in Rule 5.1) is proposed which, if accepted or approved by the Court (as the case may be), will result in the Company being controlled by a new company;

- 9 -

5.5.2 at least 75% of the shares in the new company will be held by persons who immediately before the offer or proposal was made were shareholders in the Company; and

5.5.3 before Awards vest under Rule 5.1, an offer is made to Participants to release their Awards in consideration of the grant of equivalent new Awards

the old Awards shall not vest under Rule 5.1 and, if the offer to release the old Awards in consideration for the grant of new Awards is not accepted within the period specified in such offer by the Participant in respect of any old Award, that old Award shall lapse on the expiry of that period.

6. VARIATION OF CAPITAL

6.1 Variation of capital: adjustments to awards

Subject to Rule 6.3 below, in the event of any increase or variation of the share capital of the Company or a demerger, special dividend or other similar event (whenever effected), the Remuneration Committee may make such adjustments as they consider appropriate to the number of Deferred Shares (and, if the Award takes the form of an option, the amount, if any, payable on exercise of such option).

6.2 Notification to Participants of adjustments to Awards

As soon as reasonably practicable after making any adjustment under Rule 6.1 above, the Company shall give notice in writing of the adjustment to any Participant affected by it.

6.3 Nuclear Liabilities Fund Limited Conversion

The exercise by the Nuclear Liabilities Fund Limited of its right to convert all or part of the annual payment to be made to it pursuant to the terms of the contribution agreement into convertible ordinary shares in the Company or the conversion of such convertible ordinary shares shall not be grounds for making an adjustment under Rule 6.1.

7. SHAREHOLDING REQUIREMENT

7.1 Guidelines

The Remuneration Committee shall set guidelines to require the Executive Team to hold shares in the Company. For a Participant who is a director of the Company, this will require him to hold shares equal in value to 50 per cent of his gross salary by such date as the Remuneration Committee shall determine.

7.2 Shares which are “held”

For the purposes of Rule 7.1, shares beneficially owned by the Participant, his immediate family or family trusts, or shares subject to an Award which takes the form of an option where the option is capable of exercise following release, shall be treated as being held by a Participant.

- 10 -

8. ALTERATIONS

8.1 General rule on alterations

Subject to Rule 8.2 below, the Remuneration Committee may at any time alter or add to all or any of the provisions of the Plan, or the terms of any Award granted under it, in any respect.

8.2 Shareholder approval

Subject to Rule 8.3 below, no alteration to the advantage of Participants shall be made to the provisions concerning:

8.2.1 eligibility;

8.2.2 the individual limit on participation;

8.2.3 the overall limits on the issue of shares or the transfer of treasury shares under this Plan;

8.2.4 the basis for determining how many shares Participants receive; and

8.2.5 the adjustments that may be made following a variation of capital

without the prior approval by ordinary resolution of the members of the Company in general meeting.

8.3 Minor alterations

Rule 8.2 above shall not apply to any minor alteration to benefit the administration of the Plan to take account of a change in legislation or to obtain or to maintain favourable tax, exchange controls or regulatory treatment for Participants, any Participating Company or the Trustees.

8.4 Participant consent

No alteration or addition to the disadvantage of any existing rights of a Participant shall be made under Rule 8.1 above unless:

8.4.1 the Company shall have invited every such Participant to give an indication as to whether or not he approves the alteration or addition, and

8.4.2 the alteration or addition is approved by a majority of those Participants who have given such an indication.

8.5 Notification of alteration or addition

As soon as reasonably practicable after making any alteration or addition under Rule 8.1 above, the Company shall give notice of it to any Participant affected by it.

- 11 -

9. MISCELLANEOUS

9.1 Employment

The rights and obligations of any individual under the terms of his office or employment with any Participating Company shall not be affected by his participation in the Plan or any right which he may have to participate in the Plan. An individual who participates in the Plan shall waive any and all rights to compensation or damages in consequence of the termination of his office or employment for any reason whatsoever insofar as those rights arise or may arise from his ceasing to have rights under any Award under the Plan as a result of such termination.

9.2 Disputes

In the event of any dispute or disagreement as to the interpretation of the Plan, or as to any question or right arising from or related to the Plan, the decision of the Remuneration Committee shall be final and binding upon all persons.

9.3 Financial assistance

The Company and any Subsidiary may provide money to the trustees of any trust or any other person to enable them or him to acquire shares to be held for the purposes of the Plan, or enter into any guarantee or indemnity for those purposes, to the extent permitted by section 153(4) of the Companies Act 1985 and, where applicable, section 154 of that Act.

9.4 Notices

Any notice or other communication under or in connection with the Plan may be given by either:

9.4.1 personal delivery or by sending the same by post, in the case of a company to its registered office, and in the case of an individual to his last known address, or, where he is a director or employee of a Participating Company, either to his last known address or to the address of the place of business at which he performs the whole or substantially the whole of the duties of his office or employment;

9.4.2 in an electronic communication to their usual business address or such other address for the time being notified for the purpose to the person giving the notice; or

9.4.3 by such other method as the Remuneration Committee determines.

9.5 Third parties

No third party has any rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of the Plan.

- 12 -

9.6 Governing law

The rules of the Plan and the rights and obligations of any individual under the Plan shall be governed by and construed in accordance with the law of England and Wales.

- 13 -

APPENDIX

PERFORMANCE CONDITIONS AND INDIVIDUAL LIMITS FOR THE FIRST THREE YEAR CYCLE

1. Introduction

1.1 For the first Three Year Cycle (namely, the Financial Years ending 31 March 2006, 2007 and 2008), the Performance Conditions will be based on the following measures:

1.1.1 Safety and Environment;

1.1.2 EBITDA (Pre-Capex);

1.1.3 Nuclear Output;

1.1.4 Non-Outage Backlog;

1.1.5 Trading Measure;

1.1.6 Free Cash Flow; and

1.1.7 Equity Market Capitalisation.

1.2 The targets applicable to the Performance Conditions are as follows, and should be read in conjunction with the notes and definitions set out below:

Financial Year ending 31 March 2006		Adjusted Group Targets2	Group Targets2
EBITDA (Pre-Capex)		£800 million	£1,000 million
Nuclear Output4		64.5 TWh	69.5 TWh
	AFR
Safety & Environment3	EI
	UATR
Non Outage Backlog3
Trading Measure3,5
Free Cash Flow3
Equity Market Capitalisation6,7
Financial Year ending 31 March 2007		Adjusted Group Targets2	Group Targets2
EBITDA (Pre-Capex)		£925 million	£1,250 million
Nuclear Output4		65.5 TWh	72 TWh
	AFR
Safety & Environment3	EI
	UATR
Non Outage Backlog3
Trading Measure3,5
Free Cash Flow3
Equity Market Capitalisation6

- 14 -

Financial Year ending 31 March 2008		Adjusted Group Targets2	Group Targets2
EBITDA (Pre-Capex)		£1,200 million	£1,600 million
Nuclear Output		69.5 TWh	74.0 TWh
	AFR
Safety & Environment	EI
	UATR
Non Outage Backlog
Trading Measure
Free Cash Flow
Equity Market Capitalisation

1.3 For employees who are not members of the Executive Team, additional targets may be set.

Notes to the targets set out above:

(1) All performance targets will be audited independently of the Company and the Remuneration Committee shall retain discretion to adjust Awards to reflect any independent audit report. If any recording standards change, the Remuneration Committee shall have the discretion to reassess performance measures to take account of any such changes. For the Safety & Environment basket of measures this shall also include internal periodic audit to ensure that all parts of the business are monitoring and recording the correct metrics. In recognition of the volatility in UK electricity market prices, and the potential impact on realised prices and hence EBITDA, each year the Remuneration Committee will review market prices during the prior year and forecast prices for future years. If there has been a significant (more than 5%) variation in the assumed prices in the targets, the Remuneration Committee shall adjust EBITDA targets (either upwards or downwards) by an amount based on expected output, the market price change and the portion of the output that would be expected to be exposed to the changes in price. At the same time, the Remuneration Committee will review achieved output and will assess whether future output targets remain appropriate in the light of what is known about plant condition and performance at that time.

(2) For performance between Adjusted Group Target and Group Targets, Awards shall be increased on the basis of straight-line interpolation.

(3) For these measures, targets will be set on an annual basis. For this reason, projected targets for the Financial Years ending 31 March 2006, 31 March 2007 and 31 March 2008 are left blank.

(4) Assumes no nuclear assets will be bought or sold over the duration of the Plan. The Remuneration Committee shall reset the target if these assumptions change.

- 15 -

(5) The trading measure for the Financial Years ending 31 March 2006, 31 March 2007 and 31 March 2008 will be defined to reflect “trading value” which will be a value at risk measure.

(6) Targets for Equity Market Capitalisation will be set for the Financial Years ending 31 March 2006, 31 March 2007 and 31 March 2008 at the beginning of 2005.

2. Weighting of Group Targets

2.1 The Executive Team performance targets will be entirely based on Group Targets, and the proposed weighting for the Executive Team is as follows:

Year	Safety1		EBITDA		Nuclear Output		Non- Outage Backlog		Trading Margin		Free Cash Flow		Equity Market Capitalisation
2006	17.5	%	30	%	20	%	10	%	5	%	7.5	%	10	%
2007	17.5	%	30	%	20	%	10	%	5	%	7.5	%	10	%
2008	17.5	%	30	%	20	%	10	%	5	%	7.5	%	10	%

Note

(1) A “Safety Over-Ride” will apply. In the event of an INES event at level 2 or above, there will be a presumption that the entire Award will be scaled back appropriately, and the Remuneration Committee shall consider by how much to scale back any potential Award.

3. Total Potential Maximum Award for the Executive Team

3.1 The proposed total maximum Awards for Participants based on the first Three Year Cycle (the Financial Years ending 31 March 2006, 2007 and 2008) are as follows:

Tier	Adjusted Award over 3 years (1)	Maximum Award over 3 years (1)
Executive Team	6 X Basic Annual Salary (2)	14 X Basic Annual Salary (2)

Notes

(1) These awards are the aggregate figure for the three Financial Years ending 31 March 2006, 2007 and 2008. The Maximum Award assumes all of the Group Targets are achieved at the maximum Group Target level for each category in each of the three years covered for the Plan, and assumes that the awards all fully vest. The Maximum Award level for subsequent Three Year Cycles shall be determined by the Remuneration Committee prior to the start of each Three Year Cycle. Awards for the first Three Year Cycle will be made on the basis of 20% of the total potential maximum award for that three year period being made in respect of the Financial Year ending 31 March 2006, 40% in respect of the Financial Year ending 31 March 2007 and 40% in respect of the Financial Year ending 31 March 2008.

- 16 -

(2) Basic Annual Salary will be set as of the date of publication of the prospectus relating to the initial admission to listing of shares in the Company (expected to be 29 November 2004). Further increases of basic annual salary after the date of that prospectus will not increase the Maximum Award over the first Three Year Cycle. For the Financial Year ending 31 March 2006 and 31 March 2007 only, a 3 X Basic Annual Salary multiplier will apply to the Nuclear Output measure for the Adjusted Group Target. The Chief Nuclear Officer, Roy Anderson, was hired from the US and as a result his total compensation is potentially higher to reflect prevailing market rates in the US. His potential earnings over the same period are 1.67 times higher than the 14 X figure set out above for the remaining Executive Team members.

4. Definitions

4.1 For these purposes of this Appendix the following definitions will apply:

Accident Frequency Rate (“AFR”)	The number of lost time accidents (staff and non-staff) over the financial year in question per 200,000 hours worked. This is a standard WANO measure.
Capital Expenditure (Capex)	Capital Expenditure is currently expensed by the British Energy Group in its profit and loss account due to the impairment of its asset base carried out during the financial year ended 31 March 2003. EBITDA (Pre-Capex), as defined below, excludes the costs of investment expenditure that, had British Energy Group not have impaired its asset base, would ordinarily have been capitalized under UK GAAP. The Remuneration Committee reserves the right to adjust the target EBITDA (Pre-Capex) should the amount of capital that is added back to arrive at the EBITDA (Pre-Capex), differ significantly from that assumed when setting the target.
Commencement Date	1 April 2005.
EBITDA (Pre-Capex)	For each financial year ending on 31 March, 100% of group operating profit of British Energy Group before interest, tax, depreciation, and amortisation and before capital expenditure is expensed to the profit and loss account or one time charges or exceptional items based on UK GAAP. EBITDA (Pre-Capex) excludes any charges to the profit and loss account relating to the NLF Cash Sweep Payment or decommissioning fund contributions. It includes any relevant charge to profit and loss arising as a result of SSAP 24 or FRS 17 and excludes any charge to the profit and loss account relating to employee share schemes.

- 17 -

Environmental Incidents (“EI”)	The number of off-site reportable environmental incidents over the financial year in question as reported in the British Energy safety and regulation department board papers in the past. Each event is either a release of radioactivity or a breach of an authorised discharge limit or discharge consent.
Equity Market Capitalisation	The equity market capitalisation of British Energy Group before the impact of NLF converting the NLF Cash Sweep Payment into shares averaged over the final 90 business days of the relevant Financial Year.
Free Cash Flow (or Operating Cash Flow)	Net cash flow for operating activities of the British Energy Group prior to the NLF Cash Sweep Payment and after working capital movement and capital expenditure and before interest, tax, debt repayments and one-time charges of the British Energy Group. The Remuneration Committee will take account of any exceptional movements in cash flow in the last quarter of the relevant Financial Year.
Non-Outage Backlog	Total of outstanding plant defects which are work requests that have been partially actioned by maintenance, or also still awaiting action after screening by the station Work Review Groups based on a priority weighting set by the Nuclear Performance Review Committee of the Board.
Nuclear Output	Output from the Group Nuclear Stations over the financial year in Terrawatt hours.
Safety Environment	Combination of the Accident Frequency Rate, Environmental Incidents and Unplanned Automatic Trip Rate.
Trading Measure	This will be a trading measure, details of which will be determined by the Remuneration Committee before the Commencement Date.
Unplanned Automatic Trip Rate (“UATR”)	The number of unplanned automatic trips over the relevant Financial Year per 7,000 hours critical. This is a standard WANO measure.
WANO	World Association of Nuclear Operators

- 18 -

EX-4.12

Exhibit 4.12

British Energy Group plc

BRITISH ENERGY GROUP PLC

EXECUTIVE SHARE OPTION PLAN 2004

(PARTS ONE AND TWO)

Adopted 28/11/04

Inland Revenue Reference (Part One): X22758/GRP

New Bridge Street Consultants LLP

20 Little Britain

London EC1A 7DH

CONTENTS

		Page
PART ONE		1
1.	DEFINITIONS AND INTERPRETATION	1
2.	ELIGIBILITY	2
3.	GRANT OF OPTIONS	2
4.	LIMITS	3
5.	EXERCISE OF OPTIONS	5
6.	TAKEOVER, RECONSTRUCTION AND WINDING-UP	6
7.	VARIATION OF CAPITAL	8
8.	ALTERATIONS	10
9.	MISCELLANEOUS	10
PART TWO		12
1.	DEFINITIONS AND INTERPRETATION	12
2.	ELIGIBILITY	13
3.	GRANT OF OPTIONS	13
4.	LIMITS	14
5.	EXERCISE OF OPTIONS	15
6.	TAKEOVER, RECONSTRUCTION AND WINDING-UP	17
7.	VARIATION OF CAPITAL	18
8.	ALTERATIONS	18
9.	MISCELLANEOUS	19

PART ONE : INLAND REVENUE APPROVED OPTIONS

1. DEFINITIONS AND INTERPRETATION

(1) In this Plan, unless the context otherwise requires:

“the Board” means the board of directors of the Company or a committee appointed by such board of directors;

“the Committee” means the Remuneration Committee of the Board save that upon the occurrence of any of the corporate events described more fully in Rule 6, then the terms means the Remuneration Committee of the Board as constituted immediately before such events occurs;

“the Company” means British Energy Group plc (registered in Scotland No. SC 270184);

“the Grant Date” in relation to an option means the date on which the option was granted;

“Group Member” means:

(a) a Participating Company or a body corporate which is (within the meaning of section 736 of the Companies Act 1985) the Company’s holding company or a subsidiary of the Company’s holding company; or

(b) a body corporate which is (within the meaning of section 258 of that Act) a subsidiary undertaking of a body corporate within paragraph (a) above and has been designated by the Board for this purpose;

“ITEPA” means the Income Tax (Earnings and Pensions) Act 2003;

“the London Stock Exchange” means London Stock Exchange plc;

“Participant” means a person who holds an option granted under the Plan;

“Participating Company” means the Company or any Subsidiary or any company which is not under the control of any single person, but is under the control of two persons, one of them being the Company, and to which the Board has with the approval of the Inland Revenue resolved that the Plan shall for the time being extend;

“Performance Condition” means such other objective term(s), which shall be notified to the Participant on the Grant Date, that the person granting the option shall apply to such option in addition to the terms set out in these rules the satisfaction of which shall determine the extent to which (if at all) an option is capable of exercise;

“the Plan” means the British Energy Group plc Executive Share Option Plan 2004 as herein set out comprising Rules 1 to 9 of this Part One but subject to any alterations or additions made under Rule 8 below;

“Schedule 4” means Schedule 4 to ITEPA;

“Subsidiary” means a body corporate which is a subsidiary of the Company within the meaning of section 736 of the Companies Act 1985 and is under the control of the Company within the meaning of section 719 of ITEPA;

- 1 -

“the Trustee” means the trustee or trustees or the time being of any trust established for the benefit of all or most of the employees of the Company and/or Subsidiaries;

and expressions not otherwise defined herein have the same meanings as they have in Schedule 4.

(2) Any reference in the Plan to any enactment includes a reference to that enactment as from time to time modified, extended or re-enacted.

2. ELIGIBILITY

(1) Subject to sub-rule (3) below, a person is eligible to be granted an option under the Plan if and only if he is on the grant day a full-time director of a Participating Company or a qualifying employee of a Participating Company.

(2) For the purposes of sub-rule (1) above:

(a) an individual shall be treated as a full-time director of a Participating Company if he is obliged to devote to the performance of the duties of his office or employment with Participating Companies not less than 25 hours a week;

(b) a qualifying employee, in relation to a Participating Company, is an employee whether full-time or part-time of a Participating Company (other than one who is a director of a Participating Company).

(3) A person is not eligible to be granted an option under the Plan at any time:

(a) within six months immediately preceding the date on which he is bound to retire in accordance with the terms of his contract of employment; or

(b) when he is not eligible to participate in the Plan by virtue of paragraph 9 of Schedule 4.

3. GRANT OF OPTIONS

(1) Subject to sub-rule (2) below and Rule 4 below, the Committee on behalf of the Company or the Trustee may (but, in the case of the Trustee, only following a recommendation of the Committee) grant to any person who is eligible to be granted an option under the Plan an option to acquire shares in the Company (which satisfy the requirements of paragraphs 16 to 20 of Schedule 4, on the Grant Date and (subject to Rule 7(5) at the date of exercise of the option), upon the terms set out in this Plan and such other Performance Conditions as the grantor of the option may specify; and for this purpose an option to acquire includes an option to purchase and an option to subscribe for shares.

(2) An option may only be granted under the Plan:

(a) within the period of 6 weeks beginning with:

(i) the date on which the Plan is approved by the Company’s shareholders; or

(ii) the date on which the Plan is approved by the Inland Revenue under Schedule 4; or

(iii) the dealing day next following the date on which the Company announces its results for any period; or

- 2 -

(iv) the removal of any restriction imposed under statute, order or regulation (including any regulation, order or requirement imposed by the London Stock Exchange, UKLA or any other regulatory authority) which had previously prevented the grant of an option under this paragraph (a); or

(b) at any other time when the circumstances are considered by the Board to be sufficiently exceptional to justify the grant thereof; and

(c) within the period of 10 years beginning with the date on which the Plan is approved by the Company’s shareholders.

(3) The price at which shares may be acquired by the exercise of an option granted under the Plan shall be determined by the Committee before the grant thereof, but shall not be less than:

(a) if the price of shares of the same class as those shares are listed in the London Stock Exchange Daily Official List, the price shall be the middle-market quotation of shares of that class (as derived from that List) on the Grant Date or the day immediately preceding the Grant Date, as selected by the Committee, (and if the day immediately preceding the Grant Date is not a dealing day, the middle-market quotation at the close of the dealing day immediately preceding this day can be used) provided that no such dealing day shall fall before the day on which the Company last announced its results for any period;

(b) if paragraph (a) does not apply, the market value (within the meaning of Part VIII of the Taxation of Chargeable Gains Act 1992) of shares of that class, as agreed in advance with Shares Valuation of the Inland Revenue, on the Grant Date; and

(c) in the case of an option to acquire shares by subscription, the nominal value of those shares.

(4) An option granted under the Plan to any person:

(a) shall not, except as provided in Rule 5(4) below, be capable of being transferred, assigned or charged by him and any purported transfer, assignment or charge shall cause the option to lapse forthwith; and

(b) shall lapse forthwith if he is adjudged bankrupt.

(5) There shall be no monetary consideration for the grant of any option under the Scheme, and accordingly any such option shall be granted by deed.

(6) A Participant shall be entitled to renounce, surrender, cancel, or agree to the cancellation of, an option granted to him under the Scheme within the period of 30 days immediately following the Grant Date and, if any option is so renounced, surrendered or cancelled, it shall be deemed never to have been granted.

4. LIMITS

(1) No person shall be granted options under the Plan which would, at the time they are granted, cause the aggregate market value of the shares which he may acquire in pursuance of options granted to him under the Plan or under any other share option scheme, not being a savings-related share option scheme, approved under Schedule 4 and established by the Company or by any associated company of the Company (and not exercised) to exceed or further exceed £30,000 or such other limit as may apply from time to time for the purposes of paragraph 6(1) to Schedule 4.

- 3 -

(2) No person shall be granted options which would, at the time they are granted, cause the aggregate price at which he may acquire shares in pursuance of options granted to him in any financial year under this Plan to exceed 200% of the salary of such person, and for the purposes of this sub-rule:

(a) a person’s salary shall be taken to be his basic salary before tax (excluding benefits in kind and bonuses) expressed as an annual rate, payable by the Participating Companies to him at that time;

(b) any option which shall have been released to any extent shall be treated to that extent as if it were still exercisable; and

(c) where a payment of remuneration is made otherwise than in sterling, the payment shall be treated as being of the amount of sterling ascertained by applying such rate of exchange published in a national newspaper as the Committee shall reasonably determine.

(3) No options shall be granted in any year which would, at the time they are granted, cause the number of shares in the Company which shall have been or may be issued (or transferred in the case of the use of treasury shares) in pursuance of options granted in the period of 10 years ending at that time, or been issued (or transferred in the case of the use of treasury shares) in that period otherwise than in pursuance of options, under this Plan or under any other employees’ share scheme adopted by the Company to exceed such number as represents 10 per cent. of the ordinary share capital of the Company in issue at that time.

(4) No options shall be granted in any year which would, at the time they are granted, cause the number of shares in the Company which shall have been or may be issued (or transferred in the case of the use of treasury shares) in pursuance of options granted in the period of 10 years ending at that time, or been issued (or transferred in the case of the use of treasury shares) in that period otherwise than in pursuance of options, under this Plan or under any other executive share scheme adopted by the Company to exceed such number as represents 5 per cent. of the ordinary share capital of the Company in issue at that time.

(5) For the purposes of this Rule 4, the market value of the shares in relation to which an option was granted shall be calculated:

(a) in the case of an option granted under the Plan, as on the day by reference to which the price at which shares may be acquired by the exercise thereof was determined in accordance with Rule 3(3) above;

(b) in the case of an option granted under any other approved scheme, as at the time when it was granted or, in a case where an agreement relating to the shares has been made under paragraph 22 of Schedule 4, such earlier time or times as may be provided in the agreement; and

(c) in the case of any other option, as on the day or days by reference to which the price at which shares may be acquired by the exercise thereof was determined.

(6) Any option granted under the Plan shall be limited and take effect so that the above limits are complied with.

- 4 -

5. EXERCISE OF OPTIONS

(1) The exercise of any option granted under the Plan shall be effected in such form and manner as the Board may from time to time prescribe.

(2) Subject to sub-rules (4) and (5) below and to sub-rules (1), (3) and (4) of Rule 6 below, an option granted under the Plan may not be exercised before the third anniversary of the Grant Date.

(3) An option may only be exercised if the Performance Condition has been satisfied.

(4) If any Participant dies before exercising an option granted to him under the Plan and at a time when either he is a director or employee of a Group Member or he is or would be entitled to exercise the option by virtue of sub-rule (5) below, the option may (and must, if at all) be exercised by his personal representatives within 12 months after the date of his death.

(5) If any Participant ceases to be a director or employee of a Group Member (otherwise than by reason of his death), the following provisions apply in relation to any option granted to him under the Plan:

(a) if he so ceases by reason of injury, ill-health or disability, or retirement on reaching the age at which he is bound to retire in accordance with the terms of his contract of employment, redundancy (within the meaning of the Employment Rights Act 1996) or by reason only that his office or employment is in a company which ceases to be a Group Member, or relates to a business or part of a business which is transferred to a person who is not a Group Member, the option may (and subject to sub-rule (4) above must, if at all) be exercised within the exercise period; or

(b) if he so ceases for any other reason, the option may not be exercised at all unless the Committee acting fairly and reasonably shall so permit, in which event it may (and subject to sub-rule (4) above must, if at all) be exercised to the extent permitted by the Board acting fairly and reasonably within the exercise period;

and in this sub-rule the exercise period is the period of six months from the date of his cessation.

(6) A Participant shall not be treated for the purposes of sub-rule (5) above as ceasing to be a director or employee of a Group Member until such time as he is no longer a director or employee of any Group Member.

(7) Notwithstanding any other provision of the Plan, an option granted under the Plan may not be exercised after the expiration of the period of 10 years (or such shorter period as the Committee may have determined before the grant thereof) beginning with the Grant Date.

(8) A Participant shall not be eligible to exercise an option under the Plan at any time when he is not eligible to participate in the Plan by virtue of paragraph 9 of Schedule 4.

(9) Within 30 days after an option under the Plan has been exercised by any person, the Board on behalf of the Company shall allot or procure the transfer to him (or a nominee for him) of the number of shares in respect of which the option has been exercised unless the Board considers that allotment or transfer thereof would not be lawful in all relevant jurisdictions.

- 5 -

(10) It is a condition of exercise of any option that in a case where a Group Member (or former Group Member) is obliged to (or would suffer a disadvantage if it were not to) account for any tax (in any jurisdiction) for which the person in question is liable by virtue of the exercise of the option and/or for any social security contributions payable by or assessable on the person in question, which for the avoidance of doubt does not include secondary national insurance contributions in the UK, (together, the “Tax Liability”), that person has either:-

(a) made a payment to the Group Member (or former Group Member) of an amount equal to the Tax Liability; or

(b) entered into arrangements acceptable to that or another Group Member to secure that such a payment is made (whether by authorising the sale of some or all of the shares on his behalf and the payment to the Group Member of the relevant amount out of the proceeds of sale or otherwise).

(11) All shares allotted under the Plan shall rank pari passu in all respects with the shares of the same class for the time being in issue save as regards any rights attaching to such shares by reference to a record date prior to the date of the allotment.

(12) If shares of the same class as those allotted under the Plan are listed in the London Stock Exchange Official List, the Company shall apply to the London Stock Exchange for any shares so allotted to be admitted to that List.

(13) For the purposes of paragraph 35A of Schedule 4 the specified retirement age shall be 55.

6. TAKEOVER, RECONSTRUCTION AND WINDING-UP

(1) Subject to sub-rule (7) below, if any person obtains control of the Company (within the meaning of section 719 of ITEPA) as a result of making a general offer to acquire shares in the Company, or having obtained such control makes such an offer, the Board shall within 7 days of becoming aware thereof notify every Participant thereof and, subject to earlier lapse of the option under sub-rules (4), (5) and (7) of Rule 5 above, an option granted under the Plan may be exercised, subject to sub-rule (10) of Rule 5, within one month (or such longer period as the Committee may acting fairly and reasonably permit) of such notification, and to the extent that it is not exercised within that period shall (notwithstanding any other provision of the Plan) lapse on the expiration thereof.

(2) For the purposes of sub-rule (1) above, a person shall be deemed to have obtained control of the Company if he and others acting in concert with him have together obtained control of it.

(3) Subject to sub-rule (7) below, if any person becomes bound or entitled to acquire shares in the Company under sections 428 to 430F of the Companies Act 1985, or if the Court sanctions a compromise or scheme of arrangement under section 425 of the Companies Act 1985, or if the Company passes a resolution for voluntary winding up, or if an order is made for the compulsory winding up of the Company, the Board shall forthwith notify every Participant thereof and, subject to earlier lapse of the option under sub-rules (4), (5) and (7) of Rule 5 above, any option granted under the Plan may be exercised, subject to sub-rule (10) of Rule 5, within one month of such notification, and to the extent that it is not exercised within that period shall (notwithstanding any other provision of the Plan) lapse on the expiration thereof.

- 6 -

(4) If a demerger which, in the opinion of the Committee would affect the market price of shares subject to outstanding options to a material extent, is proposed then the Committee may at its discretion (acting fairly and reasonably) forthwith notify every Participant that, subject to earlier lapse of the option under sub-rules (4), (5) and (7) of Rule 5 above, an option granted under the Plan may be exercised, subject to sub-rule (10) of Rule 5, on such terms and during such period not exceeding one month preceding or following such event as may be determined by the Committee acting fairly and reasonably provided that if an option is exercised in advance of and conditional upon such demerger and such demerger shall not occur then the conditional exercise shall not be effective and the option shall continue to subsist.

(5) If any company (“the acquiring company”):

(a) obtains control of the Company as a result of making –

(i) a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied the person making the offer will have control of the Company, or

(ii) a general offer to acquire all the shares in the Company which are of the same class as the shares which may be acquired by the exercise of options granted under the Plan, or

(b) obtains control of the Company in pursuance of a compromise or arrangement sanctioned by the court under section 425 of the Companies Act 1985 or Article 418 of the Companies (Northern Ireland) Order 1986, or

(c) becomes bound or entitled to acquire shares in the Company under sections 428 to 430F of that Act or Articles 421 to 423 of that Order,

any Participant may at any time within the relevant period specified under paragraph 26(3) of Schedule 4, by agreement with the acquiring company, release any option granted under the Plan which has not lapsed (“the old option”) in consideration of the grant to him of an option (“the new option”) which (for the purposes of that paragraph) is equivalent to the old option but relates to shares in a different company (whether the acquiring company itself or some other company falling within paragraph 16(b) or (c) of Schedule 4).

(6) The new option shall not be regarded for the purposes of sub-rule (5) above as equivalent to the old option unless the conditions set out in paragraph 27(4) of Schedule 4 are satisfied, but so that the provisions of the Plan shall for this purpose be construed as if:

(a) the new option were an option granted under the Plan at the same time as the old option;

(b) except for the purposes of the definitions of “Group Member”, “Participating Company” and “Subsidiary” in Rule 1(1) above and the reference to “the Committee” in Rule 5(7) above, the expression “the Company” were defined as “a company whose shares may be acquired by the exercise of options granted under the Plan”; and

(c) Rule 8(2) below were omitted.

- 7 -

(7) If:

(a) the events referred to in this Rule 6 are part of an arrangement (a “Reorganisation”) which will mean that the Company will be under the control of another company or the business of the Company is carried on by another company;

(b) the persons who owned the shares in the Company immediately before the change of control will immediately afterwards own more than 75% of the shares in that other company; and

(c) notice of the offer of a replacement option pursuant to sub-rule (5) is given

then an option shall not become exercisable as a result of that Reorganisation and subject to earlier lapse under sub-rules (4), (5) and (7) of Rule 5 above, shall lapse three months following the notification of the Reorganisation to every Participant. Where sub-rule (5) is applied in these circumstances, the provisions of sub-rule (6) will also apply but with the omission of paragraph (c) of sub-rule (6).

7. VARIATION OF CAPITAL

(1) Subject to sub-rule (3) below, in the event of any variation of the share capital of the Company (whenever effected), the Committee may make such adjustments as it considers appropriate under sub-rule (2) below.

(2) An adjustment made under this sub-rule shall be to one or more of the following:

(a) the number of shares in respect of which any option granted under the Plan may be exercised;

(b) the price at which shares may be acquired by the exercise of any such option; or

(c) where any such option has been exercised but no shares have been allotted or transferred pursuant to such exercise, the number of shares which may be so allotted or transferred and the price at which they may be acquired.

(3) At a time when the Plan is approved by the Inland Revenue under Schedule 4, no adjustment under sub-rule (2) above shall be made without the prior approval of the Inland Revenue.

(4) An adjustment under sub-rule (2) above may have the effect of reducing the price at which shares may be acquired by the exercise of an option to less than their nominal value, but only if and to the extent that the Committee shall be authorised to capitalise from the reserves of the Company a sum equal to the amount by which the nominal value of the shares in respect of which the option is exercised and which are to be allotted pursuant to such exercise exceeds the price at which the same may be subscribed for and to apply such sum in paying up such amount on such shares; and so that on exercise of any option in respect of which such a reduction shall have been made the Committee shall capitalise such sum (if any) and apply the same in paying up such amount as aforesaid.

(5) If the shares subject to any option cease to satisfy the requirements of paragraphs 16 to 20 of Schedule 4 at any time after the Grant Date then:

(a) the Board shall as soon as practicable notify the Inland Revenue of this;

(b) the grantor of the option will not be required to allot, transfer or procure the allotment or transfer of shares which satisfy those requirements upon the exercise of any option;

- 8 -

(c) for the avoidance of doubt, all unexercised options shall continue to exist; and

(d) the Plan shall continue to exist but if the Inland Revenue withdraw their approval of the Plan under Schedule 4, it shall continue to exist as an unapproved share option plan.

- 9 -

8. ALTERATIONS

(1) Subject to sub-rules (2), (4) and (5) below, the Committee may at any time alter this Plan. When doing so they shall have regard to the fact that, any alteration to a key feature (the meaning of such term defined in Schedule 4) made at a time when this Plan is approved by the Inland Revenue under Schedule 4 shall not have effect unless and until unless the Inland Revenue and until have approved the alteration. The Company shall notify the Inland Revenue as soon as practicable of an alteration under this Rule 8 or any variation under Rule 7 which could cause the Plan to cease to be approved by the Inland Revenue under Schedule 4.

(2) Subject to sub-rule (3) below, no alteration or addition to the advantage of the persons to whom options may be granted may be made under sub-rule (1) above to any of the provisions concerning eligibility, the limits on individual participation and the number of shares which may be issued under the Plan, the terms of exercise, the rights attaching to the shares acquired, the non-assignability of options and adjustment of options on a variation of capital without the prior approval by ordinary resolution of the Company in general meeting.

(3) Sub-rule (2) above shall not apply to:

(a) any minor alteration to benefit the administration of this Plan, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for Participants or any Group Member; or

(b) any alteration or addition solely relating to a Performance Condition.

(4) No alteration or addition to the disadvantage of any Participant shall be made under sub-rule (1) above unless:

(a) the Committee shall have invited every relevant Participant to give an indication as to whether or not he approves the alteration or addition, and

(b) the alteration or addition is approved by a majority of those Participants who have given such an indication.

(5) No alteration which solely relates to a Performance Condition subject to which an option has been granted shall be made under sub-rule (1) above unless:

(a) there shall have occurred an event which shall have caused the Committee reasonably to consider that the Performance Condition would not, without the alteration, achieve its original purpose;

(b) the Committee shall act fairly and reasonably in making the alteration; and

(c) the amended Performance Condition will be not more difficult to satisfy than the unamended Performance Condition would have been but for the event in question.

9. MISCELLANEOUS

(1) The rights and obligations of any individual under the terms of his office or employment with any Group Member shall not be affected by his participation in the Plan or any right which he may have to participate therein, and an individual who participates therein shall and does waive any and all rights to compensation or damages in consequence of the termination of his office or employment for any reason whatsoever insofar as those rights arise or may arise from his ceasing to have rights under or be entitled to exercise any option under the Plan as a result of such termination.

- 10 -

(2) In the event of any dispute or disagreement as to the interpretation of the Plan, or as to any question or right arising from or related to the Plan, the decision of the Board shall be final and binding upon all persons.

(3) The Company and any Subsidiary may provide money to the trustees of any trust or any other person to enable them or him to acquire shares to be held for the purposes of the Plan, or enter into any guarantee or indemnity for these purposes, to the extent permitted by section 153 of the Companies Act 1985.

(4) In the event that shares are transferred to a Participant in pursuance of any option granted under the Plan, the Participant shall, if so required by the person making the transfer, join that person in making a claim for relief under section 165 of the Taxation of Chargeable Gains Act 1992 in respect of the disposal made by him in effecting such transfer.

(5) Any notice or other communication under or in connection with the Plan may be given by personal delivery or by sending the same by post, in the case of a company to its registered office, and in the case of an individual to his last known address, or, where he is a director or employee of a Group Member, either to his last known address or to the address of the place of business at which he performs the whole or substantially the whole of the duties of his office or employment or in an electronic communication to an address for the time being notified for that purpose to the person giving the notice.

(6) The Plan and all options granted under it shall be governed and construed in accordance with English law.

- 11 -

PART TWO : NON-TAX FAVOURED OPTIONS

1. DEFINITIONS AND INTERPRETATION

(1) In this Plan, unless the context otherwise requires:

“the Board” means the board of directors of the Company or a committee appointed by such board of directors;

“the Committee” means the Remuneration Committee of the Board save that upon the occurrence of any of the corporate events described more fully in Rule 6, then the terms means the Remuneration Committee of the Board as constituted immediately before such events occurs;

“the Company” means British Energy Group plc (registered in Scotland No. SC 270184);

“the Grant Date” in relation to an option means the date on which the option was granted;

“Group Member” means:

(a) a Participating Company or a body corporate which is (within the meaning of section 736 of the Companies Act 1985) the Company’s holding company or a subsidiary of the Company’s holding company; or

(b) a body corporate which is (within the meaning of section 258 of that Act) a subsidiary undertaking of a body corporate within paragraph (a) above and has been designated by the Board for this purpose;

“ITEPA” means the Income Tax (Earnings and Pensions) Act 2003;

“the London Stock Exchange” means London Stock Exchange plc;

“Participant” means a person who holds an option granted under the Plan;

“Participating Company” means the Company or any Subsidiary or any company which is not under the control of any single person, but is under the control of two persons, one of them being the Company, and to which the Board has resolved that the Plan shall for the time being extend;

“Performance Condition” means such other objective term(s), which shall be notified to the Participant on the Grant Date, that the person granting the option shall apply to such option in addition to the terms set out in these rules the satisfaction of which shall determine the extent to which (if at all) an option is capable of exercise;

“the Plan” means the British Energy Group plc Executive Share Option Plan 2004 as herein set out comprising Rules 1 to 9 of this Part Two but subject to any alterations or additions made under Rule 8 below;

“Schedule 4” means Schedule 4 to ITEPA;

“Subsidiary” means a body corporate which is a subsidiary of the Company within the meaning of section 736 of the Companies Act 1985;

“the Trustee” means the trustee or trustees or the time being of any trust established for the benefit of all or most of the employees of the Company and/or Subsidiaries; and expressions not otherwise defined herein have the same meanings as they have in Schedule 4.

- 12 -

(2) Any reference in the Plan to any enactment includes a reference to that enactment as from time to time modified, extended or re-enacted.

2. ELIGIBILITY

(1) Subject to sub-rule (3) below, a person is eligible to be granted an option under the Plan if and only if he is on the grant day a full-time director of a Participating Company or a qualifying employee of a Participating Company.

(2) For the purposes of sub-rule (1) above:

(a) an individual shall be treated as a full-time director of a Participating Company if he is obliged to devote to the performance of the duties of his office or employment with Participating Companies the whole or substantially the whole of his working time;

(b) a qualifying employee, in relation to a Participating Company, is an employee whether full-time or part-time of a Participating Company (other than one who is a director of a Participating Company).

(3) A person is not eligible to be granted an option under the Plan at any time within six months immediately preceding the date on which he is bound to retire in accordance with the terms of his contract of employment.

3. GRANT OF OPTIONS

(1) Subject to sub-rule (2) below and Rule 4 below, the Committee on behalf of the Company or the Trustee may (but, in the case of the Trustee, only following a recommendation of the Committee) grant to any person who is eligible to be granted an option under the Plan an option to acquire shares in the Company, upon the terms set out in this Plan and such other Performance Conditions as the grantor of the option may specify; and for this purpose an option to acquire includes an option to purchase and an option to subscribe for shares¹.

(2) An option may only be granted under the Plan:

(a) within the period of 6 weeks beginning with:

(i) the date on which the Plan is approved by the Company’s shareholders; or

(ii) the date on which Part One of the Plan is approved by the Inland Revenue; or

(iii) the dealing day next following the date on which the Company announces its results for any period; or

(iv) the removal of any restriction imposed under statute, order or regulation (including any regulation, order or requirement imposed by the London Stock Exchange, UKLA or any other regulatory authority) which had previously prevented the grant of an option under this paragraph (a) above; or

¹ For options to be granted to Canadian tax resident Participants, the intention is that these options will be granted as a right to subscribe only.

- 13 -

(b) at any other time when the circumstances are considered by the Board to be sufficiently exceptional to justify the grant thereof; and

(c) within the period of 10 years beginning with the date on which the Plan is approved by the Company’s shareholders.

(3) The price at which shares may be acquired by the exercise of an option granted under the Plan shall be determined by the Committee before the grant thereof, but shall not be less than:

(a) if the price of shares of the same class as those shares are listed in the London Stock Exchange Daily Official List, the price shall be the middle-market quotation of shares of that class (as derived from that List) on the Grant Date or the day immediately preceding the Grant Date, as selected by the Committee², (and if the day immediately preceding the Grant Date is not a dealing day, the middle-market quotation at the close of the dealing day immediately preceding this day can be used) provided that no such dealing day shall fall before the day on which the Company last announced its results for any period;

(b) if paragraph (a) does not apply, the market value (within the meaning of Part VIII of the Taxation of Chargeable Gains Act 1992) of shares of that class, as agreed in advance with Shares Valuation of the Inland Revenue, on the Grant Date; and

(c) in the case of an option to acquire shares by subscription, the nominal value of those shares.

(4) An option granted under the Plan to any person:

(a) shall not, except as provided in Rule 5(4) below, be capable of being transferred, assigned or charged by him and any purported transfer, assignment or charge shall cause the option to lapse forthwith; and

(b) shall lapse forthwith if he is adjudged bankrupt.

(5) There shall be no monetary consideration for the grant of any option under the Scheme, and accordingly any such option shall be granted by deed.

(6) A Participant shall be entitled to renounce, surrender, cancel, or agree to the cancellation of, an option granted to him under the Scheme within the period of 30 days immediately following the Grant Date and, if any option is so renounced, surrendered or cancelled, it shall be deemed never to have been granted.

4. LIMITS

(1) No person shall be granted options which would, at the time they are granted, cause the aggregate price at which he may acquire shares in pursuance of options granted to him in any financial year under this Plan to exceed 200% of the salary of such person, and for the purposes of this sub-rule:

(a) a person’s salary shall be taken to be his basic salary before tax (excluding benefits in kind and bonuses) expressed as an annual rate, payable by the Participating Companies to him at that time;

² For options to be granted to Canadian tax resident Participants, the intention is that the price on the Grant Date shall be used.

- 14 -

(b) any option which shall have been released to any extent shall be treated to that extent as if it were still exercisable; and

(c) where a payment of remuneration is made otherwise than in sterling, the payment shall be treated as being of the amount of sterling ascertained by applying such rate of exchange published in a national newspaper as the Committee shall reasonably determine.

(2) No options shall be granted in any year which would, at the time they are granted, cause the number of shares in the Company which shall have been or may be issued (or transferred in the case of the use of treasury shares) in pursuance of options granted in the period of 10 years ending at that time, or been issued (or transferred in the case of the use of treasury shares) in that period otherwise than in pursuance of options, under this Plan or under any other employees’ share scheme adopted by the Company to exceed such number as represents 10 per cent. of the ordinary share capital of the Company in issue at that time.

(3) No options shall be granted in any year which would, at the time they are granted, cause the number of shares in the Company which shall have been or may be issued (or transferred in the case of the use of treasury shares) in pursuance of options granted in the period of 10 years ending at that time, or been issued (or transferred in the case of the use of treasury shares) in that period otherwise than in pursuance of options, under this Plan or under any other executive share scheme adopted by the Company to exceed such number as represents 5 per cent. of the ordinary share capital of the Company in issue at that time.

(4) Any option granted under the Plan shall be limited and take effect so that the above limits are complied with.

5. EXERCISE OF OPTIONS

(1) The exercise of any option granted under the Plan shall be effected in such form and manner as the Committee may from time to time prescribe.

(2) Subject to sub-rules (4) and (5) below and to sub-rules (1), (3) and (4) of Rule 6 below, an option granted under the Plan may not be exercised before the third anniversary of the Grant Date.

(3) An option may only be exercised if the Performance Condition has been satisfied.

(4) If any Participant dies before exercising an option granted to him under the Plan and at a time when either he is a director or employee of a Group Member or he is or would be entitled to exercise the option by virtue of sub-rule (5) below, the option may (and must, if at all) be exercised by his personal representatives within 12 months after the date of his death.

(5) If any Participant ceases to be a director or employee of a Group Member (otherwise than by reason of his death), the following provisions apply in relation to any option granted to him under the Plan:

(a) if he so ceases by reason of injury, ill-health or disability, or retirement on reaching the age at which he is bound to retire in accordance with the terms of his contract of

- 15 -

employment, redundancy (within the meaning of the Employment Rights Act 1996, or by reason only that his office or employment is in a company which ceases to be a Group Member, or relates to a business or part of a business which is transferred to a person who is not a Group Member, the option may (and subject to sub-rule (4) above must, if at all) be exercised within the exercise period; or

(b) if he so ceases for any other reason, the option may not be exercised at all unless the Committee acting fairly and reasonably shall so permit, in which event it may (and subject to sub-rule (4) above must, if at all) be exercised to the extent permitted by the Committee acting fairly and reasonably within the exercise period;

and in this sub-rule the exercise period is the period of six months from the date of his cessation.

(6) A Participant shall not be treated for the purposes of sub-rule (4) and (5) above as ceasing to be a director or employee of a Group Member until such time as he is no longer a director or employee of any Group Member.

(7) Notwithstanding any other provision of the Plan, an option granted under the Plan may not be exercised after the expiration of the period of 10 years (or such shorter period as the Committee may have determined before the grant thereof) beginning with the Grant Date.

(8) Within 30 days after an option under the Plan has been exercised by any person, the Board on behalf of the Company shall allot or procure the transfer to him (or a nominee for him) of the number of shares in respect of which the option has been exercised unless the Board considers that allotment or transfer thereof would not be lawful in all relevant jurisdictions.

(9) It is a condition of exercise of any option that in a case where a Group Member (or former Group Member) is obliged to (or would suffer a disadvantage if it were not to) account for any tax (in any jurisdiction) for which the person in question is liable by virtue of the exercise of the option and/or for any social security contributions (and when granting an option, the grantor can if it so wishes specify that this shall include secondary national insurance contributions in the UK) (together, the “Tax Liability”), that person has either:

(a) made a payment to the Group Member (or former Group Member) of an amount equal to the Tax Liability; or

(b) entered into arrangements acceptable to that or another Group Member to secure that such a payment is made (whether by authorising the sale of some or all of the shares on his behalf and the payment to the Group Member of the relevant amount out of the proceeds of sale or otherwise);

(c) if the Board so requires, the Participant has entered into such joint election under Section 431 of the Income Tax (Earnings and Pensions) Act 2003 with the relevant Group Member as required by the Board or such other form of tax election as required by the Board to achieve similar effect.

(10) All shares allotted under the Plan shall rank pari passu in all respects with the shares of the same class for the time being in issue save as regards any rights attaching to such shares by reference to a record date prior to the date of the allotment.

- 16 -

(11) If shares of the same class as those allotted under the Plan are listed in the London Stock Exchange Official List, the Company shall apply to the London Stock Exchange for any shares so allotted to be admitted to that List.

6. TAKEOVER, RECONSTRUCTION AND WINDING-UP

(1) Subject to sub-rule (5) below, if any person obtains control of the Company (within the meaning of section 719 of ITEPA) as a result of making a general offer to acquire shares in the Company, or having obtained such control makes such an offer, the Board shall within 7 days of becoming aware thereof notify every Participant thereof and, subject to earlier lapse of the option under sub-rules (4), (5) and (7) of Rule 5 above, an option granted under the Plan may be exercised, subject to sub-rule (9) of Rule 5, within one month (or such longer period as the Committee may permit) of such notification, and to the extent that it is not exercised within that period shall (notwithstanding any other provision of the Plan) lapse on the expiration thereof.

(2) For the purposes of sub-rule (1) above, a person shall be deemed to have obtained control of the Company if he and others acting in concert with him have together obtained control of it.

(3) Subject to sub-rule (5) below, if any person becomes bound or entitled to acquire shares in the Company under sections 428 to 430F of the Companies Act 1985, or if the Court sanctions a compromise or scheme of arrangement under section 425 of the Companies Act 1985, or if the Company passes a resolution for voluntary winding up, or if an order is made for the compulsory winding up of the Company, the Board shall forthwith notify every Participant thereof and any option granted under the Plan may, subject to earlier lapse of the option under sub-rules (4), (5) and (7) of Rule 5 above, may be exercised, subject to sub-rule (9) of Rule 5, within one month of such notification, and to the extent that it is not exercised within that period shall (notwithstanding any other provision of the Plan) lapse on the expiration thereof.

(4) If a demerger which, in the opinion of the Committee would affect the market price of shares subject to outstanding options to a material extent, is proposed then the Committee may at its discretion forthwith notify every Participant that, subject to earlier lapse of the option under sub-rules (4), (5) and (7) of Rule 5 above, an option granted under the Plan may be exercised, subject to sub-rule (9) of Rule 5, on such terms and during such period preceding or following such event as may be determined by the Committee provided that if an option is exercised in advance of and conditional upon such event and such event shall not occur then the conditional exercise shall not be effective and the option shall continue to subsist.

(5) If:

(a) the events referred to in this Rule 6 are part of an arrangement (a “Reorganisation”) which will mean that the Company will be under the control of another company or the business of the Company is carried on by another company;

- 17 -

(b) the persons who owned the shares in the Company immediately before the change of control will immediately afterwards own more than 75% of the shares in that other company; and

(c) notice of the offer of a replacement option is given

then an option shall not become exercisable as a result of that Reorganisation but shall be released and shall be replaced by a new option over shares in the other company and which satisfies the conditions set out in paragraphs 27(4)(b) to (d) of Schedule 4, unless the Committee determines otherwise. Following this replacement of the option these rules shall continue to apply to the new option mutatis mutandis to take account of this replacement as the Committee shall reasonably determine.

7. VARIATION OF CAPITAL

(1) In the event of any variation of the share capital of the Company (whenever effected), a demerger, a payment of a special dividend or other event which, in the opinion of the Committee would affect the market price of shares subject to outstanding options to a material extent, the Board may make such adjustments as it considers appropriate under sub-rule (2) below.

(2) An adjustment made under this sub-rule shall be to one or more of the following:

(a) the number of shares in respect of which any option granted under the Plan may be exercised;

(b) the price at which shares may be acquired by the exercise of any such option; or

(c) where any such option has been exercised but no shares have been allotted or transferred pursuant to such exercise, the number of shares which may be so allotted or transferred and the price at which they may be acquired.

(3) An adjustment under sub-rule (2) above may have the effect of reducing the price at which shares may be acquired by the exercise of an option to less than their nominal value, but only if and to the extent that the Committee shall be authorised to capitalise from the reserves of the Company a sum equal to the amount by which the nominal value of the shares in respect of which the option is exercised and which are to be allotted pursuant to such exercise exceeds the price at which the same may be subscribed for and to apply such sum in paying up such amount on such shares; and so that on exercise of any option in respect of which such a reduction shall have been made the Committee shall capitalise such sum (if any) and apply the same in paying up such amount as aforesaid.

8. ALTERATIONS

(1) Subject to sub-rules (2), (4) and (5) below, the Board may at any time alter this Plan.

(2) Subject to sub-rule (3) below, no alteration or addition to the advantage of the persons to whom options may be granted may be made under sub-rule (1) above to any of the provisions concerning eligibility, the limits on individual participation and the number of shares which may be issued under the Plan, the terms of exercise, the rights attaching to the shares acquired, the non-assignability of options and adjustment of options on a variation of capital without the prior approval by ordinary resolution of the Company in general meeting.

- 18 -

(3) Sub-rule (2) above shall not apply to:

(a) any minor alteration to benefit the administration of this Plan, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for Participants or any Group Member; or

(b) any alteration or addition solely relating to a Performance Condition.

(4) No alteration or addition to the disadvantage of any Participant shall be made under sub-rule (1) above unless:

(a) the Committee shall have invited every relevant Participant to give an indication as to whether or not he approves the alteration or addition, and

(b) the alteration or addition is approved by a majority of those Participants who have given such an indication.

(5) No alteration which solely relates to a Performance Condition subject to which an option has been granted shall be made under sub-rule (1) above unless:

(a) there shall have occurred an event which shall have caused the Committee reasonably to consider that the Performance Condition would not, without the alteration, achieve its original purpose;

(b) the Committee shall act fairly and reasonably in making the alteration; and

(c) the amended Performance Condition will, in the reasonable opinion of the Board, be not materially more difficult to satisfy than the unamended Performance Condition would have been but for the event in question.

9. MISCELLANEOUS

(1) If any Participant appoints any person to act on his behalf for the purposes of the Plan, such person may:

(a) exercise any option granted to the Participant under the Plan;

(b) make such arrangements for funding the exercise as may be appropriate (including borrowing money on reasonable terms);

(c) sell sufficient of the shares acquired by the exercise to enable the costs of exercise (including the repayment of any loan and interest thereon) to be met out of the net proceeds of sale; and

(d) take any other action which he reasonably considers to be necessary or desirable in connection with the above.

(2) The rights and obligations of any individual under the terms of his office or employment with any Group Member shall not be affected by his participation in the Plan or any right which he may have to participate therein, and an individual who participates therein shall and does waive any and all rights to compensation or damages in consequence of the termination of his office or employment for any reason whatsoever insofar as those rights arise or may arise from his ceasing to have rights under or be entitled to exercise any option under the Plan as a result of such termination.

- 19 -

(3) In the event of any dispute or disagreement as to the interpretation of the Plan, or as to any question or right arising from or related to the Plan, the decision of the Board shall be final and binding upon all persons.

(4) The Company and any Subsidiary may provide money to the trustees of any trust or any other person to enable them or him to acquire shares to be held for the purposes of the Plan, or enter into any guarantee or indemnity for these purposes, to the extent permitted by section 153 of the Companies Act 1985.

(5) In the event that shares are transferred to a Participant in pursuance of any option granted under the Plan, the Participant shall, if so required by the person making the transfer, join that person in making a claim for relief under section 165 of the Taxation of Chargeable Gains Act 1992 in respect of the disposal made by him in effecting such transfer.

(6) Any notice or other communication under or in connection with the Plan may be given by personal delivery or by sending the same by post, in the case of a company to its registered office, and in the case of an individual to his last known address, or, where he is a director or employee of a Group Member, either to his last known address or to the address of the place of business at which he performs the whole or substantially the whole of the duties of his office or employment or in an electronic communication to an address for the time being notified for that purpose to the person giving the notice.

(7) The Plan and all options granted under it shall be governed and construed in accordance with English law.

- 20 -

EX-4.13

Exhibit 4.13

British Energy Group plc

BRITISH ENERGY GROUP PLC

EMPLOYEE SHARE OPTION PLAN 2004

Adopted 28/11/04

Inland Revenue Reference X22757/GRP

New Bridge Street Consultants LLP

20 Little Britain

London EC1A 7DH

CONTENTS

PART A: UK APPROVED OPTION		1
1.	DEFINITIONS AND INTERPRETATION	1
2.	ELIGIBILITY	2
3.	GRANT OF OPTIONS	2
4.	LIMITS	3
5.	EXERCISE OF OPTIONS	3
6.	TAKEOVER, RECONSTRUCTION AND WINDING-UP	5
7.	VARIATION OF CAPITAL	7
8.	ALTERATIONS	7
9.	MISCELLANEOUS	8
PART B: INTERNATIONAL OPTIONS		9

PART A: UK APPROVED OPTIONS

1. DEFINITIONS AND INTERPRETATION

(1) In this Plan, unless the context otherwise requires:

“the Board” means the board of directors of the Company or a committee appointed by such board of directors;

“the Committee” means the Remuneration Committee of the Board save that upon the occurrence of any of the corporate events described more fully in Rule 6, then the terms means the Remuneration Committee of the Board as constituted immediately before such events occurs;

“the Company” means British Energy Group plc (registered in Scotland No. SC 270184);

“the Grant Date” in relation to an option means the date on which the option was granted;

“Group Member” means:-

(a) a Participating Company or a body corporate which is (within the meaning of section 736 of the Companies Act 1985) the Company’s holding company or a subsidiary of the Company’s holding company; or

(b) a body corporate which is (within the meaning of section 258 of that Act) a subsidiary undertaking of a body corporate within paragraph (a) above and has been designated by the Board for this purpose;

“ITEPA” means the Income Tax (Earnings and Pensions) Act 2003;

“the London Stock Exchange” means London Stock Exchange plc;

“Participant” means a person who holds an option granted under the Plan;

“Participating Company” means the Company or any Subsidiary or any company which is not under the control of any single person, but is under the control of two persons, one of them being the Company, and to which the Board has with the approval of the Inland Revenue resolved that the Plan shall for the time being extend;

“the Plan” means the British Energy Group plc Employee Share Option Plan 2004 as herein set out but subject to any alterations or additions made under Rule 8 below;

“Schedule 4” means Schedule 4 to ITEPA;

“Subsidiary” means a body corporate which is a subsidiary of the Company within the meaning of section 736 of the Companies Act 1985 and is under the control of the Company within the meaning of section 719 of ITEPA;

“the Trustee” means the trustee or trustees or the time being of any trust established for the benefit of all or most of the employees of the Company and/or Subsidiaries;

and expressions not otherwise defined herein have the same meanings as they have in Schedule 4.

(2) Any reference in the Plan to any enactment includes a reference to that enactment as from time to time modified, extended or re-enacted.

- 1 -

2. ELIGIBILITY

(1) Subject to sub-rule (3) below, a person is eligible to be granted an option under the Plan if and only if he is on the grant day a full-time director of a Participating Company (other than the Company) or a qualifying employee of a Participating Company.

(2) For the purposes of sub-rule (1) above:-

(a) an individual shall be treated as a full-time director of a Participating Company if he is obliged to devote to the performance of the duties of his office or employment with Participating Companies not less than 25 hours a week;

(b) a qualifying employee, in relation to a Participating Company, is an employee whether full-time or part-time of a Participating Company (other than one who is a director of a Participating Company).

(3) A person is not eligible to be granted an option under the Plan at any time:-

(a) within two years immediately preceding the date on which he is bound to retire in accordance with the terms of his contract of employment; or

(b) when he is not eligible to participate in the Plan by virtue of paragraph 9 of Schedule 4.

3. GRANT OF OPTIONS

(1) Subject to sub-rule (2) below and Rule 4 below, the Committee on behalf of the Company or the Trustee may by deed (but, in the case of the Trustee, only following a recommendation of the Committee) grant to any person who is eligible to be granted an option under the Plan an option to acquire shares in the Company which satisfy the requirements of paragraphs 16 to 20 of Schedule 4, on the Grant Date and (subject to Rule 7(5) at the date of exercise of the option, upon the terms of this Plan and such other objective terms as the grantor of the option may specify at the Date of Grant.

(2) An option may only be granted under the Plan:

(a) within the period of 6 weeks beginning with the date on which the Plan is approved and adopted by the Company, the date on which Part A of the Plan is approved by the Inland Revenue under Schedule 4 or the dealing day next following the date on which the Company announces its results for any period, or at any other time when the circumstances are considered by the Board to be sufficiently exceptional to justify the grant thereof; and

(b) within the period of 10 years beginning with the date on which the Plan is approved and adopted as aforesaid.

(3) The price at which shares may be acquired by the exercise of an option granted under the Plan shall be determined by the Committee before the grant thereof, but shall not be less than:-

(a) if the price of shares of the same class as those shares are listed in the London Stock Exchange Daily Official List, the price shall be the middle-market quotation of shares of that class (as derived from that List) on the Grant Date (or if the Grant Date is not a dealing day, the dealing day immediately preceding the Grant Date); or

- 2 -

(b) if paragraph (a) above does not apply, the market value (within the meaning of Part VIII of the Taxation of Chargeable Gains Act 1992) of shares of that class, as agreed in advance for the purposes of the Plan with Shares Valuation of the Inland Revenue, on the Grant Date (or such other day as may be agreed with the Inland Revenue).

(4) The number of shares in respect of which an option shall be granted to any individual under the Plan shall be such number as shall be determined by the Committee or the Trustee, as the case may be, before the grant thereof.

(5) An option granted under the Plan to any person:-

(a) shall not, except as provided in Rule 5(3) below, be capable of being transferred by him; and

(b) shall lapse forthwith if he is adjudged bankrupt.

4. LIMITS

(1) No person shall be granted options under the Plan which would, at the time they are granted, cause the aggregate market value of the shares which he may acquire in pursuance of options granted to him under the Plan or under any other share option scheme, not being a savings-related share option scheme, approved under Schedule 4 and established by the Company or by any associated company of the Company (and not exercised) to exceed or further exceed £30,000 or such other limit as may apply from time to time for the purposes of paragraph 6(1) of Schedule 4.

(2) No options shall be granted in any year which would, at the time they are granted, cause the number of shares in the Company which shall have been or may be issued (or transferred in the case of the use of treasury shares) in pursuance of options granted in the period of 10 years ending at that time, or been issued (or transferred in the case of the use of treasury shares) in that period otherwise than in pursuance of options, under this Plan or under any other employees’ share scheme adopted by the Company to exceed such number as represents 10 per cent. of the ordinary share capital of the Company in issue at that time.

(3) For the purposes of this Rule 4, the market value of the shares in relation to which an option was granted shall be calculated:-

(a) in the case of an option granted under the Plan, as on the day by reference to which the price at which shares may be acquired by the exercise thereof was determined in accordance with Rule 3(3) above;

(b) in the case of an option granted under any other approved scheme, as at the time when it was granted or, in a case where an agreement relating to the shares has been made under paragraph 22 of Schedule 4, such earlier time or times as may be provided in the agreement; and

(c) in the case of any other option, as on the day or days by reference to which the price at which shares may be acquired by the exercise thereof was determined.

(4) Any option granted under the Plan shall be limited and take effect so that the above limits are complied with.

5. EXERCISE OF OPTIONS

(1) The exercise of any option granted under the Plan shall be effected in such form and manner as the Board may from time to time prescribe.

- 3 -

(2) Subject to sub-rules (3) and (4) below and to sub-rules (1), (3) and (4) of Rule 6 below, an option granted under the Plan may not be exercised before the third anniversary of the Grant Date.

(3) If any Participant dies before exercising an option granted to him under the Plan and at a time when either he is a director or employee of a Group Member or he is or would be entitled to exercise the option by virtue of sub-rule (4) below, the option may (and must, if at all) be exercised by his personal representatives within 12 months after the date of his death.

(4) If any Participant ceases to be a director or employee of a Group Member (otherwise than by reason of his death), the following provisions apply in relation to any option granted to him under the Plan:-

(a) if he so ceases by reason of injury or disability or by reason only that his office or employment is in a company which ceases to be a Group Member, or relates to a business or part of a business which is transferred to a person who is not a Group Member, the option may (and subject to sub-rule (3) above must, if at all) be exercised within the exercise period;

(b) if he so ceases by reason of retirement on reaching the age at which he is bound to retire in accordance with the terms of his contract of employment, or redundancy (within the meaning of the Employment Rights Act 1996) the option may (and subject to sub-rule (3) above must, if at all) be exercised within the exercise period;

(c) if he so ceases for any other reason, the option may not be exercised at all unless the Board acting fairly and reasonably shall so permit, in which event it may (and subject to sub-rule (3) above must, if at all) be exercised to the extent permitted by the Board acting fairly and reasonably within the exercise period;

and in this sub-rule the exercise period is the period which shall expire 6 months after his so ceasing.

(5) A Participant shall not be treated for the purposes of sub-rule (4) above as ceasing to be a director or employee of a Group Member until such time as he is no longer a director or employee of any Group Member.

(6) Notwithstanding any other provision of the Plan, an option granted under the Plan may not be exercised after the expiration of the period of 10 years (or such shorter period as the Committee may have determined before the grant thereof) beginning with the Grant Date.

(7) A Participant shall not be eligible to exercise an option under the Plan at any time when he is not eligible to participate in the Plan by virtue of paragraph 9 of Schedule 4.

(8) Within 30 days after an option under the Plan has been exercised by any person, the Board on behalf of the Company shall procure the transfer to him (or a nominee for him) of the number of shares in respect of which the option has been exercised unless the Board considers that transfer thereof would not be lawful in all relevant jurisdictions.

(9) It is a condition of exercise of any option that in a case where a Group Member (or former Group Member) is obliged to (or would suffer a disadvantage if it were not to) account for any tax (in any jurisdiction) for which the person in question is liable by virtue of the exercise of the option and/or for any social security contributions recoverable from the person in question (together, the “Tax Liability”), that person has either:-

(a) made a payment to the Group Member (or former Group Member) of an amount equal to the Tax Liability; or

- 4 -

(b) entered into arrangements acceptable to that or another Group Member to secure that such a payment is made (whether by authorising the sale of some or all of the shares on his behalf and the payment to the Group Member of the relevant amount out of the proceeds of sale or otherwise).

(9) All shares allotted under the Plan shall rank pari passu in all respects with the shares of the same class for the time being in issue save as regards any rights attaching to such shares by reference to a record date prior to the date of the allotment.

(10) If shares of the same class as those allotted under the Plan are listed in the London Stock Exchange Official List, the Company shall apply to the London Stock Exchange for any shares so allotted to be admitted to that List.

(11) For the purposes of paragraph 35A of Schedule 4 the specified retirement age shall be 55.

6. TAKEOVER, RECONSTRUCTION AND WINDING-UP

(1) If any person obtains control of the Company (within the meaning of section 719 of ITEPA) as a result of making a general offer to acquire shares in the Company, or having obtained such control makes such an offer, the Board shall within 7 days of becoming aware thereof notify every Participant thereof and, subject to the restrictions on exercise contained in sub-rules (3), (4) and (6) of Rule 5 above, an option granted under the Plan may be exercised, subject to sub-rule (9) of Rule 5, within one month (or such longer period as the Board acting fairly and reasonably may permit) of such notification, but to the extent that it is not exercised within that period shall (notwithstanding any other provision of the Plan) lapse on the expiration thereof.

(2) For the purposes of sub-rule (1) above, a person shall be deemed to have obtained control of the Company if he and others acting in concert with him have together obtained control of it.

(3) Subject to sub-rule (7) below, if any person becomes bound or entitled to acquire shares in the Company under sections 428 to 430F of the Companies Act 1985, or if the Court sanctions a compromise or scheme of arrangement under section 425 of the Companies Act 1985, or if the Company passes a resolution for voluntary winding up, or if an order is made for the compulsory winding up of the Company, the Board shall forthwith notify every Participant thereof and, subject to earlier lapse of the option under sub-rules (3), (4), and (6) of Rule 5 above, any option granted under the Plan may be exercised, subject to sub-rule (9) of Rule 5, within one month of such notification, and to the extent that it is not exercised within that period shall (notwithstanding any other provision of the Plan) lapse on the expiration thereof.

(4) If a demerger which, in the opinion of the Committee would affect the market price of shares subject to outstanding options to a material extent, is proposed then the Committee may at its discretion (acting fairly and reasonably) forthwith notify every Participant that, subject to earlier lapse of the option under sub-rules (3), (4) and (6) of Rule 5 above, an option granted under the Plan may be exercised, subject to sub-rule (9) of Rule 5, on such terms and during such period not exceeding one month preceding or following such event as may be determined by the Committee acting fairly and reasonably provided that if an option is exercised in advance of and conditional upon such demerger and such demerger shall not occur then the conditional exercise shall not be effective and the option shall continue to subsist.

- 5 -

(5) If any company (“the acquiring company”):

(a) obtains control of the Company as a result of making –

(i) a general offer to acquire the whole of the issued ordinary share capital of the Company which is made on a condition such that if it is satisfied the person making the offer will have control of the Company, or

(ii) a general offer to acquire all the shares in the Company which are of the same class as the shares which may be acquired by the exercise of options granted under the Plan, or

(b) obtains control of the Company in pursuance of a compromise or arrangement sanctioned by the court under section 425 of the Companies Act 1985 or Article 418 of the Companies (Northern Ireland) Order 1986, or

(c) becomes bound or entitled to acquire shares in the Company under sections 428 to 430F of that Act or Articles 421 to 423 of that Order,

any Participant may at any time within the relevant period specified under paragraph 26(3) of Schedule 4, by agreement with the acquiring company, release any option granted under the Plan which has not lapsed (“the old option”) in consideration of the grant to him of an option (“the new option”) which (for the purposes of that paragraph) is equivalent to the old option but relates to shares in a different company (whether the acquiring company itself or some other company falling within paragraph 16(b) or (c) of Schedule 4).

(6) The new option shall not be regarded for the purposes of sub-rule (5) above as equivalent to the old option unless the conditions set out in paragraph 27(4) of Schedule 4 are satisfied, but so that the provisions of the Plan shall for this purpose be construed as if:-

(a) the new option were an option granted under the Plan at the same time as the old option;

(b) except for the purposes of the definitions of “Group Member”, “Participating Company” and “Subsidiary” in Rule 1(1) above and the reference to “the Committee” in Rule 5(6) above, the expression “the Company” were defined as “a company whose shares may be acquired by the exercise of options granted under the Plan”; and

(c) Rule 8(2) below were omitted.

(7) If:

(a) the events referred to in this Rule 6 are part of an arrangement (a “Reorganisation”) which will mean that the Company will be under the control of another company or the business of the Company is carried on by another company;

(b) the persons who owned the shares in the Company immediately before the change of control will immediately afterwards own more than 75% of the shares in that other company; and

(c) notice of the offer of a replacement option pursuant to sub-rule (5) is given

then an option shall not become exercisable as a result of that Reorganisation and subject to earlier lapse under sub-rules (3), (4) and (6) of Rule 5 above, shall lapse three months following the notification of the Reorganisation to every Participant. Where sub-rule (5) is applied in these circumstances, the provisions of sub-rule (6) will also apply but with the omission of paragraph (c) of sub-rule (6).

- 6 -

7. VARIATION OF CAPITAL

(1) Subject to sub-rule (3) below, in the event of any variation of the share capital of the Company (whenever effected), the Committee may make such adjustments as it considers appropriate under sub-rule (2) below.

(2) An adjustment made under this sub-rule shall be to one or more of the following:-

(a) the number of shares in respect of which any option granted under the Plan may be exercised;

(b) the price at which shares may be acquired by the exercise of any such option; or

(c) where any such option has been exercised but no shares have been allotted or transferred pursuant to such exercise, the number of shares which may be so allotted or transferred and the price at which they may be acquired.

(3) At a time when the Plan is approved by the Inland Revenue under Schedule 4, no adjustment under sub-rule (2) above shall be made without the prior approval of the Inland Revenue.

(4) An adjustment under sub-rule (2) above may have the effect of reducing the price at which shares may be acquired by the exercise of an option to less than their nominal value, but only if and to the extent that the Committee shall be authorised to capitalise from the reserves of the Company a sum equal to the amount by which the nominal value of the shares in respect of which the option is exercised and which are to be allotted pursuant to such exercise exceeds the price at which the same may be subscribed for and to apply such sum in paying up such amount on such shares; and so that on exercise of any option in respect of which such a reduction shall have been made the Committee shall capitalise such sum (if any) and apply the same in paying up such amount as aforesaid.

(5) If the shares subject to any option cease to satisfy the requirements of paragraphs 16 to 20 of Schedule 4 at any time after the Grant Date then:-

(a) the Board shall as soon as practicable notify the Inland Revenue of this;

(b) the grantor of the option will not be required to allot, transfer or procure the allotment or transfer of shares which satisfy those requirements upon the exercise of any option;

(c) for the avoidance of doubt, all unexercised options shall continue to exist; and

(d) the Plan shall continue to exist but if the Inland Revenue withdraw their approval of the Plan under Schedule 4, it shall continue to exist as an unapproved share option plan.

8. ALTERATIONS

(1) Subject to sub-rules (2) and (4) below, the Board may at any time alter this Plan. When doing so they shall have regard to the fact that, an alteration to a “key feature” (the meaning of such as defined in Schedule 4) made at a time when this Plan is approved by the Inland Revenue under Schedule 4, shall not have effect unless and until the Inland Revenue have approved the alteration. The Company shall notify the Inland Revenue as soon as practicable of an alteration under this Rule 8 or any variation under Rule 7 which could cause the Plan to cease to be approved by the Inland Revenue under Schedule 4.

(2) Subject to sub-rule (3) below, no alteration to the advantage of the persons to whom options have been or may be granted shall be made to Rule 2, Rules 3(2), 3(3), 3(4) and 3(5), Rule 4, Rules 5(2) to 5(4) and Rules 5(6) to 5(9), Rule 6 and Rules 7(1) and 7(2) without the prior approval by ordinary resolution of the members of the Company in general meeting.

- 7 -

(3) Sub-rule (2) above shall not apply to any minor alteration to benefit the administration of this Plan, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for Participants or any Group Member.

(4) No alteration or addition to the disadvantage of any Participant shall be made under sub-rule (1) above unless:-

(a) the Committee shall have invited every relevant Participant to give an indication as to whether or not he approves the alteration or addition, and

(b) the alteration or addition is approved by a majority of those Participants who have given such an indication.

9. MISCELLANEOUS

(1) The rights and obligations of any individual under the terms of his office or employment with any Group Member shall not be affected by his participation in the Plan or any right which he may have to participate therein, and an individual who participates therein shall waive any and all rights to compensation or damages in consequence of the termination of his office or employment for any reason whatsoever insofar as those rights arise or may arise from his ceasing to have rights under or be entitled to exercise any option under the Plan as a result of such termination.

(2) In the event of any dispute or disagreement as to the interpretation of the Plan, or as to any question or right arising from or related to the Plan, the decision of the Board shall be final and binding upon all persons.

(3) The Company and any Subsidiary may provide money to the trustees of any trust or any other person to enable them or him to acquire shares to be held for the purposes of the Plan, or enter into any guarantee or indemnity for these purposes, to the extent permitted by section 153 of the Companies Act 1985.

(4) In the event that shares are transferred to a Participant in pursuance of any option granted under the Plan, the Participant shall, if so required by the person making the transfer, join that person in making a claim for relief under section 165 of the Taxation of Chargeable Gains Act 1992 in respect of the disposal made by him in effecting such transfer.

(5) Any notice or other communication under or in connection with the Plan may be given by personal delivery or by sending the same by post, in the case of a company to its registered office, and in the case of an individual to his last known address, or, where he is a director or employee of a Group Member, either to his last known address or to the address of the place of business at which he performs the whole or substantially the whole of the duties of his office or employment.

(6) The Plan and all options granted under it shall be governed and construed in accordance with English law.

- 8 -

PART B: INTERNATIONAL OPTIONS

1. Rules 1-9 of the Plan shall apply except as set out below.

2. In the definition of “Participating Company” in Rule 1(1), the words “with the approval of the Inland Revenue” are deleted.

3. Delete Rule 2(3)(b).

4. In Rule 3(1) delete the words “which satisfy the requirements of paragraphs 16 to 20 of Schedule 4 on the Grant Date and (subject to Rule 7(5)) at the date of exercise of the option” and the word “objective”.

5. Delete Rule 3(3)(b).

6. Delete Rule 4(1) and replace it with the following “No person shall be granted options under the Plan which would, at the time they are granted, cause the aggregate price at which shares may be acquired by the exercise of options granted to him under the Plan to exceed or further exceed £30,000.”

7. Delete Rule 4(3).

8. In Rule 5(4)(b) delete all the words “, or redundancy (within the meaning of the Employment Rights Act 1996)”.

9. Delete Rule 5(7).

10. In Rule 5(9) the following words be inserted as a new paragraph (c):

“and if the Board so requires the Participant has entered into such joint election under Section 431 of the Income Tax (Earnings and Pensions) Act 2003 with the relevant Group Member as required by the Board or such other form of tax election as required by the Board to achieve similar effect.”

11. No option granted under this Part B shall be capable of exercise whilst the Board considers that any immediate sale of the shares acquired thereto would be unlawful in all relevant jurisdictions, and in such event, the Board has the discretion to specify that an option that has become exercisable under Rule 5(3) or Rule 5(4) will be capable of exercise in the 12 month period commencing when any such sale would become lawful.

12. Delete Rules 6(5) and 6(6).

13. Delete Rules 7(3) and 7(5).

14. In Rule 7(1), the words “a demerger, a payment of a special dividend or other event which, in the opinion of the Committee would effect the market price of shares subject to outstanding options to a material extent,” be inserted after the words “(whenever effected)”.

15. In Rule 8(1) delete the second and third sentences.

16. Delete Rule 9(4).

- 9 -

EX-4.15

Exhibit 4.15

DATED: 8 October, 2004

THE SECRETARY OF STATE FOR TRADE AND INDUSTRY

- AND -

BRITISH ENERGY PLC

DEED RELATING TO

THE DECISION OF

THE COMMISSION OF THE EUROPEAN COMMUNITIES

Slaughter and May

One Bunhill Row

London EC1Y 8YY

(WJS/TP)

CA042810002

CONTENTS

		Page
1.	INTERPRETATION	5
2.	ENHANCED REPORTING	12
3.	INTRA-GROUP RESTRUCTURING; RING-FENCING	13
4.	CAPACITY RESTRICTIONS	17
5.	PRICING IN DIRECT SUPPLY BUSINESS	18
6.	OTHER COVENANTS	22
7.	ANNOUNCEMENTS	24
8.	CONFIDENTIALITY	24
9.	DAMAGES NOT AN ADEQUATE REMEDY	25
10.	CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999	26
11.	FURTHER ASSURANCE	26
12.	NOTICES	26
13.	COSTS AND EXPENSES	27
14.	COUNTERPARTS	27
15.	VARIATION	27
16.	CHOICE OF GOVERNING LAW	27
17.	JURISDICTION	27
18.	AGENT FOR SERVICE	28
Schedule 1 Exceptional Market Circumstances Tests		30
Schedule 2 Appointment of Independent Expert		31
Schedule 3 Matters Relating to Independent Expert		32
Schedule 4 Aggregated Discounted Relevant Payments		34
Schedule 5 Intra-Group Restructuring		36

Schedule 6 Accession	40
Schedule 7 Prevailing Wholesale Market Price	43
Annex Independent Expert Terms of Reference	48

*** indicates materials omitted and filed separately with the Commission.

3

DATE: 8 October, 2004

PARTIES:

(A) THE SECRETARY OF STATE FOR TRADE AND INDUSTRY, of 1 Victoria Street, London SW1H 0ET (the “Secretary of State”); and

(B) BRITISH ENERGY PLC of 3 Redwood Crescent, Peel Park, East Kilbride G74 5PR (registered in Scotland No. SC162273) (“British Energy”).

BACKGROUND

(A) In September 2002, British Energy initiated discussions with the Secretary of State with a view to seeking immediate financial support and to enable a longer term restructuring of British Energy to take place.

(B) In November 2002, British Energy announced the principles of a restructuring of the British Energy Group with its significant financial creditors which, together with other proposals agreed between British Energy and the Secretary of State, were intended to lead to a solvent restructuring of the British Energy Group.

(C) In March 2003 the Government of the United Kingdom (the “Government”) submitted a restructuring plan in respect of British Energy to the Commission of the European Communities (the “Commission”) in accordance with the requirements of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (1999/C288/02) for approval under Article 87(3)(c) of the EC Treaty.

(D) British Energy, certain other members of the British Energy group and its significant financial creditors entered into a restructuring agreement dated as of 30 September 2003 (the “Creditor Restructuring Agreement”) under the terms of which a solvent restructuring of the British Energy group would be effected. The solvent restructuring of the British Energy group to be thereby effected will involve, inter alia, the creation of a new ultimate parent company, British Energy Group plc (“BE plc”) and a new wholly-owned subsidiary of BE plc, British Energy Holdings plc (“Holdings”). BE plc and Holdings will be the holding companies of British Energy Generation Limited (“BEG”) and British Energy Generation (UK) Limited (“BEG (UK)”).

(E) On 1 October 2003, British Energy, BEG, BEG (UK), certain other members of the British Energy group, the Nuclear Generation Decommissioning Fund Limited (to be renamed Nuclear Liabilities Fund Limited) (the “NLF”) and the Secretary of State entered into an agreement (the “Government Restructuring Agreement”) under the terms of which they agreed to enter into the agreements that constitute the Nuclear Liabilities Agreements (as defined therein).

(F) By a decision dated 22 September 2004 (the “Decision”), the Commission authorised, pursuant to Article 87(3)(c) of the EC Treaty, aid to be provided by the Government to the British Energy group.

*** indicates materials omitted and filed separately with the Commission.

4

(G) In the context of the Decision the Government gave certain undertakings to the Commission to regulate the British Energy group’s commercial behaviour and to provide various reports to the Commission.

(H) The parties are entering into this Deed in order to implement the undertakings referred to in Recital (G).

THE PARTIES AGREE as follows:

1. INTERPRETATION

1.1 In this Deed:

“Accession Deed”	means an accession deed which complies with the requirements of Schedule 6 (Accession);
“Accounts”	means, in respect of a Financial Period, the annual consolidated audited accounts of the Group;
“Act”	means the Companies Act 1985;
“Aggregate Discounted Relevant Payments”	means an amount calculated pursuant to clause 2.1 in accordance with Schedule 4 (Aggregate Discounted Relevant Payments);
“Asset Option Agreement”	means the asset option agreement to be entered into on the Restructuring Date between EPL, BEPET and Barclays Bank PLC;
“BEG”	has the meaning given in Recital (D);
“BEG(UK)”	has the meaning given in Recital (D);
“BEPET”	means British Energy Power and Energy Trading Limited (registered no. SC200887) of 3 Redwood Crescent, Peel Park, East Kilbride G74 5PR;
“BNFL”	means British Nuclear Fuels plc (company number 1002607) whose registered office is at Risley, Warrington, Cheshire WA3 6AS;
“Business Day”	means a day (other than a Saturday or a Sunday) on which banks are open for business (other than solely for trading and settlement in euro) in London and Edinburgh;
“Commission”	has the meaning given in Recital (C);
“Creditor Restructuring Agreement”	has the meaning given in Recital (D);

*** indicates materials omitted and filed separately with the Commission.

5

“Decision”	has the meaning given in Recital (F);
“Deed”	means this deed, including its recitals, schedules and annex;
“Eggborough”	means the 1970 megawatt coal-fired power station which is located at Eggborough in Yorkshire;
“Eggborough Options”	means the options granted to Barclays Bank PLC (in its capacity as security trustee for the EPL Lenders): (A)   under the Share Option Agreement, to acquire the entire issued share capital of EPL held by EPHL; and (B)   under the Asset Option Agreement, to acquire property and assets, including Eggborough, from EPL;
“Electricity Supply Business”	means the authorised business of supplying electricity directly to end-users, including activities necessary for or directly incidental to such business;
“Electricity Supply Restructuring”	has the meaning given in clause 3.1(A);
“Electricity Supply Subsidiary”	has the meaning given in clause 3.1(A);
“Electricity Trading Business”	means the business of wholesale energy trading, including activities, such as risk management, which are necessary for or directly incidental to such trading;
“EPL Credit Agreement”	means the credit agreement dated 13 July 2000 between EPL as borrower, Barclays Capital as arranger, Barclays Bank PLC as agent and security trustee and various financial institutions as lenders;
“EPL Lenders”	means the lenders from time to time under the EPL Credit Agreement;
“EPHL”	means Eggborough Power Holdings Limited (registered number SC201083) of 3 Redwood Crescent, Peel Park, East Kilbride G74 5PR;
“EPL”	means Eggborough Power Limited (registered number 03782700) of Barnett Way, Barnwood, Gloucester, Gloucestershire GL4 3RS;
“Execution Date”	means the date on which this Deed is signed by all parties to it;

*** indicates materials omitted and filed separately with the Commission.

6

“Financial Periods”	means accounting periods, adopted from time to time by the Ultimate Parent Company in accordance with the Act, for the purpose of producing the Accounts;
“Government”	has the meaning given in Recital (C);
“Group”	means the Ultimate Parent Company and its Subsidiaries from time to time and “Group Member” means any person which is a member of the Group from time to time;
“Historic Liabilities Funding Agreement”	means the Historic Liabilities Funding Agreement to be entered into on the Restructuring Date between the Secretary of State and various Group Members pursuant to which, inter alia, the Secretary of State agrees to meet certain payment obligations of BEG and BEG(UK) under the BNFL Historic Contracts (as defined therein);
“Independent Expert”	means an expert appointed pursuant to clause 5.19 in accordance with Schedule 2 (Appointment of Independent Expert);
“Independent Expert Procedures”	means the procedures to be applied in determining whether or not exceptional market circumstances exist, as set out in clauses 5.4 to 5.10 inclusive;
“Intra-Group Restructuring”	has the meaning given in clause 3.1;
“Licences”	means all licences held by each Group Member under the Electricity Act 1989;
“NLF”	has the meaning given in Recital (E);
“Non-Nuclear Generation Business”	means the authorised business of generating electricity and the provision of Ancillary Services otherwise than as part of the Nuclear Generation Business;
“Nuclear Generation Business”	means the authorised business of generating electricity and the provision of Ancillary Services from the nuclear power stations described in Schedule 1 to the Nuclear Liabilities Funding Agreement, including fossil-fuelled generation auxiliary to such nuclear generation and the conduct of Related Nuclear Activities and Related Nuclear Research Activities;
“Nuclear Generation Restructuring”	has the meaning in clause 3.1(B);

*** indicates materials omitted and filed separately with the Commission.

7

“Nuclear Liabilities Funding Agreement”	means the Nuclear Liabilities Funding Agreement to be entered into on the Restructuring Date between the Secretary of State, the NLF and various Group Members pursuant to which, inter alia, the NLF agrees to fund certain uncontracted nuclear liabilities and decommissioning costs of the Group;
“OfGEM”	means the Office of Gas and Electricity Markets;
“Pending Disposal Period”	means the period:
	(A)   from and including the date on which: (i)     either EPL or EPHL receives a notice that one of the Eggborough Options is being exercised; or (ii)    any steps are taken to enforce the security over the shares in EPL or Eggborough;
	(B)   to and excluding the date on which the registered generating capacity of Eggborough is no longer available to the Group;
“Personnel”	means the directors, officers, employees, agents and advisers of each Group Member;
“Prevailing Wholesale Market Price”	is the time-weighted average wholesale market price for electricity prevailing at the relevant time, as reported by Heren, Argus or other reputable, independent publishers of wholesale market prices;
“Reference Financial Period”	has the meaning given in clause 2.1;
“Relevant Payments”	means payments made by: (A)   the NLF to meet the Costs of Discharging Liabilities and Licensee Compensation Amounts pursuant to, and as such terms are defined in, the Nuclear Liabilities Funding Agreement; and
	(B)   the Secretary of State to discharge the Incremental Historic Liabilities pursuant to, and as such term is defined in, the Historic Liabilities Funding Agreement;
“Relevant Payments Threshold”	means £1,629 million;

*** indicates materials omitted and filed separately with the Commission.

8

“Reporting Auditors”	means the auditors engaged pursuant to clause 2 (Enhanced reporting);
“Rights of Control”	mean rights of control (as defined in Article 3.2 of Regulation 139/2004/EC) but excluding normal trading contracts for energy or capacity (including as such normal trading contracts: (i) contracts for load management or interruptibility; (ii) insurance or option-type contracts; contracts for consolidation of related services; and (iii) contracts for the provision of related services to small fossil-fuelled generators);
“Ring-Fencing Report”	a written analysis which may be used to demonstrate that the Nuclear Generation Business has not provided any cross subsidy to any other business of the Group;
“Share Option Agreement”	means the share option agreement to be entered into on the Restructuring Date between EPHL, EPL, BEPET and Barclays Bank PLC;
“Subsidiary”	means:
	(A)   any subsidiary within the meaning of section 736 of the Act; and
	(B)   any subsidiary undertaking as defined in section 258 of the Act;
“Tests”	means the tests for determining whether or not exceptional market circumstances exist, as set out in Schedule 1 (Exceptional Market Circumstances Tests);
“Transmission System”	a system in Great Britain which (a) consists (wholly or mainly) of high voltage lines and electrical plant, and (b) is used for conveying electricity from a generating station to a substation, or from one generating station to another or from one substation to another; and
“Ultimate Parent Company”	means British Energy and, upon completion of the restructuring referred to in Recital (D), British Energy Group plc.

1.2 In this Deed, unless otherwise stated or the context requires otherwise:

(A) words importing the singular only shall include the plural and vice versa;

(B) words importing any gender shall include all other genders;

(C) words importing natural persons shall include corporations;

*** indicates materials omitted and filed separately with the Commission.

9

(D) references to any “party” means a party to this Deed and shall be construed so as to include its successors in title pursuant to an intra-group restructuring, permitted assigns and permitted transferees;

(E) references to a “company” shall be construed so as to include any company, corporation or other body corporate, wherever and however incorporated or established;

(F) references to a “person” shall be construed so as to include any individual, firm, company, government, state or agency of a state, local or municipal authority or government body or any joint venture, association or partnership (whether or not having separate legal personality);

(G) a reference to any statute or statutory provision shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted;

(H) a reference to “law” includes common or customary law, principles of equity and any constitution, code of practice, decree, judgment, decision, legislation, order, ordinance, regulation, bye-law, statute, treaty or other legislative measure in any jurisdiction or any present or future directive, regulation, guideline, request, rule or requirement (in each case, whether or not having the force of law but, if not having the force of law, the compliance with which is in accordance with the general practice of persons to whom the directive, regulation, guideline, request, rule or requirement is intended to apply) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

(I) any reference to a “day” (including within the phrase “Business Day”) shall mean a period of 24 hours running from midnight to midnight;

(J) a reference to an “authorised business” means a business or activity authorised by (i) a licence granted (or treated as granted) under section 6, or (ii) exemption granted under section 5, of the Electricity Act 1989;

(K) any reference to “Ancillary Services” shall have the meaning given in standard licence condition 1 in generation licences issued pursuant to the Electricity Act 1989;

(L) any reference to “Related Nuclear Activities” and “Related Nuclear Research Activities” shall each have the meaning given in Part II of Section D in generation licences issued pursuant to the Electricity Act 1989 (Supplementary Standard Conditions for nuclear generators);

(M) a reference to any other document referred to in this Deed is, unless the context otherwise requires, a reference to that other document as amended, varied, novated or supplemented at any time;

         (N) (i)     the rule known as the ejusdem generis rule shall not apply and, accordingly, general words introduced by the word “other” shall not be given a restrictive meaning by reason of the fact that they are preceded by words indicating a particular class of acts, matters or things;

*** indicates materials omitted and filed separately with the Commission.

10

(ii) general words shall not be given a restrictive meaning by reason of the fact that they are followed by particular examples intended to be embraced by the general words;

(O) the Schedules form part of this Deed and shall have the same force and effect as if expressly set out in the body of this Deed, and reference to this Deed shall include the Schedules;

(P) references to any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official, or any legal concept or thing shall in respect of any jurisdiction other than England be deemed to include what most nearly approximates in that jurisdiction to the English legal term;

(Q) any reference to a “manifest error of assessment” shall be applied in the same way as it is applied by the Court of Justice and the Court of First Instance of the European Communities in relation to grounds of annulment of decisions of the Commission;

(R) a reference to a “clause” or a “Schedule” is a reference to a clause of, or a schedule to, this Deed; and

(S) a reference to a “paragraph” is a reference to a paragraph within a clause or a Schedule.

1.3 If, after execution of this Deed, BE plc substitutes British Energy as the Ultimate Parent Company, any reference to “British Energy” in this Deed (other than in the recitals) shall, upon execution of an Accession Deed by BE plc in accordance with clause 6 (Other covenants), be deemed to refer to BE plc.

1.4 This Deed is being entered into in order to implement the undertakings given by the Government in connection with the Decision. If there is:

(A) any ambiguity or inconsistency in the provisions of this Deed; or

(B) any dispute as to the interpretation or intended effect of this Deed or any provision contained in it,

such ambiguity, inconsistency or dispute shall be resolved, to the extent possible, by reference to the Decision.

1.5 All headings and titles are inserted for convenience only. They are to be ignored in the interpretation of this Deed.

*** indicates materials omitted and filed separately with the Commission.

11

2. ENHANCED REPORTING

Calculation of Relevant Payments Threshold

2.1 At the expiry of each Financial Period, British Energy will calculate the Aggregate Discounted Relevant Payments for the immediately following Financial Period (a “Reference Financial Period”). British Energy will notify the Secretary of State of the Aggregate Discounted Relevant Payments for each Reference Financial Period no later than the date on which it publishes the Accounts for the immediately preceding Financial Period.

2.2 British Energy will ensure that the notification of each Aggregate Discounted Relevant Payments pursuant to clause 2.1 is accompanied by all necessary supporting information, documentation and explanations which are reasonably required to enable the Secretary of State to verify the calculation of the Aggregate Discounted Relevant Payments.

Enhanced reporting proposals

2.3 If, in any Reference Financial Period, the Aggregate Discounted Relevant Payments for that Reference Financial Period exceeds the Relevant Payments Threshold, British Energy will:

(A) notify the Secretary of State; and

(B) promptly provide the Secretary of State with all information, documentation, explanations and assistance reasonably requested by the Secretary of State for the purposes of carrying out the Enhanced Reporting. The assistance to be provided by British Energy to the Secretary of State shall include reasonable access to all Personnel (who shall be instructed by British Energy (or the relevant Group Member) to comply with any such requests from the Secretary of State).

2.4 British Energy shall indemnify and keep indemnified the Secretary of State for all costs and expenses of any auditors engaged by the Secretary of State for the purposes of conducting the Enhanced Reporting.

2.5 The Secretary of State may provide any report produced pursuant to the conduct of the Enhanced Reporting, together with any information, documentation, and explanations provided by or on behalf of British Energy pursuant to clause 2.3(B), to the Commission.

2.6 For the purposes of this clause 2 (Enhanced reporting), “Enhanced Reporting” means the additional reporting and auditing requirements which the Government has undertaken to conduct if the Relevant Payments Threshold is exceeded, such reporting and auditing to include:

(A) the internal audit by the Nuclear Decommissioning Authority of its controls and monitoring procedures relating to Relevant Payments, such audit to include a check that the processes adopted have been properly applied and that expenditure by the NLF pursuant to the Historic Liabilities Funding Agreement and the Nuclear Liabilities Funding Agreement has been properly incurred; and

*** indicates materials omitted and filed separately with the Commission.

12

(B) the external audit to be conducted by an agency appointed by the Secretary of State, such agency to be independent of the Secretary of State, the Group and the Nuclear Decommissioning Authority, such audit to include the production of an annual report on the results of specific procedures designed to verify that Relevant Payments are being used only for the purposes authorised by the Decision and are restricted to the minimum necessary to achieve those purposes.

3. INTRA-GROUP RESTRUCTURING; RING-FENCING

Intra-Group Restructuring

3.1 British Energy shall, as soon as practicable after the Execution Date and in any event before 1 April 2005, procure that:

(A) subject to clause 3.3(A), the Electricity Supply Business which, as at the Execution Date, is being conducted by BEG, is transferred to a separate, wholly-owned Subsidiary of British Energy (the “Electricity Supply Subsidiary”) (the “Electricity Supply Restructuring”); and

(B) subject to clause 3.3(B), the Nuclear Generation Business which, as at the Execution Date, is being conducted by BEG and BEG(UK), is consolidated into a separate, wholly-owned Subsidiary of British Energy which conducts only the Nuclear Generation Business (the “Nuclear Generation Restructuring”),

(together, the “Intra-Group Restructuring”).

3.2 The Intra-Group Restructuring will be implemented at British Energy’s cost and expense by means of the steps set out in Parts C and D of Schedule 5 (Intra-Group Restructuring).

Action prior to Intra-Group Restructuring

3.3 British Energy will use all reasonable endeavours to procure that:

(A) prior to the implementation of the Electricity Supply Restructuring, all consents, approvals, authorisations and permissions which are necessary for the implementation of the Electricity Supply Restructuring (each, an “Electricity Supply Consent”) are obtained from OfGEM and all other government, statutory, regulatory and industry bodies having jurisdiction in respect of such restructuring (including those detailed in Part A of Schedule 5 (Intra-Group Restructuring)); and

(B) prior to the implementation of the Nuclear Generation Restructuring all consents, approvals, authorisations and permissions which are necessary for the implementation of the Nuclear Generation Restructuring (each, a “Nuclear Generation Consent”) are obtained from the Nuclear Installations Inspectorate, OfGEM and all other government, statutory, regulatory and industry bodies having jurisdiction in respect of such restructuring (including those detailed in Part B of Schedule 5 (Intra-Group Restructuring)).

*** indicates materials omitted and filed separately with the Commission.

13

3.4 If any Electricity Supply Consent is not obtained before 1 April 2005, British Energy:

(A) shall continue to use all reasonable endeavours to procure such Electricity Supply Consent;

(B) pending receipt of such consent shall be relieved of its obligation to implement the Electricity Supply Restructuring; and

(C) as soon as reasonably practicable following receipt of such Electricity Supply Consent, shall implement the Electricity Supply Restructuring.

3.5 If any Nuclear Generation Consent is not obtained before 1 April 2005, British Energy:

(A) shall continue to use all reasonable endeavours to procure such Nuclear Generation Consent;

(B) pending receipt of such consent shall be relieved of its obligation to implement the Nuclear Generation Restructuring; and

(C) as soon as reasonably practicable following receipt of such Nuclear Generation Consent, shall implement the Nuclear Generation Restructuring.

Ring-fencing

3.6 British Energy will procure that:

(A) if the Nuclear Generation Restructuring is not implemented prior to 1 April 2005, separate accounts are produced for the Nuclear Generation Business for the Financial Period ending 31 March 2006 and for each subsequent Financial Period until such restructuring has been implemented; and

(B) if:

(i) the Electricity Supply Restructuring is not implemented prior to 1 April 2005 separate accounts are produced for the Electricity Supply Business for the Financial Period ending 31 March 2006 and for each subsequent Financial Period until such restructuring has been implemented; and

(ii) in any Financial Period the Electricity Supply Subsidiary conducts any business other than the Electricity Supply Business, the accounts for the Electricity Supply Subsidiary should query include a note to the audited accounts which discloses separately the turnover and operating profit attributable to the Electricity Supply Business for each such Financial Period. For this purpose, British Energy will make a reasonable apportionment of costs as between the Electricity Supply Business and any other business or activity of the Electricity Supply Subsidiary. Such note will be reconciled to the audited financial statements of the Electricity Supply Subsidiary.

*** indicates materials omitted and filed separately with the Commission.

14

3.7 British Energy shall:

(A) as part of the Nuclear Generation Restructuring, procure that the Licences:

(i) provide for the Nuclear Generation Business and the Non-Nuclear Generation Business to be treated as separate businesses for regulatory purposes; and

(ii) prohibit the Nuclear Generation Business from giving any cross-subsidy to any other business of the Group;

(B) following the implementation of the Nuclear Generation Restructuring:

(i) procure that the Nuclear Generation Business is maintained in, and conducted by, a separate Subsidiary of British Energy and shall not permit such Subsidiary to conduct any other business; and

(ii) use all reasonable endeavours to ensure that the Licences comply with the requirements of clause 3.7(A) on an ongoing basis following such implementation;

(C) following the implementation of the Electricity Supply Restructuring, procure that the Electricity Supply Business is maintained in, and conducted by, a separate Subsidiary of British Energy; and

(D) procure that the Electricity Trading Business which, as at the Execution Date, is being conducted by BEPET, is maintained in, and conducted by, a separate Subsidiary of British Energy.

3.8 At any time during which the Licences do not comply with the requirements of clause 3.7(A), British Energy shall procure that:

(A) the Nuclear Generation Business and Non-Nuclear Generation Business are treated as separate businesses as if clause 3.7(A) had been fulfilled; and

(B) the Nuclear Generation Business does not give any cross-subsidy to any other business of the Group.

*** indicates materials omitted and filed separately with the Commission.

15

Ring-Fencing Reports

3.9 If the Licences do not comply with clause 3.7(A), British Energy shall engage, at its own cost and expense, reputable independent accounting experts (the “Ring-Fencing Experts”) and shall procure that:

(A) the Ring-Fencing Experts prepare a Ring-Fencing Report in respect of each Financial Period, with the first such report being prepared for the Financial Period ending 31 March 2006; and

(B) each Ring-Fencing Report is provided by the Ring-Fencing Experts to British Energy no later than 3 months after the publication of the Accounts. On receipt of each Ring-Fencing Report, British Energy shall promptly provide a copy of it to the Secretary of State.

3.10 British Energy will, at least 1 month prior to the engagement of the Ring-Fencing Experts, notify the Secretary of State of the proposed terms of engagement for such experts (including the procedures to be adopted in producing each Ring-Fencing Report) (the “Ring-Fencing Terms”). The Secretary of State may, by notice in writing to British Energy, require British Energy to modify the Ring-Fencing Terms to the extent required to comply, or monitor compliance, with the Decision and this Deed.

3.11 British Energy will notify the Secretary of State at least 1 month prior to making any amendment to the Ring-Fencing Terms and the Secretary of State may, by notice in writing to British Energy, prohibit such amendment if and to the extent that such proposed amendment will prevent compliance, or the monitoring of compliance, with the Decision and this Deed.

3.12 The Secretary of State may:

(A) review each Ring-Fencing Report and British Energy shall promptly provide with all such information, documentation, explanations and assistance as the Secretary of State may request to determine that the Ring-Fencing Report:

(i) is true, accurate and complete in all material respects;

(ii) complies with the Ring-Fencing Terms; and

(iii) is sufficiently detailed to enable the Secretary of State to comply with the requirements of the Decision; and

(B) provide each Ring-Fencing Report and any information contained in it, together with any information, documentation and explanations provided by or on behalf of British Energy pursuant to paragraph (A), to the Commission.

The assistance to be provided by British Energy pursuant to this clause 3.12 shall include reasonable access to all Personnel (who shall be instructed by British Energy (or the relevant Group Member) to comply with any request for assistance from the Secretary of State).

*** indicates materials omitted and filed separately with the Commission.

16

4. CAPACITY RESTRICTIONS

Restrictions

4.1 British Energy shall not, for a period of six years from the date of the Decision, own or have Rights of Control over operational, registered nuclear generating capacity in the European Economic Area (other than (i) the nuclear generation assets owned as at the date of the Decision and (ii) any operation and maintenance contracts to which a Group Member is a party provided that such Group Member has no interest in the corresponding electricity output) without obtaining the prior written consent of the Commission.

4.2 Subject to clauses 4.3, 4.4 and 4.5, British Energy shall not, for a period of six years from the date of the Decision, own or have Rights of Control over:

(A) registered, operational, fossil-fuelled electricity generating capacity in the European Economic Area; or

(B) the capacity of any large hydro-electric generating station (as defined in the Renewables Obligations Order 2002 in effect as at the Execution Date) in the United Kingdom,

(together referred to as “Restricted Capacity”) which in aggregate exceeds 2,020 megawatts (any Restricted Capacity in excess of 2,020 megawatts being “Excess Restricted Capacity”) .

Exceptions

4.3 During a Pending Disposal Period, the Group shall be entitled to own or have Rights of Control over Excess Restricted Capacity provided that either:

(A) it does not operate such Excess Restricted Capacity; or

(B) it immediately divests itself of all operational control and interest in such Excess Restricted Capacity and the output generated thereby.

4.4 If the generating capacity at Eggborough becomes unavailable to the Group following exercise of one of the Eggborough Options or enforcement of security over the share capital of EPL or Eggborough the Group shall be entitled to own or have Rights of Control over Restricted Capacity not exceeding 2,222 megawatts provided that British Energy (on behalf of the Group) declares its Restricted Capacity to the operator of the Transmission System as 2,020 megawatts and does not operate any Excess Restricted Capacity.

4.5 If the generating capacity at Eggborough becomes unavailable to the Group as a result of irreparable failure or force majeure, the Group shall be entitled to own or have Rights of Control over Restricted Capacity not exceeding 2,222 megawatts, provided that British Energy (on behalf of the Group) declares its Restricted Capacity to the operator of the Transmission System as 2,020 megawatts and does not operate any Excess Restricted Capacity.

*** indicates materials omitted and filed separately with the Commission.

17

5. PRICING IN DIRECT SUPPLY BUSINESS

Pricing restriction

5.1 Subject to clause 5.2, British Energy shall not, for a period of six years from the date on which the Independent Expert is appointed (the “Relevant Period”), supply or offer to supply non-domestic end-users who purchase (or wish to purchase) electricity directly from the Electricity Supply Business on terms where the price of the energy element of the offer or contract is below the Prevailing Wholesale Market Price, taking into account electricity volumes, load factors/predictability, interruptibility, duration and credit/payment terms (an illustration of the methodology of adjusting the Prevailing Wholesale Market Price is provided by way of example in Schedule 7 (Prevailing Wholesale Market Price)) (the “Pricing Restriction”).

Exception

5.2 The Pricing Restriction shall be disapplied in the manner and for the period specified in clause 5.11 if the Independent Expert determines that exceptional market circumstances exist.

5.3 Any determination by the Independent Expert as to the existence of exceptional market circumstances shall be made solely on the basis of whether or not the Tests have been fulfilled.

Procedure for determination of exceptional market circumstances

5.4 If British Energy considers that there are strong indications that exceptional market circumstances are likely to occur so as to justify pricing below the Prevailing Wholesale Market Price under clause 5.2, it shall give written notice to the Independent Expert (with a copy to the Secretary of State):

(A) outlining its analysis of the market circumstances;

(B) providing relevant information which demonstrates that the Tests are very close to being, or are likely to be, fulfilled; and

(C) indicating how it proposes to react to these circumstances in its offers to non-domestic end-users or potential end-users of the Electricity Supply Business,

(an “Amber Notice”).

5.5 If, within ******** of serving an Amber Notice, British Energy considers that exceptional market circumstances exist, it shall give written notice to the Independent Expert (with a copy to the Secretary of State):

(A) indicating that it proposes to disapply the Pricing Restriction on the basis that the Tests are fulfilled;

(B) providing the most recent information which demonstrates that the Tests are fulfilled; and

*** indicates materials omitted and filed separately with the Commission.

18

(C) requiring the Independent Expert to determine, as soon as possible and in any event within 24 hours of such notification, whether exceptional market circumstances exist or not,

(a “Red Notice”).

5.6 The parties shall use all reasonable endeavours to procure that, within 24 hours of receipt of a Red Notice, the Independent Expert shall make his determination as to whether or not exceptional market circumstances exist (the “Expert Determination”) and shall forthwith give notice to British Energy and the Secretary of State of his determination in writing together with the reasons for the determination.

5.7 A determination that exceptional market circumstances exist shall be effective for ******** from notification of the Expert Determination being given to British Energy (the “Determination Validity Period”).

5.8 If British Energy considers that exceptional market circumstances are likely to continue after the Determination Validity Period, it shall give a notice to the Independent Expert (with a copy to the Secretary of State) (a “Supplementary Red Notice”) at least ******** in advance of the expiry of the Determination Validity Period providing relevant information which demonstrates that the Test in paragraph 3 of Schedule 1 (Exceptional Market Test Circumstances) will be fulfilled after the Determination Validity Period.

5.9 The parties shall use all reasonable endeavours to procure that, within 24 hours of receipt of a Supplementary Red Notice and in any event prior to the expiry of the Determination Validity Period, the Independent Expert shall make his determination as to whether or not exceptional market circumstances will continue to exist after the Determination Validity Period (the “Supplementary Expert Determination”) and shall forthwith inform British Energy and the Secretary of State of his determination in writing together with the reasons for the determination.

5.10 A determination that exceptional market circumstances shall continue to exist after the Determination Validity Period shall be effective for ******** from notification of the Supplementary Expert Determination being given to British Energy (the “Supplementary Determination Validity Period”). This process may be repeated for so long as the Independent Expert determines that exceptional market circumstances persist.

Consequences of Expert Determination

5.11 If the Independent Expert determines that exceptional market circumstances exist, the Electricity Supply Business shall be entitled:

(A) for the Determination Validity Period; and

(B) for any Supplementary Determination Validity Period,

(together the “Exceptional Circumstances Period”) to supply or offer to supply non-domestic end-users who purchase (or wish to purchase) electricity directly from the Electricity Supply Business on terms where the price of the energy element of the offer

*** indicates materials omitted and filed separately with the Commission.

19

or contract is below the Prevailing Wholesale Market Price. Any such supply or offer to supply is subject to the further condition that British Energy believes in good faith that such supply or offer to supply is necessary in order for the Electricity Supply Business to respond to competitive offers to such end-users.

5.12 If the Independent Expert determines that exceptional market circumstances do not exist, British Energy must notify the Secretary of State that it intends:

(A) to continue to comply with the Pricing Restriction; or

(B) to price the energy element of its offers to non-domestic end-users below the Prevailing Wholesale Market Price because it believes that the Independent Expert has made a manifest error of assessment in making the Expert Determination or Supplementary Expert Determination (as the case may be).

5.13 If British Energy (a) delivers a notice pursuant to clause 5.12(B), (b) acts, or indicates that it intends to act, in breach of the Pricing Restriction or (c) the Secretary of State reasonably believes that British Energy has acted or intends to act in breach of the Pricing Restriction, the Secretary of State:

(A) may apply to a court of competent jurisdiction:

(i) for a final injunction to enforce compliance with the Pricing Restriction but will give British Energy advance notice of any such application; and/or

(ii) for an order that the Group accounts to the Secretary of State for any profits made by the Group as a result of a breach of the Pricing Restriction and, in this regard, the parties agree that British Energy shall be obliged to account to the Secretary of State for any profits arising from any breach of the Pricing Restriction; and

(B) will give British Energy the opportunity in any hearing of the Secretary of State’s application pursuant to paragraph (A) to be heard and contend that no such injunction and/or order should be made (such contention to be made, in circumstances where the Independent Expert has made an Expert Determination and/or a Supplementary Expert Determination, on the basis that the Independent Expert has made a manifest error of assessment and that as a result of this the Expert Determination and/or Supplementary Expert Determination is ineffective).

5.14 The Secretary of State and British Energy agree that notwithstanding any notice period stipulated by the procedural rules of the court, the Secretary of State may make an application for a final injunction pursuant to clause 5.13(A)(i) on 24 hours notice to British Energy. Moreover, the Secretary of State and British Energy agree that any such application will be urgent and therefore undertake to use all reasonable endeavours to ensure the swift hearing and determination of any such application.

5.15 If the Court hearing the Secretary of State’s application for a final injunction finds that the Independent Expert has made a manifest error of assessment and that accordingly the Expert Determination and/or Supplementary Expert Determination is ineffective, the Secretary of State shall:

*** indicates materials omitted and filed separately with the Commission.

20

(A) withdraw any application made pursuant to clause 5.13 (insofar as such application has not been dismissed by the Court); and

(B) require the Independent Expert to reconsider the Expert Determination and, if appropriate, any Supplementary Expert Determination, in the light of the court’s findings (such requirement having the same procedural effect as a Red Notice or a Supplementary Red Notice (as the case may be)).

British Energy obligations regarding the Independent Expert

5.16 British Energy shall during the Relevant Period:

(A) co-operate in good faith with the Independent Expert and comply in a timely manner with any reasonable requests of the Independent Expert (including requests for information, documents, explanations or access to Personnel) to enable him to:

(i) make any Expert Determination or Supplementary Expert Determination; and

(ii) provide reports to the Secretary of State in accordance with his terms of engagement as set out in Schedule 3 (Matters relating to Independent Expert); and

(B) without prejudice to the generality of the foregoing, following an Expert Determination (or Supplementary Expert Determination) that exceptional market circumstances existed, promptly, and in any event within 1 month of expiry of each Exceptional Circumstances Period, provide a report to the Independent Expert which:

(i) specifies the Exceptional Circumstances Period;

(ii) summarises the sales activities of the Electricity Supply Business vis-à-vis non-domestic end-users in terms of offers made, customers retained and won and prices offered during the relevant Exceptional Circumstances Period; and

(iii) contains relevant information (if any) on, and measures of prices paid by, non-domestic end-users for electricity during the Exceptional Circumstances Period.

Expert Determinations binding; Expert Determination not provided

5.17 Any Expert Determination or Supplementary Expert Determination shall, in the absence of a court of competent jurisdiction determining that the Expert Determination or Supplementary Expert Determination is ineffective on the basis there has been a manifest error of assessment by the Independent Expert, be final and binding.

*** indicates materials omitted and filed separately with the Commission.

21

5.18 If the Independent Expert is, acting in good faith, unable to make a determination that exceptional market circumstances exist either because the information provided in an Amber Notice, a Red Notice or a Supplementary Red Notice is insufficient or because any Group Member has failed to comply with its obligations under clause 5.16, the Independent Expert shall notify British Energy and the Secretary of State, without any delay and in any event within 24 hours, that he was unable to make such determination and, for the purposes of this Deed, shall be deemed to have made an Expert Determination that exceptional market circumstances do not exist.

Appointment of Independent Expert

5.19 The Secretary of State will procure that an Independent Expert is appointed and remunerated in accordance with the provisions of Schedule 2 (Appointment of Independent Expert).

5.20 The contract between the Secretary of State and the Independent Expert shall impose obligations on the Independent Expert including those set out in Schedule 3 (Matters relating to Independent Expert).

Liability relating to Independent Expert

5.21 British Energy:

(A) for itself and on behalf of the Electricity Supply Business, acknowledges and agrees that the Secretary of State shall have no responsibility or liability whatsoever for any liabilities, losses, charges, claims, demands, costs or expenses (together, “Liabilities”) incurred or suffered by any Group Member or the Electricity Supply Business which arises out of or in connection with any Expert Determination, any Supplementary Expert Determination or any other action or omission of the Independent Expert (together, “Expert Conduct”); and

(B) it shall not, and it shall procure that no Group Member shall, bring any action, claim or proceeding, or make any demand whatsoever against the Secretary of State in respect of Liabilities incurred or suffered by any Group Member or the Electricity Supply Business which arises out of or in connection with any Expert Conduct.

6. OTHER COVENANTS

Co-operation

6.1 British Energy shall comply with any and all requests from the Secretary of State for information, documentation or explanations and shall do all such other acts and things requested in writing by the Secretary of State which are:

(A) in the Secretary of State’s opinion, required in order to ensure compliance with the Decision or the other provisions of this Deed or to enable the Secretary of State or the Commission to monitor compliance with the Decision or this Deed; or

*** indicates materials omitted and filed separately with the Commission.

22

(B) required to respond to requests for information, documentation or explanations from the Commission in relation to the Decision or monitoring compliance with the Decision.

Recovery of aid granted

6.2 If the Commission adopts a decision that the United Kingdom must recover any aid granted or paid to the Group or any Group Member in relation to the notified Restructuring Plan (a “Repayment Decision”) and the recovery order of the Repayment Decision has not been annulled by the Court of First Instance or the European Court of Justice, then British Energy shall repay any aid ordered to be recovered under the Repayment Decision.

Accession; Compliance with Deed by Group Members

6.3 British Energy shall procure that:

(A) no Group Member shall do anything which is contrary to British Energy’s compliance with the terms of this Deed;

(B) each Group Member shall comply with:

(i) the terms of this Deed (including the restrictions, undertakings and obligations which are expressed to apply to, be given by or be imposed upon, British Energy) if and to the extent that such compliance is required to enable the Government to perform the undertakings given by it to the Commission in connection with the Decision; and

(ii) the requirements of clause 7 (Announcements) and clause 8 (Confidentiality);

(C) Group Members specified in any written request from the Secretary of State to British Energy accede to be bound by this Deed in accordance with Schedule 6 (Accession), such accession to be completed promptly and in any event within 5 Business Days of receipt by British Energy of such a request; and

(D) without prejudice to the generality of paragraph (C), prior to any person:

(i) assuming the conduct of the Electricity Supply Business;

(ii) assuming the conduct of the Electricity Trading Business;

(iii) assuming the conduct of the Nuclear Generation Business and/or the Non-Nuclear Generation Business; or

(iv) becoming the ultimate parent company of the Group pursuant to an intra-group restructuring,

such person accedes to be bound by this Deed in accordance with Schedule 6 (Accession).

*** indicates materials omitted and filed separately with the Commission.

23

Corporate restructuring; Disposals

6.4 British Energy shall not dispose of all or part of the Nuclear Generation Business and/or the Electricity Supply Business or carry out any corporate restructuring of the Group unless details of the proposed disposal or corporate restructuring have been provided to the Secretary of State and she consents (such consent not to be unreasonably withheld) that arrangements are in place such that, upon implementation of any such disposal or restructuring, she will continue to be in compliance with the terms of the Decision.

7. ANNOUNCEMENTS

7.1 Subject to clauses 7.2 and 7.3, no announcement concerning the subject matter of this Deed or any ancillary matter shall be made by any party without the prior written approval of the other party, that approval not to be unreasonably withheld or delayed.

7.2 A party may, after consultation with the other parties, make an announcement concerning the subject matter of this Deed or any ancillary matter if required by:

(A) law; or

(B) any securities exchange or regulatory or governmental body to which that party is subject or submits, wherever situated, including the Commission, the London Stock Exchange, the UK Listing Authority, the Financial Services Authority and the UK Panel on Takeovers and Mergers, whether or not the requirement has the force of law.

7.3 The Secretary of State may make an announcement to Parliament concerning the subject matter of this Deed or any ancillary matter if she considers that it is appropriate to do so pursuant to her duty to Parliament but, when reasonably practicable, shall consult with British Energy prior to such announcement.

7.4 The restrictions contained in this clause 7 (Announcements) shall continue to apply without limit in time.

8. CONFIDENTIALITY

8.1 Each party shall treat as confidential:

(A) the terms of reference of the Independent Expert;

(B) the nature, procedure and results of any Tests conducted by the Independent Expert;

(C) the reasons given by the Independent Expert for any Expert Determination of Supplementary Expert Determination; and

(D) clauses 4.3(B), 5.4 to 5.15 (inclusive) and 5.16(B), Schedule 1 (Exceptional Market Circumstances Tests) and Schedule 5 (Intra-Group Restructuring)

(together, “Confidential Information”).

*** indicates materials omitted and filed separately with the Commission.

24

8.2 Each party shall:

(A) not disclose any Confidential Information to any person other than any of its directors, officers or employees or, in respect of British Energy, the directors, officers or employees of any Group Member who need to know such information in order to discharge their duties; and

(B) procure that any person to whom any such Confidential Information is disclosed by it complies with the restrictions contained in this clause 8 (Confidentiality) as if such person were a party to this Deed.

8.3 Nothing in this clause 8 (Confidentiality) shall prevent the Secretary of State from disclosing Confidential Information:

(A) in so far as is necessary for responding to requests for information, documentation or explanations from the Commission or for complying with any of the United Kingdom’s reporting requirements under the Decision; and

(B) to Parliament to the extent that she considers that it is appropriate to do so pursuant to her duty to Parliament but, where reasonably practicable, shall consult with British Energy prior to such disclosure.

8.4 Notwithstanding the other provisions of this clause 8 (Confidentiality), a party may disclose any such Confidential Information:

(A) if and to the extent required by law or for the purpose of any judicial proceedings;

(B) if and to the extent required by any securities exchange or regulatory or governmental body to which that party is subject or submits, wherever situated, including the National Audit Office, the Comptroller and Auditor General, the Commission, the UK Listing Authority, the London Stock Exchange, the Financial Services Authority and the UK Panel on Takeovers and Mergers, whether or not the requirement for information has the force of law;

(C) to its professional advisers, auditors and bankers; and

(D) if and to the extent the information has come into the public domain through no fault of that party.

Any information to be disclosed pursuant to paragraphs (A) or (B) shall be disclosed only after notice to the other parties.

8.5 The restrictions in this clause 8 (Confidentiality) shall continue to apply without limit in time.

9. DAMAGES NOT AN ADEQUATE REMEDY

Without prejudice to the provisions of clauses 5.13 to 5.15, British Energy acknowledges that breaches by British Energy of this Deed (including any failure by British Energy to procure that each Group Member complies with its terms) may result in injury to the public and/or third parties rather than injury specific to the Secretary of State and/or that damages will not be an adequate remedy for breach and that equitable relief by way of injunction or specific performance will normally be appropriate.

*** indicates materials omitted and filed separately with the Commission.

25

10. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

The parties to this Deed do not intend that any term of this Deed should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Deed (including the Independent Expert).

11. FURTHER ASSURANCE

Each party shall at its own cost, from time to time on request, do or procure the doing of all acts and/or execute or procure the execution of all documents in a form reasonably satisfactory to the other parties which any party may reasonably consider necessary for giving full effect to this Deed and securing the full benefit of the rights, powers and remedies conferred upon it in this Deed.

12. NOTICES

12.1 A notice under this Deed shall only be effective if it is in writing. Telexes and e-mail notices are not permitted but faxes are permitted.

12.2 Notices under this Deed shall be sent to a party at its address or facsimile number and for the attention of the individual set out below:

Party	Address	Facsimile No.	Attention:
The Secretary of State	1 Victoria Street London SW1H 0ET	020 7215 0138	Head of BE Team, Energy Group, Department of Trade and Industry
Any Group Member	3 Redwood Crescent Peel Park East Kilbride G74 5PR	01355 594 022	Company Secretary

provided that a party may change its notice details on giving notice to the other parties of the change in accordance with this clause 12 (Notices). That notice shall only be effective on the date falling five clear Business Days after the notification has been received or such later date as may be specified in the notice.

12.3 Any notice given under this Deed shall, in the absence of earlier receipt, be deemed to have been duly given as follows:

(A) if delivered personally, on delivery;

*** indicates materials omitted and filed separately with the Commission.

26

(B) if sent by first class post from the UK to a UK address, two clear Business Days after the date of posting;

(C) if sent by first class airmail to an address outside the UK, five clear Business Days after the date of posting; and

(D) if sent by facsimile, when clearly received in full.

12.4 Any notice given under this Deed outside Working Hours (being 9.30am to 5.30pm on each Business Day) in the place to which it is addressed shall be deemed not to have been given until the start of the next period of Working Hours in such place.

12.5 Notwithstanding the foregoing provisions of this clause 12 (Notices), the parties shall procure that any Expert Determination or Supplementary Expert Determination shall be notified to British Energy and the Secretary of State by facsimile with a copy by post.

13. COSTS AND EXPENSES

Except as otherwise agreed in writing or as stated in this Deed, each party shall pay its own costs and expenses in relation to the negotiation, preparation, execution and carrying into effect of this Deed and all other documents referred to in it.

14. COUNTERPARTS

14.1 This Deed may be executed in any number of counterparts, and by the parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart.

14.2 Each counterpart shall constitute an original of this Deed, but all the counterparts shall together constitute but one and the same instrument.

15. VARIATION

This Deed may only be varied in writing signed by each of the parties (save to the extent that the Tests are modified by the Independent Expert in accordance with Schedule 1 (Exceptional Market Circumstances Tests)).

16. CHOICE OF GOVERNING LAW

This Deed is to be governed by and construed in accordance with English law.

17. JURISDICTION

17.1 The courts of England are to have jurisdiction to settle any dispute arising out of or in connection with this Deed. Any proceedings, suit or action arising out of or in connection with this Deed (together, “Proceedings”) may be brought in the English courts.

17.2 Any Proceedings may also be brought in the courts of Scotland.

*** indicates materials omitted and filed separately with the Commission.

27

17.3 Any party may bring Proceedings in any court which has jurisdiction other than by virtue of clause 18 (Agent for Service).

17.4 This clause 17 (Jurisdiction) shall not limit the right of any party to bring Proceedings, to the extent permitted by law, in the courts of more than one jurisdiction at the same time.

17.5 Each party waives (and agrees not to raise) any objection, on the ground of forum non conveniens or on any like ground, to the taking of Proceedings by another party in any court in accordance with this clause 17 (Jurisdiction). Each party also agrees that a judgment against it in Proceedings brought in any jurisdiction in accordance with this clause 17 (Jurisdiction) shall be conclusive and binding upon it and may be enforced in any other jurisdiction.

17.6 Each party irrevocably submits and agrees to submit to the jurisdiction of the English courts and of any other court in which Proceedings may be brought in accordance with this clause 17 (Jurisdiction).

18. AGENT FOR SERVICE

18.1 British Energy irrevocably appoints BEG to be its agent for the receipt of Service Documents and agrees that any Service Document may be effectively served on it in connection with Proceedings in England and Wales by service on its agent effected in any manner permitted by the Civil Procedure Rules 1998.

18.2 If BEG at any time ceases for any reason to act as such, British Energy shall appoint a replacement agent having an address for service in England and Wales and shall notify the Secretary of State of the name and address of the replacement agent. Failing such appointment and notification, the Secretary of State shall be entitled by notice to appoint a replacement agent to act on behalf of British Energy. The provisions of this clause 18 (Agent for Service) applying to service on an agent apply equally to service on a replacement agent.

18.3 A copy of any Service Document served on an agent shall be sent by post to British Energy. Failure or delay in so doing shall not prejudice the effectiveness of service of the Service Document.

18.4 “Service Document” means a claim form, application notice, order, judgment or other document relating to any Proceedings.

*** indicates materials omitted and filed separately with the Commission.

28

IN WITNESS of which this document has been executed as a Deed and delivered on the date stated at the beginning of this Deed.

IN WITNESS whereof these present consisting of this and the 25 preceding pages and the 7 Schedules and 1 Annex attached are executed as follows:

The corporate seal of the SECRETARY OF STATE FOR TRADE AND INDUSTRY hereunto affixed is authenticated by:	) )     ) ) ) )
An official in the Department of Trade and Industry
at on the                                                                day of                                                                    2004

SUBSCRIBED for and on behalf of BRITISH ENERGY PLC by	) ) ) ) ) ) ) ) )
		Director
		Director/Secretary
at on the                                                                day of                                                                    2004

*** indicates materials omitted and filed separately with the Commission.

29

Schedule 1

Exceptional Market Circumstances Tests

In order to make a determination that exceptional market circumstances exist, the Independent Expert must be satisfied that the tests in paragraph 1 and either paragraph 2 or 3 are fulfilled.

1. In any period of ******** (ending not more than ******** before any Amber Notice), ********of those existing, non-domestic, direct customers of the Electricity Supply Business to whom the Electricity Supply Business has made offers of supply have rejected such offers in circumstances in which the offers of supply were on terms such that the margin on the energy element of the offer over the Prevailing Wholesale Market Price was ******** in the relevant customer offer.

2. Volumes traded in the wholesale electricity market over a ******** period have dropped to less than ******** of the average of those volumes traded in the same period in the last ******** for which data is available.

3. The Group has offered to supply a minimum of ******** of electricity in the wholesale electricity market ******** and that volume has not been sold within ******** of the offer being made.

The parties acknowledge and agree that if any or all of the Tests become inoperable (including in circumstances in which the public domain data used in applying the Tests ceases to be available, or the nature of the Tests become public or the Independent Expert is satisfied (on the basis of discussions with, or evidence provided by, British Energy), that a competitor has knowledge of the Tests), the following shall apply:

(i) the terms of engagement of the Independent Expert will permit him/her to amend or substitute any or all of the Tests;

(ii) any such amendment or substitution will only be permitted after the Independent Expert (a) has consulted with the Secretary of State and British Energy and has had due regard to their representations and (b) any approval of the Commission required pursuant to the Decision has been obtained (such approval to be obtained ex post facto if the amendment or substitution is to be implemented during any Contract Renewal Round); and

(iii) if such circumstances do arise, the Secretary of State and British Energy will procure that the Independent Expert promptly notifies them of any such amendment or substitution and, with effect from delivery of such notice, the Tests set out in this Deed shall be deemed to be amended or substituted accordingly.

30

Schedule 2

Appointment of Independent Expert

1. For the selection of the Independent Expert, the Secretary of State will conduct an open tender process advertised in the Office Journal of the European Communities (“OJEC”) in accordance with relevant public procurement rules.

2. The selection process will be completed as soon as practicable and, in any event, within four months after the date of the Decision, provided that the OJEC process is completed within this timescale.

3. The Secretary of State will invite tenders against terms of reference set out in the Annex to this Deed. The invitation to tender will not include the details of the Tests which shall only be disclosed to the proposed Independent Expert after his selection and after an appropriate confidentiality agreement has been completed.

4. The Secretary of State will procure that the Independent Expert is appointed by a selection panel comprising an expert on energy markets (to be appointed by OfGEM), a financial expert (to be appointed by the Institute of Chartered Accountants in England and Wales) and an independent chair (to be appointed by the Secretary of State). Such selection panel will be required to select the applicant presenting the most economically advantageous tender.

5. The Independent Expert chosen will be engaged by the Secretary of State but will, as part of the engagement terms, owe a duty of care both to the Secretary of State and British Energy. This duty of care will have the scope, and be subject to the limitations, set out in the agreed form of engagement letter.

6. British Energy will reimburse the Secretary of State the costs of the procurement process and the costs of the Independent Expert in accordance with the agreed form of engagement letter.

31

Schedule 3

Matters Relating to Independent Expert

The Secretary of State will procure that the following obligations will be imposed on the Independent Expert in the contract of engagement between him and the Secretary of State:

1. To use all reasonable endeavours to make an Expert Determination as soon as practicable and in any event within 24 hours of receiving a Red Notice.

2. Upon receipt of a Supplementary Red Notice, to use all reasonable endeavours to make a Supplementary Expert Determination as soon as practicable and, in any event, prior to the expiry of the Determination Validity Period.

3. To provide the Secretary of State with an annual report for each Financial Period setting out:

(A) the Independent Expert’s analysis of the Electricity Supply Business’ annual realised price per megawatt hour for the energy element of its contracts with non-domestic, direct customers and its average purchase price per megawatt hour;

(B) a review of a representative sample of the Electricity Supply Business’ contracts with non-domestic, direct customers during the year (in terms of volume and duration) together with the contemporary price matrices (used by the Electricity Supply Business to formulate price offers) and associated publicly quoted forward price information; and

(C) a summary and review of any occasions when British Energy issued an Amber Notice and/or an Expert Determination was made that exceptional market circumstances existed.

The draft of each annual report will be submitted to British Energy prior to submission to the Secretary of State to enable British Energy to comment and to verify the accuracy of data and other information used in each such report.

4. To publish the fact of any Expert Determination and Supplementary Expert Determination no later than 10 Business Days after the end of each Contract Renewal Round, without disclosure of the reasons for any such determinations or the content of the Tests.

5. Subject to paragraph 4 to keep confidential:

(A) his terms of reference;

(B) the results or content of the Tests;

(C) the reasons for any Expert Determination or Supplementary Expert Determination; and

32

(D) any confidential business information specified as such and provided by British Energy to the Independent Expert to carry out his functions,

in each case unless any of the above (i) have come into the public domain through no fault of the Independent Expert or (ii) are required to be disclosed by any court of competent jurisdiction or regulatory authority. This duty of confidence would be an obligation owed both to British Energy and the Secretary of State.

6. For the purposes of this Schedule 3 (Matters Relating to Independent Expert):

“Amber Notice” has the meaning given in clause 5.4;

“Contract Renewal Round” means:

(A) each period during which nondomestic end-users renew contracts with electricity suppliers for the forward purchase of electricity, being periods which end, as at the Execution Date, biannually on 31 March and 30 September each year; and

(B) in circumstances in which the market practice referred to in paragraph (A) changes, any equivalent period or periods during which such forward purchase contracts are renewed between electricity suppliers and nondomestic end-users;

“Expert Determination” has the meaning given in clause 5.6;

“Red Notice” has the meaning given in clause 5.5;

“Supplementary Expert Determination” has the meaning given in clause 5.9; and

“Supplementary Red Notice” has the meaning given in clause 5.8.

*** indicates materials omitted and filed separately with the Commission.

33

Schedule 4

Aggregated Discounted Relevant Payments

1.1 Calculation of Aggregate Discounted Relevant Payments

For each Reference Financial Period, the Aggregate Discounted Relevant Payments will be calculated as follows:

ADRP = OAP + (HMG / R)

where

ADRP	means the Aggregate Discounted Relevant Payments for the Reference Financial Period;
OAP	means the Opening Aggregate Discounted Relevant Payments, being the Aggregate Discounted Relevant Payments for the Financial Period two years prior to the Reference Financial Period;
HMG	means the Relevant Payments made in the Financial Period prior to the Reference Financial Period; and
R	means the Discount Factor calculated in accordance with paragraph 1.2.

1.2 Calculation of Discount Factor

R = OR x (1 + NDR)

where

R	is the Discount Factor for the Financial Period prior to the Reference Financial Period;
OR	means the Opening Discount Factor, being the Discount Factor for the Financial Period two years prior to the Reference Financial Period and, for the Reference Financial Period ending on 31 March 2006, the OR shall be 1; and
NDR	means the nominal discount rate for the Financial Period prior to the Reference Financial Period as published by the Commission (as updated every five years).

34

1.3 Worked Example

Simple illustration of no breach
Reference Financial Period of date of breach		None
Relevant Payments Threshold (£m)	RPT	1,629
Financial Period (y/e 31st March)			2004		2005		2006		2007		2008		2009		2010		2011		2012
Reference Financial Period (y/e 31st March)	RFP		2005		2006		2007		2008		2009		2010		2011		2012		2013
Calculation of Discount Factor (R)
Nominal Discount Rate for Financial Period	NDR		5.4	%	5.4	%	5.4	%	5.4	%	5.4	%	5.4	%	5.4	%	5.4	%	5.4	%
Opening Discount Factor for Financial Period	OR		1.000		1.054		1.111		1.171		1.234		1.301		1.371		1.445		1.523
Discount Factor for Financial Period	R = OR x (1 + NDR)		1.054		1.111		1.171		1.234		1.301		1.371		1.445		1.523		1.605
Calculation of Aggregate Discounted Relevant Payments (ADRP)
Opening Aggregate Discounted Relevant Payments (£m)	OAP		0		(95	)	(185	)	(270	)	(351	)	(428	)	(501	)	(570	)	(636	)
Relevant Payments made in Financial Period (£m)	HMG		(100	)	(100	)	(100	)	(100	)	(100	)	(100	)	(100	)	(100	)	(100	)
Discount Factor for Financial Period	R		1.054		1.111		1.171		1.234		1.301		1.371		1.445		1.523		1.605
Relevant Payments (discounted to 31/03/2003) (£m)			(95	)	(90	)	(85	)	(81	)	(77	)	(73	)	(69	)	(66	)	(62	)
Aggregate Discounted Relevant Payments for RFP (£m)	ADRP = OAP + (HMG / R)		(95	)	(185	)	(270	)	(351	)	(428	)	(501	)	(570	)	(636	)	(698	)
Relevant Payments Threshold breached?	ADRP > RPT?		N		N		N		N		N		N		N		N		N

The example above shows, for illustrative purposes only, how the Aggregated Discounted Relevant Payments are calculated in each year. The calculation is a simple updating of the (discounted) aggregated level of Relevant Payments each year compared to a (discounted) threshold level. If this threshold is exceeded, the enhanced reporting requirements are activated immediately.

Taking the Financial Period ending 31 March 2005, the RFP is 2006. Pursuant to clause 2.1, British Energy must notify the Secretary of State of the ADRP for RFP 2006 no later than the date on which it publishes its Accounts for Financial Period 2005.

To calculate ADRP for RFP 2006 (£185m), take the ADRP from RFP 2005 (£95m) and add the discounted Relevant Payments for Financial Period 2005 (£90m). This is derived by discounting the Relevant Payments for Financial Period 2005 (£100m) by the Discount Factor for Financial Period 2005 (1.111).

The Discount Factor for Financial Period 2005 (1.111) is calculated using the (closing) Discount Factor for Financial Period 2004 (1.054) (i.e., the Opening Discount Factor for 2005). This is then discounted by the nominal discount rate for Financial Period 2005 (5.4%) as published by the Commission. All payments are therefore discounted back to 31 March 2003. Cashflows are therefore assumed to occur at the year end and are discounted for a full year in the year in which they occur.

Thus, immediately following the end of Financial Period 2005 (RFP 2006), British Energy compares its ADRP to date (i.e., for Financial Periods 2004 and 2005) against the Relevant Payments Threshold. If the ADRP exceeds this value, then British Energy must carry out the requirements set out in clause 2.3.

*** indicates materials omitted and filed separately with the Commission.

35

Schedule 5

Intra-Group Restructuring

Part A: Steps prior to Electricity Supply Restructuring

British Energy will procure that an application is made (or other appropriate steps taken) to obtain the Consents required:

(A) from OfGEM to transfer the Licence for electricity supply held by BEG to the Electricity Supply Subsidiary (anticipated to be British Energy Direct Limited);

(B) for the Electricity Supply Subsidiary to accede to relevant market codes and agreements (including, without limitation, the Balancing and Settlement Code and the Connection and Use of System Code);

(C) for the Electricity Supply Subsidiary to enter use of system agreements with relevant transmission and distribution companies;

(D) for the Electricity Supply Subsidiary to complete MRASCo supplier entry processes, obtain the corresponding certification and accede to the MRA; and

(E) to assign BEG’s consolidation contracts to the Electricity Supply Subsidiary and put in place appropriate arrangements relating to obligations under the climate change levy and renewables obligations regimes.

Part B: Steps prior to Nuclear Generation Restructuring

1. OfGEM

British Energy will use all reasonable endeavours to procure that the following amendments (or other amendments with the same substantive effect) are made to the Licence held by the Nuclear Generation Business:

(A) SLC 17 is applied.

(B) SLC 17A is applied.

(C) SLC 1 is amended such that within the definition of “separate business”, sub-paragraphs (a) to (d) are deleted and replaced with the following:

“(a) the nuclear generation business of the licensee;

(b) the non-nuclear generation business of the licensee;

(c) the supply business of the licensee;

(d) any distribution business of an affiliate or related undertaking of the licensee; and

(e) any transmission business of an affiliate or related undertaking of the licensee.”

36

(D) SLC D1 is amended as follows:

(i) The words “In this Section” are deleted.

(ii) The following definition is added:

“non-nuclear generation business means the authorised business of the licensee or any affiliate or related undertaking of the licensee in the generation of electricity and the provision of ancillary services otherwise than as part of the nuclear generation business.”

(E) SLC 17A is amended by inserting the word “nuclear” before the word “generation” in paragraph 6.

The amendments referred to in paragraphs (A) and (B) will be effected pursuant to directions to be issued by OfGEM. The amendments referred to in paragraphs (C) to (E) will be effected pursuant to the provisions of Part III of the Licence of the Nuclear Generation Business.

2. Other

British Energy will procure that, in connection with the consolidation of the Nuclear Generation Business into a separate wholly-owned Subsidiary of BE plc (the “Nuclear Generation Subsidiary”), an application is made:

(A) to the NII for the Nuclear Generation Subsidiary to obtain nuclear site licences in respect of the Hunterston and Torness reactors;

(B) to obtain authorisation from the Scottish Environmental Protection Agency (pursuant to the Radioactive Substances Act 1993) for the Nuclear Generation Subsidiary to operate Hunterston and Torness;

(C) for the Consents required for the Nuclear Generation Subsidiary to accede to relevant market codes and agreements;

(D) if the Nuclear Generation Restructuring is to be implemented prior to BETTA Go-Live, for the Consents required from Scottish Power and Scottish and Southern Energy in connection with the assignation of the Nuclear Energy Agreement to the Nuclear Generation Subsidiary;

(E) to obtain the consent of the HSE and NII to the cessation of cross-licensee working arrangements; and

(F) to put in place all the necessary arrangements to secure the efficient and legal transfer of BEG(UK)’s assets and liabilities to the Nuclear Generation Subsidiary, including, without limitation, employees, land, shared facilities and necessary contractor arrangements.

*** indicates materials omitted and filed separately with the Commission.

37

Part C: Nuclear Generation Restructuring

(A) The Nuclear Generation Business will be consolidated into the Nuclear Generation Subsidiary.

(B) Either:

(i) if the Nuclear Generation Restructuring is being undertaken prior to BETTA Go-Live:

(a) British Energy will notify OfGEM that BEG(UK) is ceasing to carry on the activity of licensed generation;

(b) BEG(UK)’s nuclear generation business and assets will be transferred to the Nuclear Generation Subsidiary; and

(c) OfGEM will issue a direction specifying that Section C of the SLCs will come into effect within the Licence of the Nuclear Generation Business on the specified date and revoke BEG(UK)’s generation licence; or

(ii) if the Nuclear Generation Restructuring is being undertaken after BETTA Go-Live, British Energy will notify OfGEM that BEG(UK) has transferred its nuclear generation business and assets to the Nuclear Generation Subsidiary.

(C) British Energy will use all reasonable endeavours to procure the completion of all other subordinate external and internal business transfer activities either in advance of, or in tandem with, the consolidation of the Nuclear Generation Business (including, without limitation, the Nuclear Generation Subsidiary’s accession to market codes and agreements, assigning necessary contracts to the Nuclear Generation Subsidiary, setting up new finance and banking arrangements for the Nuclear Generation Subsidiary, implementing the Nuclear Generation Subsidiary’s internal IT systems, procedures and controls, assigning (or entering into new) external service agreements for IT and other necessary service provision and transferring Personnel to the Nuclear Generation Subsidiary).

Part D: Electricity Supply Restructuring

(A) British Energy will transfer the Licence for electricity supply held by BEG to the Electricity Supply Subsidiary.

(B) British Energy will use all reasonable endeavours to procure the completion of all other subordinate external and internal business transfer activities, either in advance of or in tandem with the Licence transfer process (including, without limitation, accession by the Electricity Supply Subsidiary to market codes and agreements, assigning customer contracts from BEG to the Electricity Supply Subsidiary, setting up new finance and banking arrangements, implementing internal IT systems, procedures and controls, assigning (or entering into new) external service agreements for IT service provision, execution of a service agreement with BEPET and transferring Personnel to the Electricity Supply Subsidiary).

*** indicates materials omitted and filed separately with the Commission.

38

Part E: Interpretation

In this Schedule 5 (Intra-Group Restructuring):

“BETTA Go-Live” means the date designated by the Secretary of State on which wholesale trading of electricity using a Great Britain-wide set of arrangements is first permitted (as contemplated by OfGEM’s consultation paper entitled “The Development of British Electricity Trading and Transmission Arrangements”);

“Consents” means consents, approvals, authorisations and permissions;

“HSE” means the Health & Safety Executive;

“NII” means the Nuclear Installations Inspectorate; and

“SLC” means a standard licence condition as set out in Licences.

*** indicates materials omitted and filed separately with the Commission.

39

Schedule 6

Accession

If any Group Member is required to accede to be bound by the terms of this Deed under clause 6 (Other Covenants), British Energy shall procure that that Group Member: (a) executes an accession deed in the form, or in substantially the form set out in Part A of this Schedule 6 (Accession); and (b) delivers to the Secretary of State the documentation specified in Part B of this Schedule 6 (Accession).

40

Part A: Form of Accession Deed

THIS DEED POLL is made on [date] by [Acceding Party], a company incorporated [in/under the laws of] [            ] under registered number [            ], whose registered office is at [            ] (the “Acceding Party”).

WHEREAS:

This Deed Poll is supplemental to the Deed relating to the Decision of the Commission of the European Communities (Reference Number [*]) dated [date], 2004 and entered into between the Secretary of State for Trade and Industry and British Energy plc (such agreement, as amended, supplemented or novated from time to time, the “Commission Undertakings Deed”).

THIS DEED POLL WITNESSES as follows:

1. Words and expressions defined in the Commission Undertakings Deed have the same meaning in this Deed Poll.

2. With effect from the date of this Deed Poll, the Acceding Party undertakes to adhere to and be bound by the provisions of the Commission Undertakings Deed, and to perform the obligations imposed by the Commission Undertakings Deed, in all respects as if the Acceding Party were a party to the Commission Undertakings Deed and named therein in addition to British Energy.

3. The parties to this Deed Poll acknowledge and agree that the execution of this Deed Poll shall not operate as a release of the obligations or liabilities of any other Group Member under the Commission Undertakings Deed.

4. The address and facsimile number of the Acceding Party for the purposes of clause 12 (Notices) of the Commission Undertakings Deed are as follows:

Party	Address	Facsimile no.	FAO
·	[Its registered office from time to time]	·	·

5. This Deed Poll is governed by, and shall be construed in accordance with, English law.

6. The provisions of clause 17 (Jurisdiction) of the Commission Undertakings Deed shall apply equally to this Deed Poll.

7. [The agent for receipt of Service Documents on behalf of the Acceding Party for the purposes of clause 18 (Agent for Service) of the Commission Undertakings Deed is [*] of [*].]

IN WITNESS of which this Deed Poll has been executed and delivered by the Acceding Party on the date which first appears above.

[Insert execution block for Acceding Party]

*** indicates materials omitted and filed separately with the Commission.

41

Part B: Other accession documentation

1. A copy of a resolution of the board of directors of that Group Member (or a committee of that board, accompanied by a copy of a resolution of that board appointing the relevant Committee):

(A) approving the terms of this Deed and of the Accession Deed;

(B) authorising a specified person or persons to execute the Accession Deed; and

(C) authorising a specified person or persons to sign on its behalf and/or execute all other documents and notices to be signed and/or executed by it in accordance with this Deed.

2. A copy of the memorandum and articles of association and certificate of incorporation of that Group Member.

3. A specimen of the signature of each person authorised by the resolution referred to in paragraph (A) above.

4. A certificate of an authorised signatory of the Group Member, certifying that each copy document specified in this Part B of Schedule 6 (Accession) is correct, complete and in full force and effect as at a date no earlier than the date of the Accession Deed being entered into by such Group Member.

5. Such other documents as the Secretary of State may reasonably require.

*** indicates materials omitted and filed separately with the Commission.

42

Schedule 7

Prevailing Wholesale Market Price

Under the Pricing Restriction, British Energy may not price the energy element of its offers to or contracts with nondomestic end users below the Prevailing Wholesale Market Price. This Schedule provides a general description and an illustrative example of the methodology that would be followed to translate the reported prevailing wholesale market price into the price underpinning the energy element in the offers to or contracts with nondomestic end users, to take account of factors such as electricity volumes, load factors/predictability, interruptability and duration.

The energy element of retail supply prices

The energy element of the retail supply price is based on the effective or equivalent purchase price of energy from the wholesale electricity markets in Great Britain. As such, it excludes other costs incurred by British Energy which include (but are not limited) to:

• access to and usage of the high voltage national transmission network and the low voltage local distribution networks;

• balancing costs incurred in the Balancing Mechanism;

• costs associated with meeting the Renewables Obligation;

• metering costs; and

• direct costs of the Electricity Supply Business such as staff, billing and other internal costs or allocations.

The Prevailing Wholesale Market Price

The Prevailing Wholesale Market Price is the time-weighted average (i.e., baseload) wholesale market price for electricity prevailing at the relevant time, as reported by Heren, Argus or other reputable, independent publishers of wholesale market prices. In making offers to nondomestic end users, this wholesale market price must be translated into an estimated purchase price of energy from the wholesale markets for an individual customer. It is estimated for each individual consumer because:

• published wholesale electricity forward prices are only generally available for two standard load shapes; and

• individual consumer’s load shapes are almost always different from the standard load shapes for which published forward prices are available.

Simply using an unadjusted baseload forward price for pricing a customer’s demand would set an inappropriately low price for a consumer with demand that increased in (higher priced) peakload periods. Similarly, using an unadjusted peakload forward price would set an inappropriately high price for a consumer whose demand was predominantly in (lower priced) baseload periods.

43

Accordingly, for each consumer, the published wholesale forward electricity prices are scaled to produce a demand-weighted price which more accurately reflects the particular load shape of the relevant consumer.

Scaling of Forward Electricity Prices

There is no uniquely correct way of scaling published wholesale forward electricity prices to reflect the detailed load shape of relevant consumers. However, any methodology for doing this for a relevant consumer over the period of a contract is expected to approximate to the following general steps:

Step 1: Project wholesale electricity prices for each half hour over the period of the consumer contract

Market participants use a range of modelling techniques and data sources to project wholesale electricity prices. Such modelling techniques would normally take account, inter alia, of a range of price drivers including such factors as fuel prices, operating costs, demand, availability of plant, the competitiveness of the market and the strategies of market participants. The objective of this step is to derive a matrix of wholesale prices (half hours by days) over the duration of the contract.

Step 2: Scale projected wholesale electricity prices to be consistent with published forward market prices

The projected prices contained in the wholesale price matrix are then scaled to be consistent with published forward market prices (from such sources as Heren and Argus). In this way, the average of baseload prices in the matrix are set equal to the published baseload forward price and, similarly, the average of peakload prices in the matrix are set equal to the published peakload forward price.

Step 3: Project consumer demand for each half hour over the period of the consumer contract

Market participants use a range of modelling techniques and data sources to project consumer demand. The objective of this step is to derive a matrix of consumer demand (typically half hours by days) over the period of the consumer contract.

Step 4: Calculate cost of wholesale electricity to satisfy projected consumer demand

The cost of wholesale electricity to satisfy projected consumer demand is calculated by multiplying the scaled price matrix from Step 2 with the consumer demand matrix from Step 3.

Step 5: Calculate the Demand-Weighted Customer Price

The demand-weighted price underpinning the customer’s offer would be calculated by dividing the total cost of wholesale electricity to satisfy projected consumer demand (from Step 4) by the total projected consumer demand (from Step 3).

*** indicates materials omitted and filed separately with the Commission.

44

Illustrative example of estimating the Demand-weighted Customer Price

The methodology for estimating the demand-weighted price underpinning the supply offer for a particular customer outlined above is illustrated here.

Consider the situation where British Energy is seeking to make an offer to a consumer requesting electricity supply for a single week.

(1) Project wholesale electricity prices for each half hour over the period of the consumer contract

The figure below shows the results of an illustrative modelling exercise projecting wholesale electricity prices for each of the 336 half hours in the week for which the consumer is seeking an offer for its supply.

(2) Scale projected wholesale electricity prices to be consistent with published forward market prices

The projected wholesale electricity prices have been scaled to be consistent with the published wholesale prices. In this example, a simple approach to scaling is used, resulting in a simple shift in the projected wholesale electricity price. After scaling, the projected baseload and peakload prices are consistent with published prices that are, in this example, assumed to be £25/MWh and £32/MWh respectively.

*** indicates materials omitted and filed separately with the Commission.

45

(3) Project consumer demand for each half hour over the period of the consumer contract

The figure below shows the illustrative projection of the consumer’s weekly demand by half hour. Total projected consumption is 656 MWh.

(4) Calculate cost of wholesale electricity to satisfy projected consumer demand

The cost of wholesale electricity to satisfy the projected consumer demand is calculated by multiplying the scaled price matrix from Step 2 with the consumer demand matrix from Step 3. In the illustrative example, this is £18,399.

(5) Calculate the Demand-weighted Customer Price

This is calculated by dividing the total cost of wholesale electricity to satisfy projected consumer demand (from Step 4) by the total projected consumer demand (from Step 3). In the illustrative example, this is £28.04/MWh, as shown in the figure below.

*** indicates materials omitted and filed separately with the Commission.

46

*** indicates materials omitted and filed separately with the Commission.

47

Annex

Independent Expert Terms of Reference

UK Department of Trade and Industry

Appointment of an Independent Expert to monitor, regulate and report on

British

Energy’s compliance with undertakings to the UK Government in respect of

pricing to

non-domestic end-consumers

Terms of Reference

October 2004

*** indicates materials omitted and filed separately with the Commission.

49

Contents

		Page
1.	INTRODUCTION	51
2.	THE PROCESS AND CRITERIA FOR SELECTION AND AWARD	51
3.	THE SCOPE OF WORK	52
4.	REQUIREMENTS PLACED ON THE INDEPENDENT EXPERT	56
5.	SUBMISSION OF PROPOSALS	57
6.	TENDER TIMETABLE	58
7.	ACCEPTANCE OF TENDER	59

*** indicates materials omitted and filed separately with the Commission.

50

1. INTRODUCTION

1.1 On 22 September 2004 the European Commission approved the UK Government’s proposed restructuring aid for British Energy plc (“BE”), which is intended to ensure the safe management of BE’s long-term nuclear liabilities and the long-term financial viability of BE.

1.2 In providing the restructuring aid to BE, the UK Government will ensure that BE complies with certain compensatory measures designed to mitigate as far as possible any adverse effects of the aid on BE’s competitors.

1.3 As one of the agreed compensatory measures, BE has undertaken, for a period of six years, not to offer to supply non-domestic end-users who purchase electricity directly from BE on terms where the energy element of the contract with the end-users is priced below the prevailing wholesale price, taking account of electricity volumes, load factors/predictability, interruptibility, duration and credit/payment terms (the “Pricing Restriction”).

1.4 The Pricing Restriction may be relaxed in exceptional market circumstances - where certain objective tests of market conditions (the “Tests”) are judged to be satisfied - to allow BE to respond in good faith to competition.

1.5 In light of this, the Department of Trade and Industry (the “DTI”) is seeking offers for a contract for the services of suitably qualified individuals (“Named Experts”) contracting through a single organisation (the “Independent Expert”) who will undertake to monitor, regulate and report on certain matters relating to the Pricing Restriction (including making determinations in respect of the satisfaction of the Tests). Where the context requires, references in these terms of reference to the Independent Expert shall be deemed to include the Named Experts.

1.6 The Independent Expert will be engaged by the DTI and the appointment will be funded by BE.

1.7 This document is intended to enable each party pre-selected to bid for the contract to understand:

(A) the process for selection and award (including the relevant award criteria) of the contract for the Independent Expert;

(B) the scope of work of the Independent Expert (including the key obligations that will be placed on the Independent Expert); and

(C) the information required from tenderers.

2. THE PROCESS AND CRITERIA FOR SELECTION AND AWARD

2.1 Selection of the Independent Expert will be based [(in descending order of priority)] on:

(A) relevant and proven technical expertise;

(B) proposed methodology for conducting the specified scope of work;

(C) the ability to respond to the requirements of the Independent Expert’s role; and

(D) the period of time during which the tenderer, having been appointed as the Independent Expert, will undertake:

(i) to avoid any conflict of interest; and

(ii) to remain independent from BE, the DTI and BE’s competitors in the EU/EEA,

in each case after the engagement as Independent Expert has ended.

2.2 The Independent Expert will be selected by a panel (the “Independent Panel”) comprising:

(A) an expert on energy markets to be appointed by the Office of Gas and Electricity Markets (“OfGEM”);

(B) a financial expert who is a member of the Institute of Chartered Accountants in England and Wales (the “ICAEW”) and who has been appointed using the President’s Appointment Scheme administered by the ICAEW; and

(C) an independent chairperson to be appointed by the DTI.

2.3 The award will be based on the most economically advantageous offer.

3. THE SCOPE OF WORK

3.1 Overview of tasks

(A) The Independent Expert will be required to undertake two tasks:

(i) Firstly, the Independent Expert will prepare an annual report (each, an “Annual Report”) on certain matters relating to British Energy’s Direct Supply Business (“DSB”), comprising:

(a) an analysis of the overall annual average margins on the energy element of the non-domestic end-user contracts (“Direct Supply Contracts”) offered by the DSB (see paragraph 3.3).

(b) a review of a representative sample of Direct Supply Contracts to confirm that they have been offered in accordance with the Pricing Restriction (see paragraph 3.4); and

(c) a description of the work completed by the Independent Expert in that Contract Year (including, if BE has claimed that exceptional market circumstances have arisen during that Contract Year, a description of market conditions affecting the DSB, an analysis of the DSB’s selling activities (such as offers made and customers retained and won) during each contract renewal round and details of any suspension of the Pricing Restriction).

*** indicates materials omitted and filed separately with the Commission.

52

(ii) Secondly, if applicable, the Independent Expert will perform and validate the Tests when BE claims that the market is experiencing ^‘exceptional market circumstances’ (see paragraph 3.5).

(B) The Independent Expert will provide each Annual Report within 4 months of the end of the relevant Contract Year and the first Annual Report will cover the period from the date of the Independent Expert’s appointment until the end of the Contract Year in which such appointment was made.

(C) Before submitting each Annual Report to the DTI, the Independent Expert will provide a copy of the report in draft to BE for comment and verification of the accuracy of the data and other information used by the Independent Expert in compiling the report. The DTI will provide a copy of each Annual Report to the European Commission.

(D) Following the end of each contract selling round, the Independent Expert will also publish a notification of the fact of any determination as to the existence of exceptional market circumstances (if BE has requested the Tests to be validated) (see paragraph 3.6).

(E) For the purposes of this work, a “Contract Year” is a 12-month period beginning 1st April.

3.2 Period of engagement

The Independent Expert will be engaged until all of the reporting requirements relating to the sixth Contract Year following the appointment have been completed.

3.3 Review of annual average energy margins

(A) The DTI requires the Independent Expert to analyse the DSB’s average annual realised price per MWh of the energy element in its Direct Supply Contracts and its average price per MWh for energy procured to meet these requirements, either from a third party or from British Energy Power and Energy Trading Limited (“BEPET”)) or any successor company.

(B) In carrying out this task, the Independent Expert will need, among other things, to:

(i) collect data from BE on annual volumes (MWh) and revenues under Direct Supply Contracts;

(ii) identify the non-energy costs incurred in respect of Direct Supply Contracts;

*** indicates materials omitted and filed separately with the Commission.

53

(iii) isolate the energy cost element in the realised revenues from Direct Supply Contracts; and

(iv) collect data from BE on its wholesale energy procurement costs and volumes (MWh) attributable to the relevant year’s sales volumes (MWh).

(C) It is expected that the DSB’s wholesale energy requirements will be largely satisfied by internal transfers from BEPET. However, this may not always be the case. In addition, it cannot be excluded that there might be changes to BE’s corporate structure or organisation. In either case the Independent Expert will be required to ensure that monitoring of BE’s compliance with the Pricing Restriction remains effective and may need to change their approach to the monitoring to do so. This also applies to the task set out in paragraph 3.4 below.

3.4 Review of Direct Supply Contracts

(A) The Independent Expert is required to review a representative sample (in terms of volume and duration) of Direct Supply Contracts concluded during the course of each Contract Year together with the contemporary price matrices (used internally by the DSB to price its customer offers) and associated publicly quoted forward price information on which its offers were based to confirm whether the energy element of the contracts was offered at or above the prevailing wholesale market price, taking account of electricity volumes, load factors/predictability, interruptibility, duration and credit/payment terms.

(B) In carrying out this task, the Independent Expert will need, among other things, to:

(i) collect data from BE on Direct Supply Contracts and develop a methodology (in consultation with BE) for identifying a representative sample of such contracts;

(ii) advise the DTI on what should constitute a representative sample of Direct Supply Contracts;

(iii) identify non-energy costs incurred in each sampled Direct Supply Contract;

(iv) isolate the energy cost element in each sampled Direct Supply Contract adjusting if necessary for electricity volumes, load factors/predictability, interruptibility, duration and credit/payment terms;

(v) compare the isolated energy cost element with the inputs and outputs of BE’s pricing matrices;

(vi) determine that the price matrices used are a reasonable method of transforming published wholesale prices into the energy element of the sampled Direct Supply Contracts; and

*** indicates materials omitted and filed separately with the Commission.

54

(vii) compare the wholesale energy price input to BE’s pricing matrices with publicly quoted prevailing wholesale prices.

(C) BE’s pricing matrices are derived using software employed by BE to transform published wholesale prices into a half-hourly matrix of 365 by 48 containing estimates of wholesale prices for each half hour of the year. This is then used together with the profile of expected consumer demand to determine a structure of energy price offers for each consumer.

3.5 Conducting the Tests; Issuing Determinations

(A) In exceptional market circumstances, BE is permitted to price the energy element of contracts below the prevailing wholesale market price where it may be necessary to respond to competition in good faith. These circumstances are expected to be rare, and would only be expected to occur during the bi-annual direct supply contract selling rounds. In any case they are likely to persist for a limited period only.

(B) The Independent Expert will perform the Tests which will form the basis for judging whether exceptional market circumstances are prevailing. The details of the Tests will only be revealed to the relevant tenderer who has been awarded the contract and only after the actual award of the contract and appropriate confidentiality undertakings have been given by the Independent Expert and the Named Experts to the DTI and BE.

(C) If the Tests become inoperable (for instance because (i) any public domain data used ceases to be available, (ii) the nature of the Tests become public or (iii) any of BE’s competitors has knowledge of the Tests) so that their effective operation becomes impossible, then the Independent Expert, after consulting with BE and the DTI and having due regard to their representations, will be required to amend or substitute the Tests. Any such amendment or substitution will need to be approved by the European Commission, although such approval may be obtained ex post facto if the amendment or substitution needs to be implemented during a contract renewal round.

(D) The judgement of whether exceptional market circumstances exist will be effected in two different stages: in the first stage BE will give the Independent Expert a notice that it believes that exceptional market circumstances are about to occur. In the second stage BE will require the Independent Expert to issue as soon as possible, and in any event within 24 hours, a determination as to whether or not the Tests are satisfied. If the Independent Expert determines that the Tests are satisfied, BE will be permitted to price below the prevailing wholesale market price for a limited period in response to the situation. BE may seek an extension of the exemption from the restriction if exceptional market circumstances persist.

(E) In carrying out this task, the Independent Expert will need, among other things, to.

(i) develop in advance a precise methodology for collecting any external data required to carry out the Tests;

*** indicates materials omitted and filed separately with the Commission.

55

(ii) agree with BE on any internal data required to carry out the Tests and the timeframes within which this data will be required; and

(iii) develop and agree with BE a precise methodology for the execution of the general forms of the Tests that have been agreed with the European - Commission - this methodology will need to be agreed with the DTI.

(F) The DTI may seek an injunction or other court order to in connection with BE’s compliance with the Pricing Restriction. Similarly, BE will be able to-challenge the Independent Expert’s determination as to the satisfaction of the Tests in_. certain circumstances. In each case the Independent Expert may be required provide evidence to the court at the relevant court proceedings.

Independent Expert report on exceptional market circumstances

3.6 If the Independent Expert is asked by BE to determine whether the Tests have been met and whether BE should be permitted to price below the prevailing wholesale market price, the Independent Expert will provide the DTI with a written report of the analysis undertaken and the results of the Tests as soon as he makes his determination. The Independent Expert will also publish in a national newspaper a simple notice of the fact of any determination he has made (but without revealing the details or content of the Tests) within 10 business days of the completion of the relevant contract selling round.

Obligations on British Energy

3.7 BE will be obliged, under an undertaking to be entered into with the DTI, to co-operate in good faith with the Independent Expert and comply in a timely manner with any reasonable requests of the Independent Expert (including requests for information, documents or access to staff or management) to enable the Independent Expert to perform the Tests and provide the reports in accordance with these terms of reference. If BE fails to provide adequate information the Independent Expert will be able to determine that exceptional market circumstances do not exist.

4. REQUIREMENTS PLACED ON THE INDEPENDENT EXPERT

4.1 In carrying out the scope of work set out in paragraph 3, the Independent Expert will undertake to:

(A) demonstrate that the Independent Expert is independent of BE, the DTI and BE’s competitors in the EU/EEA;

(B) demonstrate to the Independent Panel that any conflicts of interest will be avoided, for the period of the contract and for an appropriate period of time after the end of the contract;

(C) remain independent for the period of the contract and for an appropriate period of time after the end of the contract from BE, the DTI and BE’s competitors in the EU/EEA;

*** indicates materials omitted and filed separately with the Commission.

56

(D) demonstrate that the Independent Expert has the requisite knowledge of the operation of the relevant UK electricity markets to carry out the work;

(E) not substitute any Named Expert except in circumstances in which the Independent Expert can demonstrate that such substitute Named Expert will comply with:

(i) the relevant criteria for selection set out in paragraph 2;

(ii) the undertakings relevant to Named Experts as specified in paragraph 4.2;

(F) respond as soon as possible to, and in any event within 24 hours of, any request by BE to them to consider the existence or persistence of exceptional market circumstances, during the contract selling rounds;

(G) provide the service on a 24/7 basis during the contract selling rounds;

(H) carry out the role of Independent Expert for the period specified in paragraph 3.2; and

(I) keep all information related to the work of the Independent Expert confidential for the term of the contract and thereafter and in so doing accept a liability not just to the DTI but also BE for breaches attributable to the Independent Expert.

4.2 The undertakings referred to in paragraphs 4.1(A) to (D) (inclusive) and _i shall apply both to the Independent Expert and each of the Named Experts.

4.3 The Independent Expert is not required to carry out an audit of data provided to it by BE. However the Independent Expert will be required to carry out certain procedures, to be agreed with the DTI, with the purpose of checking data provided by BE.

5. SUBMISSION OF PROPOSALS

5.1 Proposals should clearly identify the following information:

(A) a short profile of the relevant experience and qualifications of each Named Expert who will be responsible for carrying out the work of the Independent Expert;

(B) a statement of the Independent Expert’s independence from BE, the DTI and BE’s competitors in the EU/EEA and an agreement to be bound by the proposed confidentiality conditions (as set out in the draft engagement letter attached to these terms of reference (the “Engagement Letter”));

*** indicates materials omitted and filed separately with the Commission.

57

(C) demonstration of an understanding of the scope of work and requirements placed on the Independent Expert;

(D) a description of the proposed methodology for conducting the specified scope of work;

(E) details of the tenderer’s proposal as to the longest period of time during which it will undertake:

(i) to avoid any conflict of interest after the end of the contract (as referred to in paragraph 4.1(B)); and

(ii) to remain independent of the DTI, BE and BE’s competitors in the EU/EEA after the end of the contract (as referred to in paragraph 4.1(C));

(F) the proposed cost of services:

(i) for production of the Annual Reports (as referred to in paragraph 3.1(A)(i)), on an all-inclusive basis; and

(ii) for the activities relating to the development of the methodology for producing the Annual Reports, the development of the methodology for making determinations (as referred to in paragraph 3.5(E)) and the making of determinations (as referred to in paragraph 3.1(A)(ii)), in each case on an hourly or daily basis (or on another basis provided that an explanation of the pricing structure is included with the proposal), together with a separate estimate of expenses; and

(G) a statement of acceptance of the Engagement Letter and, where any term of the Engagement Letter is not acceptable, details of any proposed amendments.

5.2 [•] copies of your proposal should be submitted to the chairman of the Independent Panel at: [address]

5.3 Please note that proof of your despatch of materials for submission is not proof of its receipt by the Independent Panel.

6. TENDER TIMETABLE

Date and time	Action
[ • ]	Successful and unsuccessful applicants advised accordingly.
[ • ]	Initiation meeting at the DTI’s London offices.

*** indicates materials omitted and filed separately with the Commission.

58

7. ACCEPTANCE OF TENDER

The DTI reserves the right not to award this contract following evaluation of all submissions and to reissue a contract notice at a later date.

*** indicates materials omitted and filed separately with the Commission.

59

EX-4.16

Exhibit 4.16

DATED: 25 AUGUST 2004

Amended and Restated

Master Trade Receivables

Financing Facility

between

Barclays Bank PLC

as Bank

and

British Energy Generation Limited

as Seller

CityPoint     One Ropemaker Street     London     EC2Y 9SS

T +44 (0)20 7628 2020     F +44 (0)20 7628 2070     DX Box No 12

CONTENTS

1.	Definitions and interpretation	1
2.	The Facility	1
3.	Facility Limit	1
4.	Condition precedent	2
5.	General Utilisation	4
6.	Utilisation of the Facility	6
7.	Collection and Administration	7
8.	Notification of Assignment or Trust and use of power of attorney	8
9.	Non-Eligible Debts and shortfalls	10
10.	Seller’s right to repurchase	11
11.	Fees	11
12.	Payments	12
13.	Representations	13
14.	Undertakings	17
15.	Financial Covenant	44
16.	Bank covenants	44
17.	Termination	45
18.	Events of Default	46
19.	Termination Events	47
20.	Right to Refinance	50
21.	Increased Costs	50
22.	Changes to the Obligors	51
23.	Transfers and sub-participations by the Bank	52
24.	Confidentiality	52
25.	Waivers and Remedies Cumulative	54
26.	Power of attorney	54
27.	Miscellaneous	54

i

28.	Notices	56
29.	Governing Law and Jurisdiction	56
30.	Deed	57
SCHEDULE 1 : [INTENTIONALLY LEFT BLANK]		58
SCHEDULE 2 : PURCHASE PRICE CALCULATION		59
PART 1 : INITIAL PURCHASE PRICE FOR DEBTS OR PROCEEDS OF RESTRICTED DEBTS		59
PART 2 : DEFERRED PURCHASE PRICE FOR DEBTS OR PROCEEDS OF RESTRICTED DEBTS		63
SCHEDULE 3 : DEFINITIONS		64
SCHEDULE 4 : FORM OF NOTICE OF ASSIGNMENT OR TRUST		93
SCHEDULE 5 : NOTICES		94
PART 1 : FORM OF UTILISATION NOTICE		94
PART 2 : ADDITIONAL UTILISATION NOTICE		100
SCHEDULE 6 : FORM OF ACCESSION DEED		101
SCHEDULE 7 : FORM OF COMPLIANCE CERTIFICATE		106
SCHEDULE 8 : FORM OF GUARANTEE		107
1.	Definitions and Construction	108
2.	Guarantee and Indemnities	109
3.	Continuing Security	110
4.	Preservation of Rights	110
5.	Effectiveness of Security	111
6.	Avoidance of Payments	111
7.	Value Added Tax	111
8.	Payments	111
9.	New Accounts	112
10.	Deferral of Guarantors’ rights	112
11.	Set-Off	112
12.	Appropriations	112
13.	Stamp Duty	113

ii

14.	Assignment and Transfer	113
15.	Certificate	113
16.	Remedies and Waivers	113
17.	Successors and Assigns	113
18.	Partial Invalidity	113
19.	Notices	114
20.	Ownership of Guarantee	114
21.	Governing Law and Jurisdiction	114
22.	Deed	114
SCHEDULE 9 : FORM OF DEED OF CHARGE		117
1.	Definitions and Construction	118
2.	Covenant to pay	120
3.	Creation of Security	120
4.	Conversion of floating charge	121
5.	Restrictions on dealing	122
6.	Covenants	122
7.	Monitoring the Security	123
8.	Extension and Variation of the Law of Property Act 1925	123
9.	Enforcement	124
10.	Powers of Receiver	126
11.	Applications of moneys	127
12.	Power of attorney	127
13.	Protection of third parties	128
14.	Effectiveness of Security	128
15.	Assignment	130
16.	Costs and expenses	130
17.	Indemnity	130
18.	Restrictions on liability	130
19.	Redemption of Security	131

iii

20.	Avoidance of payments	131
21.	Retention of Security	132
22.	Payments free of deduction	132
23.	Value Added Tax	132
24.	Notices	132
25.	Certificate	133
26.	Discretion	133
27.	Ownership of Deed of Charge	133
28.	Governing Law and Jurisdiction	133
29.	Deed	133

iv

THIS DEED is dated 25 August 2004 and was amended and restated on 8 October 2004 and made

BETWEEN:

(1) BARCLAYS BANK PLC, (the “Bank” which expression shall include its permitted assigns and transferees), registered in England and Wales as company number 1026167 and having its registered office at 54 Lombard Street, London EC3P 3AH; and

(2) BRITISH ENERGY GENERATION LIMITED, (the “Seller” which expression shall include its permitted transferees), registered in England and Wales as company number 3076445 and having its registered office at Barnett Way, Barnwood, Gloucester GL4 3RS.

1. Definitions and interpretation

1.1 Schedule 3 contains a list of defined terms for this Deed.

1.2 Unless a contrary indication appears, any reference in this Deed to:

(A) the Bank, the Seller, any Guarantor, any Obligor or any Party shall be construed so as to include its successors in title, permitted assigns and permitted transferees;

(B) this Deed or any other Finance Document or any other agreement or instrument defined or referred to in this Deed or any other Finance Document shall be construed as being a reference to this Deed or such other Finance Document or other agreement or instrument (as the case may be) as amended, varied, supplemented, novated or replaced from time to time;

(C) a provision of law is a reference to that provision as amended or re-enacted; and

(D) a time of day is a reference to London time.

1.3 Section, clause and schedule headings are for ease of reference only.

1.4 Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Deed.

1.5 An Event of Default or Termination Event is “continuing” if it has not been remedied or waived.

2. The Facility

Subject to the terms of this Deed, the Bank makes available to the Seller a debt purchase facility pursuant to which the Bank will, subject to the terms of this Deed, pay a purchase price in respect of its purchase from the Seller of:

(A) Debts (excluding Restricted Debts); and

(B) the proceeds of Restricted Debts.

3. Facility Limit

3.1 The Drawn Facility Amount shall not at any time exceed whichever is the lesser of:

(A) the Facility Limit; and

1

(B) £60,000,000.

3.2 No breach of this Deed will occur solely as a result of a breach of the Drawn Facility Amount exceeding the Facility Limit, but without prejudice to Clause 9.3.

4. Condition precedent

4.1 Condition precedent to this Deed coming into force

The delivery to the Bank of the CRA Consent Letter and the Trustee Consent Letter is a condition precedent to the rights and obligations of the Parties under this Deed coming in to force (other than the Seller’s obligation to pay those of the fees that are referred to in Clause 11 and the Fee Letter and which are expressed to be payable on the date of this Deed).

4.2 Conditions precedent to the first Utilisation

The Seller shall only be permitted to deliver a Utilisation Notice and the Bank shall only be obliged to purchase Debts (or, as the case may be, the proceeds of Restricted Debts) subject to the terms of this Deed when the Bank confirms in writing to the Seller that it has received the following documents in form and substance satisfactory to the Bank:

(A) certified copies of the memorandum, articles of association and certificate of incorporation of the Seller;

(B) a copy of the resolution of the board of directors of the Seller approving the terms of, and the transactions contemplated by, each Finance Document to which it is a party and authorising certain person or persons to sign each such Finance Document to which it is a party;

(C) a certificate of the Seller (signed by a director) confirming that entering into and performing its obligations under each Finance Document to which it is a party, would not cause any borrowing and/or guaranteeing or similar limit binding on it to be exceeded;

(D) a certificate of an authorised signatory of the Seller certifying that each copy document relating to it specified in this Clause 4.2(A) and (B) is correct, complete and in full force and effect as at a date no earlier than the date of this Deed;

(E) a specimen of the signature of each person authorised by the Seller to sign each Finance Document to which it is a party on behalf of it and to sign and/or send all documents and notices to be signed and/or sent by the Seller under each Finance Document to which it is a party;

(F) a capacity and “true sale” legal opinion as to English law of Simmons & Simmons and a “true sale” legal opinion as to Scottish law of Tods Murray LLP each addressed to the Bank;

(G) a “no-conflict” legal opinion from Clifford Chance addressed to the Bank confirming that this Deed, the Guarantee, the Deed of Charge and the transactions contemplated thereby do not conflict with the Restructuring Documents;

2

(H) a due diligence report on the Specimen Contracts prepared for the Bank by Simmons & Simmons and Tods Murray LLP;

(I) certified copies of the Specimen Contracts and other documentation relating to the Debts as the Bank may reasonably require;

(J) evidence that the fees described in Clause 11.1(A) and 11.1(C) and any other fees, costs and expenses then due from the Seller under the Finance Documents have been or will be paid to the Bank on or prior to the first day of the Availability Period;

(K) the following financial due diligence documents:

(1) a due diligence report addressed to the Bank and prepared by the Accountants to include a review of the Seller’s credit and collection policies; and

(2) a copy of the Parent Management Presentation;

(L) a copy of the latest audited consolidated financial statements of the Parent and the latest audited financial statements of the Seller;

(M) evidence that the Seller has activated the “Business Master” system (being the Bank’s electronic banking platform which enables the Seller to monitor payments both inwards and outwards from the Collection Account);

(N) any other information, document, assurance or opinion relating to the Debts, the Debtors, the Policies or otherwise that the Bank may reasonably require;

(O) evidence that the Collection Account has been opened with the Bank;

(P) the Deed of Charge duly executed by the Seller in favour of the Bank;

(Q) notification by the Seller to the Insurance Company that the Bank is to be named as loss payee under each of the Policies (to the extent any are in full force and effect);

(R) a priority agreement between the Bank and the Secretary for Trade and Industry and a certificate of non-crystallisation, each in the form agreed at the date of this Deed in each case, unless the DTI Security has at that time been released;

(S) confirmation of installation by the Seller of appropriate facility administration software by a specialist third party receivables administration services company selected by the Bank and confirmation of a successful test of the operation of such software; and

(T) written notice to each of Clydesdale and Citibank N.A. from the Seller that all amounts paid into the Clydesdale Account or the account held at Citibank N.A. arising out of Relevant Debts on and from a date specified in such notice (being a date not later than the first Utilisation Date on which a Utilisation Notice is proposed to be delivered to the Bank) are held on trust for the Bank.

3

4.3 Covenant in relation to pre-Utilisation phase

Each of the Bank and the Seller shall use its best endeavours, up to the date on which the Bank provides the confirmation to the Seller referred to in Clause 4.2 (the “CP Satisfaction Date”), to agree any such amendments to this Deed which the Bank (acting reasonably) considers appropriate as a result of:

(A) any Historical Receivables Information provided by the Seller to the Bank prior to the CP Satisfaction Date; and/or

(B) testing and review of the procedures for delivering of Monthly Settlement Reports, Weekly Reports, Utilisation Notices or Additional Utilisation Notices (together in each case with the format thereof) and for delivering or storing related information by the Seller pursuant to this Deed to the Bank prior to the CP Satisfaction Date.

5. General Utilisation

5.1 Delivery of a Utilisation Notice

(A) If the Seller wishes to use the Facility, it must deliver to the Bank a duly completed Utilisation Notice or Additional Utilisation Notice.

(B) The Seller may deliver a Utilisation Notice or Additional Utilisation Notice not later than 10.00 a.m. on any Business Day.

(C) Only one Utilisation Notice or Additional Utilisation Notice may be delivered on any Business Day. An Additional Utilisation Notice may not be delivered on any day on which a Utilisation Notice is delivered.

5.2 Conditions precedent to each Utilisation

A Utilisation Notice may only be delivered if:

(A) no Default, Termination Event or Potential Termination Event is continuing or would result from the proposed Utilisation; and

(B) on the relevant Utilisation Date each of the representations required to be made by the Seller and/or each Obligor, as applicable, pursuant to Clause 13 of this Deed is true in all material respects.

5.3 Completion of a Utilisation Notice

A Utilisation Notice will not be regarded as having been duly completed unless:

(A) the proposed Utilisation Date is a Business Day within the Availability Period;

(B) it relates to all outstanding Debts (other than Restricted Debts) and the proceeds of all outstanding Restricted Debts legally and beneficially owned by the Seller as at that Utilisation Date (save that to the extent any part of the Debts represents a Debt which has previously been sold to the Bank, then the Debt need not be beneficially owned by the Seller);

(C) the Sterling amount of the Requested Purchase Price in respect of the Debts referred to in that Utilisation Notice does not exceed the Maximum Available Initial

4

Purchase Price less the Drawn Facility Amount immediately prior to that Utilisation and the amount requested would not cause a breach of the limit referred to in Clause 3;

(D) it contains a warranty from the Seller confirming:

(1) that the Debts it relates to together constitute all outstanding Debts legally and beneficially owned by the Seller as at that Utilisation Date (save that to the extent any part of a Debt represents a Debt which has previously been sold to the Bank, then that part of the Debt need not be beneficially owned by the Seller); and

(2) which of those Debts referred to in the Utilisation Notice are, in the reasonable opinion of the Seller, Eligible Debts; and

(3) which of those Debts referred to in the Utilisation Notice are, in the reasonable opinion of the Seller, Restricted Debts; and

(4) the Requested Purchase Price does not include any amounts in respect of billed Debts or Unbilled Debts where such amounts have previously been sold to the bank as Unbilled Debts; and

(5) the Concentration Limit Adjustment and the General Concentration Limit Adjustment for the Debts referred to in the Utilisation Notice (together with calculations establishing such figure);

(6) in relation to Debts being sold and/or Restricted Debts whose proceeds are being sold to the Bank during the Pre-Restructuring Period, that a Notice of Assignment or Trust relating to the sale of such Debts and/or proceeds of such Restricted Debts will be given to each relevant Debtor by no later than five (5) Business Days following the sale of such Debts and/or proceeds of such Restricted Debts;

(7) in relation to Debts being sold and/or Restricted Debts whose proceeds are being sold to the Bank during the Post-Restructuring Period and following an election by the Bank that the Facility shall operate on a disclosed basis in accordance with Clause 8, that a Notice of Assignment or Trust relating to the sale of such Debts and/or proceeds of such Restricted Debts will be given to each relevant Debtor by no later than five (5) Business Days following the sale of such Debts and/or proceeds of such Restricted Debts; and

(8) to the extent the Utilisation Notice refers to Restricted Debts, that the Seller has no Two-way Trading Arrangement with any Debtor to which those Restricted Debts relate, other than the relevant Contract and any Two-way Trading Arrangement previously disclosed in writing to the Bank; and

(E) it contains a warranty from the Seller confirming that, in relation to the Utilisation Notice, it has stored all supporting information relevant to the Utilisation Notice in an electronic format acceptable to the Bank, including, in relation to all those Relevant Debts which are Unbilled Debts, all information necessary to enable an Invoice to be issued to relevant Debtors; and

5

(F) it has attached to it, if previously requested by the Bank, copies of each Invoice evidencing the Relevant Debts (other than those which are Unbilled Debts).

5.4 Delivery of copies of Notices of Assignment or Trust

Following a request by the Bank, during the Pre-Restructuring Period or during the Post-Restructuring Period following an election by the Bank that the Facility shall operate on a disclosed basis in accordance with Clause 8, the Seller shall deliver to the Bank copies of each Notice of Assignment or Trust sent by the Seller to the Debtors within five (5) Business Days of the date any Debts and/or proceeds of Restricted Debts are sold to the Bank or, if later, the date of such request.

6. Utilisation of the Facility

6.1 Sale

Delivery of a duly completed Utilisation Notice constitutes an agreement by the Seller to sell to the Bank and by the Bank to purchase all outstanding Debts (other than outstanding Restricted Debts) and the proceeds of all outstanding Restricted Debts legally and beneficially owned by the Seller as at that Utilisation Date.

6.2 Actions of the Bank and the Seller

On each Utilisation Date on which a duly completed Utilisation Notice is delivered:

(A) the Bank shall pay to the Seller the Requested Purchase Price referred to in the Utilisation Notice being an amount equal to or less than the Maximum Available Initial Purchase Price (calculated in accordance with part 1 of schedule 2) for that Utilisation less the Drawn Facility Amount immediately prior to that Utilisation (provided that if the Maximum Available Initial Purchase Price is zero or a negative number, the Requested Purchase Price will be zero); and

(B) in the case of Debts other than Restricted Debts, the Seller, with full title guarantee (and as regards Scottish Debts, absolute warrandice), shall thereby assign absolutely to the Bank those Purchased Debts so that:

(1) if the assignment or assignation is effected during the Pre-Restructuring Period or, during the Post-Restructuring Period following an election by the Bank that the Facility shall operate on a disclosed basis in accordance with Clause 8, the Bank becomes the legal owner of all those Purchased Debts; and

(2) if the assignment or assignation is effected during the Post-Restructuring Period and prior to any election by the Bank that the Facility shall operate on a disclosed basis in accordance with Clause 8:

(a) the Bank becomes the beneficial owner of all those Purchased Debts (other than the Scottish Debts); and

(b) in the case of Scottish Debts, the Seller shall thereby hold such Scottish Debts and any proceeds thereof on trust for the Bank absolutely.

6

(C) in the case of Restricted Debts, the Seller and the Bank agree as between themselves that, notwithstanding (i) the restrictions contained in the Contracts for those Restricted Debts and (ii) that the following actions may not be effective as against the relevant Debtor(s) of those Restricted Debts, the Seller shall thereby:

(1) with full title guarantee (and as regards Scottish Debts, absolute warrandice) sell and the Bank shall purchase the proceeds of such Restricted Debts; and

(2) hold such Restricted Debts and any proceeds thereof on trust for the Bank absolutely.

6.3 Treatment of cancelled Invoices

For the avoidance of doubt, where an Invoice is cancelled and a credit note issued as a result of a billed Debt suffering a Dilution, it is acknowledged and agreed that during the period from such cancellation up to the date on which a new Invoice is issued (the “Cancellation Period”) in respect of the now unbilled reduced amount of that Debt (the “Resulting Unbilled Debt”), the Bank will have the same rights, title and interest in and to such Resulting Unbilled Debt as it had in the billed Debt pursuant to Clause 6.2 before such cancellation.

6.4 Further funding against previously Purchased Debts and Restricted Purchased Debts

Subject to the terms of this Deed, the Seller may on any Business Day (other than a Business Day on which a Utilisation Notice is delivered) during the Availability Period, deliver an Additional Utilisation Notice requesting that the Bank pay to it further amounts by way of purchase price for any previously sold Relevant Debts up to a maximum limit equal to the Facility Limit less the Drawn Facility Amount immediately prior to such Utilisation, provided that:

(A) no Default, Termination Event or Potential Termination Event is continuing or would result from the proposed Utilisation;

(B) each of the representations required to be made by the Seller and/or each Obligor, as applicable, pursuant to Clause 13 of the Deed is true in all material respects; and

(C) such a Utilisation would not cause a breach of Clause 3.

6.5 Deferred Purchase Price

The Bank shall pay to the Seller, by payment to such account as the Seller may specify from time to time, by electronic transfer on or before 3.00 p.m. on each Business Day (where the Seller has notified the Bank by no later than 10.00 a.m.) or 3.00 p.m. on the next following Business Day (in all other cases), the Deferred Purchase Price (if any) calculated on that Business Day in accordance with part 2 of schedule 2 and notified to the Bank by the Seller.

7. Collection and Administration

7.1 On and from the first Utilisation Date on which a Utilisation Notice is delivered to the Bank:

(A) unless the Bank specifies otherwise, the Seller shall, as agent and trustee of the Bank, continue to collect at its own expense all Relevant Debts;

7

(B) subject to Clause 7.1(C), the Seller shall use all reasonable endeavours to ensure that, up to and including the date on which the Drawn Facility Amount is permanently reduced to zero and no other amounts are owing by the Obligors to the Bank under the Finance Documents, all amounts paid by Debtors in respect of Debts are paid directly into the Collection Account and shall ensure that:

(1) any other amounts received or recovered by it in respect of any Relevant Debt (whether directly from a Debtor, under a Policy or otherwise) shall be held by the Seller on trust for the Bank absolutely; and

(2) all such other amounts received or recovered by it in respect of any Debt (whether directly from a Debtor, under a Policy or otherwise) shall be paid into the Collection Account on a daily basis;

(C) the Seller shall use all reasonable endeavours to ensure that all payments made by Debtors in respect of Debts whose Invoices were issued prior to the expiry of the Relevant Payment Grace Period for such Debts are made direct into the Collection Account in accordance with Clause 7.1(B) as soon as is reasonably practicable and in any event on and from the expiry of the Relevant Payment Grace Period;

(D) to the extent that the Seller receives the proceeds of a Debt and fails to pay such proceeds into the relevant Collection Account in accordance with Clauses 7.1(B) and 7.1(C) the Seller shall owe the Bank a debt payable on demand in an amount equal to such proceeds; and

(E) all cleared funds standing to the credit of the Collection Account shall be applied by the Bank in the following order:

(1) first, in reduction of the Drawn Facility Amount;

(2) secondly, in or towards satisfaction of any fees, costs and expenses payable by the Seller or any other Obligor under the Finance Documents which have fallen due and which remain unpaid for 5 or more Business Days from the due date;

(3) thirdly, in or towards amounts due in respect of the Facility Charge and which remain unpaid for 5 or more Business Days from the due date; and

(4) fourthly, any balance to the Seller, such payment being, if Relevant Debts remain outstanding, by way of Deferred Purchase Price.

7.2 The Seller can elect (at its sole discretion) to amend the percentages set out in (B) of the definition of “Concentration Limit”, any such amendments to take effect upon the next recalculation of the definitions referred to in Clause 14.2(A) following the supply of such information by the Seller necessary for such recalculation.

8. Notification of Assignment or Trust and use of power of attorney

8.1 Subject to clause 8.2, the Bank may only complete a Notice of Assignment or Trust in respect of a Relevant Debt and send it to the relevant Debtor (or require the Seller to do the same on its behalf) and/or exercise its powers pursuant to Clause 26 in respect of a Relevant Debt:

(A) in accordance with Clauses 15.4, 18 and 19; or

8

(B) if the Bank reasonably believes that its ability to recover the proceeds of any Relevant Debt may be materially prejudiced if it does not do so.

8.2 Notwithstanding Clause 8.1, the Bank may complete a Notice of Assignment or Trust in respect of a Relevant Debt and send it to the relevant Debtor (or require the Seller to do the same on its behalf) at any time during the Pre-Restructuring Period.

8.3 In the case where the Bank completes a Notice of Assignment or Trust in respect of a Relevant Debt and sends it to the relevant Debtor, the Bank shall have the right to take proceedings in its own name directly against the relevant Debtor.

8.4 Should the Bank wish to exercise its rights under:

(A) Clause 8.1(A), but only so far as such rights arise from the occurrence of a Termination Event under Clauses 19.1(B), 19.1(C), 19.1(D), 19.1(H), 19.1(I) or 19.1(J); or

(B) Clause 8.1(B),

it shall give prior written notice to the Seller of its intention to do so and shall only exercise such rights once a period of five (5) Business Days has elapsed from the date on which such notice is received and provided that the Seller does not elect to repurchase the Debts in accordance with Clause 8.5.

8.5 The Seller shall have the right to elect irrevocably and unconditionally by written notice to the Bank, such written notice to be received not later than five (5) Business Days from the date of receipt by the Seller of the notice referred to in Clause 8.4, to repurchase any Purchased Debt and/or the proceeds of any Restricted Purchased Debt in relation to which the Bank wishes to exercise its rights under Clause 8.1(A) (so far as such rights arise from the occurrence of a Termination Event under Clauses 19.1(B) 19.1(C), 19.1(D), 19.1(H), 19.1(I) or 19.1(J)) or Clause 8.1(B).

8.6 Any repurchase by the Seller in accordance with Clause 8.5 will be effected by the Seller paying to the Bank the Repurchase Price for the Relevant Debt to be repurchased in cleared funds to the Collection Account, following receipt of which the Bank shall, at the cost of the Seller, re-assign and, as the case may be, release from trust, such Purchased Debt and/or the proceeds of any such Restricted Purchased Debt to the Seller without recourse or warranty by the Bank other than a warranty that the Bank shall re-assign and, as the case may be, release from trust, that Purchased Debt and/or the proceeds of that Restricted Purchased Debt free from any Security Interest created by the Bank.

8.7 If the Seller does not elect to repurchase the relevant Purchased Debt and/or the proceeds of the relevant Restricted Purchased Debt in accordance with Clause 8.5, the Bank shall have the right to (i) complete a Notice of Assignment or Trust in respect of any such Purchased Debt and/or Restricted Purchased Debt and send it to the relevant Debtor and/or (ii) exercise its powers pursuant to Clause 26 in respect of any such Relevant Debts.

9

9. Non-Eligible Debts and shortfalls

9.1 Non-Eligible Debts

(A) If at any time (including, for the avoidance of doubt, after the Termination Date to the extent any Relevant Debts remain outstanding) it transpires that any Relevant Debts that were identified as Eligible Debts in the relevant Utilisation Notice either (i) were not in fact Eligible Debts on the relevant Utilisation Date; or (ii) have ceased to be Eligible Debts since the relevant Utilisation Date, then the Seller shall promptly inform the Bank thereof and, whether or not the Bank has been so informed, the Bank will have the right, exercisable at the option of the Bank, to request that the Seller repurchase any such Relevant Debts from the Bank.

(B) Any such repurchases referred to in Clause 9.1(A) will be effected on the earlier of: (i) the next following Utilisation Date on which a Utilisation Notice or Additional Utilisation Notice is delivered in accordance with this Deed; or (ii) 3 Business Days following written notice from the Bank requesting the repurchase of such Relevant Debts, by the Seller paying to the Bank on that date the Repurchase Price for those non-Eligible Debts to be repurchased, in cleared funds into the Collection Account (in accordance with Clause 12.5), and upon receipt of such cleared funds the Bank will reassign and, as the case may be, release from trust, such non-Eligible Debts or, as the case may be, the proceeds of such non-Eligible Debts to the Seller without recourse or warranty by the Bank other than a warranty that the Bank shall reassign and, as the case may be, release from trust, such non-Eligible Debts or, as the case may be, the proceeds of such non-Eligible Debts in question, free from any Security Interest created by the Bank.

9.2 Policy shortfall

If a claim is made under a Policy in respect of any Relevant Debt that is an Insured Debt that has not been repurchased by the Seller in accordance with this Deed, and a payment is subsequently made by an Insurer to the Seller under such Policy in respect of that Insured Debt, the Seller shall pay into the Collection Account on demand an amount equal to:

(A) any deductible amount (if any) applicable under that Policy in respect of the payment by the relevant Insurer; and

(B) an amount equal to that portion of the outstanding amount of such Insured Debt that is not covered by the commercial indemnity under the relevant Policy),

and provided that payments from the Seller under this Clause 9.2 and Clause 14.3(G) are equal in aggregate to the original Sterling amount of the Invoice for such Relevant Debt, the Seller shall be released from any further obligation under this Deed to the Bank in respect of that Relevant Debt.

9.3 Reserve Shortfall

If on any Business Day from and including the date of this Deed until the Drawn Facility Amount is permanently reduced to zero and no other amounts are outstanding to the Bank under this Deed, the Bank notifies the Seller that the Drawn Facility Amount exceeds the Facility Limit (the amount of such excess being the “Reserve Shortfall”) and if such excess is not dealt with under Clause 9.1, then within three (3) Business Days the Seller shall make a payment to the Collection Account (in accordance with Clause 12.5) equal to such Reserve Shortfall.

10

10. Seller’s right to repurchase

10.1 If at any time:

(A) the Drawn Facility Amount is reduced to zero; and

(B) there are no amounts which have fallen due and which remain unpaid to the Bank under the Finance Documents,

then the Bank will offer to sell any outstanding Purchased Debts, or the proceeds of any outstanding Restricted Purchased Debts, back to the Seller.

10.2 Any such sale referred to in Clause 10.1 may be effected on any Business Day on which the conditions referred to in Clause 10.1(A) and 10.1(B) have been met by the Seller paying to the Bank on that Business Day the sum of £1 for all those outstanding Purchased Debts and/or proceeds of outstanding Restricted Purchased Debts to be sold back to the Seller, in cleared funds into the Collection Account, and upon receipt of such payment the Bank will reassign and, as the case may be, release from trust, such Purchased Debts and/or proceeds of outstanding Restricted Purchased Debts to the Seller without recourse or warranty by the Bank other than a warranty that the Bank shall reassign and, as the case may be, release from trust, such Purchased Debts and/or proceeds of outstanding Restricted Purchased Debts, free from any Security Interest created by the Bank.

11. Fees

11.1 The Seller shall pay to the Bank:

(A) an arrangement, underwriting and structuring fee payable in accordance with the Fee Letter;

(B) a non-utilisation fee of 0.75 per cent. per annum multiplied by the average unutilised portion of the Facility for that quarter (i.e. £60,000,000 less the average Drawn Facility Amount for that quarter), payable quarterly in arrear during the Availability Period and on the Termination Date;

(C) an administration fee payable in accordance with the Fee Letter;

(D) any additional utilisation fee payable in accordance with the Fee Letter;

(E) a facility charge, which shall accrue daily on the Drawn Facility Amount, payable as follows:

(1) during the Pre-Restructuring Period at a rate per annum which is the aggregate of:

(a) 4%;

(b) the Bank’s applicable overnight LIBOR rate;

(c) the Mandatory Cost, if any; and

11

(d) the cost of processing all direct debits, cheques and BACS payments made to the Collection Account;

(2) during the Post-Restructuring Period at a rate per annum which is the aggregate of:

(a) 2%;

(b) the Bank’s applicable overnight LIBOR rate; and

(c) the Mandatory Cost, if any; and

(d) the cost of processing all direct debits, cheques and BACS payments made to the Collection Account,

(the “Facility Charge”) in each case quarterly in arrear starting from the date of this Deed until such date on or after the Termination Date as the Drawn Facility Amount is permanently reduced to zero, each such payment to be made within 5 Business Days of receipt of notice from the Bank detailing the fees referred to in Clauses 11.1(B), 11.1(C) and 11.1(D) and the Facility Charge payable for that quarter.

11.2 Any fee referred to in Clause 11.1 above is exclusive of any value added tax or other tax. If any value added tax or other tax is so chargeable, it shall be paid by the Seller at the same time as the fee.

11.3 The Facility Charge shall accrue from day to day and shall be calculated on the basis of the actual number of days elapsed and a year of 365 days (or as market practice otherwise dictates).

12. Payments

12.1 All payments under the Finance Documents shall be made in Sterling to the relevant Party to its account(s) at such office or bank as it may notify to the other Party for this purpose prior to the date of this Deed or any other notified by it to the other Party by not less than 5 Business Days’ notice. Payments under the Finance Documents shall be made for value on the due date, subject to any applicable grace periods, at such times and in such funds as the Bank may specify as being customary at the time for the settlement of Sterling transactions.

12.2 Subject to Clause 12.4, all payments made by an Obligor under the Finance Documents shall be made without set-off or counterclaim and without any deductions or withholdings whatsoever. If an Obligor or any Debtor in respect of its Debt is compelled to make any deduction the relevant Obligor shall pay additional amounts to ensure receipt by the Bank of the full amount the Bank would have received but for the deduction.

12.3 If any Obligor fails to pay any amount under the Finance Documents, that Obligor shall pay interest to the Bank on demand on the unpaid amount (both before and after judgment) at the rate of 2 per cent. above the Bank’s applicable overnight LIBOR rate from time to time.

12.4 If on any day a payment is due from the Seller under the Finance Documents to the Bank and a payment is due from the Bank to the Seller under this Deed, only the net sum shall be paid by whichever party owes the greater amount.

12

12.5 Any references in the Finance Documents to an obligation of any Obligor to pay an amount to the Bank in cleared funds into the Collection Account (a “Relevant Amount”) shall be construed as being capable of being satisfied by either:

(A) (1)      the Obligors paying that Relevant Amount in cash; or

(2) the Seller offering for sale at the price of one pound Sterling (£1) further Debts (or proceeds thereof) such that the Maximum Available Initial Purchase Price for those Debts is equal to such Relevant Amount; or

(3) the Obligors paying an amount in cash and the Seller offering for sale at the price of one pound Sterling (£1) further Debts such that the Maximum Available Initial Purchase Price for those Debts and the cash are in aggregate equal to such Relevant Amount,

provided that Debts (or their proceeds) may be offered for sale only if they may be so offered under the other provisions of this Deed; or

(B) the Bank deducting such Relevant Amount from the Requested Purchase Price on the next following Utilisation Date on which Debts (and/or the proceeds of Restricted Debts) are sold in accordance with Clause 6.2,

provided further that this Clause 12.5 shall not apply in respect of payments to be made by the Seller under Clauses 7.1(B), 7.1(C), 7.1(D) and 18.2(E).

13. Representations

13.1 Each Obligor represents to the Bank on the date of this Deed (provided that it is acknowledged and agreed that no Obligor shall be required to make the representations referred to in Clauses 13.1(G), 13.1(I) and 13.1(Q) on the date of this Deed) and on each date on which a Utilisation Notice or an Additional Utilisation Notice is delivered that:

(A) it is a limited liability company, duly incorporated and validly existing under the laws of the jurisdiction of its incorporation;

(B) it has full power to enter into, and to perform its obligations under the Finance Documents to which it is a party and, in the case of the Seller, under any Contract and, in each case, the transactions contemplated thereby, and it has taken all necessary action to authorise the entry into and performance of its obligations under each of the foregoing documents;

(C) its obligations under the Finance Documents to which it is a party and, in the case of the Seller, under any Contract are its legal, valid, binding and enforceable obligations enforceable in accordance with their respective terms;

(D) neither the entry into, nor the performance of and compliance with, the obligations expressed to be assumed by it under the Finance Documents to which it is a party and, in the case of the Seller, under any Contract, violates, contravenes, constitutes a default under or otherwise conflicts with:

(1) any existing law, statute, rule or regulation, any judgment, order, decree or award or any consent, approval or authorisation to which it is subject; or

13

(2) any provision of the its Memorandum or Articles of Association or of its charter or any other governing instrument or constitutional document; or

(3) the terms of any agreement or document to which it is a party or which is binding on it or any of its assets including, without limitation, the Restructuring Documents;

(E) neither the entry into, nor the performance of and compliance with, the obligations expressed to be assumed by it under the Finance Documents to which it is a party and, in the case of the Seller, under any Contract, would cause any borrowing and/or guaranteeing or similar limit binding on it to be exceeded;

(F) (save, during the period of 21 days from the date of the Deed of Charge, for delivery of particulars of the Deed of Charge for registration with the Registrar of Companies) the only authorisations, approvals, consents, licences, exemptions, filings, registrations, notarisations and other matters, official or otherwise, required in connection with the entry into, performance, validity and enforceability of the Finance Documents are those referred to in Clause 4.1 which, prior to the first Utilisation under this Deed, will have been obtained or effected and thereafter will remain in full force and effect and there are no circumstances which indicate that any of the same are likely to be revoked in whole or in part;

(G) no Default, Termination Event or Potential Termination Event is continuing or might be reasonably expected to result from any Utilisation;

(H) in the case of the Seller, its payment obligations under the Finance Documents to which it is a party will be secured by first ranking security under the Deed of Charge, and in the case of any other Obligor, its payment obligations under the Finance Documents to which it is a party rank at least pari passu with, the claims of all its other unsecured creditors, except for obligations mandatorily preferred by law applying to companies generally;

(I) neither it, nor any Debtor is required under the law of its jurisdiction of incorporation to make any deduction for or on account of tax from any payment it may make under the Finance Documents to which it is a party or under any Contract in respect of any Debt;

(J) (save the need for the Seller to deliver particulars of the Deed of Charge for registration with the Registrar of Companies within 21 days of the date of this Deed) under the law of its jurisdiction of incorporation, it is not necessary that any of the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to the Finance Documents or the transactions contemplated thereby;

(K) it is in material compliance with all applicable laws and regulations;

(L) no material litigation, arbitration or administrative proceedings are current, pending or threatened against it except and to the extent disclosed in writing at the date of this Deed;

(M) all Material Information provided to the Bank, Cresta, the Accountants, and Simmons & Simmons in respect of the Facility by or on behalf of the Obligors from and including 3 December 2003 up to but excluding the date of this Deed (to the extent not superseded or corrected by the relevant Obligor by such date or if later,

14

the date on which such information was relied upon by the Bank) was true, complete and accurate in all respects material to the Bank in the context of this Facility at its date and did not omit any information which, if disclosed, would reasonably be expected to adversely affect the Bank’s decision to enter into this Deed, other than as disclosed, and nothing has occurred since the date of the information which renders it untrue or misleading in any respect material to the Bank in the context of this Facility;

(N) other than the Projections, all written information (including information conveyed by electronic communications) supplied by or on behalf of the Obligors to the Bank pursuant to this Deed (to the extent not superseded or corrected by the relevant Obligor prior to the date on which the Bank took action in reliance thereon) was true, complete and accurate in all respects material to the Bank in the context of this Facility at the date supplied, did not have any omissions material to the Bank in the context of this Facility and nothing has occurred since the date of the information which renders such information untrue or misleading in any respect material to the Bank in the context of this Facility;

(O) the Projections were, to the extent not superseded or corrected by written information supplied to the Bank prior to the date of this Deed:

(1) based on assumptions which, as at the date on which such Projections were prepared, fair and reasonable; and

(2) made in good faith after careful consideration by the management of the Parent;

(P) the latest consolidated audited accounts of the Group delivered to the Bank in accordance with this Deed show a true and fair view of the consolidated financial condition of the Group as at that date and there has been no material adverse change in the financial condition of the Group since that date and, in the case of each other Obligor, its latest audited accounts delivered to the Bank in accordance with this Deed show a true and fair view of the financial condition of that Obligor at that date and there has been no material adverse change in the financial condition of that Obligor since that date;

(Q) it is not unable to pay its debts as they fall due within the meaning of section 123(1) of the Insolvency Act 1986 and will not become unable to do so as a result of entering into the Finance Documents to which it is a party; and

(R) at the time of any Utilisation after the Restructuring Date it is not unable to pay its debts as they fall due within the meaning of section 123(2) of the Insolvency Act 1986 and it has not stopped, suspended or threatened to stop payment of its debts generally or proposed or made any agreement for the deferral or rescheduling of its debts generally or proposed or made an arrangement under section 1 of the Insolvency Act 1986 or section 425 of the Companies Act 1985 with or for the benefit of its creditors generally, or any class of them.

13.2 The Seller represents and warrants to the Bank on each date on which a Utilisation Notice is delivered and, in the case of the representations referred to in Clauses 13.2(B), 13.2(D) and 13.2(E), on the date of this Deed, that:

(A) since the date of creation of the earliest created Debt sold to the Bank under this Deed, it is, and has been during all such times, in compliance with its credit and

15

collection policies with respect to any Relevant Debts in all material respects and has not made any material change to its credit and collection policies in force as at the date of this Deed or as subsequently amended in accordance with Clause 14.3(E);

(B) the copies of the Contracts which it has delivered to the Bank are true and complete copies of those Contracts;

(C) it has no Two-way Trading Arrangements with any Debtor to which any Restricted Debt offered in the Utilisation Notice relates other than as disclosed in the calculations in respect of the General Concentration Limit Adjustment in respect of such Utilisation Notice;

(D) as regards Two-way Trading Arrangements with any Debtor to which any Debt offered in the Utilisation Notice relates which is not a Restricted Debt, it has no Two-way Trading Arrangements other than:

(1) Unconnected Two-way Trading Arrangements; and/or

(2) Connected Two-way Trading Arrangements:

(a) under which First Category Export Debts arise; or

(b) under which Second Category Export Debts arise; and

(E) there are no amounts in respect of the salaries, bonuses, commissions and other similar payments of its employees, in aggregate amount greater than £1,000,000, that have fallen due but remain unpaid for a period of more than 30 days after the date or period for payment set out in the relevant contract save through technical or administrative error.

13.3 The Seller represents and warrants to the Bank on each date on which a Utilisation Notice and, other than in the case of Clause 13.3(A) and (B), an Additional Utilisation Notice is delivered, that:

(A) it is the legal and beneficial owner of each Debt referred to in the relevant Utilisation Notice (save that to the extent any part of a Debt represents a Debt which has previously been sold to the Bank, then that part of the Debt need not be beneficially owned by the Seller) and each such Debt and corresponding Invoice and Contract is held by it free of any Security Interest (other than in favour of the Bank and other than a floating charge under the DTI Security);

(B) each Debt (other than any Restricted Debt) and the proceeds of each Restricted Debt referred to in the relevant Utilisation Notice and/or, as the case may be, for which the Seller is requesting further payment in the relevant Additional Utilisation Notice, is/are freely assignable in accordance with this Deed and each Restricted Debt referred to in the relevant Utilisation Notice and/or, as the case may be, for which the Seller is requesting further payment in the relevant Additional Utilisation Notice, is chargeable in accordance with the Deed of Charge and capable of being held on trust;

(C) it, and to the best of its knowledge, each Debtor, has complied with all material obligations required, as at such Utilisation Date, to be complied with by it or, as the case may be the Debtor, under each relevant Contract and in respect of each

16

Invoice (if any) relating to the Relevant Debts (excluding any such Debts which are not Eligible Debts) referred to in the relevant Utilisation Notice and/or, as the case may be, for which the Seller is requesting further payment in the relevant Additional Utilisation Notice, and there is no Dispute with any Debtor outstanding in connection with any such Contract or Invoice (if any);

(D) each Debt referred to in the relevant Utilisation Notice and/or, as the case may be, for which the Seller is requesting further payment in the relevant Additional Utilisation Notice, is a valid and binding payment obligation of the Debtor of that Debt;

(E) it has no reason to believe that any Debtor relating to any Debt (excluding any such Debts which are not Eligible Debts) referred to in the relevant Utilisation Notice and/or, as the case may be, for which the Seller is requesting further payment in the relevant Additional Utilisation Notice, will fail to pay any amount due and payable to the Seller under the relevant Contract within 60 days from its due date;

(F) during the Pre-Restructuring Period and during the Post-Restructuring Period following an election by the Bank that the Facility shall operate on a disclosed basis in accordance with Clause 8, in relation to each Debt referred to in the relevant Utilisation Notice, a Notice of Assignment or Trust relating to the sale of such Debts and/or proceeds of such Restricted Debts, will be given to each relevant Debtor on that Utilisation Date by no later than five (5) Business Days following the sale of such Debts and/or proceeds of such Restricted Debts;

(G) the Seller has received no notice of crystallisation of the floating charge granted by the Seller pursuant to the DTI Security; and

(H) there is a valid and binding Contract in existence relating to each Debt referred to in the relevant Utilisation Notice and/or, as the case may be, for which the Seller is requesting further payment in the relevant Additional Utilisation Notice.

14. Undertakings

14.1 General Information

The Seller shall from and including the date of this Deed until the Drawn Facility Amount is permanently reduced to zero and no other amounts are outstanding to the Bank under this Deed:

(A) Financial Statements

supply to the Bank:

(1) audited consolidated financial statements of the Parent and its Subsidiaries for each fiscal year prepared in accordance with Floating UK GAAP, consistently applied, as soon as the Parent publicly releases such financial statements, but in any event within 90 days after the end of such fiscal year;

(2) any other quarterly or semi-annual financial statements of the Parent and its Subsidiaries prepared in accordance with Floating UK GAAP, consistently applied, as soon as the Parent publicly releases such financial statements;

17

(3) within 5 Business Days of their release, each notice, statement or circular issued to the members or creditors (or any class thereof, including but not limited to the Bondholders) of the Parent or any Restricted Subsidiary;

(4) within 5 Business Days of their release, all regulatory news statements;

(5) within 5 Business Days of their publication, all reports required to be published by the UKLA by virtue of the admission of any of the Capital Stock of the Parent to the Official List of the UKLA and, if none of its Capital Stock is so listed, all such reports as if such Capital Stock were so admitted; and

(6) with each set of financial statements delivered pursuant to Clauses 14.1(A)(1) and 14.1(A)(2), a Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 15 as at the date as at which those financial statements were drawn up. Each such Compliance Certificate shall be signed by two directors of the Seller;

(B) Other non-Debt Related Information

supply to the Bank:

(1) within 5 Business Days of their being agreed, the terms of any interest coverage ratio financial covenants agreed during the Post-Restructuring Period with other creditors of any member of the Group that are on more favourable terms (from a creditor perspective) than the Financial Covenant (such covenants referred to hereinafter as “Favourable Covenants”);

(2) within 5 Business Days of becoming aware of them, the details of any material litigation, arbitration or administrative proceedings which are current, threatened or pending against any Obligor;

(3) promptly, such further information regarding the financial condition, business and operations of any Obligor as the Bank may reasonably request; and

(4) as soon as it is publicly available, a copy of the prospectus relating to the re-admission of the Capital Stock of the Parent to the Official List of the UKLA pursuant to the Restructuring Documents.

14.2 Debt Related Information

Subject to the final paragraph of this Clause 14.2, the Seller shall from and including the date of this Deed until the Drawn Facility Amount is permanently reduced to zero and no other amounts are outstanding to the Bank under this Deed:

(A) supply to the Bank on each Monthly Reporting Date or such other day in each calendar month as is agreed between the Parent and the Bank from time to time in writing a monthly report (the “Monthly Settlement Report”) to include details of:

(1) a statement showing all collections received by the Seller in respect of all Debts since the previous Monthly Settlement Report and up-to-date outstanding ledger balances for the Debts broken down into Purchased Debts and Restricted Purchased Debts;

18

(2) a statement showing all Debts since the previous Monthly Settlement Report including a breakdown of concentrations across the Debtor portfolio;

(3) the aged balance of all outstanding Debts, confirmation as to which of those outstanding Debts are Eligible Debts and which are not Eligible Debts and data referring to levels of Defaulted Debts;

(4) an up-to-date calculation of:

(a) the Default Ratio;

(b) the Dilution Ratio;

(c) the Dilution Horizon Ratio;

(d) the Delinquency Ratio;

(e) the Loss Reserve Ratio;

(f) the Loss Reserve Percentage; and

(g) the Loss Horizon Ratio; and

(5) any other information relating to Debts requested by the Bank (acting reasonably) including, but not limited to, any information required to be stored by the Seller pursuant to Clause 5.3(E);

(B) (commencing from the date on which the initial Utilisation occurs) supply to the Bank on each Friday on which the Drawn Facility Amount is greater than zero, a report (the “Weekly Report”) showing:

(1) details of all Debts that have ceased to be Eligible Debts since the previous Weekly Report was delivered; and

(2) details of any Dilutions suffered since the previous Weekly Report was delivered;

(C) (commencing from the date on which the initial Utilisation occurs) supply to the Bank by 1.30pm on each Business Day:

(1) statements showing the cash balances standing to the credit of the Clydesdale Account and the Seller’s account held at Citibank N.A., London branch in respect of Debts whose Invoices were issued prior to the expiry of the Relevant Payment Grace Period for such Debts as at that time on that Business Day (the “Cash Balances”); and

(2) copies of irrevocable payment instructions from the Seller sent to Clydesdale and Citibank N.A., London branch requesting that such Cash Balances be paid into the Collection Account on the same day as that instruction;

(D) keep proper accounts of all dealings by the Seller under the Contracts and ensure those accounts bear a notation of each assignment or sale made under this Deed in favour of the Bank;

19

(E) procure that the Bank, any of its agents, representatives, advisers and, subject to Clause 24, the Bank’s transferees or assigns are:

(1) allowed access on reasonable notice to inspect the books and all other records and data of the Seller relating to Debts, Contracts and collections (including, without limitation, any meter reading data of each relevant Debtor); and

(2) rendered all assistance necessary in order to be able to produce and despatch Invoices to Debtors in respect of Unbilled Debts when exercising its rights under Clause 26 of this Deed;

(F) procure that if, on or after the date of this Deed, any person, other than the Bank, is granted a Security Interest over the undertaking or assets of the Seller (other than the Debts) and is entitled to appoint a receiver (whether administrative or otherwise) pursuant to such Security Interest, it will be a term of such receiver’s appointment that it will, to the extent it is able to do so taking into account its legal duties, and at the request and cost of Barclays, ensure that Barclays, any of its agents, representatives, advisers and permitted transferees or assignees are:

(1) allowed access on reasonable notice to inspect the books and all other records and data of the Seller relating to Debts, Contracts and collections (including, without limitation, any meter reading data of each relevant Debtor); and

(2) rendered all assistance necessary in order to be able to produce and despatch Invoices to Debtors in respect of Unbilled Debts when exercising its rights to do so under Clause 26 of this Deed;

(G) immediately supply to the Bank details of any Dispute;

(H) within 7 days of request by the Bank, supply to the Bank a schedule of outstanding amounts due and payable in respect of the Relevant Debts;

(I) notify the Bank of:

(1) any Default, Termination Event or Potential Termination Event (and the steps, if any, being taken to remedy it) in each case promptly upon the Seller becoming aware of it; and

(2) any withdrawal, or cancellation of, or change in the Bank’s loss payee status under, any Policy upon the Seller becoming aware of it; and

(J) promptly on request by the Bank, supply to the Bank any other information in connection with this Deed, any Policy or any Contract as the Bank may reasonably request, including certified copies of any Invoices and any credit limit decision from an Insurer in relation to any Insured Debtor.

In relation to information relating to July 2004, August 2004 and any subsequent month up until the date in which the Bank confirms that a successful test has occurred pursuant to Clause 4.2(S), the Seller shall supply to the Bank such information relating to Debts as the Bank (acting reasonably and based on the scope of Historical Receivables Information previously received from the Seller) considers necessary, and the remaining provisions of this Clause 14.2 shall not apply during such period.

20

14.3 Debt Related Covenants

The Seller shall from and including the date of this Deed until the Drawn Facility Amount is permanently reduced to zero and no other amounts are outstanding to the Bank under this Deed:

(A) other than in favour of the Bank, not create or permit to exist any Security Interest on any Debt (including its proceeds), Invoice, Contract, Policy (if any exists) or the Collection Account other than the DTI Security;

(B) other than to the Bank, not sell, transfer, discount, factor, grant or lease or otherwise dispose of all or any part of the Debts (including their proceeds), Invoices, Contracts, Policies (if any exist) or any amount standing to the credit of the Collection Account;

(C) acknowledge and agree that the Collection Account is an account in the name of the Bank, that only the Bank shall be entitled to operate the Collection Account and that no Obligor shall be entitled to seek to debit any amount from the Collection Account;

(D) where possible and appropriate, promptly demand payment in full of any Relevant Debt which has fallen due and payable from the relevant Debtor in accordance with the Seller’s standard credit and collection policies previously disclosed to the Bank;

(E) adhere to in all material respects, and not materially alter, its credit and collection policies relating to Debtors as previously disclosed to the Bank (including, without limitation, as regards issuance of Invoices), nor its operation of such policies without the prior written consent of the Bank (such consent not to be unreasonably withheld or delayed);

(F) not without the prior written consent of the Bank (such consent not to be unreasonably withheld or delayed):

(1) grant any time or waiver to, or make any composition with, any Debtor in respect of any Relevant Debts other than in accordance with the Seller’s credit and collection policies; or

(2) amend, rescind or terminate any Contract other than in accordance with the Seller’s credit and collection policies;

(G) promptly make any claim it is entitled to make under any Policy (if one exists) and pay the proceeds of any such claim that it may receive (subject to the Bank’s rights as loss payee) which relate to a Relevant Debt into the Collection Account in accordance with Clauses 7 and 12;

(H) comply with:

(1) all its material obligations under the Contracts; and

(2) all terms and conditions of any Policy (for so long as such Policy is in full force and effect);

21

(I) in relation to the Seller, not enter into any Two-way Trading Arrangement or other contract with any Debtor in respect of which Restricted Debts relate other than the relevant Contract; and

(J) use its reasonable endeavours to procure that as soon as practicable each of the Debtors relating to Restricted Debts gives their consent in writing to future assignments or assignations of such Restricted Debts to the Bank in accordance with the terms and conditions of this Deed;

(K) after the first Utilisation, use its reasonable endeavours to procure that as soon as practicable the Bank is named as loss payee in respect of each Policy;

(L) use its reasonable endeavours to procure that as soon as reasonably practicable in relation to any Contract which incorporates (i) the Seller’s 2001 standard terms and conditions (the “Conditions”) or (ii) paragraph 10 of the Conditions (or obligations of the Seller substantively similar to the provisions of such paragraph), the Seller obtains either (i) written consent from the relevant Debtor to the disclosure of any relevant confidential information to the Bank, or (ii) an amendment of the terms of the Contract to the effect that disclosure of relevant confidential information to the Bank is permitted; and

(M) in respect of any Contract pursuant to which the Seller’s liability has not been limited, it will use its reasonable efforts at the date of renewal of such Contract to agree with the relevant Debtor limitation of liability provisions similar to those contained in the Seller’s standard terms and conditions (2003 version).

14.4 General Covenants

Each Obligor shall, and shall procure that each other member of the Group shall, from and including the date of this Deed until the Drawn Facility Amount is permanently reduced to zero and no other amounts are outstanding to the Bank under this Deed:

(A) Compliance with laws

comply in all material respects with all applicable laws (including environmental laws) and regulations to which it may be subject;

(B) Consents, licences etc.

obtain, comply, protect and maintain (and take no action which could foreseeably imperil the continuation of) all licences and statutory authorisations, consents, approvals, intellectual property, trade names, franchises and contracts which are material and necessary for the conduct and continuation of its business substantially as presently conducted;

(C) Insurance

other than in relation to credit insurance in respect of Debtors, maintain such insurance as is required by the provisions of any statutory or licensing requirements;

22

(D) Ranking

ensure that, in the case of the Seller, its payment obligations under the Finance Documents to which it is a party are secured by first ranking security under the Deed of Charge, and in the case of any other Obligor, its payment obligations under the Finance Documents to which it is a party rank at least pari passu with, the claims of all its other unsecured creditors, except for obligations mandatorily preferred by law applying to companies generally;

(E) Favourable Financial Covenant

following a request by the Bank agree to make any amendments as are necessary to this Deed in order to provide the Bank with an interest coverage ratio financial covenant on as favourable terms as those of any Favourable Covenant;

(F) Relative financial strength of Guarantors

after the fifth Business Day of the Post-Restructuring Period only, ensure that the gross assets, turnover and EBIT of the Seller and the Guarantors (taken as a whole) will at all times constitute in aggregate at least 90% of the consolidated gross assets, turnover and EBIT, respectively, of the Parent and its Restricted Subsidiaries on a rolling four quarter basis, calculated in accordance with Relevant GAAP (excluding all assets relating to amounts receivable under the Nuclear Liabilities Documentation and excluding the Eggborough Subsidiaries and BETS (for so long as it cannot reasonably guarantee the Bonds as a result of requirements of the FSA or other legal requirements in relation to its business)); provided that for this purpose (i) neither the Eggborough Subsidiaries nor BETS (for so long as it cannot reasonably guarantee the Bonds as a result of requirements of the FSA or other legal requirements in relation to its business) shall be Guarantors or be deemed to be Material Subsidiaries; and (ii) all assets, turnover and EBIT of the Eggborough Subsidiaries and (for so long as it cannot reasonably guarantee the Bonds as a result of requirements of the FSA or other legal requirements in relation to its business) BETS shall be excluded in determining the Material Subsidiaries of the Parent and compliance with this Clause 14.4(F);

(G) General books of account

keep, and procure that each of the other Material Subsidiaries keeps, proper books of account as may be necessary to comply with applicable laws of its jurisdiction of incorporation and so as to enable the financial statements of the Parent and its Subsidiaries to be prepared in accordance with Clause 14.1(A);

(H) Corporate existence

do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence; and (ii) the rights (statutory or otherwise), licences and franchises of itself provided, however, that the Seller shall not be required to preserve any such right, licence or franchise if the directors of the Seller shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Seller and that the loss thereof is not adverse in any material respect to the Bank;

23

(I) Taxes

pay, prior to delinquency, all material taxes, assessments and governmental charges except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Bank and the Bank’s rights under or in respect of the Finance Documents, the Contracts or any Policy;

(J) Maintenance of properties

cause all material properties owned by it or the Parent or any of its other Restricted Subsidiaries or used or held for use in the conduct of its business or the business of any of the Parent or its Restricted Subsidiaries to be maintained and kept in reasonably good condition, repair and working order (ordinary wear and tear excepted) and supplied with all reasonably necessary equipment and will cause to be made all reasonably necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the reasonable judgment of such Obligor or, as applicable, the Parent or such other Restricted Subsidiary may be consistent with sound business practice and necessary so that the business carried on in connection therewith may be properly conducted; provided, however, that nothing in this Clause 14.4(J) shall prevent such Obligor or, as applicable, the Parent or such other Restricted Subsidiary from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the reasonable judgment of the directors of such company acting in good faith, desirable in the conduct of its business or the business of any of its Subsidiaries and would not be reasonably likely to have a material adverse effect on the ability of the any such Obligor to perform its respective obligations under the Finance Documents or in the case of the Seller, the Contracts or any Policy;

(K) Limitation on Financial Indebtedness during the Pre-Restructuring Period

during the Pre-Restructuring Period, not and shall not cause or permit the Parent or any other Restricted Subsidiary to, create, issue, incur, assume, guarantee or otherwise in any manner become directly or indirectly liable for the payment of or otherwise incur, contingently or otherwise (collectively, “incur”), any Financial Indebtedness (including any Acquired Indebtedness), other than:

(A) Financial Indebtedness incurred as at the date of this Deed;

(B) Financial Indebtedness incurred under the Finance Documents;

(C) Financial Indebtedness incurred under the Government Facility; and

(D) Permitted Financial Indebtedness (as defined in 14.4(L)) (with no double counting).

(L) Limitation on Financial Indebtedness during the Post-Restructuring Period

during the Post-Restructuring Period, not and shall not cause or permit the Parent or any other Restricted Subsidiary to “incur” (as defined in Clause 14.4(K) above) any Financial Indebtedness (including any Acquired Indebtedness), other than Permitted Financial Indebtedness, unless the Consolidated Fixed Charge Coverage Ratio of the Parent and its Restricted Subsidiaries for the most recent four full fiscal quarters for which financial statements are available immediately

24

preceding the incurrence of such Financial Indebtedness, taken as one period, is greater than 2.0 to 1.0 (the “UK GAAP Ratio”), in each case giving pro forma effect to the contemplated Financial Indebtedness in relation to use of proceeds, issuance and retirement of debt, acquisitions and dispositions and applying Relevant GAAP.

It is acknowledged and agreed that prior to the Restructuring Date, the Parent will (i) appoint a firm of independent accountants (the “BE Appointed Accountants”) to determine a US GAAP ratio level corresponding to the UK GAAP Ratio level set forth above; and (ii) deliver to the BE Appointed Accountants and to the advisers to the Bondholders copies of the Parent’s long-term business plans under both UK and US GAAP. No later than six months after the Restructuring Date, the Parent will require the BE Appointed Accountants to propose an appropriate US GAAP ratio level (the “Proposed US GAAP Ratio”) and notify the Bondholders in writing of the Proposed US GAAP Ratio, and of any proposed amendments to terms defined as described herein solely for the purposes of calculating such ratio (such amendments not to take effect for any other purposes of these definitions) to take account of differences in accounting treatment of items used in the calculation of the US GAAP Ratio compared with the UK GAAP Ratio. If an Objecting Majority (as defined in the Creditor Restructuring Agreement) which in the case of the Consenting Bondholders and RBS shall require a Bondholder/RBS Consenting Majority (as such terms are defined in the Creditor Restructuring Agreement) have not objected to the Proposed US GAAP Ratio within 30 days of such notification, the foregoing covenant shall be revised to replace the UK GAAP Ratio with the Proposed US GAAP Ratio with effect from the Conversion Date. If an Objecting Majority objects to the Proposed US GAAP Ratio within such 30 day period, then within 5 days of receipt by the Parent of such notification, at the expense of the Parent, the Trustee will appoint a firm of independent accounting experts which shall not be the Group’s auditors, and shall not be a provider of material services to the Group (the “Independent Accountants”) nominated by the Institute of Chartered Accountants to determine an appropriate US GAAP ratio by no later than 30 days after the date of appointment of such Independent Accountants. For purposes of the foregoing covenant, the US GAAP ratio determined by the Independent Accountants (the “Determined US GAAP Ratio”) will replace the UK GAAP Ratio upon the date such determination is delivered in writing to the Trustee by the Independent Accountants. The Bank shall have no role in the determination of the US GAAP ratio level.

Notwithstanding the foregoing, the Parent and, to the extent specifically set forth below, the Restricted Subsidiaries may incur each and all of the following (collectively, the “Permitted Financial Indebtedness”):

(1) Financial Indebtedness of the Issuer under the Bonds and of any Bond Guarantor pursuant to the Bond Guarantee;

(2) Financial Indebtedness under the Nuclear Liabilities Documentation and the CTA Documentation (but excluding any Financial Indebtedness not provided for under such documentation in the form agreed as at the Restructuring Date);

(3) Financial Indebtedness of the Parent or any Restricted Subsidiary outstanding on the Issue Date and not otherwise referred to in this definition of “Permitted Financial Indebtedness”;

25

(4) any renewals, extensions, substitutions, refundings, refinancings or replacements (including successive refinancing) (each, a “refinancing”) of Financial Indebtedness permitted pursuant to the Consolidated Fixed Charge Coverage Ratio test set out above or any of the categories of Permitted Financial Indebtedness specified herein provided that (a) the aggregate principal amount is not thereby increased by more than the expenses incurred by the Parent and the Restricted Subsidiaries in connection with such refinancing plus the lesser of (i) the stated amount of any premium to be paid in connection with such refinancing and (ii) the amount of premium actually paid to refinance such Financial Indebtedness, and (b) the maturity is no shorter than the maturity and the average life is no shorter than the average life of the Financial Indebtedness which it refinances;

(5) Financial Indebtedness of the Parent or a wholly-owned Restricted Subsidiary which is owing to or held by the Parent or another wholly owned Restricted Subsidiary, provided that any disposition, pledge or transfer of any such Financial Indebtedness to a Person that is not the Parent or a wholly-owned Restricted Subsidiary, or any transaction pursuant to which any wholly-owned Restricted Subsidiary which has any such Financial Indebtedness owing to it ceases to be a wholly-owned Restricted Subsidiary, shall be deemed to be an incurrence of such Financial Indebtedness not permitted by this Clause 14.4(L)(5);

(6) Financial Indebtedness of the Parent or any Restricted Subsidiary arising out of Interest Rate Agreements or Currency Hedging Agreements relating to (i) Financial Indebtedness of the Parent or any Restricted Subsidiary or (ii) obligations to purchase or sell assets or properties incurred in the ordinary course of business; provided that the notional amount of such Interest Rate Agreements does not exceed the aggregate principal amount of the related Financial Indebtedness, and such Currency Hedging Agreements do not increase the obligations of the Parent or any Restricted Subsidiary other than as a result of fluctuations in interest or foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder (“Permitted Hedging”);

(7) Financial Indebtedness arising out of Trading Arrangements of the Parent or any Restricted Subsidiary or out of any guarantee, indemnity, letter of credit or other reimbursement obligation, supporting or securing such Trading Arrangements;

(8) Financial Indebtedness arising from any guarantee, indemnity or letter of credit, where such guarantee, indemnity or letter of credit is responsive to a requirement pursuant to the Balancing and Settlement Code, the Connection and Use of System Code or the Grid Code, or required under the terms of the Parent’s, any Restricted Subsidiary’s or any Eggborough Subsidiary’s Electricity Generation Licence, Electricity Supply Licence or Gas Shipper’s Licence, or otherwise reasonably required to obtain and maintain access to, or use of, transmission and distribution systems (including, for the avoidance of doubt, interconnectors) and participation in wholesale electricity markets in England, Wales or Scotland for any of the Parent, the Restricted Subsidiaries or the Eggborough Subsidiaries;

(9) Financial Indebtedness arising from any guarantee, performance guarantee, indemnity or letter of credit (i) in respect of Permitted Financial Indebtedness

26

of the Parent or any Restricted Subsidiary; (ii) in connection with environmental licences and any other permits, licences or authorisations, or in compliance with any other regulatory requirements, in any such case in relation to any Permitted Business of the Parent or any Restricted Subsidiary; (iii) in connection with operation and maintenance contracts, management services contracts or consultancy services contracts of the Parent or any Restricted Subsidiary to the extent reasonably necessary to carry on such business in accordance with Clause 14.4(U); and (iv) in relation to obligations to H.M. Customs & Excise of the Parent or any Restricted Subsidiary;

(10) Financial Indebtedness incurred in the ordinary course of business in respect of letters of credit to support workers’ compensation obligations, performance bonds, completion guarantees, bid bonds, bankers acceptances and surety or appeal bonds for the Parent or any Restricted Subsidiary, in each case other than in connection with the borrowing of money;

(11) Financial Indebtedness of the Parent or any Restricted Subsidiary arising from the honouring by a bank or other financial institution of a cheque or draft (or similar instruments) inadvertently drawn against insufficient funds, provided that such Financial Indebtedness is extinguished within 5 Business Days of incurrence;

(12) Financial Indebtedness pursuant to indemnification, adjustment of purchase price or similar obligations incurred in connection with the purchase or disposal of a business or asset; and

(13) Financial Indebtedness of the Parent and the Restricted Subsidiaries in addition to that described in Clauses 14.4(L)(1) to 14.4(L)(12) (inclusive) above, in a maximum aggregate principal amount of £75 million (with no double counting) of which (i) £40 million may be applied in meeting costs and expenditures resulting from outages and seasonal working capital and will be available to be drawn at any time (the “Seasonal Basket”) and (ii) £35 million will be available only to meet credit support obligations in respect of Trading Arrangements (the “Collateral Basket”); provided that the Collateral Basket may be drawn only to the extent that (and up to the amount by which) the Target Amount has not been reached. £60 million of the £75 million basket may be incurred under this Deed (the “Secured Basket”). Amounts outstanding under the Seasonal Basket must be reduced to zero for a period of 45 consecutive days in any financial year provided that the foregoing restriction shall not apply during any financial year in which the difference between total Cash (as defined in the Contribution Agreement as in effect on the Restructuring Date) and the Target Amount is less than £100 million at any time during such financial year.

For the purposes of determining compliance with any restriction on the incurrence of Financial Indebtedness under this Clause 14.4(L), the Sterling-equivalent principal amount of all Financial Indebtedness denominated in another currency will be calculated using the spot rate of exchange for the purchase of the relevant currency against payment of Sterling being quoted by the Bank on the date of testing; provided that if any Financial Indebtedness denominated in a currency other than Sterling is subject to a Currency Hedging Agreement covering all principal of, premium (if any) and interest payable on such Financial Indebtedness, the amount of such Financial Indebtedness expressed in Sterling will be determined taking into account such Currency Hedging Agreement.

27

For purposes of determining compliance with this Clause 14.4(L), (1) the maximum amount of Financial Indebtedness that the Parent or a Restricted Subsidiary may incur pursuant to this covenant shall not be deemed to be exceeded, with respect to any outstanding Financial Indebtedness, due solely to the result of fluctuations in the exchange rates of currencies; (2) in the event that an item of Financial Indebtedness meets the criteria of more than one of the types of Financial Indebtedness permitted by this covenant, the Parent in its sole discretion shall classify such item of Financial Indebtedness and from time to time reclassify such item of Financial Indebtedness and only be required to include the amount of such Financial Indebtedness as one of such types; (3) an item of Financial Indebtedness that meets the criteria of more than one of the types of Financial Indebtedness permitted by this covenant may be divided and classified under more than one of the types of Financial Indebtedness described above; and (4) the amount of Financial Indebtedness issued at a price that is less than the principal amount thereof will be equal to the amount of the liability in respect thereof determined in accordance with Relevant GAAP. Accrual of interest, accrual of dividends, the accreted value and the payment of interest in the form of additional Financial Indebtedness will not be deemed to be an incurrence of Financial Indebtedness for purposes of this covenant.

For purposes of determining any particular amount of Financial Indebtedness under this covenant, guarantees, liens or obligations with respect to any letter of credit supporting Financial Indebtedness otherwise included in the determination of a particular amount will not be included;

(M) Limitation on transactions with Affiliates

during the Post-Restructuring Period, not and shall not cause or permit the Parent or any other Restricted Subsidiary to, directly or indirectly, enter into any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with or for the benefit of any Affiliate of the Parent (other than the Parent or a Restricted Subsidiary) unless such transaction or series of related transactions is entered into on terms no less favourable to the Parent or such Restricted Subsidiary, as the case may be, than those terms which would be available in a comparable transaction in arm’s length dealings with an unrelated party, and:

(1) with respect to any transaction or series of related transactions involving aggregate payments in excess of £2 million, the Parent delivers an Officer’s Certificate to the Bank certifying that such transaction or series of related transactions is on terms no less favourable to the Parent or such Restricted Subsidiary, as the case may be, than those terms which would be available in a comparable transaction in arm’s length dealings with an unrelated third party; and

(2) with respect to any transaction or series of related transactions involving aggregate payments in excess of £5 million, such transaction or series of related transactions has been approved by the disinterested members of the board of directors of the Parent, or in the event there is only one disinterested member, by such disinterested member, as being in the interests of the relevant company; or

(3) with respect to any transaction or series of related transactions involving aggregate payments in excess of £25 million, the Parent delivers to the Bank

28

a written opinion of an investment banking firm of international standing or other recognised independent expert stating that the transaction or series of related transactions is on fair and reasonable terms (from a financial point of view) to the relevant company;

provided, however, that this covenant shall not apply to:

(a) transactions which comply with the provisions of Clause 14.4(N);

(b) the provision of benefit arrangements for any employee, officer or director of the Parent or any Restricted Subsidiary, including vacation plans, health and life insurance plans, deferred compensation plans, director’s and officer’s indemnification agreements and retirement or savings plans and similar plans, and any stock option or stock incentive plans (together with the issuance of securities pursuant to, or for the purpose of the funding of, any such agreements or arrangements), entered into in the ordinary course of business and which are customary in industry;

(c) transactions entered into prior to the Issue Date or as part of the Restructuring including, without limitation, under or pursuant to the Nuclear Liabilities Documentation as in effect on the Restructuring Date;

(d) payment of compensation to and reimbursement of expenses of employees, officers or directors of the Parent or any Restricted Subsidiary in the ordinary course of business;

(e) advances to employees as permitted under Permitted Investments;

(f) Trading Arrangements of the Parent or any Restricted Subsidiary entered into on an arm’s-length basis;

(g) transactions entered into on an arm’s-length basis in the ordinary course of business between the Parent and any Restricted Subsidiary or between Restricted Subsidiaries;

(h) advances to employees, officers and directors (or guarantees of third party loans to employees, officers and directors) in the ordinary course of business;

(i) transactions with the NLF and the Secretary of State which comply with Condition 8.5 (Limitations on transactions with the NLF and the Secretary of State);

(j) transactions with British Nuclear Fuels plc which comply with Condition 8.6 (Limitations on transactions with BNFL);

(k) Permitted Payments; and

(l) any sale of Capital Stock of the Parent, other than Disqualified Capital Stock;

29

(N) Eggborough transactions

during the Post-Restructuring Period and for as long as the Eggborough Subsidiaries are not Material Subsidiaries, the following provisions shall also apply:

(1) transactions under the CTA Documentation as in effect on the Restructuring Date shall be permitted (notwithstanding the provisions of Condition 8.2 (Limitation on Restricted Payments);

(2) payments to EPL shall be permitted (notwithstanding the provisions of Condition 8.2 (Limitation on Restricted Payments):

(a) up to and including 31 March 2010:

(i) if made pursuant to the CTA Documentation in the form agreed on the Restructuring Date (including the issue of deferred shares in the Issuer as contemplated by the CTA Documentation but excluding any Investments not provided for under the CTA Documentation, in each case in the form agreed on the Restructuring Date); plus

(ii) in an amount in each year not exceeding the greater of (x) an amount equal to 10% of the aggregate amount of capital expenditure scheduled for such year as set out in the Capital Investments Works Schedule (as defined in the CTA in the form agreed on the Restructuring Date); and (y) £500,000, subject to an aggregate maximum amount until termination of the CTA of £3,000,000; and

(b) after 31 March 2010:

(i) to the extent required in order for EPL to be able to operate and maintain the Eggborough Plant in accordance with the standards of a Reasonable and Prudent Operator and comply with its obligations under the Finance Documents; and

(ii) to the extent not permitted pursuant to (b)(i), to fund capital expenditure, the primary purpose of which is the maintenance (including non-recurring maintenance) and/or repair of a capital nature of the Eggborough Plant,

provided that, in each of Clauses 14.4(N)(2)(a)(ii), 14.4(N)(2)(b)(i) and 14.4(N)(2)(b)(ii) above, EPL continues to own the Eggborough Plant and EPHL continues to own the shares in EPL at such time;

(3) other than Permitted Payments, or payments under any agency or security trustee fee letter in existence on the Restructuring Date, each Obligor shall not and shall not cause or permit the Parent or any other Restricted Subsidiary to pay, or cause to be paid, any consideration to or for the benefit of any Eggborough Lenders for or as an inducement to any consent, waiver, or forbearance or amendment of any of the terms or provisions of the CTA Documentation unless such equivalent and pro rata consideration is offered to be paid, and is paid, to all Bondholders (other than the holder of the CTA Global Bond);

30

(4) each Obligor shall, and shall procure that the Parent and each other Restricted Subsidiary shall, ensure that any transaction (other than a transaction permitted by Clause 14.4(N)(1), (2) or (3)) entered into by it, the Parent and/or any of the Restricted Subsidiaries with any Eggborough Subsidiary must:

(a) be on arm’s-length terms;

(b) not have an effect which would be adverse to the economic or financial position of the Bondholders generally; and

(c) be treated as a Restricted Payment in accordance with Condition 8.2 (Limitation on Restricted Payments); and

(5) each Obligor shall, and shall procure that the Parent and each other Restricted Subsidiary shall, unless the consent of a majority of the Bondholders (by Principal Amount Outstanding of the Bonds) is obtained, ensure that no amendment may be made to any of the CTA Documentation if the effect of the amendment would be adverse to the economic or financial position of the Bondholders;

(O) Negative pledge

not and shall not cause or permit the Parent or any other Restricted Subsidiary to, directly or indirectly, create or permit the creation of, any Security Interest on assets of it, the Parent, the Issuer or any Restricted Subsidiary or assign or convey any right to receive income or profits therefrom, unless the obligations of the Obligors under the Finance Documents to which they are a party are directly secured equally and rateably with (or in the case of Subordinated Indebtedness, prior or senior thereto, with the same relative priority as the obligations of the Obligors under the Finance Documents to which they are a party shall have with respect to such Subordinated Indebtedness) the obligation or liability secured by such Security Interest, except for:

(1) Security Interests existing on the date of this Deed;

(2) Security Interests required to be granted pursuant to, or as a condition precedent to, the Nuclear Liabilities Documentation, including to secure the payment of the Decommissioning Default Payment (as defined in the Contribution Agreement);

(3) any guarantee, indemnity or credit support in favour of a third party providing agency, brokerage, clearing or settlement services in respect of Trading Arrangements of the Parent and/or any Restricted Subsidiary, provided that such guarantee, indemnity or credit support is for such services to the Parent and/or any Restricted Subsidiary;

(4) Security Interests under court judgments or court orders to the extent that the same are adequately bonded and appeals have not been exhausted;

(5) Security Interests arising by reason of taxes, assessments or other governmental charges not yet delinquent or which are being contested in good faith;

31

(6) deposits to secure public, regulatory or statutory obligations or in lieu of surety bonds incurred in the ordinary course of business;

(7) any lien arising by operation of law;

(8) any rights of set-off with respect to demand or time deposits with financial institutions and banker’s liens and any depositary institution’s security in bank accounts with it in the ordinary course of business save where the Parent or any Restricted Subsidiary indicates that such deposit is made by way of collateral;

(9) any Security Interest with respect to assets of the Parent or a Restricted Subsidiary granted by the Parent or a Restricted Subsidiary to the Parent, the Issuer or a Bond Guarantor to secure Financial Indebtedness owing to the Parent, the Issuer or such Bond Guarantor;

(10) any Security Interest the principal purpose and effect of which is to allow the setting-off or netting of obligations of the Parent and/or any Restricted Subsidiary with those of a financial institution in the ordinary course of the cash management arrangements of the Parent or any Restricted Subsidiary;

(11) any Security Interest represented by good faith deposits in connection with tenders, leases and contracts (other than contracts for the payment of money) of the Parent and/or any Restricted Subsidiary;

(12) any Security Interest to secure performance bonds, leases (including statutory and common law landlord’s liens), statutory obligations, surety and appeal bonds, letters of credit and other obligations of a like nature and incurred in the ordinary course of business of the Parent or any Restricted Subsidiary;

(13) any Security Interest provided in connection with environmental licences and any other permits, licences or authorisations, or in compliance with any other regulatory requirements, in any such case in relation to any Permitted Business of the Parent or any of its Restricted Subsidiaries;

(14) any Security Interest over cash paid into an escrow account by any third party pursuant to any deposit or retention of purchase price arrangements entered into pursuant to any disposal or acquisition (permitted by the terms of the Bonds) made by the Parent and/or any Restricted Subsidiary;

(15) any Security Interest created under or in connection with or arising out of the Balancing and Settlement Code, the Connection and Use of System Code or the Grid Code, required under the terms of the Parent’s, any Restricted Subsidiary’s or any Eggborough Subsidiary’s Electricity Generation Licence, Electricity Supply Licence or Gas Shipper’s Licence or otherwise reasonably required to obtain and maintain access to, or use of, transmission and distribution systems and participation in wholesale electricity markets in England, Wales or Scotland for any of the Parent, the Restricted Subsidiaries or the Eggborough Subsidiaries provided that any collateral so provided by any Eggborough Subsidiary is provided on terms such that, upon release, such collateral shall not be paid to it but shall instead be returned to the Parent or, as the case may be, the relevant Restricted Subsidiary;

32

(16) any Security Interest given by way of cash collateral or cash deposits in relation to Trading Arrangements of the Parent or any Restricted Subsidiary or procurement contracts with suppliers, in each case entered into in the ordinary course of that company’s business (or any such security interest given in respect of letters of credit relating to such obligations);

(17) any Security Interest securing for the benefit of the vendor of a Renewables Obligation Certificate, emissions permit (in relation to the Eggborough Plant) or other similar or related permits, obligations or entitlements (each, a “Permit”), some or all of the purchase price payable in respect of such Permit, provided that such Security Interest only extends to such Permit and secures Financial Indebtedness in an amount not in excess of the purchase price for such Permit;

(18) any Security Interest over goods or documents of title arising in the course of letters of credit transactions entered into by the Parent and/or any Restricted Subsidiary in the ordinary course of business;

(19) any provision for the retention of title to any asset by the vendor or transferor of such asset which asset is acquired by the Parent or any Restricted Subsidiary in a transaction entered into in the ordinary course of business of the Parent or such Restricted Subsidiary and for which kind of transaction it is normal market practice for such retention of title provision to be included or arising under conditional sale or hiring arrangements in respect of goods supplied in the ordinary course of trading;

(20) any Security Interest on assets of a member of the Group which becomes a member of the Group after the date of this Deed, to secure obligations of that member of the Group existing at the date on which it becomes a member of the Group (but not any increase in principal amount (other than by capitalisation of interest) or extension of maturity of such obligations) provided that such Security Interest was not created in contemplation of or in connection with such company becoming a member of the Group, that such Security Interest shall not extend to any other assets owned by the Parent or any Restricted Subsidiary and that such obligations are repaid in full within 180 days of such company becoming a member of the British Energy Group;

(21) any Security Interest over receivables comprising part of the Secured Basket (including any related insurance policies taken out by the seller of the receivables in relation to the debtors under such receivables and any Security Interest over the records and systems necessary for producing invoices relating to such receivables);

(22) any Security Interest granted in favour of financial services providers over cash deposits held with such providers in relation to clearing and settlement services provided to them;

(23) any Security Interest given by way of cash collateral securing obligations of a member of the British Energy Group under electricity trading or procurement contracts with suppliers, in each case entered into in the ordinary course of that company’s business (or any such Security Interest given in respect of letters of credit relating to such obligation);

33

(24) any other Security Interest not permitted under Clauses 14.4(O)(1) to 14.4(O)(23) (inclusive) above securing obligations (contingent or otherwise) of up to £10 million in aggregate at any one time; and

(25) renewals and/or refinancings of any of the items referred to in Clauses 14.4(O)(1) to 14.4(O)(24) (inclusive) above provided that such renewal/refinanced Security Interest is limited to all or part of the same property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) or is in respect of property that is subject to a Security Interest permitted under this covenant,

provided that each Obligor shall not and shall not cause or permit the Parent or any Restricted Subsidiary to, grant any Security Interest in respect of its benefits and rights under the HLFA or the NLFA.

For the avoidance of doubt, no purpose trust declared, arising or subsisting in respect of moneys received by the Parent or any of its Subsidiaries from the Secretary of State pursuant to the HLFA or from the Secretary of State or the NLF pursuant to the NLFA and which moneys are, in either case, required to be held on trust for the benefit of the Secretary of State or the NLF until they are applied for the purpose for which they were given, shall constitute a Security Interest for the purposes of the foregoing;

(P) Limitation on sale of certain assets

save for:

(1) any sale hereunder of Debts (other than Restricted Debts) or the proceeds of Restricted Debts;

(2) any sale of the assets which are the subject of the NLF Purchase Options, upon and pursuant to exercise of such option in the form agreed as at the Restructuring Date;

(3) any sale of BEPET coal stocks in accordance with the CTA Documentation upon exercise of an Eggborough Break Option or enforcement of the Eggborough Security;

(4) any tax loss surrenders to the Parent or any Restricted Subsidiary; and

(5) any tax loss surrenders to Unrestricted Subsidiaries on arm’s-length terms,

(which shall each be permitted),

not and shall not cause or permit the Parent or any other Restricted Subsidiary to, directly or indirectly, consummate an Asset Sale unless (1) at least 80% of the consideration from such Asset Sale consists of any combination of cash or Cash Equivalents, (2) the Parent and/or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets subject to such Asset Sale and (3) such sale is approved by a resolution of the board of directors of the relevant company a certified copy of which shall be delivered to the Bank.

34

Each Obligor shall procure that the net cash proceeds of any Asset Sale must either:

(1) be invested in a Permitted Business of the Parent or a Restricted Subsidiary within 180 days of receipt; and/or

(2) be retained or used as Cash Reserves to the extent the amount standing to the credit of the Cash Reserves is lower than the Target Amount.

The amount of such net cash proceeds not so invested within 180 days or so retained or used as Cash Reserves as provided above constitutes “Excess Proceeds”.

When the aggregate amount of Excess Proceeds exceeds £10 million and the amount standing to the credit of the Cash Reserves is no lower than the Target Amount, the Issuer shall offer to apply the Excess Proceeds in purchasing or redeeming Bonds (in whole or in part) on the next succeeding Interest Payment Date and in payment of the Accelerated Decommissioning Payment in accordance with Condition 3.7 (Accelerated decommissioning payment) together with any other Financial Indebtedness of the Issuer ranking pari passu with the Bonds (“Pari Passu Indebtedness”) outstanding and containing similar provisions requiring the Issuer to make an offer to repurchase such Financial Indebtedness with the proceeds from any Asset Sale.

The offer price for the Bonds will be equal to 101% of the Principal Amount Outstanding of the Bonds plus accrued and unpaid interest, if any, to the date of purchase (subject to the rights of Holders of record on relevant Record Dates to receive interest due on an Interest Payment Date), and will be payable in cash.

Any such offer will be made in the manner specified in Condition 3.5 (Mandatory repurchase offers from excess cash).

(Q) Limitation on issuances of guarantees of Financial Indebtedness

(1) during the Post-Restructuring Period, not and shall not cause or permit the Parent or any other Restricted Subsidiary (which is not a Bond Guarantor or a Guarantor), other than BETS for so long as it cannot reasonably guarantee the Bonds or enter into the Guarantee as a result of requirements of the FSA or other legal requirements in relation to its business, directly or indirectly, to guarantee, assume or in any other manner become liable with respect to any Financial Indebtedness of the Parent or any Restricted Subsidiary (other than by way of the Nuclear Guarantee) unless any such Restricted Subsidiary simultaneously therewith (or prior thereto) executes and delivers a guarantee of payment on the Bonds and of the Obligations (as defined in the Guarantee), on an equal and rateable basis with such guarantee for so long as such guarantee remains effective, and with recoveries thereunder limited (if at all) to no less than an amount equal to the amount of Financial Indebtedness of the Parent or the Restricted Subsidiary so guaranteed; provided, however, that any guarantee by a Restricted Subsidiary of Financial Indebtedness which is a subordinated obligation of the Parent or the Restricted Subsidiary shall be subordinated and junior in right of payment to the contemporaneous guarantee of the Bonds and of the Obligations (as defined in the Guarantee) by such Restricted Subsidiary; and provided, further, that each Obligor shall not cause or permit any Restricted Subsidiary to guarantee or secure any Capital Stock of the Parent or the Issuer.

35

(2) Notwithstanding the foregoing, any guarantee by a Restricted Subsidiary of the Bonds shall provide by its terms that it (and all Security Interests securing the same) shall be automatically and unconditionally released and discharged upon any sale, exchange or transfer to any Person not an Affiliate of the Parent, of all of the Parent’s or any Restricted Subsidiary’s equity interest in, or all or substantially all the assets of, such Restricted Subsidiary, which transaction is in compliance with the covenants contained herein and such Restricted Subsidiary is released from all guarantees, if any, by it of other Financial Indebtedness of the Parent or any Restricted Subsidiaries and, with respect to any guarantees created after the Issue Date pursuant to the above Clause 14.4(Q)(1), the release by the holders of the Financial Indebtedness of the Parent or any Restricted Subsidiary described in the above Clause 14.4(Q)(1) of their Security Interest or their guarantee by such Restricted Subsidiary (including any deemed release upon payment in full of all obligations under such Financial Indebtedness), at such time as (a) no other Financial Indebtedness of the Parent or any Restricted Subsidiary has been secured or guaranteed by such Restricted Subsidiary, as the case may be, or (b) the holders of all such other Financial Indebtedness which is secured or guaranteed by such Restricted Subsidiary also release their Security Interest in, or guarantee by, such Restricted Subsidiary (including any deemed release upon payment in full of all obligations under such Financial Indebtedness);

(R) Limitation on sale and leaseback transactions

during the Post-Restructuring Period, not and shall not cause or permit the Parent or any other Restricted Subsidiary to, enter into sale and leaseback transactions unless (1) the sale or transfer of such property or assets to be leased is treated as an Asset Sale and complies with Clause 14.4(P) and Clause 14.4(O), and (2) if the resulting lease obligation were treated as Financial Indebtedness, such Financial Indebtedness would be permitted under Clause 14.4(L);

(S) Limitation on sale of Subsidiary equity interests

during the Post-Restructuring Period, not and shall not cause or permit any other Restricted Subsidiary to issue, sell or transfer any Capital Stock of any Restricted Subsidiary except:

(1) to the Parent or a wholly-owned Restricted Subsidiary (excluding, for these purposes, any Special Share held by the Secretary of State); or

(2) Capital Stock issued by an entity prior to the time it becomes a Restricted Subsidiary or merges with a Restricted Subsidiary and not issued in contemplation of such entity’s becoming or merging into a Restricted Subsidiary,

provided that this limitation shall not apply in relation to (i) a sale of all of the Parent’s and the Restricted Subsidiaries’ Capital Stock in a Restricted Subsidiary otherwise in compliance with the covenants contained herein including Clause 14.4(P) or (ii) any issue of deferred shares by the Issuer pursuant to an exercise of an Eggborough Break Option or an enforcement of the Eggborough Security;

36

(T) Limitation on restrictions on distributions from Restricted Subsidiaries

during the Post-Restructuring Period, not and shall not cause or permit the Parent or any other Restricted Subsidiary to, create, directly or indirectly, or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:

(i) pay dividends or make any other distributions on its Capital Stock or any other interest or participation in or measured by its profits;

(ii) pay any Financial Indebtedness owed to the Parent or a Restricted Subsidiary;

(iii) make any Investment in any Obligor; or

(iv) transfer any of its property or assets to the Parent or any Restricted Subsidiary.

However this covenant shall not prohibit:

(1) any encumbrance or restriction pursuant to an agreement, in the form in effect at or entered into on the Issue Date (including, for the avoidance of doubt, the Contribution Agreement);

(2) any encumbrance or restriction under the Bonds, the Bond Guarantee, the Guarantee, the Trust Deed, this Deed or the Deed of Charge;

(3) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Financial Indebtedness incurred by such Restricted Subsidiary on or prior to the date on which such Subsidiary was acquired directly or indirectly by the Parent (other than Financial Indebtedness incurred as consideration for, or to provide all or any portion of the funds or credit support utilised to consummate, or incurred in contemplation of or in connection with, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Parent or the Issuer) and outstanding on such date;

(4) any encumbrance or restriction pursuant to an agreement effecting a refinancing of Financial Indebtedness incurred pursuant to an agreement referred to in sub-clauses (1), (2) or (3) above or this sub-clause (4) or contained in any amendment to an agreement referred to in sub-clauses (1), (2) or (3) above or this sub-clause (4); provided, however, that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such refinancing agreement or amendment are no more restrictive in any material respect than those encumbrances and restrictions with respect to such Restricted Subsidiary contained in such predecessor agreements;

(5) in the case of sub-clause (iv) above, any such encumbrance or restriction consisting of customary non-assignment provisions in leases governing leasehold interests to the extent such provisions restrict the transfer of the lease or the property leased thereunder;

37

(6) in the case of sub-clause (iv) above, restrictions contained in security agreements or mortgages securing Financial Indebtedness of a Restricted Subsidiary in the ordinary course of business to the extent such encumbrances or restrictions restrict the transfer of the property subject to such security agreements or mortgages;

(7) any encumbrance or restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of Capital Stock or assets in the ordinary course of business of such Restricted Subsidiary pending the closing of such sale or disposition;

(8) any customary encumbrances or restrictions created under any agreement with respect to Financial Indebtedness under the Seasonal Basket, the Collateral Basket and the Secured Basket;

(9) any encumbrance or restriction in connection with purchase money Financial Indebtedness for property acquired in the ordinary course of business that imposes restrictions on the transfer of the property so acquired; and

(10) any encumbrance or restriction that is as a result of applicable law or regulation.

For purposes of determining compliance with this covenant, in the event that a restriction meets the criteria of more than one of the categories of permitted restrictions described in sub-clauses (1) through (10) above, the Seller shall, in its sole discretion, classify such restriction in any manner that complies with this covenant, and such restriction will be treated as existing pursuant to the clauses designated by the Seller;

(U) Conduct of business

and shall ensure that the Issuer and the other Restricted Subsidiaries shall, limit their activities to:

(1) the supply, sale and purchase of products and services supporting the generation and sale of the output of the Group’s plants, or relating to renewable obligation certificates, emissions (in relation to the Eggborough Plant) or other similar or related permits, obligations or entitlements;

(2) the sale and purchase of electricity consolidation services;

(3) entry into Trading Arrangements;

(4) the supply of fuel for use in the business of the generation and sale of the output of the Group’s plants;

(5) nuclear and renewable generation, together with generation at the Eggborough Plant, in the UK;

(6) the supply, sale and purchase of electricity in the UK and through interconnectors with the UK and within Europe and Scandinavia;

38

(7) defuelling and decommissioning of plants owned or formerly owned by the Group;

(8) activities which are reasonably necessary in connection with or ancillary or incidental to any of the activities described in Clauses 14.4(U)(1) to 14.4(U)(7) (inclusive) above (including the provision of other defuelling and decommissioning operation and maintenance services and consultancy services related to any of the activities described above, provided that such provision shall account for no more than £60 million of turnover per annum); and

(9) making Investments or acquisitions that fall within the limitations set out in Clauses 14.4(U)(1) to 14.4(U)(8) (inclusive) above and otherwise are in compliance with this Deed, the Conditions and the Trust Deed;

(V) Maintenance of Target Reserves

during the Post-Restructuring Period, ensure that the Parent and its other Restricted Subsidiaries shall comply with all provisions of the Nuclear Liabilities Documentation (including, without limitation, Clauses 8 (Cash Reserves), 9 (Target Amount) and 10 (Forecast Expenditure Reserve) of the Contribution Agreement) in the form agreed on the Restructuring Date relating to the Target Reserves;

(W) Consolidation, merger, sale of assets

during the Post-Restructuring Period, not and shall not cause or permit the Parent, the Issuer or any Bond Guarantor to, in a single transaction or through a series of related transactions, consolidate with or merge with or into any other Person or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets to any Person or group of Persons if such transaction or series of transactions, in the aggregate, would result in a sale, assignment, conveyance, transfer, lease or disposition of all or substantially all of the properties and assets of it, the Parent, the Issuer or such Bond Guarantor to any other Person or group of Persons, unless at the time and after giving effect thereto:

(1) in the case of a merger, consolidation or sale of assets as described in the previous paragraph the Obligor, the Parent, the Issuer or such Bond Guarantor, as the case may be, is the continuing company resulting from such merger, consolidation or sale of assets, and the surviving entity is a corporation, limited liability company or similar corporate entity duly organised and validly existing under the laws of England and Wales or Scotland;

(2) any successor of an Obligor, the Parent, the Issuer or such Bond Guarantor resulting from such merger, consolidation or sale of assets expressly assumes, by entering into an Accession Deed in a form satisfactory to the Bank, all the obligations of such Obligor, the Parent, the Issuer or as applicable such Bond Guarantor under the Finance Documents to which it is a party and the Bond Guarantee, and such Finance Documents to which it is a party and the Bond Guarantee remain in full force and effect as so supplemented;

(3) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis (and treating any Financial

39

Indebtedness not previously an obligation of an Obligor, the Parent, the Issuer or any of the Bond Guarantors which becomes the obligation of such Obligor, the Parent, the Issuer or Bond Guarantor (or any successor to any of the foregoing) as a result of such transaction or series of transactions as having been incurred at the time of such transaction or transactions), no Default will have occurred and be continuing;

(4) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis (on the assumption that the transaction or series of transactions occurred on the first day of the most recent fiscal quarter prior to the consummation of such transaction or series of transactions for which financial statements are available with the appropriate adjustments with respect to the transaction or series of transactions being included in such pro forma calculation), the Parent or any successor to the Parent could incur £1.00 of additional Financial Indebtedness (other than Permitted Financial Indebtedness) under the provisions of Clause 14.4(L);

(5) immediately after giving effect to such transaction or series of transactions on a pro forma basis (and treating any Financial Indebtedness not previously an obligation of an Obligor, the Parent, the Issuer or any of the Bond Guarantors which becomes the obligation of such Obligor, the Parent, the Issuer or such Bond Guarantor as a result of such transaction or series of transactions as having been incurred at the time of such transaction or transactions), such Obligor, the Parent, the Issuer or such Bond Guarantor (or any successor to any of them) shall have a Consolidated Net Worth in an amount no less than the Consolidated Net Worth of such entity prior to such transaction or series of transactions; and

(6) at the time of the transaction or series of transactions such Obligor, the Parent, the Issuer, such Bond Guarantor or their respective successor, as applicable, will have delivered, or caused to be delivered, to the Bank, in form and substance reasonably satisfactory to the Bank, an Officer’s Certificate and an opinion of a firm of independent professional advisers acceptable to the Bank, each to the effect that all conditions provided for under this Deed, the Conditions and the Trust Deed relating to such transaction have been complied with.

For the avoidance of doubt, any sale of the assets which are the subject of the NLF Purchase Options, upon and pursuant to the exercise of such options in the form agreed as at the Restructuring Date, and any sale pursuant to this Deed shall be permitted without satisfying any of the foregoing conditions.

14.5 Limitation on Unrestricted Subsidiaries

The Seller may designate after the Issue Date any Subsidiary (other than the Issuer or a Bond Guarantor) as an Unrestricted Subsidiary (a “Designation”) only if:

(A) no Default shall have occurred and be continuing at the time of or after giving effect to such Designation;

(B) the Parent would be permitted to make an Investment (other than a Permitted Investment) at the time of Designation (assuming the effectiveness of such Designation) pursuant to Condition 8.2 (Limitation on Restricted Payments) in an

40

amount (the “Designation Amount”) equal to the greater of (1) the net book value of the Parent’s interest in such Subsidiary calculated in accordance with US GAAP, and (2) the Fair Market Value of the Parent’s interest in such Subsidiary as determined in good faith by the Parent’s board of directors;

(C) the Parent would be permitted to incur £1.00 of additional Financial Indebtedness (other than Permitted Financial Indebtedness) pursuant to Clause 14.4(K) at the time of such Designation (assuming the effectiveness of such Designation);

(D) such Unrestricted Subsidiary does not own any Capital Stock in any Restricted Subsidiary which is not simultaneously being designated an Unrestricted Subsidiary;

(E) such Unrestricted Subsidiary is not liable, directly or indirectly, with respect to any Financial Indebtedness other than Unrestricted Subsidiary Indebtedness, provided that an Unrestricted Subsidiary may provide a guarantee for the Bonds or accede as a Guarantor; and

(F) such Unrestricted Subsidiary is not a party to any agreement, contract, arrangement or understanding at such time with the Parent or any Restricted Subsidiary unless the terms of any such agreement, contract, arrangement or understanding are no less favourable to the Parent or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Parent or any Restricted Subsidiary or, in the event such condition is not satisfied, the value of such agreement, contract, arrangement or understanding to the Unrestricted Subsidiary shall be deemed a Restricted Payment.

In the event of any such Designation, the Parent shall be deemed to have made an Investment constituting a Restricted Payment pursuant to Condition 8.2 (Limitation on Restricted Payments) for all purposes of this Deed in the Designation Amount.

Save as provided in the CTA Documentation (in the form agreed as at the Restructuring Date) and save as otherwise provided herein, each Obligor shall not and shall not cause or permit the Parent or any Restricted Subsidiary at any time, to:

(1) provide credit support for, guarantee or subject any of its property or assets (other than the Capital Stock of any Unrestricted Subsidiary) to the satisfaction of, any Financial Indebtedness of any Unrestricted Subsidiary (including any undertaking, agreement or instrument evidencing such Financial Indebtedness) (other than Permitted Investments in Unrestricted Subsidiaries); or

(2) be directly or indirectly liable for any Financial Indebtedness of any Unrestricted Subsidiary provided that the foregoing shall not prohibit the existence of guarantees (not incurred in contemplation of that company becoming an Unrestricted Subsidiary) in existence at the time such Unrestricted Subsidiary was classified an Unrestricted Subsidiary.

For purposes of the foregoing, the Designation of a Subsidiary of the Parent as an Unrestricted Subsidiary shall be deemed to be the Designation of all of the Subsidiaries of such Subsidiary as Unrestricted Subsidiaries.

The Seller may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary (a “Revocation”) if:

(A) no Default shall have occurred and be continuing at the time of and after giving effect to such Revocation;

41

(B) all Security Interests and Financial Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Revocation would, if incurred at such time, have been permitted to be incurred for all purposes of this Deed; and

(C) such redesignated Subsidiary shall not have any Financial Indebtedness outstanding (other than Financial Indebtedness which would be Permitted Financial Indebtedness if deemed incurred on the date of Revocation, or which, after giving pro forma effect to the incurrence of any such Financial Indebtedness of such redesignated Subsidiary as if such Financial Indebtedness was incurred on the date of the Revocation, the Parent could incur £1.00 as additional Financial Indebtedness (other than as Permitted Financial Indebtedness) pursuant to Clause 14.4(L).

All Designations and Revocations must be evidenced by a resolution of the board of directors of the Parent delivered to the Bank certifying compliance with the foregoing provisions.

The Seller will be deemed to have designated the Eggborough Subsidiaries as Unrestricted Subsidiaries at the time the Trust Deed is entered into without complying with the foregoing test.

14.6 Overriding provision

Nothing in the Finance Documents shall prevent the Parent and its Restricted Subsidiaries from complying, and the Parent and the Restricted Subsidiaries shall comply, with any undertakings required by, and directions of, any of:

(A) H.M. Nuclear Installations Inspectorate;

(B) the Environment Agency;

(C) the Office for Civil Nuclear Security;

(D) the Health and Safety Executive;

(E) the Scottish Environment Protection Agency; and

(F) the Office of Gas and Electricity Markets or the Gas and Electricity Markets Authority,

or, in each case, any successor thereto, provided, in the case of 14.6(B), 14.6(C), 14.6(D), 14.6(E) and 14.6(F) above, that where such compliance, but for this provision, would have resulted in a breach of any material provision of the Finance Documents, two directors and the Chief Executive Officer of the Parent provide the Bank with an Officer’s Certificate stating that such Person had no reasonable alternative but to comply with such material undertakings or directions in (but for the operation of this clause) breach of such provision of the Finance Documents, and each such Person shall comply with any other mandatory provisions of law or regulation, notwithstanding any other provision hereof. Nothing in this overriding provision shall prevent a failure to pay any amount due under the Finance Documents from constituting an Event of Default in accordance with Clause 18.1(A).

42

Where, in the reasonable opinion of the Bank, any such compliance would have (but for the operation of this clause) resulted in a breach of any material provision of the Finance Documents, the Bank may, following not less than 5 Business Days’ prior notice to the Seller, cease to purchase any further Debts (or, as the case may be, the proceeds of any such Debts) hereunder if such compliance results in a Material Adverse Change.

14.7 Suspension of certain of the General Covenants

If on any date following the Issue Date:

(A) the Bonds are rated Investment Grade by the Relevant Rating Agencies; and

(B) no Default shall have occurred and be continuing,

then, beginning on that day and subject to the provisions of the final paragraph of this Clause 14.7, the covenants contained in the following Clauses will be suspended:

(1) Clause 14.4(L) (Limitation on Financial Indebtedness during the Post-Restructuring Period);

(2) Clause 14.4(M) (Limitation on transactions with Affiliates);

(3) Clause 14.4(P) (Limitation on sale of certain assets);

(4) Clause 14.4(Q) (Limitation on issuances of guarantees of Financial Indebtedness);

(5) Clause 14.4(R) (Limitation on sale and leaseback transactions);

(6) Clause 14.4(S) (Limitation on sale of Subsidiary equity interests);

(7) Clause 14.4(T) (Limitation on restrictions on distributions from Restricted Subsidiaries); and

(8) Clause 14.4(U) (Conduct of business);

and following such suspension, any and all provisions with respect to this Deed which refer to, are dependent upon the satisfaction and due performance of, or relate in any other way to, any of the covenants so suspended shall be interpreted to give effect to and construed in light of the suspension of such covenants.

Notwithstanding the foregoing, if the Bonds cease to be rated Investment Grade by the Relevant Rating Agencies, the foregoing covenants shall be reinstated as of and from the date of such rating decline without the requirement for any action. In connection with the foregoing, no Default will be deemed to occur solely by reason of any action taken by the Obligors, the Parent and the Restricted Subsidiaries while the covenants were suspended, and business activities commenced during the period when the application of such covenants was suspended may be continued, provided such activities are continued only in size and scope consistent with such activities on the date such suspension ceased, or are reduced in size and scope, and that such activities were not undertaken in contemplation of such rating decline.

43

15. Financial Covenant

15.1 From the date of this Deed until no amounts are or may be outstanding under this Deed each of the Obligors undertakes with the Bank at all times that the ratio of Consolidated EBITDA of the Group and the Unrestricted Subsidiaries to the Consolidated Interest Expense of the Parent and the Unrestricted Subsidiaries (excluding any charges in respect of revalorisation or the unwinding of any discount on liabilities other than Financial Indebtedness) shall not be less than:

Period	Ratio
12 month period ending on 30 September 2004	2:1
12 month period ending on 31 December 2004	2.5:1
and thereafter quarterly on a rolling 12 month basis for each 12 month period ending on 31 March, 30 June, 30 September and 31 December	3:1

15.2 For the purpose of Clause 15.1 the ratio shall be tested on the basis of a 12 month rolling period for the twelve month period ending on each relevant quarterly test date of 31 March, 30 June, 30 September and 31 December in each year.

15.3 The calculation of ratios and other amounts under this Clause 15 shall be made by the Seller with effect on each quarterly test date by reference to the latest consolidated financial statements, management accounts and other financial information of the Group and the Unrestricted Subsidiaries for the financial year, or other period in relation to which the calculation falls to be made. It is acknowledged and agreed that in relation to the inclusion of quarterly data from the period preceding the Restructuring Date in the calculation of the ratio during the Post-Restructuring Period, adjustments will be made so as to exclude charges specific to the Pre-Restructuring Period. In particular non-cash fuel expenses and the additional interest payable under the Standstill Arrangements will be excluded.

15.4 On and at any time after the occurrence of a breach of the Financial Covenant and for so long as it is continuing the Bank may:

(A) serve Notices of Assignment or Trust on all Debtors relating to any Relevant Debts or request that the Seller does the same on its behalf and/or the Bank may exercise its powers pursuant to Clause 26 in respect of a Relevant Debt; and/or

(B) request that the Seller shall, in relation to any future Debts being sold (or whose proceeds are being sold) to the Bank, ensure that a Notice of Assignment or Trust relating to the sale of such Debts (or their proceeds) is given to each relevant Debtor immediately after each sale of such Debts (or their proceeds); and/or

(C) elect that all Restricted Debts shall cease to be classified as Eligible Debts for the purposes of this Deed.

16. Bank covenants

Each of the Bank and the Seller agree to make such amendments to this Deed as are necessary in order to ensure that the provisions set out in Clauses 14.1(A), 14.4(F) to 14.4(W) (inclusive), 14.5, 14.6, 14.7 and Clauses 19.1(E) to 19.1(G) (inclusive) are on

44

substantially the same terms as the corresponding provisions set out in the Conditions of the Bonds as at the Issue Date (including any changes to defined terms for the purposes of those clauses) provided that all costs and expenses relating to any such amendments (including any costs and expenses of the Bank in relation thereto) shall be for the account of the Seller.

The Bank covenants that if the Seller enters into the Decommissioning Default Payment Debenture in substantially the form of the draft document made available to the Bank before the date of this Deed (or in such other form where the amendments made are not materially prejudicial to the Bank) and the Bank has prior to such entry been provided with documents mutatis mutandis the same as those referred to in Clause 4.2(R), but with the NLF and, where appropriate, the Secretary of State, amended as may be necessary to reflect any change in law after this Deed, then the Bank will agree that references in this Deed and the Deed of Charge to the DTI Security and the DTI shall include references to the Decommissioning Default Payment Debenture and the NLF.

17. Termination

Subject to Clauses 4, 18 and 19, the Facility is available for a period of three (3) years from the Start Date provided that the Seller may terminate this Deed at any time on a Business Day by giving not less than thirty (30) days’ prior written notice to the Bank. Following an election by the Seller to terminate this Deed and the expiry of such 30 day notice period:

(A) the Seller shall immediately repurchase all outstanding Relevant Debts (or their proceeds as the case may be) by paying to the Bank an amount equal to the sum of (i) Drawn Facility Amount; and (ii) all other amounts that remain outstanding to the Bank under the Finance Documents, in cleared funds into the Collection Account and upon receipt of such cleared funds the Bank will reassign and (as the case may be) release from trust such Relevant Debts or, as the case may be, the proceeds of such Relevant Debts to the Seller without recourse or warranty by the Bank other than a warranty that the Bank shall reassign and (as the case may be) release from trust the Relevant Debts or, as the case may be, the proceeds of such Relevant Debts in question free from any Security Interest created by the Bank; and

(B) provided all the amounts due under Clause 17(A) have been irrevocably been paid in full to the Bank, the Bank will:

(1) pay, on the same timeframe as provided in Clause 6.5, any proceeds standing to the credit of the Collection Account to the Seller, by payment to such account as the Seller may specify from time to time; and

(2) (within 5 Business Days of a request from the Seller) notify the Insurance Company that the Bank consents to it no longer being named loss payee under each of the Policies (to the extent any are in full force and effect); and

(C) the rights and obligations of each of the Obligors and the Bank under the Finance Documents accrued prior to termination and the obligations of the Bank under Clause 17(B), will continue in full force and effect.

45

18. Events of Default

18.1 Each of the events set out in this Clause 18.1 is an Event of Default:

(A) the Seller, or any Guarantor, does not pay on the due date any amount payable by it under any of the Finance Documents to which it is a party unless:

(1) its failure to pay is caused by administrative or technical error; and

(2) payment is made within 3 Business Days of the due date; or

(B) any Financial Indebtedness of an Obligor or any other member of the Group becomes (or becomes capable of being declared) payable before its stated maturity provided that no Event of Default will occur under this Clause 18.1(B) if the aggregate Sterling amount of Financial Indebtedness involved is less than £25m (index-linked by reference to Retail Prices Index changes after the Issue Date); or

(C) a receiver, administrative receiver, administrator or similar official is appointed in relation to any Obligor or a distress, execution or other process is enforced or an encumbrancer takes possession of the whole or a substantial part of the undertaking or assets of any such Obligor and, in any such case, the same is not paid out or discharged within 90 days; or

(D) any Obligor is declared insolvent, is unable (or admits inability) to pay its debts as they fall due (within the meaning of section 123(1) of the Insolvency Act 1986); or

(E) during the Post-Restructuring Period, unless otherwise agreed in writing by the Bank, any Obligor fails within 5 Business Days after being called upon to do so by the Bank, to provide a certificate signed by two of its directors certifying (without personal liability except in the event of fraud or wilful default) that it is not unable to pay its debts within the meaning of section 123(2) of the Insolvency Act 1986; or

(F) save where required pursuant to the Restructuring Documents and the Standstill Arrangements, any Obligor stops, suspends or threatens to stop payment of its debts generally or proposes or makes any agreement for the deferral or rescheduling of its debts generally or proposes or makes an arrangement under section 1 of the Insolvency Act 1986 or section 425 of the Companies Act 1985 with or for the benefit of its creditor generally, or any class of them; or

(G) an order is made by a competent court or an effective resolution is passed for the winding-up or administration of any Obligor, save for a merger, consolidation, reorganisation or reconstruction previously approved by the Bank or whereby its undertaking and assets are transferred to the Parent or another Obligor; or

(H) the Seller’s Electricity Supply Licence is revoked (save where a transferee of the Electricity Supply Licence becomes the Seller in accordance with Clause 22.1); or

(I) the Secretary of State having issued and not withdrawn a notification to the Parent prior to the Restructuring Date in the terms set out in Clause 3.1(c) of the Government Restructuring Agreement.

18.2 On and at any time after the occurrence of an Event of Default specified in Clause 18.1 above, and for so long as it is continuing, the Bank may, following notice in writing to the Seller that an Event of Default has occurred (a “Default Notice”):

(A) cease to purchase any further Debts (or, as the case may be, the proceeds of any such Debts) hereunder; and/or

46

(B) serve a Notice of Assignment or Trust on the relevant Debtor(s) relating to Relevant Debts or request that the Seller does the same on behalf of the Bank; and/or

(C) exercise its powers under Clause 26 in relation to any Relevant Debts, including, without limitation, in the case of Relevant Debts which relate to Unbilled Debts, issue Invoices to the relevant Debtor(s) in respect of those Unbilled Debts in the name of the Seller; and/or

(D) enforce the security created by the Deed of Charge in accordance with the terms thereof; and/or

(E) request that the Seller shall immediately repurchase all outstanding Relevant Debts (or their proceeds as the case may be) by paying to the Bank an amount equal to the sum of (i) the Drawn Facility Amount; and (ii) all other amounts that remain outstanding to the Bank under the Finance Documents, in cleared funds into the Collection Account and upon receipt of such cleared funds the Bank will reassign and (as the case may be) release from trust such Relevant Debts or, as the case may be, the proceeds of such Relevant Debts to the Seller without recourse or warranty by the Bank other than a warranty that the Bank shall reassign and (as the case may be) release from trust the Relevant Debts or, as the case may be, the proceeds of such Relevant Debts free from any Security Interest created by the Bank.

18.3 Following the service of a Default Notice by the Bank under Clause 18.2 above:

(A) provided all the amounts due under Clause 18.2(E) have been irrevocably been paid in full to the Bank, the Bank will pay any proceeds standing to the credit of the Collection Account to the Seller, by payment to such account as the Seller may specify from time to time; and

(B) the rights and obligations of each of the Obligors and the Bank under the Finance Documents accrued prior to termination and the obligations of the Bank under Clause 18.3(A), will continue in full force and effect.

19. Termination Events

19.1 Each of the events set out in this Clause is a Termination Event:

(A) an Obligor does not comply with any provision of any of Clauses 14.3(A), 14.3(B), 14.4(D), 14.4(K), 14.4(L), 14.4(O), 14.4(P), 14.4(S) or 14.4(W); or

(B) (other than in respect of any representation made or repeated pursuant to clauses 13.3 or Clause 5.3(D)(1) - 5.3(D)(4) (inclusive)) a representation made or repeated in any of the Finance Documents or in any document delivered by or on behalf of an Obligor under any of those documents is incorrect in any material respect when made or deemed to be made or repeated unless the underlying circumstances (if in the Bank’s reasonable opinion are capable of remedy) are remedied within 15 Business Days of such representation being made or deemed repeated; or

(C) the Seller fails to deliver any Monthly Settlement Report or Weekly Report on the due date and the failure to deliver continues unremedied for 10 Business Days from the due date for delivery during the first six months from the date the Bank provides confirmation to the Seller pursuant to Clause 4.2 in respect of satisfaction of conditions precedent and 5 Business Days thereafter; or

47

(D) an Obligor does not comply with any other provision of the Finance Documents to which it is a party (other than those provisions referred to in Clauses 15.1, 18.1(A), 19.1(A) or 19.1(C) of this Deed) and the failure to comply, if capable of remedy, continues unremedied for 10 Business Days from the earlier of (i) the date on which the relevant Obligor becomes aware of such failure to comply; and (ii) date of notice by the Bank to the relevant Obligor requiring remedy; or

(E) any of the following occurs:

(1) any Financial Indebtedness of an Obligor or any other member of the Group becomes (or becomes capable of being declared) payable before its stated maturity or is not paid when due or, as the case may be, within any originally applicable grace period;

(2) any Obligor or any other member of the Group fails to pay on the due date or, as the case may be, within any applicable grace period, amounts falling due under a Trading Arrangement;

(3) any Obligor or any other member of the Group defaults under a Trading Arrangement (other than a default falling under Clause 19.1(E)(2) above), and such default leads to a liquidation, acceleration or termination by the counterparty of obligations of that Obligor or other member of the Group thereunder; or

(4) a Security Interest given by any Obligor or any other member of the Group other than in respect of a Trading Arrangement becomes enforceable by reason of a default in relation thereto;

where the aggregate value of the claim or claims so arising under Clauses 19.1(E)(1), 19.1(E)(2) and 19.1(E)(4) above exceeds £25 million (index-linked by reference to Retail Prices Index changes after the Issue Date) or the aggregate net value of the claim or claims so arising under Clause 19.1(E)(3) above exceeds £35 million (index-linked by reference to Retail Prices Index changes after the Issue Date); or

(F) any Obligor or any other member of the Group ceases to carry on the whole or substantially the whole of its business, save (i) for the purposes of a merger, consolidation, reorganisation or reconstruction (x) not due to insolvency of that Obligor or other member of the Group and where all or substantially all of its assets are transferred to the Parent or another Obligor or (y) the terms of which have previously been approved in writing by the Bank, or (ii) as a consequence of an exercise of the NLF Purchase Options, provided that if the Parent or any other member of the Group shall cease to hold or shall transfer any of the Licences held by it at the date of this Deed (other than (X) where such Licence is revoked, terminated or surrendered or lapses in the circumstances envisaged by paragraphs (A)(i), (ii), (iii) or (iv) of the definition of Restructuring Event and such revocation, termination, surrender or lapse does not constitute a Restructuring Event pursuant to paragraph (A) of such definition by virtue of proviso (1) thereto, or (Y) where such Licence lapses in the circumstances envisaged by the bracketed exception to paragraph (A)(iii) of such definition of Restructuring Event) it shall be deemed to have ceased to carry on the whole or substantially the whole of its business (and

48

neither of exceptions (i) and (ii) above shall apply) unless the transferee (a) is a wholly owned Subsidiary of the Parent and (b) (unless it is an Obligor) accedes as an Obligor and a Guarantor in accordance with Clause 22.2(B); or

(G) any judgment or decree for the payment of money in excess of £25 million or its foreign currency equivalent (as determined by the Bank in its sole discretion as at the date of the judgment or decree) is entered against any Obligor, remains outstanding for a period of 60 consecutive days following such judgment and is not discharged, waived or stayed; or

(H) at any time Expected Dilutions is equal to or greater than 2.63%; or

(I) at any time the Loss Reserve Ratio is equal to or greater than 3.4%; or

(J) at any time the Delinquency Ratio is equal to or greater than 40%; or

(K) any of the Obligors (other than the Parent) are not or cease to be a Subsidiary of the Parent and as a result the gross assets, turnover and EBIT of the Obligors (excluding those that are not or have ceased to be a Subsidiary of the Parent) (taken as a whole) at any time fails to constitute in aggregate at least 90% of the consolidated gross assets, turnover and EBIT, respectively, of the Parent and its Restricted Subsidiaries on a rolling four quarter basis, all calculated in accordance with Clause 14.4(F); or

(L) it is or becomes unlawful for an Obligor to perform any of its obligations under the Finance Documents to which it is a party and as a result the gross assets, turnover and EBIT of the Obligors (excluding those in respect of which it has become unlawful to perform any of their obligations under the Finance Documents) (taken as a whole) at any time fails to constitute in aggregate at least 90% of the consolidated gross assets, turnover and EBIT, respectively, of the Parent and its Restricted Subsidiaries on a rolling four quarter basis, all calculated in accordance with Clause 14.4(F); or

(M) an Obligor repudiates any of the Finance Documents to which it is a party or evidences an intention to repudiate any of the Finance Documents to which it is a party or any of the Finance Documents become invalid, void or unenforceable; or

(N) the Restructuring Date falls after 31 January 2005; or

(O) the Guarantors fail to accede as Obligors hereunder and Guarantors under the Guarantee in accordance with Clause 22.2; or

(P) during the Post-Restructuring Period any Obligor is unable (or admits inability) to pay its debts as they fall due within the meaning of section 123(2) of the Insolvency Act 1986 but has not yet failed to provide a certificate as provided in Clause 18.1(E) (provided that if such a certificate is provided the Termination Event shall no longer continue); or

(Q) there occurs a Material Adverse Change.

19.2 On and at any time after the occurrence of a Termination Event specified in Clause 19.1 above, and for so long as it is continuing, the Bank may following notice in writing to the Seller that a Termination Event has occurred:

(A) cease to purchase any further Debts (or, as the case may be, the proceeds of any such Debts) hereunder for such period of time as it may, in its sole discretion, determine; and/or

49

(B) serve a Notice of Assignment or Trust on the relevant Debtor(s) relating to Relevant Debts or request that the Seller does the same on behalf of the Bank; and/or

(C) exercise its powers under Clause 26 in relation to any Relevant Debts, including, without limitation, in the case of Relevant Debts which relate to Unbilled Debts, issue Invoices to the relevant Debtor(s) in respect of those Unbilled Debts in the name of the Seller.

19.3 On and at any time after the occurrence of a representation made on or repeated pursuant to Clause 13.3 or 5.3(D)(1)-5.3(D)(4) (inclusive) is incorrect in any material respect when made or deemed to be made or repeated unless the underlying circumstances (if in the Bank’s reasonable opinion are capable of remedy) are remedied within 15 Business Days of such representation being made or deemed repeated then the Bank will have the right, exercisable at the option of the Bank, to request that the Seller repurchase any Debts to which the Bank determines (in its sole discretion) such misrepresentation relates. Any such repurchases will be effected pursuant to Clause 9.1(B).

20. Right to Refinance

If the Seller seeks to refinance this Facility prior to Termination Date (a “Refinancing”), the Seller shall be permitted to offer such Refinancing to another third party bank or financial institution (a “Third Party”), provided that if:

(A) the Bank offers to provide the Refinancing on equal or more competitive terms than the Third Party (if any), then the Seller shall transact that Refinancing with the Bank; and

(B) the Third Party offers more competitive terms for any such Refinancing than the terms offered by the Bank (the “Third Party Terms”), the Seller shall disclose such Third Party Terms to the Bank (provided that to do so will not cause it to be in breach of any confidentiality obligations it owes to that Third Party) and if the Bank makes a further offer to provide the Refinancing on equal or more competitive terms than the Third Party Terms, then the Seller shall transact the Refinancing with the Bank.

21. Increased Costs

21.1 The Seller shall, on demand by the Bank, pay to the Bank the amount of any increased cost or reduction in return (whether under this Deed or on its capital) incurred by it in respect of performing, maintaining or funding its obligations under this Deed as a result of:

(A) the introduction of, or change in, or change in the interpretation or application of, any law or regulation; or

(B) compliance with any regulation made after the date of this Deed,

50

including any law or regulation relating to taxation, change in currency of a country, reserve asset, special deposit, cash ratio, liquidity or capital adequacy requirements or any other form of banking or monetary control provided that this Clause 21 shall not require the Seller to pay to the Bank the amount of any increased cost or reduction in return attributable to:

(A) any tax assessed on the Bank under the law of the jurisdiction in which the Bank is incorporated or, if different, the jurisdiction (or jurisdictions) in which the Bank is treated as resident for tax purposes if that tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by the Bank; or

(B) the wilful breach by the Bank of any law or regulation.

21.2 The Bank shall, in consultation with the Seller, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, Clause 21.1, including (but not limited to) transferring its rights and obligations under the Finance Documents to another facility office, provided that this Clause 21.2 does not in any way limit the obligations of any Obligor under the Finance Documents.

21.3 The Seller shall indemnify the Bank for all costs and expenses reasonably incurred by the Bank as a result of steps properly taken by it under Clause 21.2 in consultation with the Seller.

21.4 The Bank is not obliged to take any steps under Clause 21.2 if, in the opinion of the Bank (acting reasonably), to do so might be prejudicial to it.

22. Changes to the Obligors

22.1 No Obligor may assign or transfer any of its rights and obligations under the Finance Documents provided that the Seller shall be entitled to transfer all (but not part) of its rights and obligations under the Finance Documents to which it is a party to any transferee of the Electricity Supply Licence provided that:

(A) the Parties agree that such a transfer shall only take effect following receipt by the Seller of written confirmation from the Bank that it has received evidence satisfactory to it that such a transfer will not, in the Bank’s reasonable opinion:

(1) adversely affect any Relevant Debts previously purchased by the Bank; and

(2) adversely affect any of the Bank’s existing rights under the Finance Documents; and

(B) all costs and expenses of such assignment or transfer (including any costs and expenses of the Bank in relation thereto) shall be for the account of the Seller.

22.2 The Seller shall procure that, on each Relevant Accession Date, each Restricted Subsidiary (other than any Unrestricted Subsidiary or BETS) that is a Material Subsidiary shall:

(A) where the Relevant Accession Date for that Material Subsidiary is the Initial Accession Date:

(1) execute the Guarantee and deliver such duly executed Guarantee to the Bank; and

51

(2) accede to this Deed as an Obligor by delivering to the Bank a duly completed and executed Accession Deed together with all of the documents and other evidence listed in schedule 2 of the Accession Deed in relation to each such Guarantor, in each case in a form and substance satisfactory to the Bank; and

(B) where the Relevant Accession Date for that Material Subsidiary falls after the Initial Accession Date accede to this Deed as an Obligor and to the Guarantee as a Guarantor by delivering to the Bank a duly completed and executed Accession Deed together with all of the documents and other evidence listed in schedule 2 of the Accession Deed in relation to that Material Subsidiary, in each case in a form and substance satisfactory to the Bank.

23. Transfers and sub-participations by the Bank

23.1 Subject to Clauses 23.3 and 24, the Bank may freely assign, transfer or otherwise deal in the whole or any part of its rights, benefits and/or obligations under the Finance Documents to any bank, financial institution, trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets.

23.2 Subject to Clause 24, the Bank may also enter into sub-participations (risk or funded) with any bank or other financial institution. The Seller and each other Obligor agrees to provide such assistance as the Bank may reasonably require in relation to such sub-participations for a period of 180 days from the date of this Deed (provided that any such assistance shall not extend to the provision of Confidential Information by the Seller to the extent it has withheld its consent in accordance with Clause 23.3(A)).

23.3 Clauses 23.1 and 23.2 are subject to the conditions that:

(A) subject to Clause 23.3(B), the consent of the Seller is required for an assignment, assignation, transfer or sub-participation (risk or funded) by the Bank under this Clause 23.1, unless the assignment, assignation, transfer or sub-participation (risk or funded) is to an Affiliate of the Bank (not to be unreasonably withheld or delayed in the case of any sub-participation (risk or funded)); and

(B) the consent of the Seller to an assignment, assignation, transfer or sub-participation (risk or funded) under this Clause 23.1, or to the disclosure of any Confidential Information in accordance with Clause 24 to any potential transferee, assignee or sub-participant of the Bank’s rights, benefits and/or obligations under the Finance Documents, is not required following the occurrence of an Event of Default or a Termination Event referred to in Clauses 19.1(A), 19.1(E), 19.1(F), 19.1(G) or 19.1(K) to 19.1(Q) (inclusive) which in any such case is continuing.

24. Confidentiality

24.1 Where a Party (the “Disclosing Party”) supplies Confidential Information to another Party (the “Recipient”) each of the Parties hereto undertakes and agrees as follows:

(A) to hold any Confidential Information of which it is the Recipient in confidence and not to disclose or permit it to be made available to any person, firm or company (except to Permitted Disclosees or as permitted under Clause 23.3(B)), without the prior written consent of the Disclosing Party;

52

(B) only to use the Confidential Information for the purposes of the transactions contemplated by this Deed;

(C) without prejudice to Clauses 24.1(A) and 24.1(B) above, to ensure proper and secure storage of all Confidential Information and any copies thereof to at least the same standard as the Recipient keeps its own Confidential Information.

(D) to ensure that each person to whom it discloses Confidential Information (including each person, firm or company to which Confidential Information is disclosed under Clause 24.1(A)) is made fully aware in advance of that Party’s obligations under this Deed and agrees to be bound by terms identical in all material respects to those contained in this Clause 24;

(E) upon receipt of written demand from the Disclosing Party, the Recipient shall return the Confidential Information and any copies of it, or confirm to the Disclosing Party in writing that, save as required by law or regulation, it has been destroyed provided that no Party shall be required to return or destroy:

(1) reports, notes or other material prepared by it, or other Permitted Disclosees, or on such Party’s behalf which incorporate Confidential Information (“Secondary Information”), or

(2) any Confidential Information that is stored in any automatic electronic archiving or back-up system (“Electronic Information”) where it is not reasonably practicable to delete the same,

provided that the Recipient shall maintain the confidentiality of such Secondary Information or Electronic Information in accordance with the terms of this Clause 24; and

(F) not to make use of any other Party’s name or/any information acquired through its dealings with such other Party for publicity or marketing purposes without the prior written consent of that other Party.

24.2 Nothing in Clause 24.1 above shall apply to any information or Confidential Information:

(A) which at the time of its disclosure is in the public domain;

(B) which after disclosure comes into the public domain for any reason except the Recipient’s failure, or failure on the part of the Recipient’s Permitted Disclosees, to comply with the terms of this Deed;

(C) which is expressly disclosed by a Disclosing Party, its directors, employees or advisers on a non-confidential basis;

(D) which was lawfully in the Recipient’s possession prior to such disclosure;

(E) which is subsequently received by the Recipient from a third party without obligations of confidentiality (and, for avoidance of any doubt, the Recipient shall not be required to enquire whether there is a duty of confidentiality); or

(F) which a Recipient or a Permitted Disclosee of such Recipient is required to disclose, retain or maintain by law or any regulatory or government authority.

53

24.3 All Confidential Information shall remain the property of the Disclosing Party and its disclosure shall not confer on the Recipient any rights, including intellectual property rights, over the Confidential Information whatsoever beyond those contained in this Deed.

24.4 Without prejudice to any other rights or remedies of the Disclosing Party, the Recipient acknowledges and agrees that damages may not be an adequate remedy for any breach by it of the provisions of this Deed and that the Disclosing Party shall be entitled to seek the remedies of injunction, specific performance and other equitable relief for any threatened or actual breach of any such provision by the Recipient or its Permitted Disclosees.

24.5 Nothing contained in this Clause 24 shall be construed as prohibiting the Disclosing Party from pursuing any other remedies available by it, either at law or in equity, for any such threatened or actual breach of this letter including specific performance, recovery of damages or otherwise.

24.6 The Recipient confirms that, where applicable, it is registered under the Data Protection Act 1998 (as may be amended from time to time) (“the Data Protection Act”) and hereby undertakes to comply with all relevant provisions of the Data Protection Act. The Recipient warrants that it has the appropriate technical and organisational measures in place against unauthorised or unlawful processing of personal data and against accidental loss or destruction of, or damage to, personal data held or processed by them.

24.7 The obligations of each Party and its Permitted Disclosees under this Clause 24 shall be continuing and shall survive the termination of this Deed for a period of 3 years.

25. Waivers and Remedies Cumulative

The rights of the Bank under the Finance Documents may be exercised as often as necessary, are cumulative and not exclusive of its rights under the general law and may be waived only in writing and specifically. Delay in exercising or non-exercise of any such right is not a waiver of that right.

26. Power of attorney

The Seller irrevocably and by way of security for the performance of its obligations under the Finance Documents, appoints the Bank to be its attorney and in its name, on its behalf and as its act and deed to execute, deliver and perfect all documents (including any instruments of transfer) and do all things that the Bank may reasonably consider to be requisite for (a) carrying out any obligation imposed on the Seller under the Finance Documents, any Contract or any Policy which the Seller has not performed or (b) exercising any of the rights conferred on the Seller by the Finance Documents, any Contract, any Policy or by law, which in either case relate to the collection, preservation and/or realisation of the Relevant Debts (including the issuance of Invoices and the exercise of any other right of a legal owner of the Relevant Debts), provided that the Bank shall only be entitled to exercise the powers conferred upon it pursuant to this Clause 26 in the circumstances and on the terms set out in Clauses 8, 18 and 19. The Seller shall ratify and confirm all things done or purported to be done and all documents executed by the Bank in the exercise of that power of attorney. This power of attorney shall operate as a general power of attorney under section 10 of the Powers of Attorney Act 1971.

27. Miscellaneous

27.1 The Seller shall pay to the Bank on demand:

(A) any stamp duties or registration, documentation or similar taxes or duties in connection with the Finance Documents;

54

(B) an amount sufficient to indemnify the Bank against losses attributable to:

(1) any breach by an Obligor of any of the Finance Documents to which it is a party; and

(2) any claim in respect of the supply of electricity to which any Relevant Debt relates; and

(C) all reasonable costs and expenses incurred by the Bank in connection with:

(1) the preparation, negotiation, printing and execution of the Finance Documents (in the case of legal fees in relation thereto, subject to a maximum amount of £300,000 plus VAT and disbursements) all costs and expenses relating to the installation of administrative software by a third party receivables administration company (subject to a cap of £25,000 plus VAT) and all costs and expenses of the Accountants relating to the preparation of the Accountant’s due diligence report (subject to a cap of £40,000 plus VAT);

(2) any actual or proposed amendment, supplement, waiver, consent, reassignment, release or discharge, transfer of obligations of an Obligor pursuant to Clause 22 or question raised in relation to the Finance Documents; and

(3) the realisation of any Relevant Debt or any claim against an Insurer under a Policy,

in each case (other than in respect of (1) above) including, without limitation, any reasonable legal costs and out-of-pocket expenses and any VAT charged or chargeable in respect thereof;

(D) all costs and expenses incurred by the Bank in connection with the preservation, exercise, enforcement or perfection of any of the rights, powers and remedies conferred on the Bank by any of the Finance Documents including, without limitation, any legal costs and out-of-pocket expenses and any VAT charged or chargeable in respect thereof; and

(E) losses flowing from any judgment or claim being payable in a different currency from that agreed under this Deed.

27.2 All interest payable under this Deed shall accrue from day to day and be calculated on the basis of the actual number of days elapsed and a year of 365 days (or as market practice otherwise dictates).

27.3 If a change in any currency of a country occurs (including where there is more than one currency or currency unit recognised at the same time as the lawful currency of a country), this Deed will be amended to the extent the Bank (acting reasonably and after consultation with the Parent) determines is necessary to reflect the change.

27.4 Each Obligor must take whatever action may be reasonably necessary to implement the terms of the Finance Documents including the execution of any further documents and the giving of any notice, order or direction and the making of any registration which in each case may be required.

55

27.5 A person who is not a party to this Deed may not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999 and the consent of any third party is not required for any variation (including any release or compromise of any liability) or termination of this Deed.

27.6 Electronic communication

(A) Any communication to be made between the Bank and the Seller under or in connection with the Finance Documents may be made by electronic mail or other electronic means, if the Bank and the Seller:

(1) agree that, unless and until notified to the contrary, this is to be an accepted form of communication;

(2) notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and

(3) notify each other of any change to their address or any other such information supplied by them.

(B) Any electronic communication made between the Bank and the Seller will be effective only when actually received in readable form and in the case of any electronic communication made by the Seller to the Bank only if it is addressed in such a manner as the Bank shall specify for this purpose.

28. Notices

28.1 All notices or other communications under this Deed shall be given in writing and may be made by facsimile. Any such notice will be deemed to be given as follows:

(A) if by letter, when delivered personally or on actual receipt; and

(B) if by facsimile, when received in legible form.

However, a notice given in accordance with the above but received on a non-Business Day or after business hours in the place of receipt will only be deemed to be given on the next Business Day in that place.

28.2 The address and facsimile number of each Party for all notices under this Deed are those notified by that Party for this purpose to the other Party prior to the date of this Deed or any other notified to the other Party by not less than 5 Business Days’ notice.

29. Governing Law and Jurisdiction

This Deed is governed by English law (save that those terms of this Deed which are specific to Scottish law shall be construed in accordance with Scottish law). Each Party irrevocably agrees that the English courts shall have non-exclusive jurisdiction in relation to any legal action or proceedings arising out of or in connection with this Deed (“Proceedings”) and waives any objection to Proceedings in such courts on the grounds of venue or on the grounds that Proceedings have been brought in an inappropriate forum.

56

30. Deed

Each Party intends this document to be a deed and executes and delivers it as its deed.

IN WITNESS whereof this Deed has been executed and delivered as a deed by the Seller and the Bank on the date stated at the beginning of this Deed.

EXECUTED and DELIVERED as a DEED
by BRITISH ENERGY GENERATION		)
LIMITED		)
acting by		)
Salvatore Gatto
Director
Robert Armour
Director/Secretary
Address:	British Energy Generation Limited
	3 Redwood Crescent
	Peel Park
	East Kilbride
	G74 5PR
Tel:	+44(0) 13552 62000
Fax:	+44(0) 13552 62567
Attention:	The Group Treasurer
EXECUTED and DELIVERED as a DEED by		)
MICHAEL RAYNES		)
duly authorised attorney		)	M J Raynes
for and on behalf of:		)
BARCLAYS BANK PLC		)
in the presence of:

Witness’ signature:

Witness name: I.O. Stuttard

Witness’ address: 28 Coppins Close, Berkhamstead, Herts HP4 3NZ

Witness’ occupation: Bank Official

Address:

c/o Barclays Capital

Structured Trade & Export Finance

5 The North Colonnade

Canary Wharf

London E14 4BB

Tel: +44(0)20 7773 1815

Fax: +44(0)20 7773 1831

Attention: Ian Stuttard

57

SCHEDULE 1 : [INTENTIONALLY LEFT BLANK]

58

SCHEDULE 2 : PURCHASE PRICE CALCULATION

PART 1: INITIAL PURCHASE PRICE FOR DEBTS OR PROCEEDS OF RESTRICTED DEBTS

Total Relevant Debts:	Aggregate Sterling amount of all outstanding Relevant Debts (without double counting where billed Debts represent amounts which have already been sold as Unbilled Debts or will be on the same day) excluding for these purposes any element of such Debts that are, on such Utilisation Date, Unbilled Debts which relates to amounts payable by Debtors to the Seller in respect of any CCL or VAT.
plus
Reconciliations:	Aggregate of all negative amounts attributable to Unbilled Debts (being, for the avoidance of doubt, a negative number).
minus
Unallocated Credit Notes:	Aggregate amount of all credit notes, other than those issued in relation to specific Invoices or those outstanding for 180 days or more, excluding any amounts by which, in respect of each Debtor, such credit notes exceed the amount of that portion of Total Relevant Debts which relates to such Debtor.
minus
Cancellations of Invoices of Eligible Debts:	Aggregate amount of all credit notes cancelling Invoices in respect of Eligible Debts.
minus
non-Eligible Debts:	Aggregate Sterling amount of the Total Relevant Debts which are not Eligible Debts as at that Utilisation Date.
minus
Concentration Limit Adjustment for Total Relevant Debts:	Aggregate of all the amounts by which, in respect of each Debtor, the Sterling amount of that portion of the Total Relevant Debts which relates to such Debtor exceeds the Concentration Limit for such Debtor.
Minus
General Concentration Limit Adjustment for Total Relevant Debts	Aggregate amount calculated pursuant to the definition of “General Concentration Limit Adjustment”.
Equals
Total Fundable Debts:	Aggregate amount of Total Relevant Debts which are eligible for funding on any Utilisation Date.

59

minus

Loss Reserve Amount:

Loss Reserve Percentage x Total Fundable Debts where: “Loss Reserve Percentage” means on any Monthly Reporting Date or any Utilisation Date, the fraction expressed as a percentage equal to the greater of (i) the Concentration Floor and (ii) the fraction expressed as a percentage calculated in accordance with the following formula: LHR x LR x SF where: LHR = Loss Horizon Ratio as at the most recent Monthly Reporting Date; LR = Loss Reserve Ratio as at the most recent Monthly Reporting Date; and SF = stress factor multiple of 3.5, or 2.5 once the Bank confirms that it has received information (in form and substance satisfactory to it) in respect of Debts, provided for the twelve (12) Monthly Reporting Periods following the date of this Deed. “Loss Horizon Ratio” means, on any Monthly Reporting Date, the ratio expressed as a percentage determined by dividing (i) the aggregate Sterling amount of all Sales generated during the Loss Horizon ending on the last date of the most recently ended Monthly Reporting Period by (ii) the aggregate outstanding Sterling amount of all Eligible Debts as on the last date of the most recently ended Monthly Reporting Period. “Loss Reserve Ratio” means, on any Monthly Reporting Date, the highest three calendar month rolling average of the Default Ratios occurring during the twelve (12) most recent Monthly Reporting Periods immediately preceding such Monthly Reporting Date provided that if on any Monthly Reporting Date there are fewer than twelve (12) preceding Monthly Reporting Periods, the Loss Reserve Ratio shall be calculated on the basis of Default Ratios occurring during such Monthly Reporting Periods as have occurred and Historical Receivables Information for the remaining periods. “Default Ratio” means, on any Monthly Reporting Date, the ratio expressed as a percentage determined by dividing (i) the aggregate outstanding Sterling amount of all Debts that have become Defaulted Debts during the immediately preceding Monthly Reporting Period by (ii) the aggregate Sterling amount

60

	of all Sales generated during the first Monthly Reporting Period of the three (3) most recent Monthly Reporting Periods immediately preceding such Monthly Reporting Date ending on the last date of the most recently ended Monthly Reporting Period.
	“Historical Receivables Information” means historical numerical information relating to Debts generated by the Seller provided to the Bank in connection with the Facility, relating to periods prior to the date of the initial Utilisation, which will be used to undertake any of the financial calculations contemplated in this Deed when such calculations cannot be undertaken using numerical information relating to periods following the date of this Deed.
minus
Dilution Reserve Amount:	Dilution Reserve Percentage x Total Fundable Debts where: “Dilution Reserve Percentage” means, on any Monthly Reporting Date or any Utilisation Date, the fraction expressed as a percentage calculated in accordance with the following formula: DRP = {(SF x ED)+(DS-ED) x DS/ED} x DHR where: SF = stress factor multiple of 2.5; ED = Expected Dilutions as at the most recent Monthly Reporting Date; DS = Dilution Spike as at the most recent Monthly Reporting Date; and DHR = Dilution Horizon Ratio as at the most recent Monthly Reporting Date. “Dilution Horizon Ratio” means, on any Monthly Reporting Date, the ratio expressed as a percentage determined by dividing (i) the aggregate Sterling amount of all Sales generated during the Dilution Horizon ending on the last date of the most recently ended Monthly Reporting Period by (ii) the aggregate outstanding Sterling amount of all Eligible Debts as on the last date of the most recently ended Monthly Reporting Period. “Dilution Ratio” means, on any Monthly Reporting Date, the ratio expressed as a percentage determined by dividing (i) the aggregate Sterling amount of all Dilutions suffered in respect of Debts (excluding, for the avoidance of doubt, Unbilled Debts)

61

	during the immediately preceding Monthly Reporting Period by (ii) the aggregate Sterling amount of all Sales generated during the Monthly Reporting Period immediately preceding the most recently ended Monthly Reporting Period. “Dilution Spike” means, on any Monthly Reporting Date, the highest Dilution Ratio occurring during the twelve (12) most recent Monthly Reporting Periods immediately preceding such Monthly Reporting Date provided that if on any Monthly Reporting Date there are fewer than twelve (12) preceding Monthly Reporting Periods, the Dilution Spike shall be calculated on the basis of Dilution Ratios occurring during such Monthly Reporting Periods as have occurred and Historical Receivables Information for the remaining periods. “Expected Dilutions” means, at any Monthly Reporting Date, the average of the Dilution Ratios for the twelve (12) most recent Monthly Reporting Periods immediately preceding such Monthly Reporting Date provided that if on any Monthly Reporting Date there are fewer than twelve (12) preceding Monthly Reporting Periods, the Expected Dilutions shall be calculated on the basis of Dilution Ratios occurring during such Monthly Reporting Periods as have occurred and Historical Receivables Information for the remaining periods.
minus
Set-Off Reserve Amount:	£7.5 million during the Pre-Restructuring Period and £15 million during the Post-Restructuring Period.
equals
Maximum Gross Funding:	Provided that this amount is subject to a maximum upper limit of £60,000,000.
plus
Deferred Purchase Price:	Calculated in accordance with part 2 of schedule 2 immediately prior to the Seller delivering a Utilisation Notice on the relevant Utilisation Date. Only added if such calculation gives a negative number.
equals
Maximum Available Initial Purchase Price

62

PART 2: DEFERRED PURCHASE PRICE FOR DEBTS OR PROCEEDS OF RESTRICTED DEBTS

Proceeds of Debts Received:	Aggregate Sterling amount of all proceeds received from Debtors and/or the Seller in respect of all Debts standing in cleared funds to the credit of the Collection Account.
minus
Drawn Facility Amount:	Aggregate amount of Requested Purchase Prices for Relevant Debts in respect of which proceeds of Debts have not been previously applied in accordance with this Deed.
minus
Fees, costs and expenses:	Aggregate amount of any fees, costs and expenses payable by the Seller or any other Obligor under the Finance Documents which have fallen due and which remain unpaid for 5 or more Business Days from the due date.
minus
Facility Charge:	Amounts due in respect of the Facility Charge and which remain unpaid for 5 or more Business Days from the due date.
equals
Deferred Purchase Price	For the avoidance of doubt, if this number is negative or zero no amount shall be payable by the Bank to the Seller under Clauses 6.5 and/or 7.1(E) of this Deed.

63

SCHEDULE 3: DEFINITIONS

In this Deed:

“Accession Deed” means a deed of accession substantially in the form set out in schedule 6.

“Accountants” means PricewaterhouseCoopers.

“Acquired Indebtedness” means Financial Indebtedness of a Person:

(A) existing at the time such Person becomes a Restricted Subsidiary; or

(B) assumed in connection with the acquisition of assets from such Person,

in each case, other than Financial Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or such acquisition, as the case may be. Acquired Indebtedness shall be deemed to be incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Restricted Subsidiary, as the case may be.

“Additional Utilisation Notice” means a notice substantially in the form of part 2 of schedule 5.

“Affiliate” means, with respect to any specified Person: (i) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person; (ii) any other Person that owns, directly or indirectly, 5% or more of any class or series of such specified Person’s (or any of such Person’s direct or indirect parent’s) Capital Stock or any officer or director of any such specified Person or other Person or, with respect to any natural Person, any Person having a relationship with such Person by blood, marriage or adoption not more remote than first cousin; or (iii) any other Person 5% or more of the Voting Shares of which is beneficially owned or held directly or indirectly by such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Asset Break Option” has the meaning given to “Break Option” in the Asset Option Agreement.

“Asset Enforcement Option” has the meaning given to “Enforcement Option” in the Asset Option Agreement.

“Asset Options” means the Asset Break Option and the Asset Enforcement Option.

“Asset Option Agreement” means the asset option agreement to be entered into between EPL, BEPET and Barclays Bank PLC on or about the Restructuring Date.

“Asset Sale” means any sale, issuance, conveyance, transfer, lease or other disposition (including, without limitation, by way of merger, consolidation or sale and leaseback transaction), directly or indirectly, in one or a series of related transactions, of:

(A) any Capital Stock of any Restricted Subsidiary;

(B) all or substantially all of the properties and assets of any division or line of business of the Parent, the Issuer or any Restricted Subsidiary; or

64

(C) any other properties or assets of the Parent, the Issuer or any Restricted Subsidiary other than in the ordinary course of business.

For the purposes of this definition, the term “Asset Sale” shall not include any transfer of properties and assets:

(1) that is governed by the provisions described under Clause 14.4(W);

(2) that is by the Parent to any wholly owned Restricted Subsidiary, or by any Restricted Subsidiary to the Parent or any other wholly owned Restricted Subsidiary in accordance with the Conditions;

(3) that would be within the definition of a “Restricted Payment” and would be permitted to be made as a Restricted Payment (and shall be deemed a Restricted Payment) under such covenant; or

(4) that is of obsolete equipment in the ordinary course of business.

“Availability Period” means the period from and including the Start Date up to and including the Termination Date.

“Balancing and Settlement Code” or “BSC” means the balancing and settlement code in force from time to time or any successor to it.

“Bank Group Company” means each of the holding companies and subsidiaries of the Bank and subsidiaries each of the Bank’s holding companies (as each such term is defined in the Companies Act 1985).

“BE Appointed Accountants” has the meaning set out under Clause 14.4(K).

“BEG” means British Energy Generation Limited.

“BEG UK” means British Energy Generation (U.K.) Limited.

“BEPET” means British Energy Power and Energy Trading Limited.

“BETS” means British Energy Trading Services Limited.

“BNFL Agreements” has the meaning ascribed thereto in the Creditor Restructuring Agreement.

“Bond Guarantee” has the meaning set out under Condition 2 (Guarantees).

“Bond Guarantors” means BEG, BEG UK, British Energy International Holdings Limited, BEPET, District Energy Limited, the Parent, British Energy Treasury Finance Limited and any other company which accedes as a guarantor in accordance with the Conditions, and “Bond Guarantor” means any of them.

“Bondholder” means the person in whose name a Bond is for the time being registered in the register maintained by the Registrar (or, in the case of a joint holding, the first named thereof) and “Holder” shall be construed accordingly.

“Bonds” means the £700,000,000 7% Guaranteed Bonds due 2005-2022 of the Issuer to be issued pursuant to the Restructuring Documents.

65

“British Energy Group” means the Parent and each of its direct or indirect Subsidiaries.

“Business Day” means a day (other than a Saturday or a Sunday) on which banks are open for business in London.

“Cancellations of Invoices of Eligible Debts” has the meaning given to it in part 1 of schedule 2.

“Capital Lease Obligations” of any Person means any obligation of such Person and its Restricted Subsidiaries on a consolidated basis under any capital lease of (or other agreement conveying the right to use) real or personal property which, in accordance with US GAAP, is required to be recorded as a capitalised lease obligation.

“Capital Stock” of any Person means:

(A) any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of common stock and preferred stock of such Person whether outstanding at or issued after the Issue Date;

(B) any and all partnership interests whether general or limited or other equity or ownership interests of such Person; and

(C) limited liability company interests, any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing Person, including any preferred stock, and any rights (other than debt securities convertible into Capital Stock), warrants or options exchangeable for or convertible into such Capital Stock.

“Cash Balances” has the meaning set out in Clause 14.2(C)(1).

“Cash Equivalents” means investments in sterling demand or time deposits, certificates of deposit and short-term debt obligations (including commercial paper), synthetic sterling deposits and shares in money market liquidity funds, provided that in all cases such Investments have a maturity of not longer than six months from the date of their acquisition subject to meeting the following credit criteria: (i) money market funds authorised as an Undertaking for Collective Investment in Transferable Securities (UCITS) and with a minimum credit rating of AAA or equivalent from any two Rating Agencies (or, in the case of shares in money market liquidity funds, from any single Rating Agency); (ii) all other counterparties and other specific instruments with a minimum short term credit rating of A-1 from Standard and Poor’s, or of P-1 from Moody’s or of F-1 from Fitch.

“Cash Reserves” has the meaning ascribed thereto in the Contribution Agreement.

“CCL” means the climate change levy that may be charged by the Seller to a Debtor under a Contract.

“Clydesdale” means Clydesdale Bank PLC.

“Clydesdale Account” means the DSB Income Account (number 30210394) at Clydesdale Bank PLC (sort code 82-20-00) in the name of British Energy plc.

“Collateral Basket” has the meaning set out in Clause 14.4(L)(13).

66

“Collection Account” means the Sterling account in the name of the Bank opened with Barclays Bank PLC at its branch at 54 Lombard Street numbered 70024090 (sort code 20-32-53) and designated Barclays re: British Energy Generation Limited.

“Collection Date” means, in relation to a Relevant Debt, the Maturity Date of that Relevant Debt or any later date identified as such in the relevant Utilisation Notice.

“Commission Undertaking Deed” means the deed to be entered into between the Secretary of State and British Energy plc for the purpose of implementing certain undertakings given by the Government of the United Kingdom to the Commission of the European Community for the purpose, among other things, of regulating the British Energy Group’s commercial behaviour.

“Commodity Price Protection Agreement” means any forward contract, commodity swap, commodity option or other similar financial agreement or arrangement (excluding, for the avoidance of doubt, any Trading Arrangement) relating to, or the value of which is dependent upon, fluctuations in commodity prices.

“Compliance Certificate” means a certificate substantially in the form set out in schedule 7.

“Concentration Floor” means, on any Monthly Reporting Date, the highest percentages calculated as follows:

(A) 1 times Concentration Limit in respect of Debtors rated A-1 and/or A+;

(B) 2 times Concentration Limit in respect of Debtors rated A-2 and/or A to BBB+ (inclusive);

(C) 3 times Concentration Limit in respect of Debtors rated A-3 and/or BBB to BBB- (inclusive); or

(D) 5 times Concentration Limit in respect of Debtors which are not Investment Grade or unrated.

“Concentration Limit” means on any Monthly Reporting Date in respect of all Debtors the relevant percentage as set out below in each case multiplied by the aggregate Sterling amount of all outstanding Relevant Debts at the relevant time:

S&P Long Term Rating	S&P Short Term Equivalent Rating	Concentration Limit
AAA to AA- (inclusive)	A-1+	Unlimited
A+	A-1	10%
A to BBB+ (inclusive)	A-2	5%
BBB to BBB- (inclusive)	A-3	3%
not Investment Grade/unrated	not Investment Grade/unrated	2%

provided that there shall be no such concentration limit in respect of Debtors that are:

(A) departments of UK central government (or their equivalent in the devolved administrations of Scotland and Wales); or

67

(B) Executive Agencies (or their equivalent in the devolved administrations of Scotland and Wales); or

(C) other public bodies,

and where, in each of the foregoing cases, such Debtor’s Debts are direct liabilities of the Crown or wholly guaranteed by the Crown (“Government Debtors”) and provided further that in the case of a Debtor (other than a Government Debtor) that is affiliated with one or more other Debtors (other than a Government Debtor), the concentration limit shall be calculated as if such affiliated Debtors were one Debtor. In addition, with the prior written consent of the Bank (such consent not to be unreasonably withheld) any credit rating relating to an Affiliate of an unrated Debtor (other than a Government Debtor) will be deemed to relate to that unrated Debtor for the purposes of determining the concentration limit percentage above if the obligations of such unrated Debtor are expressly guaranteed by its rated Affiliate.

“Concentration Limit Adjustment” means in respect of all Relevant Debts which relate to a particular Debtor, the amount by which the aggregate Sterling amount of such Relevant Debts exceeds the Concentration Limit (as determined on the most recent Monthly Reporting Date) for that Debtor.

“Conditions” means the terms and conditions of the Bonds in the form or substantially in the form set out in schedule 5 (Terms and Conditions of the Bonds) of the Trust Deed.

“Confidential Information” means all information disclosed by one Party to the other relating to this Deed and the transactions contemplated thereby.

“Connected Two-way Trading Arrangement” means a Two-way Trading Arrangement where the debts of the Seller to the Debtor arise out of the supply to the Seller of electricity, or in some other way are closely connected to the subject matter of the contract between the Seller and the Debtor.

“Connection and Use of System Code” means the connection and use of system code as in force from time to time or any successor to it.

“Consolidated Fixed Charge Coverage Ratio” of any Person means, for any period, the ratio of:

(A) the sum of (i) Consolidated Net Income/(Loss) before dividends, and in each case to the extent deducted in computing Consolidated Net Income before dividends for such period, (ii) Consolidated Interest Expense, (iii) Consolidated Income Tax Expense, (iv) the charges in respect of the Decommissioning Payments and the NLF Payments (each as defined in the Contribution Agreement) in accordance with the provisions of the Contribution Agreement, (v) the charges and credits in respect of revalorisation of nuclear liabilities and the Secretary of State indemnity in the NLFA and the charges in respect of incremental liabilities in respect thereof, (vi) depreciation, amortisation, unburnt front-end fuel provisions, (vii) stock obsolescence charges and (viii) exceptional charges relating to station closure and all other non-cash charges less non-cash income, all determined in accordance with UK GAAP; and

(B) the sum of Consolidated Fixed Charges for such period and cash and non-cash dividends paid on any Disqualified Capital Stock or Preferred Stock of such Person and its Restricted Subsidiaries during such period, which is held by Persons other than the Parent or a Restricted Subsidiary,

68

in each case after giving pro forma effect (as calculated in accordance with Article 11 of Regulation S-X under the Securities Act or any successor provision) to:

(C) the incurrence of the Financial Indebtedness giving rise to the need to make such calculation and (if applicable) the application of the net proceeds therefrom, including to refinance other Financial Indebtedness, as if such Financial Indebtedness was incurred, and the application of such proceeds occurred, on the first day of such period;

(D) the incurrence, repayment or retirement of any other Financial Indebtedness by the Parent and its Restricted Subsidiaries since the first day of such period as if such Financial Indebtedness was incurred, repaid or retired at the beginning of such period (except that, in making such computation, the amount of Financial Indebtedness under any revolving credit facility shall be computed based upon the average daily balance of such Financial Indebtedness during such period);

(E) in the case of Acquired Indebtedness or any acquisition occurring at the time of the incurrence of such Financial Indebtedness, the related acquisition, assuming such acquisition had been consummated on the first day of such period; and

(F) any acquisition or disposition by the Parent and its Restricted Subsidiaries of any company or any business or any assets out of the ordinary course of business, whether by merger, stock purchase or sale or asset purchase or sale, or any related repayment of Financial Indebtedness, in each case since the first day of such period, assuming such acquisition or disposition had been consummated on the first day of such period;

provided that

(G) in making such computation, the Consolidated Interest Expense attributable to interest on any Financial Indebtedness computed on a pro forma basis and (i) bearing a floating interest rate shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period and (ii) which was not outstanding during the period for which the computation is being made but which bears, at the option of such Person, a fixed or floating rate of interest, shall be computed by applying at the option of such Person either the fixed or floating rate; and

(H) in making such computation, the Consolidated Interest Expense of such Person attributable to interest on any Financial Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Financial Indebtedness during the applicable period.

“Consolidated Fixed Charges” of any Person means, without duplication, for any period, the sum of:

(A) “Consolidated Interest Expense” of any Person meaning, without duplication, for any period, the sum of:

(1) the interest expense of such Person and its Restricted Subsidiaries (and for the purposes of Clause 15 only its Unrestricted Subsidiaries) for such period, on a Consolidated basis, including, without limitation:

(a) amortisation of debt discount;

(b) the net costs associated with Interest Rate Agreements, Currency Hedging Agreements and Commodity Price Protection Agreements;

69

(c) the interest portion of any deferred payment obligations;

(d) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers acceptance financing; and

(e) accrued interest; plus

(2)

(a) the interest component of the Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries (and for the purposes of Clause 15 only its Unrestricted Subsidiaries) during such period; and

(b) all capitalised interest of such Person and its Restricted Subsidiaries (and for the purposes of Clause 15 only its Unrestricted Subsidiaries); plus

(3) the interest expense under any Guaranteed Debt of such Person and any Restricted Subsidiary (and for the purposes of Clause 15 only its Unrestricted Subsidiaries) to the extent not included under sub-paragraph (1)(b) above, whether or not paid by such Person or its Restricted Subsidiaries (or for the purposes of Clause 15 only its Unrestricted Subsidiaries) ; less

(4) accrued interest income received from cash and short term investments;

(B) the scheduled payments of principal under Financial Indebtedness of the Parent and its Restricted Subsidiaries; plus

(C) any Decommissioning Payment (as defined in the Contribution Agreement) made in that period.

“Consolidated Income Tax Expense” of any Person means, for any period, the provision for UK and foreign income taxes of such Person and its Consolidated Restricted Subsidiaries for such period as determined in accordance with Relevant GAAP.

“Consolidated Net Income/(Loss)” of any Person means, for any period, the Consolidated net income/(loss) of such Person and its Restricted Subsidiaries for such period on a Consolidated basis as determined in accordance with UK GAAP, adjusted, to the extent included in calculating such net income/(loss), by excluding, without duplication:

(A) all extraordinary gains or losses net of taxes (less all fees and expenses relating thereto);

(B) the portion of net income/(loss) of such Person and its Restricted Subsidiaries on a Consolidated basis attributable to minority interests in unconsolidated Persons or Unrestricted Subsidiaries to the extent that cash dividends or distributions have not actually been received by such Person or one of its Consolidated Restricted Subsidiaries;

(C) income/(loss) of any Person combined with such Person or any of its Restricted Subsidiaries on a “pooling of interests” basis attributable to any period prior to the date of combination;

(D) any gain or loss, net of taxes, realised upon the termination of any employee pension benefit plan;

70

(E) gains or losses, net of taxes (less all fees and expenses relating thereto), in respect of dispositions of assets other than in the ordinary course of business;

(F) the net income of any Restricted Subsidiary (other than BETS) to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is not at the time permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders;

(G) any restoration to net income of any contingency reserve, except to the extent provision for such reserve was made out of income accrued at any time following the date of the Trust Deed; or

(H) any net gain arising from the acquisition of any securities or extinguishment, under Relevant GAAP, of any Financial Indebtedness of such Person.

“Consolidated Net Worth” means the total of the amounts shown on the balance sheet of the Parent and its Consolidated Restricted Subsidiaries determined on a Consolidated basis in accordance with Relevant GAAP as of the end of the most recent fiscal quarter of the Parent ending at least 45 days prior to the taking of the action for the purpose of which the determination is being made, as the sum of:

(A) the par or stated value of all outstanding Capital Stock of the Parent; plus

(B) sums paid in capital and surplus relating to such Capital Stock; plus

(C) any retained earnings or earnings surplus,

less (i) any accumulated deficit and (ii) any amounts attributable to Disqualified Capital Stock.

“Consolidation” means, with respect to any Person, the consolidation of the accounts of such Person and each of its Subsidiaries if and to the extent the accounts of such Person and each of its Subsidiaries would normally be consolidated with those of such Person, all in accordance with Relevant GAAP, and the term “Consolidated” shall have a similar meaning.

“Contract” means an arrangement between a Debtor and a Seller (whether or not written) under which the Debtor is obliged to pay for the supply of electricity provided by such Seller.

“Contribution Agreement” means the agreement between the Parent, the Issuer, the NLF, the Secretary of State, BEG and BEG UK to be entered into on or about the Restructuring Date.

“Conversion Date” means the later of (i) the end of the first financial quarter following the Restructuring Date if the Proposed US GAAP Ratio is in effect; and (ii) the end of the first financial quarter following the date on which the Determined US GAAP Ratio is in effect.

“CRA Consent Letter” means the letter dated 28 July 2004 to, inter alia, the Ad Hoc Committee of Bondholders, a copy of which has been supplied to the Bank, signed in consent by all its addressees.

“Creditor Restructuring Agreement” means the restructuring agreement dated 30 September 2003, between British Energy plc, the Companies (defined therein), the Consenting Creditors (defined therein), the Royal Bank of Scotland plc, British Nuclear Fuels plc and the Consenting Bondholders (defined therein).

71

“CTA” means the capacity and tolling agreement to be entered into between BEPET and EPL on or about the Restructuring Date.

“CTA Documentation” means the EPL Credit Agreement, the Eggborough Security, the CTA, the Asset Option Agreement, the Share Option Agreement, the EPL Intercreditor Agreement, the EPL Accounts Agreement, the First Intercompany Loan, the Second Intercompany Loan, the First Security Assignment, the Second Security Assignment and any other documentation relating to the Eggborough Plant to be entered into, or in effect, on the Restructuring Date and referred to in, or permitted under, the aforementioned documents.

“CTA Global Bond” has the meaning set out under the “Introduction” section to the terms and conditions of the Bonds.

“Currency Hedging Agreements” means, in respect of a Person, one or more of the following agreements which shall be entered into by such Person and one or more financial institutions: foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values.

“Debt” means indebtedness (including unbilled indebtedness) in respect of the supply of electricity that has occurred as at the date on which such indebtedness is sold to the Bank hereunder of a Debtor to a Seller under a Contract (including any amount payable by the Debtor to the Seller under the relevant Contract in respect of CCL or VAT or, in the case of unbilled indebtedness, such amount as would be payable by the Debtor to the Seller under the relevant Contract in respect of CCL or VAT on that unbilled indebtedness if it were invoiced on the date on which it is sold to the Bank under this Deed) and includes the right, as at the date of sale to the Bank, to payment of any interest or finance charges and all other rights of such Seller (including to issue Invoices in respect of unbilled indebtedness) under the Contract, but excluding Unbilled Non-Half-Hourly Debts.

“Debtor” means each debtor of the Seller obliged in or under the relevant Contract to make payments in respect of the supply of electricity under such Contract (but excluding any such debtors that are members of the Group) (and where a party contracts on behalf of other members of its group, shall include that company and all members of the group on behalf of which it contracts).

“Decommissioning Default Payment Debenture” means the debenture to be executed by the Parent, the Issuer and certain other Group companies in favour of the NLF dated on or about the Restructuring Date, substantially in the form of the draft document so described made available to the Bank prior to the date of this Deed (or in such other form where the amendments made are not materially prejudicial to the Bank).

“Decommissioning Payments” has the meaning ascribed thereto in the Contribution Agreement.

“Deed of Charge” means the Deed of Charge creating security over the Debts and the Policies relating to those Debts to be entered into by the Seller in favour of the Bank substantially in the form set out in schedule 9.

“Default” means an Event of Default or an event which, with the giving of notice, lapse of time, the making of a determination of materiality or fulfilment of any other applicable condition (or any combination of the foregoing), would, in accordance with Clause 18, constitute an Event of Default.

“Defaulted Debt” means a Debt in respect of which (a) the relevant Debtor has become Insolvent; (b) consistent with the Seller’s credit and collection policy as amended from time to time in

72

accordance with Clause 14.3(E), it would be written off as uncollectible; (c) any payment, or part thereof, remains unpaid, for the Default Period or more; (d) the relevant Debtor or the Seller is in breach of any Contract between them and such breach may give rise to a right of set-off (or other analogous rights) in favour of that Debtor.

“Default Notice” has the meaning given to it in Clause 18.2.

“Default Period” means in respect of a billed Debt, a period of 60 days from its due date in accordance with the relevant Invoice.

“Default Ratio” has the meaning given to it in part 1 of schedule 2.

“Deferred Purchase Price” has the meaning given to it in part 2 of schedule 2.

“Delinquency Ratio” means, on any Monthly Reporting Date, the ratio expressed as a percentage determined by dividing (i) the aggregate outstanding Sterling amount of all Debts that are Delinquent Debts as at the last date of the most recently ended Monthly Reporting Period by (ii) the aggregate outstanding Sterling amount of all Debts as at that same date.

“Delinquent Debt” means a Debt in respect of which payment, or part thereof, remains unpaid by the relevant Debtor after the Maturity Date for such Debt.

“Designation” has the meaning set out under Clause 14.5.

“Designation Amount” has the meaning set out under Clause 14.5(B).

“Determined US GAAP Ratio” has the meaning set out under Clause 14.4(L).

“Dilution” means a reduction or adjustment of the outstanding amount of a Relevant Debt as a result of any adjustments, refunds, credits or allowances permitted or incurred by a Seller in respect of that Relevant Debt after the relevant Utilisation Date.

“Dilution Debt” means a Relevant Debt in respect of which a Dilution has occurred.

“Dilution Horizon” means 60 days.

“Dilution Horizon Ratio” has the meaning given to it in part 1 of schedule 2.

“Dilution Ratio” has the meaning given to it in part 1 of schedule 2.

“Dilution Reserve Amount” has the meaning given to it in part 1 of schedule 2.

“Dilution Reserve Percentage” has the meaning given to it in part 1 of schedule 2.

“Disclosing Party” has the meaning set out in Clause 24.1.

“Dispute” means any dispute, litigation, counterclaim, claim or arbitration arising in connection with any Debt where the portion of such Debt subject to such dispute is equal to or greater than £100,000.

“Disqualified Capital Stock” means any Capital Stock of a Person or a Restricted Subsidiary thereof which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable

73

solely at the option of the holder thereof, on or prior to the maturity date of the Bonds, for cash or securities constituting Financial Indebtedness; provided, however, that Preferred Stock of a Person or any Restricted Subsidiary thereof that is issued with the benefit of provisions requiring a change of control offer or an asset sale offer to be made for such Preferred Stock in the event of a change of control of or sale of assets by such Person or Restricted Subsidiary, which provisions have substantially the same effect as the provisions of the Conditions described in Condition 3.4 (Purchase of Bonds upon a Change of Control or a Restructuring Event) and Clause 14.4(P), shall not be deemed to be Disqualified Capital Stock solely by virtue of such provisions so long as such provisions provide that such Person or Restricted Subsidiary may not repurchase or redeem such Capital Stock prior to any repurchase of the Bonds required by the Conditions.

“Distribution Agreement” means the agreement made between, among others, the Issuer and The Law Debenture Trust Corporation (Channel Islands) Limited (in its capacity as distribution trustee) relating to the distribution of Bonds and shares of the Company to certain creditors of British Energy plc.

“Dividend” means any dividend on, or distribution to holders of, any of the Parent’s Capital Stock.

“Drawn Facility Amount” has the meaning given to it in part 2 of schedule 2.

“DTI” means the Department of Trade and Industry.

“DTI Security” means, subject to Clause 16, the security over the Debts created pursuant to a debenture between, among others, the Seller and the Secretary of State dated 26 September 2002 as amended by a deed of amendment dated 28 November 2002.

“EBIT” means, for the purposes of Clause 15 only, in relation to any period, the Consolidated profits of the Group and the Unrestricted Subsidiaries for that period (before the deduction of income tax, corporation tax or withholding tax (or their equivalents in any jurisdiction) on the overall income of the Group and the Unrestricted Subsidiaries) for that period:

(A) excluding exceptional or extraordinary items (including those relating to station closure), and excluding any gain or loss realised on the disposal of assets (other than in the ordinary course of business) whether tangible or intangible;

(B) excluding interest received or interest accrued and owing to a member of the Group;

(C) deducting any profit arising out of release of provisions for liabilities and charges, other than in the ordinary course of business;

(D) excluding the portion of net income/(loss) on a Consolidated basis attributable to minority interests in unconsolidated Affiliates to the extent that cash dividends or distributions have not actually been received by the Parent or one of its Subsidiaries; and

(E) excluding all finance charges (including revalorisation and the unwinding of any discount on liabilities other than Financial Indebtedness), amortisation of any debt discount, charges relating to the NLF Payments and Decommissioning Payments each as defined in the Contribution Agreement, capital expenditure expensed, unburnt front-end fuel provisions, stock obsolescence charges and all other non-cash charges,

all determined in accordance with UK GAAP, and for the purposes of the definition of “Material Subsidiary” and Clause 14.4(F) only, “EBIT” shall mean profits before interest and tax expense calculated in accordance with Relevant GAAP.

74

“EBITDA” means, in relation to any period, EBIT before the deduction of amounts attributable to depreciation and amortisation during such period.

“Eggborough Break Option” means any of the Asset Options or the Share Options.

“Eggborough Lenders” means the persons identified as the “Banks” in the EPL Credit Agreement.

“Eggborough Plant” means the coal-fired power station located at Eggborough, Yorkshire.

“Eggborough Security” means the Security Interests created under the Eggborough Security Documents.

“Eggborough Security Documents” has the meaning given to “Security Documents” in the EPL Credit Agreement.

“Eggborough Subsidiaries” means EPL and EPHL.

“Electricity Generation Licence” means a licence to generate electricity issued pursuant to section 6(1)(a) of the Electricity Act 1989 (or any successor).

“Electricity Supply Licence” means a licence to supply electricity issued pursuant to section 6(1)(d) of the Electricity Act 1989 (or any successor).

“Electronic Information” has the meaning set out in Clause 24.1(E)(2).

“Eligible Debt” means, in relation to a Debt, that:

(A) the Debt:

(1) in respect of a billed Debt is due and payable to the Seller within 60 days from the due date specified in the relevant Invoice and in respect of an Unbilled Debt shall be due and payable within 100 days of its creation;

(2) in respect of (a) a Purchased Debt, it is freely assignable, without the need for consent of the relevant Debtor (or if such consent is required, consent has been obtained) and that, during the Pre-Restructuring Period, the assignment or assignation to the Bank has been disclosed to the relevant Debtor; and (b) in relation to a Restricted Purchased Debt, the proceeds are freely assignable and the Restricted Purchased Debt and its proceeds are capable of being charged in accordance with the Deed of Charge and of being held on trust;

(3) is governed by English law or Scottish law;

(4) is a valid and binding payment obligation of the Debtor of that Debt or (in the case of an Unbilled Debt) gives rise to a right to create such;

(5) is owed by an Eligible Debtor;

(6) has been originated by the Seller in the ordinary course of business;

(7) is denominated in Sterling;

(8) satisfies all applicable requirements of the Seller’s credit and collection policies;

75

(9) in respect of a billed Debt has not already been purchased by the Bank as an Unbilled Debt;

(10) is not a Defaulted Debt;

(11) is not a Debt for which the Debtor can retain payment to secure performance by the Seller;

(12) is not relating to a Debtor or a Contract which the Bank, acting reasonably and on the basis of credit issues regarding that Debtor, has at any time after the date of this Deed but prior to its inclusion in a Utilisation Notice, notified the Seller that it is no longer acceptable;

(13) does not relate to an invalid, ineffective, repudiated or terminated Contract;

(B) the Seller is the legal and beneficial owner of the Debt (save to the extent that any part of the Debt represents an Unbilled Debt which has previously been sold to the Bank, then that part of the Debt need not be beneficially owned by the Seller) and such Debt, the Contract relating to such Debt and, in respect of billed Debts, the Invoice relating to such Debt, is held by it free of any Security Interest other than the DTI Security;

(C) the Debt is either (i) not subject to any adjustments to the delivery price, refunds, credit notes, discounts, allowances or reserve invoices which have been made or granted to the Debtor in relation to the same or any other transaction which remains outstanding or (ii) is a First Category Export Debt or (iii) a Second Category Export Debt;

(D) the underlying Contract does not permit payment by means of a bill of exchange, promissory note or other such instrument;

(E) the Seller has obtained all required consents, approvals, notifications or filings necessary for the creation and enforceability of such Debt by the Seller, and the sale thereof to the Bank (save in relation to a Restricted Purchased Debt, any consent required from a Debtor to effect a legal assignment of such Restricted Purchased Debt);

(F) the Debt is not subject to a Dispute; and

(G) if the Debt is an Unbilled Debt, it is not owed by a Non-Half-Hourly Debtor.

“Eligible Debtor” means, as of any date of determination, a Debtor that satisfies, without limitation, the following criteria as of such date:

(A) the Debtor has premises to which the Contract relates in England, Wales or Scotland;

(B) the Debtor is not Insolvent; and

(C) the Debtor is not a member of the Group.

“EPHL” means Eggborough Power (Holdings) Limited.

“EPL” means Eggborough Power Limited.

“EPL Accounts Agreement” means the accounts agreement originally dated on or about the Restructuring Date between EPL and Barclays Bank PLC (in its capacity as account bank and agent thereunder).

76

“EPL Credit Agreement” means the credit agreement originally dated 13 July 2000 as amended and restated by an amendment and restatement deed dated on or about the Restructuring Date between, inter alia, EPL, the EPL Security Trustee and the Eggborough Lenders.

“EPL Intercreditor Deed” means the intercreditor deed originally dated 8 September 2000 as amended and restated on 5 February 2001 and as further amended and restated by an amendment and restatement deed on or about the Restructuring Date between, inter alia, the EPL Security Trustee and the Eggborough Lenders.

“EPL Security Trustee” means the person identified as the “Security Trustee” in the EPL Credit Agreement.

“Euro” or “€” means the single currency of member states of the European Union participating in such single currency.

“European Union Greenhouse Gas Emissions Trading Scheme” means a scheme introduced pursuant to EU directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community.

“Event of Default” means an event specified as such in Clause 18.1.

“Excess Proceeds” has the meaning set out under Clause 14.4(P).

“Facility” means the debt purchase facility provided to the Seller under this Deed as described in Clause 2.

“Facility Charge” has the meaning set out in Clause 11.1(E).

“Facility Limit” means, on any day, that amount which is determined by taking the aggregate Sterling amount of all outstanding Relevant Debts (without double counting where billed Debts represent amounts which have already been sold as Unbilled Debts) excluding for these purposes any element of such Relevant Debts that are, on such date, Unbilled Debts which relates to amounts payable by Debtors to the Seller in respect of any CCL or VAT, and deducting each of:

(A) the aggregate Sterling amount of all such outstanding Relevant Debts that are non-Eligible Debts;

(B) the Concentration Limit Adjustment; and

(C) the General Concentration Limit Adjustment,

(such amount being the “Total Fundable Debts” for the purposes of calculating items (D), (E) and (F) in accordance with part 1 of schedule 2) and further deducting each of:

(D) the Loss Reserve Amount; and

(E) the Dilution Reserve Amount; and

(F) the Set-Off Reserve Amount.

“Fair Market Value” means, with respect to any asset or property, the price that could be negotiated in an arm’s length, free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under pressure or compulsion to complete the transaction.

77

Unless otherwise specified in the Trust Deed, Fair Market Value shall be determined by the Parent acting in good faith, whose determination shall be conclusive (such determination shall be evidenced by an Officer’s Certificate if in excess of £2 million and also by a resolution of the board of directors of the Parent, delivered to the Trustee if such Fair Market Value exceeds £5 million).

“Favourable Covenants” has the meaning set out in Clause 14.1(B)(1).

“Fee Letter” means the fee letter between the Bank and the Seller dated on or about the date of this Deed.

“Finance Documents” means this Deed, the Guarantee, the Deed of Charge, any Accession Deed, the Fee Letter and any other document designated as being a Finance Document by the Bank and the Seller.

“Financial Covenant” means the financial covenant set out in Clause 15.1.

“Financial Indebtedness” means, with respect to any Person, without duplication:

(A) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, excluding (i) any trade payables and other accrued current liabilities arising in the ordinary course of business and (ii) such liabilities arising under the BNFL Agreements and the Contribution Agreement, but including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any letters of credit issued under letter of credit facilities, acceptance facilities or other similar facilities;

(B) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments;

(C) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), but excluding trade payables arising in the ordinary course of business;

(D) all obligations under Interest Rate Agreements or Currency Hedging Agreements of such Person;

(E) all Capital Lease Obligations of such Person;

(F) all Financial Indebtedness referred to in paragraphs (A) to (E) above of other Persons and all dividends of other Persons, the payment of which is secured by (or for which the holder of such Financial Indebtedness has an existing right, contingent or otherwise, to be secured by) any property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Financial Indebtedness;

(G) all Guaranteed Debt of such Person;

(H) all Disqualified Capital Stock issued by such Person valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends;

(I) preferred stock of any Restricted Subsidiary;

78

(J) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and

(K) any amendment, supplement, modification, deferral, renewal, extension, refunding or refinancing of any liability of the types referred to in paragraphs (A) to (J) above.

For purposes hereof, the “maximum fixed repurchase price” of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Financial Indebtedness shall be required to be determined pursuant to the Trust Deed or the Conditions, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value to be determined in good faith by the board of directors of the issuer of such Disqualified Capital Stock.

“First Category Export Debt” means, in relation to a Debt, that the Debt represents the net amount of a debt owed by the Seller to a Debtor and a larger debt owed by the Debtor to the Seller under Connected Two-way Trading Arrangements between the Seller and that Debtor.

“First Intercompany Loan” means the intercompany loan between British Energy Holdings plc as lender and EPHL as borrower dated on or about the Restructuring Date.

“First Security Assignment” means the security assignment between EPHL as assignor and the Issuer as assignee dated on or about the Restructuring Date.

“Floating UK GAAP” means generally accepted accounting principles applicable to listed companies in the United Kingdom including Financial Reporting Standards and Statements of Standard Accounting Practices issued by the Accounting Standards Board Limited or, if applicable, International Financial Reporting Standards issued by the International Accounting Standards Board and International Accounting Standards issued by the International Accounting Standards Committee and adopted by the International Accounting Standards Board.

“FSA” means the United Kingdom Financial Services Authority.

“Gas Shipper’s Licence” means a licence to arrange for the transportation of gas issued pursuant to section 7A(2) of the Gas Act 1986 (or any successor).

“General Concentration Limit Adjustment” means the amount (if any) by which the aggregate Sterling amount of:

(A) all Debts arising under Contracts which do not incorporate terms limiting the liability of the Seller to the Debtor in the form of or substantively similar to the relevant provisions of the Seller’s standard terms and conditions of business (including, but not limited to, the Contracts of the Seller with Corus, IBM, Royal Mint, Octel, Tyco and The Department of Trade and Industry, for so long as they do not incorporate such terms);

(B) in respect of each Restricted Debt arising under a Two-way Trading Arrangement, the lower of the amount of the Restricted Debt and the amount owed by the Seller to the Debtor; and

(C) in respect of each Connected Two-way Trading Arrangement under which Second Category Export Debts arise, the lower of the amount of the Debt and the amount owed by the Seller to the Debtor; less, in each case, the Concentration Limit Adjustment in respect of any such Debts, exceeds the General Concentration Limit.

79

“General Concentration Limit” means at any time an amount equal to the amount of the Set-Off Reserve Amount at such time.

“Government Facility” means the credit facility agreement dated 26 September 2002 between the Secretary of State, the Parent and certain other Group companies as specified therein, as amended or extended from time to time.

“Government Restructuring Agreement” means the government restructuring agreement dated 1 October 2003 between British Energy plc, BEG UK, BEG, the NLF, the Trustees (as defined therein) and the Other British Energy Parties (as defined therein).

“Grid Code” means the code prepared by the National Grid Company Plc pursuant to its transmission licence relating to the National Grid as amended or supplemented from time to time, or any successor to it.

“Group” means (i) during the Pre-Restructuring Period, the Parent and each of its direct or indirect Subsidiaries from time to time; and (ii) during the Post-Restructuring Period, the Parent and each of its direct or indirect Subsidiaries from time to time excluding the Eggborough Subsidiaries.

“Guarantee” means the guarantee to be entered into by the Guarantors in favour of the Bank substantially in the form set out in schedule 8.

“Guaranteed Debt” of any Person means, without duplication, all Financial Indebtedness of any other Person referred to in the definition of Financial Indebtedness above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement:

(A) to pay or purchase such Financial Indebtedness or to advance or supply funds for the payment or purchase of such Financial Indebtedness;

(B) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Financial Indebtedness or to assure the holder of such Financial Indebtedness against loss;

(C) to supply funds to, or in any other manner invest in, the debtor (including any agreement to pay for property or services without requiring that such property be received or such services be rendered);

(D) to maintain working capital or equity capital of the debtor, or otherwise to maintain the net worth, solvency or other financial condition of the debtor or to cause such debtor to achieve certain levels of financial performance; or

(E) otherwise to assure a creditor against loss,

provided that the term “guarantee” shall not include endorsements for collection or deposit, in either case in the ordinary course of business.

“Guarantors” means, each member of the Group that accedes as a Guarantor from time to time in accordance with Clause 22.2 and “Guarantor” means any one of them.

“Historical Receivables Information” has the meaning given to it in part 1 of schedule 2.

80

“HLFA” means the historic liabilities funding agreement between the Secretary of State, BEG, BEG UK, the Parent and the Issuer to be entered into on or about the Restructuring Date.

“Holder” has the meaning set out under “Bondholder” above.

“Independent Accountants” has the meaning set out under Clause 14.4(K).

“Initial Accession Date” means the earliest Relevant Accession Date.

A Debtor is “Insolvent” if:

(A) it is, or is deemed for the purposes of any law to be, or admits it is, unable to pay its debts (including, without limitation within the meaning of sections 123(1) and/or 123(2) of the Insolvency Act 1986) or to be insolvent, or has stopped, suspended or threatened to stop payment of its debts generally or proposed or made any agreement for the deferral or rescheduling of its debts generally or proposed or made an arrangement under section 1 of the Insolvency Act 1986 or section 425 of the Companies Act 1985; or

(B) it ceases, or threatens to cease, to trade; or

(C) any step (including, without limitation, the filing of any notice, application or petition, a proposal being made or a meeting convened) is taken with a view to:

(1) a composition or scheme of arrangement with any of its creditors;

(2) its administration, winding-up, liquidation or dissolution;

(3) its receivership or bankruptcy; or

(4) anything analogous to sub-paragraphs (1) - (3) above.

“Insured Debt” means all Relevant Debts generated by an Insured Debtor and which are insured under one of the Policies.

“Insured Debtor” means all Debtors in respect of which the Seller has taken out a Policy.

“Insurer” means any provider of credit insurance to the Seller from time to time.

“Interest Payment Date” means, in relation to the Bonds, 31 March, 30 June, 30 September and 31 December in each year.

“Interest Rate Agreements” means, in respect of a Person, one or more of the following agreements which shall be entered into by such Person and one or more financial institutions: interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements) and/or other types of interest rate hedging agreements from time to time.

“Investment” by any Person means any direct or indirect loan, advance or other extension of credit or capital contribution, by means of the transfer of cash or other property to others or payment for property or services for the account or use of others, or otherwise, or the purchase or acquisition of Capital Stock, Bonds, other bonds, notes or debentures or other securities or evidence of Financial Indebtedness issued by any other Person, including, without limitation, any payment on a guarantee or any obligation of the other Person, provided, for the avoidance of doubt, that any payments under the Nuclear Guarantee shall not be deemed to be an Investment.

81

“Investment Grade” means “BBB-” or better (in the case of Standard & Poor’s or Fitch) and Baa3 or better (in the case of Moody’s).

“Invoice” means each sales invoice issued in respect of a Debt to a Debtor.

“Issue Date” means the date of issue of the Bonds.

“Issuer” means British Energy Holdings plc, a company incorporated with limited liability in Scotland.

“LIBOR” means:

(A) the applicable Screen Rate; or

(B) (if no Screen Rate is available) the rate quoted by the Bank to leading banks in the London interbank market,

as at 11:00 am on the relevant Utilisation Date for the offering of overnight deposits in Sterling.

“Licence” has the meaning set out in the definition of “Restructuring Event”.

“Loss Horizon” means, on any Monthly Reporting Date, the sum in days of the Default Period plus the Weighted Average Terms of Trade.

“Loss Horizon Ratio” has the meaning given to it in part 1 of schedule 2.

“Loss Reserve Amount” has the meaning given to it in part 1 of schedule 2.

“Loss Reserve Percentage” has the meaning given to it in part 1 of schedule 2.

“Loss Reserve Ratio” has the meaning given to it in part 1 of schedule 2.

“Mandate Letter” means the mandate letter between Barclays Capital (the investment banking division of Barclays Bank PLC) the Parent and the Seller dated 30 June 2004.

“Mandatory Cost” means the cost of compliance by the Bank with the cash ratio and special deposit requirements of the Bank of England, and/or the banking supervision costs imposed by the Financial Services Authority and/or the costs imposed by any other applicable regulatory authority or central bank, in connection with the Facility expressed as a percentage per annum as determined by the Bank.

“Material Adverse Change” means an event or series of events occurs which has or is reasonably likely to have a material adverse effect on (i) the ability of the Seller or the Guarantors to perform its or their material obligations under this Deed, the Guarantee, the Deed of Charge; or (ii) the validity or enforceability of this Deed, the Guarantee or the Deed of Charge.

“Material Information” means, all written information (including information conveyed by electronic means) in respect of (a) historical data relating to the Debts, to the extent not superseded by the report referred to in Clause 4.2(K)(1); (b) the Contracts; and (c) the Seller’s billing systems, which was material to the Bank in the context of providing this Facility.

“Material Subsidiary” means initially, each of the guarantors under the Bonds, and following the Initial Accession Date any subsidiary of the Parent from time to time (being as at the date of this Deed each subsidiary of the Parent listed in schedule 1) whose consolidated gross assets,

82

turnover or EBIT is 5% or more of the consolidated gross assets, turnover or EBIT, respectively, of the Group (in each case excluding all assets relating to amounts receivable under the Nuclear Liabilities Documentation) provided that for this purpose the Eggborough Subsidiaries shall not be deemed to be Material Subsidiaries unless either (a) EPL shall have ceased to own the Eggborough Plant or (b) EPHL shall have ceased to own the shares in EPL in which case such subsidiary, if it is still in the Group, shall become a Material Subsidiary or (c) the Eggborough Security is released in accordance with its terms (subject to satisfaction of the foregoing tests) and provided that no company shall become a Material Subsidiary if the Parent has given notice to the Bank that liquidation proceedings have been commenced in respect of such company and such liquidation proceedings are being pursued with reasonable diligence. While the Eggborough Subsidiaries are not Material Subsidiaries as a result of the first proviso to this definition of “Material Subsidiary”, all assets, turnover and EBIT of the Eggborough Subsidiaries shall be excluded in determining the Material Subsidiaries of the Parent. For the purposes of this definition of “Material Subsidiary” alone, EBIT means profits before interest and tax expense.

“Maturity Date” means, in respect of each Relevant Debt (other than an Unbilled Debt), the due date for payment of that Relevant Debt as specified in the corresponding Invoice.

“Maximum Available Initial Purchase Price” has the meaning given to it in part 1 of schedule 2.

“Maximum Gross Funding” has the meaning given to it in part 1 of schedule 2.

“Monthly Reporting Date” means that day in each calendar month that falls three Business Days after the end of the previous calendar month or, if such day is not a Business Day, the next following Business Day, or such other day in each calendar month as is agreed between the Parent and the Bank from time to time.

“Monthly Reporting Period” means the period of time from and including the first day of each calendar month to and including the last day of such calendar month.

“Monthly Settlement Report” has the meaning set out in Clause 14.2(A).

“Nirex Option Agreement” means the nirex option agreement between the Secretary of State, BEG, BEG UK and the Parent to be entered into on or about the Restructuring Date.

“NLF” means the Nuclear Generation Decommissioning Fund Limited (to be renamed Nuclear Liabilities Fund Limited).

“NLFA” means the nuclear liabilities funding agreement between the Secretary of State, the NLF, BEG UK, BEG, the Parent and the Issuer to be entered into on or about the Restructuring Date.

“NLF Purchase Options” means the Nirex Option Agreement and the Option Agreement.

“NLF Payment Percentage” has the meaning set out in the Contribution Agreement.

“Non-Dividend Restricted Payment” has the meaning set out in Condition 8.2 (Limitation on Restricted Payments).

“Non-Half-Hourly Debtors” means Debtors whose electricity consumption is not metered on a half-hourly basis.

“Notice of Assignment or Trust” means a notice substantially in the form of schedule 4.

83

“Nuclear Guarantee” means the guarantee and indemnity between BEG UK, BEG, the Parent, the Issuer, the NLF, the Secretary of State and the Guarantors (as defined therein) to be entered into on or about the Restructuring Date.

“Nuclear Liabilities Documentation” means the Contribution Agreement, the Government Restructuring Agreement, the NLFA, the HLFA, the Option Agreement, the Nirex Option Agreement, the Nuclear Guarantee, the Decommissioning Default Payments Debenture and the Commission Undertaking Deed.

“Obligors” means together the Seller and the Guarantors and “Obligor” means any one of them.

“Officer’s Certificate” means a certificate signed by two directors, or by a director and the company secretary, of the entity issuing the certificate or, if so agreed by the recipient of the certificate, by another person or persons duly authorised by such entity to issue such certificate.

“Option Agreement” means the option agreement between the Secretary of State, BEG UK, BEG, the Parent and the Issuer to be entered into on or about the Restructuring Date.

“Parent” means British Energy PLC or any other company that replaces it as the ultimate holding company of the Group pursuant to the Restructuring Documents.

“Parent Management Presentation” means the presentation by the management of the Parent dated 16 August 2004.

“Pari Passu Indebtedness” has the meaning set out under Clause 14.4(P).

“Party” means a party to this Deed.

“Paying Agency Agreement” means the paying agency agreement entered into by the Issuer, the Bond Guarantors, the Trustee, the Registrar, the Paying Agents and the Transfer Agents dated on or about the Issue Date.

“Paying Agents” means the Principal Paying Agent and the other paying agents named in the Paying Agency Agreement together with any successor or additional paying agents appointed from time to time in connection with the Bonds under the Paying Agency Agreement and “Paying Agent” means any of them.

“Permit” has the meaning set out under Clause 14.4(O)(17).

“Permitted Business” means any business carried on by the Parent, the Issuer and any Restricted Subsidiary in accordance with Clause 14.4(U).

“Permitted Disclosees” means each Party’s directors, officers, employees to whom there is a legitimate business need to disclose such information for the purposes of the Facility (excluding any employees of the Bank to whom such disclosure would not be permitted by virtue of law, regulation or the Bank’s policies), financial and professional advisers and, in the case of the Bank, any potential transferee, assignee or sub-participant of the Bank’s rights, benefits and/or obligations under the Finance Documents where the Seller has consented to such disclosure (not to be unreasonably withheld or delayed in the case of any potential sub-participant).

“Permitted Financial Indebtedness” has the meaning set out under Clause 14.4(K).

“Permitted Hedging” has the meaning set out under Clause 14.4(L)(6).

84

“Permitted Investments” has the meaning set out in Condition 8.2 (Limitation on Restricted Payments).

“Permitted Payment” has the meaning set out in Condition 8.2 (Limitation on Restricted Payments).

“Person(s)” means any individual, corporation, private company with limited liability, partnership, joint venture, association, joint stock company, trust, unincorporated organisation, government or agency or political subdivision or any other entity.

“Policies” means the credit insurance policies that the Seller may take out with an Insurer from time to time in respect of any or all of the Debtors and “Policy” means any one of them.

“Post-Restructuring Period” means the period on and from the Restructuring Date, up to and including whichever is the later of (i) the Termination Date; and (ii) such other date on which the Drawn Facility Amount is permanently reduced to zero and no other amounts are owing by the Obligors to the Bank under the Finance Documents.

“Potential Termination Event” means an event which, with the giving of notice, lapse of time, determination of materiality or fulfilment of any other applicable condition (or any combination of the foregoing), would, in accordance with Clause 19, constitute an Termination Event.

“Preferred Stock” means, with respect to any Person, any Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over the Capital Stock of any other class in such Person (for the avoidance of doubt, the NLF Payment Percentage shall not be deemed to be Preferred Stock hereunder).

“Pre-Restructuring Period” means the period from and including the date of this Deed up to but excluding the Restructuring Date.

“Principal Amount Outstanding” of a Bond on any date shall be its original principal amount less the aggregate amount of all principal payments in respect of such Bond which have been paid on or prior to such date.

“Principal Paying Agent” means HSBC Bank plc in its capacity as principal paying agent in accordance with the terms of the Paying Agency Agreement or any successor or appointed from time to time in connection with the Bonds under the Paying Agency Agreement.

“Proceedings” has the meaning set out in Clause 29.

“Projections” means the financial projections as contained in and qualified by the Parent Management Presentation.

“Proposed US GAAP Ratio” has the meaning set out under Clause 14.4(K).

“Purchase” means a purchase or purported purchase by the Bank from a Seller of a Debt or its proceeds pursuant to this Deed.

“Purchased Debts” means all Debts sold by the Sellers and purchased by the Bank in accordance with Clause 6.

85

“Rating Agency” means any of (i) Standard & Poor’s (ii) Fitch Ratings Ltd. (“Fitch”) and (iii) Moody’s Investors Service Limited (“Moody’s”) or any of their respective Subsidiaries and their respective successors, (i), (ii) and (iii), together the “Rating Agencies”.

“Recipient” has the meaning set out in Clause 24.1.

“Reconciliations” has the meaning given to it in part 1 of schedule 2.

“Record Date” has the meaning set out under Condition 1 (Maturity, principal and interest).

“Redeemable Capital Stock” means any Capital Stock that, either by its terms or by the terms of any security into which it is convertible or exchangeable or otherwise, is or upon the happening of an event or passage of time would be, required to be redeemed prior to the final Stated Maturity of the principal of the Bonds or is redeemable at the option of the holder thereof at any time prior to such final Stated Maturity (other than upon a change of control of or sale of assets by the Issuer in circumstances where the Bondholders would have similar rights), or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity at the option of the holder thereof.

“Refinancing” has the meaning set out in Clause 20.

“Registrar” means HSBC Private Bank (Jersey) Limited in its capacity as registrar in accordance with the terms of the Paying Agency Agreement or any successor appointed from time to time in connection with the Bonds under the Paying Agency Agreement.

“Relevant Accession Date” means, in respect of a Restricted Subsidiary (other than BETS), the date on which it accedes as an Obligor in accordance with Clause 22.2, being (in the case of the Material Subsidiaries existing as at the Issue Date, being the guarantors under the Bonds) a date falling no later than 5 Business Days following the Issue Date, and (in each other case) a date falling after the Issue Date but no later than 45 days after the date on which the audited annual financial statements or quarterly financial statements (on a rolling four quarter basis), demonstrating such Subsidiary’s compliance with the definition of Material Subsidiary, become available.

“Relevant Amount” has the meaning set out in Clause 12.5.

“Relevant Debts” means Purchased Debts and/or Restricted Purchased Debts that have not been repurchased by the Seller pursuant to this Deed.

“Relevant GAAP” means (i) prior to the Conversion Date, UK GAAP or (ii) on or after the Conversion Date, US GAAP.

“Relevant Payment Grace Period” means in relation to Debts generated by Debtors that customarily pay amounts due in respect of such Debts via BACS or direct debit, 90 days from the date of the first Utilisation.

“Relevant Rating Agencies” means Moody’s and one other Rating Agency.

“Renewables Obligation Certificate” means a certificate issued pursuant to an order of the kind referred to in section 32 of the Electricity Act 1989 (as amended).

“Repurchase Price” means, in respect of a Debt to be repurchased by the Seller under Clauses 8.6 and/or 9.1(B), that amount which is determined by multiplying the outstanding Sterling amount of such Debt (immediately prior to such repurchase) by the Drawn Facility Amount (as at the most

86

recent date on which a Utilisation Notice was previously delivered under this Deed) and dividing by the Sterling amount of all outstanding Relevant Debts that are Eligible Debts (as at the most recent date on which a Utilisation Notice was previously delivered under this Deed).

“Requested Purchase Price” means the purchase price actually requested by the Seller from the Bank for Relevant Debts on a given Utilisation Date.

“Reserve Shortfall” has the meaning given to it in Clause 9.3.

“Restricted Debts” means those Debts generated by the Seller whose underlying Contracts contain clauses which could reasonably be interpreted as preventing the assignment, transfer or novation of the Seller’s rights against the relevant Debtor thereunder.

“Restricted Payment” has the meaning set out in Condition 8.2 (Limitation on Restricted Payments).

“Restricted Purchased Debts” means all Restricted Debts whose proceeds have been sold by the Seller and purchased by the Bank in accordance with Clause 6.

“Restricted Subsidiary” means the Issuer and any other Subsidiary of the Parent that (i) is not an Unrestricted Subsidiary on the Issue Date and (ii) has not been designated by the board of directors of the Seller by a board resolution delivered to the Bank as an Unrestricted Subsidiary pursuant to and in compliance with Clause 14.5; provided that the Eggborough Subsidiaries shall become Restricted Subsidiaries in the circumstances described under the definition of “Material Subsidiaries”.

“Restructuring” has the meaning ascribed thereto in the Creditor Restructuring Agreement.

“Restructuring Date” means the date on which the Restructuring becomes effective.

“Restructuring Documents” means the Creditor Restructuring Agreement and the Government Restructuring Agreement.

“Restructuring Event” means the occurrence of any one or more of the following events:

(A) (i) written notice being given to the Parent or any Restricted Subsidiary of revocation of a generation, supply or nuclear site licence (“Licence”) (other than following a merger of BEG and BEG UK, provided that the merged entity has a Licence) which is requisite to the conduct of the business at the relevant time or authorisation for the disposal of radioactive waste (“Disposal Authorisation”) (other than, in either case, in connection with the decommissioning of a power station or an exercise of the option under the Option Agreement) or (ii) the Parent or any Restricted Subsidiary agreeing in writing to any revocation or surrender of a Licence or Disposal Authorisation (other than, in either case, in connection with the decommissioning of the related power station or an exercise of the option under the Option Agreement) or (iii) any Licence or Disposal Authorisation lapsing (other than the lapsing of a nuclear site licence or of a Disposal Authorisation as a result of a disposal on arm’s length terms of the property or assets to which such Licence or Disposal Authorisation relates or as a result of the decommissioning of the related power station or an exercise of the option under the Option Agreement and other than following a merger of BEG and BEG UK (provide that the merged entity has a Licence and/or Disposal Authorisation, as applicable) or (iv) any legislation (whether primary or subordinate) being enacted terminating or revoking a Licence or Disposal Authorisation, provided that:

87

(1) the above shall not apply where a licence or licences or a disposal authorisation or authorisations on substantially no less favourable (in the opinion of the Trustee) terms is or are granted to the Parent and/or to one or more Restricted Subsidiaries and/or to one or more wholly-owned Subsidiaries of the Parent or a Restricted Subsidiary (and, in the case of the grant thereof to any Subsidiary of the Parent or a Restricted Subsidiary, such Subsidiary (if not a Guarantor) at the time of such grant either executes in favour of the Trustee an unconditional and irrevocable guarantee in respect of the Bonds and the Trust Deed in such form as the Trustee may approve (such approval not be withheld or delayed unreasonably, having regard to the interests of the Bondholders) or becomes a primary obligor under the Bonds);

(2) the above shall only apply, in the case of a Disposal Authorisation, if two directors of the Parent have not certified in good faith to the Trustee that such event is not materially adverse to the financial condition of the Parent or any Restricted Subsidiary;

(B) any modification (other than a modification which is of a formal, minor or technical nature or which falls within (A) above) being made to the terms and conditions of a Licence or Disposal Authorisation on or after the Issue Date unless two directors of the Parent have certified in good faith to the Trustee that the modified terms and conditions are not materially less favourable to the financial condition of the Parent or any Restricted Subsidiary;

(C) (i) BEG, BEPET, BETS or any other Group company which is party to the BSC from time to time being given notice of expulsion pursuant to the BSC or (ii) any modification being made to the BSC or (iii) any legislation (whether primary or subordinate) being enacted terminating or modifying the BSC, provided that any such termination or modification (as the case may be) is material in the context of the rights and obligations of BEG, BEPET, BETS or any other Group company which is party to the BSC from time to time under the BSC (it being acknowledged that the introduction of the proposed British Electricity Transmission and Trading Arrangements shall not constitute a material change for these purposes) and, if material, two directors of the Issuer have not certified in good faith to the Trustee that the termination or modification (as the case may be) is not materially adverse to the long term financial condition of the Parent and the Restricted Subsidiaries taken as a whole.

“Retail Prices Index” means the all items retail prices index for the United Kingdom published by the Office for National Statistics or at any future date such other index of retail prices as may have then replaced it.

“Revocation” has the meaning set out under Clause 14.5.

“Sales” means, in respect of any period, all Debts generated during such period in respect of which an Invoice has been sent to the relevant Debtor during such period.

“Scottish Debt” means a Debt generated by the Seller under a Contract governed by Scottish law.

“Screen Rate” means the British Bankers’ Association Interest Settlement Rate for Sterling for offering overnight deposits displayed on the appropriate page of the Telerate screen. If the agreed page is replaced or service ceases to be available, the Bank may, acting reasonably, specify another page or service displaying the appropriate rate after consultation with the Parent.

“Seasonal Basket” has the meaning set out in Clause 14.4(L)(13).

88

“SEC” means the United States Securities and Exchange Commission.

“Secretary of State” means the Secretary of State for Trade and Industry.

“Secondary Information” has the meaning set out in Clause 24.1(E)(1).

“Second Category Export Debt” means, in relation to a Debt, that the Debt represents a Debt owed by a Debtor to the Seller (without any deduction or netting in respect of debts owed by the Seller to such Debtor occurring in relation to the amount invoiced to the Debtor by the Seller) under Connected Two-way Trading Arrangements between the Seller and that Debtor.

“Second Intercompany Loan” means the intercompany loan between EPHL as lender and EPL as borrower dated on or about the Restructuring Date.

“Second Security Assignment” means the security assignment between EPL as assignor and EPHL as assignee dated on or about the Restructuring Date.

“Secured Basket” has the meaning set out in Clause 14.4(L)(13).

“Securities Act” means the United States Securities Act of 1933, as amended.

“Security Interest” means any mortgage, pledge, lien, charge, assignment, assignation, hypothecation or other security interest or any other agreement or arrangement having the effect of conferring security (including without limitation any sale and leaseback), but excludes for the avoidance of doubt, but without limitation, any rights of set-off or combination of accounts arising under common law, in equity or under statute or regulation.

“Seller” means British Energy Generation Limited or any other company to which British Energy Generation Limited transfers its rights and obligations in accordance with Clause 22.1.

“Set-Off Reserve Amount” has the meaning given to it in part 1 of schedule 2.

“Share Break Option” has the meaning given to “Break Option” in the Share Option Agreement.

“Share Enforcement Option” has the meaning given to “Enforcement Option” in the Share Option Agreement.

“Share Options” means the Share Break Option and the Share Enforcement Option.

“Share Option Agreement” means the share option agreement to be entered into between Barclays Bank PLC, EPHL, EPL and BEPET on or about the Restructuring Date.

“Special Share” means the special share in BEG, BEG UK, the Issuer and the Parent held by the Secretary of State which gives certain rights and protections to the holder, including the right to prevent any amendment to the anti-stakebuilding provisions in the Articles of Associations of such companies.

“Specimen Contracts” means the contracts and other documentation delivered by the Seller to the Bank pursuant to Clause 4.2(I).

“Standard & Poor’s” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc., or any of its Subsidiaries or successors.

89

“Standstill Arrangements” means the Standstill Agreement dated 14 February 2003 and the New Standstill Agreement dated 13 February 2004 as amended between, inter alia, the Parent and the Creditors (as defined therein).

“Start Date” means the date on which the Facility becomes available to the Sellers pursuant to Clause 4.

“Stated Maturity” means, when used with respect to any Financial Indebtedness or any instalment of interest thereon, the dates specified in such Financial Indebtedness as the fixed date or dates on which the principal (or any instalment of principal) of such Financial Indebtedness or such instalment of interest, as the case may be, is due and payable.

“Sterling” or “£” means the lawful currency for the time being of the United Kingdom.

“Subordinated Indebtedness” means indebtedness which is expressed to be subordinated to the unsubordinated indebtedness (including under the Bonds and the Finance Documents) of the Issuer, a Bond Guarantor or an Obligor, as applicable.

“Subsidiary” of any Person means:

(A) a corporation more than 50% of the combined Voting Shares of which is owned, directly or indirectly, by that Person or by one or more other Subsidiaries of the Person or by the Person and one or more Subsidiaries of the Person; or

(B) any other Person (other than a corporation) in which the Person, one or more Subsidiaries of the Person or such Person and one or more Subsidiaries of the Person, directly or indirectly, has at least a majority ownership and power to direct the policies, management and affairs of the Person.

“Target Amount” has the meaning given to it in the Contribution Agreement.

“Target Reserves” means all reserves required to be maintained (or applied or invested) under the Contribution Agreement.

“Termination Date” means the date on which the Bank’s obligations to purchase Debts under this Deed are terminated under Clause 17, 18 or 19.

“Termination Event” means an event specified as such in Clause 19.

“Test Statement” means a statement in respect of Unbilled Debts in a form and containing information satisfactory to the Bank.

“Third Party” has the meaning set out in Clause 20.

“Third Party Terms” has the meaning set out in Clause 20(B).

“Trading Arrangement” means a transaction entered into in the ordinary course of business on arm’s length terms and in accordance with trading policies adopted in accordance with schedule 3 of the Contribution Agreement relating to energy which is a commodity option, a commodity forward or future, commodity swap or other commodity transaction (including any grid trade or contract for differences), an energy-related environmental or renewable transaction, including, without limitation, trading in Renewables Obligation Certificates, or a transaction under an emissions trading scheme, including, without limitation, the European Union Greenhouse Gas Emissions Trading Scheme or any comparable scheme, in each case whether physically or financially settled.

90

“Transfer Agents” means the transfer agents named in the Paying Agency Agreement together with any successor or additional transfer agents appointed from time to time in connection with the Bonds under the Paying Agency Agreement.

“Trust Deed” means the deed so named dated on or before the Issue Date between the Issuer, the Bond Guarantors, the Restricted Subsidiaries and the Trustee and includes any amendment or supplement thereto.

“Trustee” means The Law Debenture Trust Corporation p.l.c. and includes all persons for the time being the trustee or trustees under the Trust Deed.

“Trustee Consent Letter” means the letter dated 28 July 2004 sent to various Law Debenture Companies, of which a copy has been supplied to the Bank, signed in consent by all its addressees.

“Two-way Trading Arrangements” means that the Seller, in addition to having a Contract with the Debtor giving rise to Debts owed by the Debtor to the Seller, also is a debtor of that Debtor or has a contract or other arrangement in place with that Debtor pursuant to which it may become a debtor of that Debtor, and “Two-way Trading Arrangement” means any one of them.

“UK GAAP” means generally accepted accounting principles applicable in the United Kingdom and approved by the Institute of Chartered Accountants of England and Wales, including Financial Reporting Standards and Statements of Standard Accounting Practices issued by the Accounting Standards Board Limited, as at 31 March 2004.

“UK GAAP Ratio” has the meaning set out under Clause 14.4(K).

“UK Listing Authority” means the United Kingdom Financial Services Authority (in its capacity as competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000).

“Unallocated Credit Notes” has the meaning given to it in part 1 of schedule 2.

“Unbilled Debts” means Debts in respect of which an Invoice has not been issued to the relevant Debtor at the time that such Debts (or their proceeds) are sold by the Seller but excluding, for the avoidance of doubt, Unbilled Non-Half-Hourly Debts.

“Unbilled Non-Half-Hourly Debts” means unbilled Debts owed to the Seller by Non-Half-Hourly Debtors.

“Unconnected Two-way Trading Arrangement” means a Two-way Trading Arrangement that is not a Connected Two-way Trading Arrangement.

“Uninsured Debt” means all Debts generated by an Uninsured Debtor and which are not insured under the Policy.

“Uninsured Debtor” means all Debtors other than Insured Debtors.

“Unrestricted Subsidiary” means (i) the Eggborough Subsidiaries (until such time as they become Restricted Subsidiaries in accordance with the proviso to the definition of Restricted Subsidiary) and (ii) any Subsidiary of the Parent designated as such in compliance with Clause 14.5.

91

“Unrestricted Subsidiary Indebtedness” of any Unrestricted Subsidiary means Financial Indebtedness of such Unrestricted Subsidiary:

(A) as to which none of the Parent, the Issuer or any Restricted Subsidiary is directly or indirectly liable (by virtue of the Parent, the Issuer or any such Restricted Subsidiary being the primary obligor on, guarantor of, or otherwise liable in any respect to, such Financial Indebtedness), except Guaranteed Debt of the Parent, the Issuer or any Restricted Subsidiary relating to any Affiliate, in which case (unless the incurrence of such Guaranteed Debt resulted in a Restricted Payment at the time of incurrence) the Parent shall be deemed to have made a Restricted Payment equal to the principal amount of any such Financial Indebtedness to the extent guaranteed at the time such Affiliate is designated an Unrestricted Subsidiary; and

(B) which, upon the occurrence of a default with respect thereto, does not result in, or permit any holder of any Financial Indebtedness of the Parent, the Issuer, or any Restricted Subsidiary to declare, a default on such Financial Indebtedness of the Parent, the Issuer or any Subsidiary or cause the payment thereof to be accelerated or payable prior to its Stated Maturity; provided that, notwithstanding the foregoing, any Unrestricted Subsidiary may guarantee the Bonds.

“US GAAP” means generally accepted accounting principles in the United States of America as at 31 March 2004.

“Utilisation” means a utilisation of the Facility.

“Utilisation Date” means each Business Day during the Availability Period.

“Utilisation Notice” means a notice substantially in the form set out in schedule 5 or such other form as may be agreed between the parties.

“VAT” means value added tax as defined in the Value Added Tax Act 1994 or any other similar sales of goods and services tax.

“Voting Shares” of any Person means shares of the Person which ordinarily have voting power for the election of directors or persons performing similar functions of such Person, whether at all times or only for so long as no senior class of securities has that voting power by reason of any contingency.

“Weekly Report” has the meaning set out in Clause 14.2(B).

“Weighted Average Terms of Trade” means 60 days.

A reference to the date of this Deed is to be construed as the date on which the Obligors signs this Deed.

92

SCHEDULE 4 : FORM OF NOTICE OF ASSIGNMENT OR TRUST

[On the letterhead of the Seller/Bank]

To:    [Debtor]

[DATE]

Dear Sirs

Master Trade Receivables Financing Facility Agreement (the “Agreement”) dated • 2004 between British Energy Generation Limited (as “Seller”) and Barclays Bank PLC (the “Bank”)

This letter constitutes notice to you that, by the Agreement, the Seller has assigned and/or holds on trust absolutely in favour of the Bank all its rights in respect of the following invoices and the following amounts you owe to us but which have not yet been invoiced relating to electricity we have supplied since the period covered by our most recent invoice (“Unbilled Amounts”).

Invoice Number	Date of Invoice	Amount	Due Date (N/A for unbilled amounts)
Unbilled Amounts1

All payments due from you under the above invoices, and in respect of the Unbilled Amounts referred to above (when invoiced), must be paid to the Bank for its own account as follows: [insert Collection Account details].

Yours faithfully

[Company/Barclays Bank PLC]

Authorised signatory

¹ Excluding CCL + VAT.

93

SCHEDULE 5: NOTICES

PART 1: FORM OF UTILISATION NOTICE

[On the letterhead of the Seller]

To: Barclays Bank PLC (the “Bank”)

c/o Barclays Capital

Structured Trade & Export Finance

5 The North Colonnade

Canary Wharf

London E14 4BB

Attention: Ian Stuttard

From: British Energy Generation Limited

[Date of Utilisation]

Master Trade Receivables Financing Facility Agreement (the “Agreement”) dated Ÿ 2004 between British Energy Generation Limited (as “Seller”) and Barclays Bank PLC (the “Bank”)

1. We refer to the Agreement. This is a Utilisation Notice. Terms defined in the Agreement have the same meaning in this Utilisation Notice.

2. The Seller wishes to utilise the Facility and we agree to [sell to the Bank the Debts referred to in the attached appendix A² and appendix B³] [and] [sell to the Bank the proceeds of the Restricted Debts referred to in the attached appendix C⁴] in accordance with the Agreement.

3. [We attach copies of all relevant Invoices for the Debts (other than Unbilled Debts) referred to in the attached appendices and certify that each copy Invoice attached is correct, complete and in full force and effect as at today’s date].⁵

4. The Seller hereby:

(A) sells and (other than Restricted Debts) assigns to the Bank, with full title guarantee (and as regards the Scottish Debts, absolute warrandice) its whole right, title, interest and benefit in, to, under and relative to all of the Debts referred to in appendix A and/or, as the case may be, appendix B and/or, as the case may be, the proceeds of all the Restricted Debts referred to in appendix C; and

(B) declares that it holds in trust in favour of the Bank on the terms set out in the Agreement its whole right, title, interest and benefit in, to, under and relative to (i) all of the Restricted Debts (including the proceeds thereof) referred to in appendix C; and (ii) pending perfection of the legal title of the Bank thereto pursuant to the Agreement or otherwise, all of the Scottish Debts that are not Restricted Debts and that are referred to in appendix B.

² Appendix A should contain all the assignable Debts owed by English Debtors.

³ Appendix B should contain all the assignable Scottish Debts.

⁴ Appendix C should contain all the Restricted Debts (both Scottish and English).

⁵ Delete if not previously requested by the Bank.

94

5. We make the representations required to be made pursuant to Clause 13 of the Agreement.

6. We confirm that:

(A) the Debts (other than Restricted Debts) being sold and the Restricted Debts whose proceeds are being sold referred to in paragraph 2 above and the attached appendices together constitute all outstanding Debts legally and beneficially owned by the Seller as at that Utilisation Date (save that to the extent any part of a Debt represents a Debt which has previously been sold to the Bank, then that part of the Debt need not be beneficially owned by the Seller);

(B) there are valid and binding Contracts in existence relating to each of the above Debts;

(C) no Default, Termination Event or Potential Termination Event is continuing or will result from the proposed Utilisation;

(D) the Concentration Limit Adjustment for the Debts referred to in the Utilisation Notice is • and we attach the calculations establishing this figure;

(E) the General Concentration Limit Adjustment for the Debts referred to in the Utilisation Notice is • and we attach the calculations establishing this figure and details of the Debtor and Contract to which such Debts relate;

(F) the Requested Purchase Price does not include any amounts in respect of billed Debts or Unbilled Debts where such amounts have previously been sold to the Bank as Unbilled Debts;

(G) [a Notice of Assignment or Trust relating to the sale of such Debts (or their proceeds) will be given to each relevant Debtor within five (5) Business Days of the date any Debts (or their proceeds) are sold to the Bank]⁶;

(H) it has no Two-way Trading Arrangements with any Debtor to which any Restricted Debt offered in the Utilisation Notice relates other than as disclosed in the calculations in respect of the General Concentration Limit in respect of such Utilisation Notice;

(I) as regards Two-way Trading Arrangements with any Debtor to which any Debt offered in the Utilisation Notice relates which is not a Restricted Debt, it has no Two-way Trading Arrangements other than:

(1) Unconnected Two-way Trading Arrangements; and/or

(2) Connected Two-way Trading Arrangements:

(a) under which First Category Export Debts arise; or

⁶ Only relevant during the Pre-Restructuring Period of if the Bank has elected to make the Facility disclosed in accordance with Clause 8.

95

(b) under which Second Category Export Debts arise; and

(J) it has stored all supporting information relevant to the Utilisation Notice in an electronic format acceptable to the Bank.

7. Please remit £•, being the aggregate Requested Purchase Price in Sterling, to the following account of the Seller: [insert relevant account details of Seller].

By:

British Energy Generation Limited

Authorised signatory

96

APPENDIX A: ASSIGNABLE ENGLISH DEBTS

Debtor Invoice
No./Test
Statement
No.
Start
Date of
Period of
Supply
Invoice
date/Test
Statement
Date
Invoice
amount
(billed
only)
Maturity
Date
(billed
only)
Eligible
Debt?
Unbilled
Entitlement
(applicable
for Unbilled
Debts only)
(£)
Scottish
Debt?
Volume
of
electricity
supplied
(kWh)

97

APPENDIX B: ASSIGNABLE SCOTTISH DEBTS

Debtor Invoice
No./Test
Statement
No.
Start
Date of
Period of
Supply
Invoice
date/Test
Statement
Date
Invoice
amount
(billed
only)
Maturity
Date
(billed
only)
Eligible
Debt?
Unbilled
Entitlement
(applicable
for Unbilled
Debts only)
(£)
Scottish
Debt?
Volume
of
electricity
supplied
(kWh)

98

APPENDIX C: RESTRICTED DEBTS (SCOTTISH AND ENGLISH)

Debtor Invoice
No./Test
Statement
No.
Start
Date of
Period of
Supply
Invoice
date/Test
Statement
Date
Invoice
amount
(billed
only)
Maturity
Date
(billed
only)
Eligible
Debt?
Unbilled
Entitlement
(applicable
for Unbilled
Debts only)
(£)
Scottish
Debt?
Volume
of
electricity
supplied
(kWh)

99

PART 2: ADDITIONAL UTILISATION NOTICE

[On the letterhead of the Seller]

To: Barclays Bank PLC (the “Bank”)

c/o Barclays Capital

Structured Trade & Export Finance

5 The North Colonnade

Canary Wharf

London E14 4BB

From: British Energy Generation Limited

[DATE]

Master Trade Receivables Financing Facility Agreement (the “Agreement”) dated • 2004 between British Energy Generation Limited (as “Seller”) and Barclays Bank PLC (the “Bank”)

1. We refer to the Agreement. This is an Additional Utilisation Notice. Terms defined in the Agreement have the same meaning in this Additional Utilisation Notice.

2. The Seller wishes to request a further amount by way of purchase price for previously sold Relevant Debts.

3. We make the representations required to be made pursuant to Clause 13 of the Agreement and confirm that such a further Utilisation would not cause a breach of Clause 3 of the Agreement.

4. We confirm that no Default, Termination Event or Potential Termination Event is continuing or will result from the proposed payment of the requested funds.

5. Please remit £•, being the requested funds in Sterling, to the following account of the Seller: [insert relevant account details of Seller].

By:

British Energy Generation Limited

Authorised signatory

100

SCHEDULE 6: FORM OF ACCESSION DEED

THIS DEED is dated • and made

BETWEEN:

(1) THE COMPANIES NAMED IN SCHEDULE 1 HERETO, (the “Companies”); and

(2) BARCLAYS BANK PLC, (the “Bank”), registered in England and Wales as company number 1026167 and having its registered office at 54 Lombard Street, London EC3P 3AH.

BACKGROUND:

(A) The Bank has agreed to make a debt purchase facility available to the Seller on and subject to the terms and conditions of the Agreement.

(B) The Companies wish to become a party to the Agreement as Obligors and to the Guarantee as Guarantors.

NOW IT IS AGREED as follows:

1. Definitions and Construction

1.1 In this Accession Deed, terms used in the Agreement and the Guarantee (unless otherwise defined in this Accession Deed) have the same meaning and construction and:

“Agreement” means the Master Trade Receivables Financing Facility Agreement dated • 2004 between British Energy Generation Limited (as “Seller”) and the Bank, as the same may have been, or may from time to time be, amended, varied, modified, supplemented or novated;

“Companies” means the companies named in schedule 1 hereto, and any reference to any “Company” shall be read and construed accordingly;

“Guarantee” means the guarantee entered into or acceded to by the Material Subsidiaries in favour of the Bank and dated a date no later than 5 Business Days following the Issue Date, as the same may have been, or may from time to time be, amended, varied, modified, supplemented or novated;

“Relevant Representations” means the representations and warranties set out in Clauses 13.1(A) to 13.1(H) (inclusive), 13.1(J), 13.1(K) and 13.1(P) to 13.1(Q) (inclusive) of the Agreement.

1.2 Unless the context otherwise requires, any reference in this document to:

(A) the “Bank”, any “Obligor”, any “Guarantor” or [any]/[the] “Company” shall be construed so as to include its successors in title, permitted assigns and permitted transferees;

(B) a “person” includes any person, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having separate legal personality) or two or more of the foregoing; and

101

(C) a provision of law is a reference to that provision as amended or re-enacted.

1.3 Clause and Schedule headings are for ease of reference only.

2. Terms of Accession

2.1 Each Company confirms that it has received a copy of the Agreement and the Guarantee, together with such other documents and information as it has required in connection herewith and therewith.

2.2 With effect from the date on which the Bank notifies the Parent that it is satisfied that it has received (in form and substance satisfactory to it) the conditions precedent listed in schedule 2 hereto (the “Effective Date”), each Company agrees to become both an Obligor under the Agreement and a Guarantor under the Guarantee pursuant to Clause 20.[2]/[3] of the Agreement.

2.3 On and from the Effective Date, each Company agrees to be bound by the terms of the Agreement and the Guarantee as if it had been an original party thereto, and undertakes to perform all the obligations expressed to be undertaken under the Agreement by an Obligor and the Guarantee by a Guarantor.

2.4 Each Company makes the Relevant Representations on the date of this Accession Deed and on the Effective Date, and confirms that these are true and correct in relation to it as at each such date as if made by reference to the facts and circumstances then existing.

3. Governing Law

This Accession Deed shall be governed by English law (save that those terms of this Deed which are specific to Scottish law shall be construed in accordance with Scottish law). Each Company irrevocably agrees that the English courts shall have non-exclusive jurisdiction in relation to any legal action or proceedings arising out of or in connection with this Deed (“Proceedings”) and waives any objection to Proceedings in such courts on the grounds of venue or on the grounds that Proceedings have been brought in an inappropriate forum.

4. Deed

Each party to this Deed intends this document to be a deed and each of the Companies executes and delivers it as its deed.

IN WITNESS WHEREOF this Accession Deed has been executed as a deed by the Companies and has been signed by or on behalf of the Bank and is intended to be and is hereby delivered as a deed on the date first above written.

102

EXECUTED and DELIVERED as a DEED
by BRITISH ENERGY GENERATION	)
LIMITED	)
acting by	)

Director

Director/Secretary

Address:	British Energy Generation Limited
	3 Redwood Crescent
	Peel Park
	East Kilbride
	G74 5PR
Tel:	+44(0) 13552 62000
Fax:	+44(0) 13552 62567
Attention:	The Group Treasurer

SIGNED by	)
[                                         ]	)
duly authorised attorney	)
for and on behalf of:	)
BARCLAYS BANK PLC	)
in the presence of:

Witness’ signature:

Witness name:

Witness’ address:

Witness’ occupation:

Address:

c/o Barclays Capital

Structured Trade & Export Finance

5 The North Colonnade

Canary Wharf

London E14 4BB

Tel: +44(0)20 7773 1815

Fax: +44(0)20 7773 1831

Attention: Ian Stuttard

103

SCHEDULE 1: THE COMPANIES

104

SCHEDULE 2: CONDITIONS PRECEDENT

1. [The Guarantee duly executed by each of the Companies.]⁷

2. An Accession Deed, duly executed by each of the Companies.

3. Certified copies of the memorandum, articles of association and certificate of incorporation of each Company.

4. A copy of the resolution of the board of directors of each Company approving the terms of, and the transactions contemplated by, this Accession Deed, the Agreement and the Guarantee and authorising a certain person or persons to sign this Accession Deed [and the Guarantee].

5. A certificate of each Company (signed by a director) confirming that entering into and performing its obligations under the Agreement and the Guarantee would not cause any borrowing and/or guaranteeing or similar limit binding on that Company to be exceeded.

6. A certificate of an authorised signatory of each Company certifying that each copy document relating to it specified in paragraphs 3 and 4 above are correct, complete and in full force and effect as at a date no earlier than the date of this Accession Deed.

7. A specimen of the signature of each person authorised by each Company to sign this Accession Deed [and the Guarantee] on behalf of that Company and to sign and/or send all documents and notices to be signed and/or sent by that Company under this Accession Deed, the Agreement and the Guarantee.

8. [A capacity and enforceability legal opinion as to Scottish law of [Scottish counsel] addressed to the Bank.]⁸

9. [A capacity and enforceability legal opinion as to English law of Simmons & Simmons addressed to the Bank.]⁹

10. A copy, certified a true copy by or on behalf of each Company, of each such law, decree, consent, licence, approval, registration or declaration (if any) as is, in the opinion of counsel to the Bank, necessary to render [the Guarantee and] the relevant Accession Deed legal, valid, binding and enforceable, to make [the Guarantee and] such Accession Deed admissible in evidence in such Company’s jurisdiction of incorporation and to enable such a Company to perform its obligations under such Accession Deed, the Agreement and Guarantee.

11. A copy of the latest audited financial statements of each of the Companies.

⁷ Only a CP to accession by Guarantors acceding on the Initial Accession Date.

⁸ Delete if no acceding company is incorporated in Scotland.

⁹ Delete if no acceding company is incorporated in England & Wales.

105

SCHEDULE 7: FORM OF COMPLIANCE CERTIFICATE

[On the letterhead of the Seller]

To: Barclays Bank PLC (the “Bank”)

c/o Barclays Capital

Structured Trade & Export Finance

5 The North Colonnade

Canary Wharf

London E14 4BB

From: British Energy Generation Limited

Dated:

Dear Sirs

Master Trade Receivables Financing Facility Agreement (the “Agreement”) dated • 2004 between British Energy Generation Limited (as “Seller”) and Barclays Bank PLC (the “Bank”)

1. We refer to the Agreement. This is a Compliance Certificate. Terms defined in the Agreement have the same meaning in this Compliance Certificate unless given a different meaning in this Compliance Certificate.

2. We confirm that for the testing period from • to •:

(A) Consolidated EBITDA of the Group and the Unrestricted Subsidiaries is •;

(B) Consolidated Interest Expense of the Parent and the Unrestricted Subsidiaries (excluding any charges in respect of revalorisation or the unwinding of any discount on liabilities other than Financial Indebtedness) is •; and

(C) The ratio of Consolidated EBITDA of the Group and the Unrestricted Subsidiaries to the Consolidated Interest Expense of the Parent and the Unrestricted Subsidiaries (excluding any charges in respect of revalorisation or the unwinding of any discount on liabilities other than Financial Indebtedness) is •.

3. We attach the calculations establishing the figures referred to in paragraph 2 above.

4. We confirm that no Default, Termination Event or Potential Termination Event is continuing as at [insert relevant test date].

Signed:
	(Director)	(Director)

106

SCHEDULE 8: FORM OF GUARANTEE

DATED: [ • ] 200[•]

Guarantee

between

The companies named in the schedule hereto

as the Guarantors

and

Barclays Bank PLC

as Bank

relating to

a Receivables Financing Facility

107

THIS GUARANTEE is dated                      200[•] and made

BETWEEN:

(1) THE COMPANIES NAMED IN THE SCHEDULE HERETO, (the “Guarantors”); and

(2) BARCLAYS BANK PLC, (the “Bank”), registered in England and Wales as company number 1026167 and having its registered office at 54 Lombard Street, London EC3P 3AH.

BACKGROUND:

(A) The Bank has agreed to make a receivables financing facility (the “Facility”) available to the Seller on and subject to the terms and conditions of the Agreement.

(B) It is a condition subsequent of the Facility that the Guarantors enter into this Guarantee for the purpose of securing the Obligations (as defined below).

NOW IT IS AGREED as follows:

1. Definitions and Construction

1.1 In this Guarantee, terms used in the Agreement (unless otherwise defined in this Guarantee) have the same meaning and construction and:

“Agreement” means the master trade receivables financing facility agreement between the Bank and the Seller dated • 2004;

“Documents” means this Guarantee, the Agreement and the Deed of Charge (each as defined in the Agreement) and all other documents entered into pursuant thereto or in connection therewith; and

“Obligations” means all present and future moneys, debts, obligations and liabilities due, owing or incurred by any Obligor to the Bank under the Documents or which any Obligor may now or at any time hereafter owe or incur to the Bank under or pursuant to any of such Documents, whether alone or jointly or jointly and severally, with any other person and whether as principal, surety or otherwise, including any obligations which are or become void, voidable, unenforceable or ineffective as against such Obligor for any reason whatsoever, whether or not known to the Bank or any Obligor and “Obligation” shall be construed accordingly.

1.2 Unless the context otherwise requires, any reference in this document to:

(A) any reference to a Document shall be construed as a reference to such Document as the same may have been, or may from time to time be, amended, varied, modified, supplemented or novated;

(B) the “Bank”, any “Obligor” or any “Guarantor” shall be construed so as to include successors in title, permitted assigns and permitted transferees and, in the case of an “Obligor” or a “Guarantor”, any person who accedes to the Agreement as an Obligor and to this Guarantee as a Guarantor pursuant to an Accession Deed;

108

(C) a “person” includes any person, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having separate legal personality);

(D) a “clause” or a “schedule” is a reference to a clause or a schedule of this Guarantee; and

(E) a provision of law is a reference to that provision as amended or re-enacted.

1.3 Clause and Schedule headings are for ease of reference only.

2. Guarantee and Indemnities

2.1 Each Guarantor irrevocably and unconditionally:

(A) guarantees to the Bank due performance by any of the Obligors of all the Obligations;

(B) undertakes with the Bank that whenever the Obligors or any of them do not pay any amount when due under or in connection with or arising out of the Obligations, it shall immediately on demand pay that amount as if it was that failing Obligor; and

(C) agrees, as a primary obligation, to indemnify the Bank immediately on demand against any cost, loss or liability suffered by the Bank as a result of any Obligation being or becoming unenforceable, void, voidable, ineffective, invalid or illegal (and the amount of the cost, loss or liability shall be equal to the amount which the Bank would otherwise have been entitled to recover).

2.2 Without prejudice to clause 2.1, but taking into account any payments made thereunder, each Guarantor agrees, as a primary obligation, to indemnify the Bank in full on demand from and against all losses, costs and expenses incurred or suffered by the Bank as a result of or in connection with any failure or breach by the failing Obligor or Obligors to fully discharge or pay any of the Obligations as and when the same shall respectively become (or, but for any invalidity, illegality, voidability, unenforceability or ineffectiveness, would have become) due for payment or discharge.

2.3 Without prejudice to clause 2.1, but taking into account any payments made thereunder, each Guarantor agrees to indemnify the Bank and keep it indemnified on demand from and against all liabilities, losses, costs and expenses incurred or suffered by the Bank in connection with or as a result of any of the Obligations expressed to be assumed by the Guarantors in this Guarantee not being performed or observed.

2.4 The obligations of each Guarantor under each of clauses 2.1, 2.2 and 2.3 shall be separate and independent from each other. Each Guarantor shall be jointly and severally liable in respect of the obligations and undertakings expressed to be assumed by each of the Guarantors under this Clause 2.

2.5 Unless the Bank otherwise agrees in writing, each payment by a Guarantor under clauses 2.1, 2.2 and 2.4 will be made in Sterling.

109

3. Continuing Security

3.1 The obligations of each Guarantor contained in this Guarantee shall constitute and be continuing obligations and shall not be satisfied, discharged or affected by any intermediate performance of all or any of the Obligations.

4. Preservation of Rights

4.1 Neither the obligations expressed to be assumed by each Guarantor in this Guarantee nor the rights, powers and remedies conferred upon the Bank by this Guarantee or by law shall be discharged, impaired or otherwise affected by:

(A) any increase in, or any reduction, discontinuance or other variation of, any facility made available to an Obligor or a Guarantor or any grant to an Obligor or a Guarantor of any new facility;

(B) any amendment to, or any variation, novation, waiver or release of, or other dealing with, any of the Obligations or any right or remedy in respect thereof;

(C) any amendment, variation, breach, novation, supplement or termination of or to any Document;

(D) any time or other indulgence being granted or agreed to be granted to an Obligor or a Guarantor;

(E) any agreement, arrangement or compromise entered into with an Obligor or a Guarantor or any variation or termination thereof;

(F) the Bank doing or not doing any of the things referred to in clause 4.2 or any act or omission in connection therewith;

(G) any act or omission in taking up, holding, perfecting, enforcing or realising any other security for all or any of the Obligations or any variation, novation, release, discharge, exchange or substitution thereof or other dealing therewith;

(H) any of the Obligations or any security therefor being or becoming illegal, invalid, unenforceable or ineffective in any respect;

(I) the Bank, any Guarantor or any Obligor becoming insolvent or any change in their respective status, function, control, ownership, name or constitution;

(J) any other act, event or omission which, but for this clause 4.1, would or might operate to discharge, impair or otherwise affect any of the obligations expressed to be assumed by any Guarantor in this Guarantee or any of the rights, powers or remedies conferred upon the Bank by this Guarantee or by law.

4.2 The Bank shall not be obliged before exercising any of the rights, powers or remedies conferred upon it by this Guarantee or by law against any Guarantor:

(A) subject to clauses 2.1 and 2.2, to make any demand on any Obligor or any other person;

110

(B) to enforce or exercise or seek to enforce or exercise any claim, right or remedy, whether conferred by any of the Documents or otherwise, against any Obligor or against any assets of any Obligor;

(C) to take any action or obtain any judgment in any court against any Obligor, or against any assets of any Obligor;

(D) to make or file any claim or proof in any insolvency, receivership, administration, bankruptcy, liquidation, winding-up or dissolution of, or other proceeding relating to, any Obligor; or

(E) to enforce or seek to enforce any other security taken in respect of any of the Obligations.

5. Effectiveness of Security

5.1 This Guarantee shall be in addition to and independent of any other security which the Bank may now or at any time in the future hold or take (whether from any Obligor, any Guarantor, or any other person) for or in respect of the Obligations or any of them or any other obligations whatsoever and:

(A) shall not operate so as in any way to prejudice, determine, affect or merge in or with any such other security; and

(B) shall not be prejudiced, determined or affected by any such other security or by any release, reassignment or discharge thereof.

6. Avoidance of Payments

6.1 Any settlement, release or discharge between a Guarantor and the Bank shall (whether or not so expressed) be deemed to be conditional upon no right, security, disposition or payment granted or made to the Bank by any Guarantor or any Obligor being void, avoided or set aside, either wholly or in part, for any reason whatsoever, including by virtue of any provisions or enactments relating to bankruptcy, insolvency, administration, liquidation or winding-up for the time being in force.

6.2 In the event of the whole or any part of any such right, security, disposition or payment being so void, avoided or set aside, the Bank shall be entitled to enforce this Guarantee against any Guarantor subsequently as if such settlement, release or discharge had not occurred and such right, security, disposition or payment (or, as the case may be, the part thereof so void, avoided or set aside) had not been granted or made.

7. Value Added Tax

7.1 All sums payable by the Guarantors or any of them under or pursuant to this Guarantee are exclusive of VAT. Accordingly, each Guarantor shall pay such VAT in addition to any sum which would otherwise be due.

8. Payments

Each payment to be made by a Guarantor under this Guarantee shall be made to the Bank, in Sterling in accordance with the terms hereof, in such manner as the Bank may from time to time direct.

111

9. New Accounts

If for any reason this Guarantee ceases to be a continuing security to the Bank, the Bank may either continue any then existing account(s) with the Obligors or open one or more fresh accounts with the Obligors, but in any case the obligations expressed to be assumed by the Guarantors in this Guarantee shall remain unaffected by and be computed without regard to any payment into or out of any such account after this Guarantee has ceased to be continuing security.

10. Deferral of Guarantors’ rights

Each Guarantor agrees that until the Bank is satisfied that (i) the Bank is under no commitment, obligation or liability (whether actual or contingent) to the Obligors or any other person which could lead to the Obligors incurring any further Obligation to the Bank, (ii) the Obligors have no Obligation to the Bank in respect of any matter or thing whatsoever and (iii) each Guarantor has no liability (whether actual or contingent) to the Bank under or pursuant to this Guarantee, such Guarantor shall not, without the Bank’s prior written consent:

(A) in respect of any amount paid or payable by such Guarantor (whether actually or continently) under or in respect of this Guarantee, seek to recover or enforce repayment from or by the Obligors or any other surety, whether by indemnity, subrogation, contribution or otherwise, or to exercise or take the benefit of any right, claim or remedy of any kind which may accrue howsoever to such Guarantor in respect of such amount; or

(B) take or permit to subsist any security from any Obligor or any other surety for or in respect of any of the obligations expressed to be assumed by such Guarantor under this Guarantee; or

(C) in the event of any bankruptcy, liquidation, winding-up or dissolution of any Obligor or any other surety, claim or prove in competition with the Bank, or accept any direct or indirect payment or distribution, in respect of any moneys owing to such Guarantor by any Obligor or such other surety on any account whatsoever.

11. Set-Off

The Bank may set off any matured obligation due from any Guarantor hereunder (to the extent beneficially owned by the Bank) against any matured obligation owed by the Bank to such Guarantor, regardless of the place of payment, booking branch or currency of either obligation.

12. Appropriations

12.1 Until the Bank is satisfied that (i) the Bank is under no commitment, obligation or liability (whether actual or contingent) to the Obligors or any other person which could lead to the Obligors incurring any further Obligation to the Bank and (ii) the Obligors have no Obligation to the Bank in respect of any matter or thing whatsoever, the Bank may:

(A) refrain from applying or enforcing any other moneys, security or rights held or received by it in respect of the Obligations or any of them, or apply and/or enforce such moneys, security or rights in such manner and order as it sees fit (whether against the Obligations or otherwise) and the Guarantors shall not be entitled to the benefit of the same; and

112

(B) hold in any account referred to in clause 9 (such account to be interest bearing), any moneys received from any Guarantor or on account of any Guarantor’s liability.

13. Stamp Duty

The Guarantors shall pay all stamp, documentary, registration and other taxes to which this Guarantee or any judgment given in connection with this Guarantee is or at any time may be subject.

14. Assignment and Transfer

14.1 Subject to clause 24 of the Agreement, the Bank may freely assign, transfer or otherwise deal in the whole or any part of its rights, benefits and/or obligations under this Guarantee to any person to whom it is entitled to assign its rights pursuant to clause 23 of the Agreement.

14.2 Each Guarantor may not assign or transfer any of its rights, benefits or obligations under this Guarantee or enter into any transaction or arrangement which would result in any of those rights, benefits or obligations passing to or being held in trust for or for the benefit of another person.

14.3 Each Guarantor will, on the Bank’s request, immediately execute and deliver to the Bank any form of instrument or other writing required by the Bank to confirm or facilitate any assignment, transfer or other dealing referred to in clause 14.1.

15. Certificate

Any demand, notification or certificate given by the Bank specifying all or any amounts at any time due from any Guarantor under any provision of this Guarantee shall, in the absence of manifest error, be conclusive and binding on such Guarantor.

16. Remedies and Waivers

No failure to exercise, nor any delay in exercising, on the part of the Bank, any right or remedy under this Guarantee shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Guarantee are cumulative and not exclusive of any rights or remedies provided by law.

17. Successors and Assigns

This Guarantee shall inure to the benefit of and be binding upon the respective successors and assigns of the Bank and each Guarantor.

18. Partial Invalidity

If, at any time, any provision of this Guarantee is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

113

19. Notices

19.1 Any account, demand, consent, record, election or notice required or permitted to be given under this Guarantee shall be in writing and sent by first class letter or telecopy addressed as follows:

If to the Bank, to:

Barclays Bank PLC

5 The North Colonnade

Canary Wharf

London EC14 4BB

Attention:	[Ian Stuttard], Structured Trade and Export Finance
Facsimile:	+44 (0)20 7773 1831
If to any Guarantor, to:
[                                ]
Attention:	[                    ]
Facsimile:	[                    ]

Or in each case to such other person or address or addresses as the party entitled to receive the same may notify in writing to the other party hereto. All notices by facsimile shall also be sent by post on the day of sending. Notices shall be deemed given when received.

20. Ownership of Guarantee

This Guarantee is and will remain the property of the Bank.

21. Governing Law and Jurisdiction

This Guarantee is governed by English law. Each Guarantor irrevocably agrees that the English courts shall have non-exclusive jurisdiction in relation to any legal action or proceedings arising out of or in connection with this Guarantee (“Proceedings”) and waives any objection to Proceedings in such courts on the grounds of venue or on the grounds that Proceedings have been brought in an inappropriate forum.

22. Deed

Each of the Guarantors and the Bank intends this document to be a deed and each Guarantor executes and delivers it as its deed.

IN WITNESS WHEREOF this Guarantee has been executed as a deed by the Guarantors and has been signed by or on behalf of the Bank and is intended to be and is hereby delivered as a deed on the date first above written.

114

EXECUTED and DELIVERED as a DEED by	)
(Director)	)
and                                  (Director)	)
for and on behalf of:	)
[GUARANTOR]	)
in the presence of:

Witness’ signature:

Witness name:

Witness’ address:

Witness’ occupation:

Address: [•]

EXECUTED and DELIVERED as a DEED by	)
[MICHAEL RAYNES]	)
duly authorised attorney	)
for and on behalf of:	)
BARCLAYS BANK PLC	)
in the presence of:

Witness’ signature:

Witness name:

Witness’ address:

Witness’ occupation:

Address:

c/o Barclays Capital

Structured Trade & Export Finance

5 The North Colonnade

Canary Wharf

London E14 4BB

Tel: +44(0)20 7773 1815

Fax: +44(0)20 7773 1831

Attention: [Ian Stuttard]

115

SCHEDULE: THE GUARANTORS

[For information only – Guarantors to be determined in accordance with Clause 22.2 of the

Agreement]

116

SCHEDULE 9: FORM OF DEED OF CHARGE

DATED: [ • ] 200[•]

Deed of Charge

between

British Energy Generation Limited

as the Company

and

Barclays Bank PLC

as Bank

relating to

a Receivables Financing Facility

117

THIS DEED OF CHARGE is dated                    200[•] and made

BETWEEN:

(1) BRITISH ENERGY GENERATION LIMITED, (the “Company”), registered in England and Wales as company number 3076445 and having its registered office at Barnett Way, Barnwood, Gloucester GL4 3RS.; and

(2) BARCLAYS BANK PLC, (the “Bank”), registered in England and Wales as company number 1026167 and having its registered office at 54 Lombard Street, London EC3P 3AH.

BACKGROUND:

(A) The Bank has agreed to make a receivables financing facility (the “Facility”) available to the Company on and subject to the terms and conditions of the Agreement.

(B) It is a condition precedent to the first Utilisation of that Facility that the Company enter into this Deed of Charge for the purpose of securing the Secured Obligations (as defined below).

NOW IT IS AGREED as follows:

1. Definitions and Construction

1.1 Definitions

In this Deed of Charge, words and phrases defined in the Agreement (unless otherwise defined in this Deed of Charge) shall have the same meaning and:

“Agreement” means the master trade receivables financing facility agreement between the Bank and the Company dated 20 August 2004;

“Billing Process Assets” means all the property of the Company in records, systems and other assets necessary for the production of Invoices by the Company;

“Charged Property” means the assets of the Company charged in favour of the Bank by or pursuant to this Deed of Charge;

“Collection Account” means the Sterling account in the name of the Bank opened with Barclays Bank PLC at its branch at 54 Lombard Street numbered 70024090 (sort code 20-32-53) and designated Barclays re: British Energy Generation Limited.

“Debt” means indebtedness (including unbilled indebtedness) in respect of the supply of electricity of a Debtor to a Seller under a Contract (including any amount payable by the Debtor to the Seller under the relevant Contract in respect of CCL or VAT or, in the case of unbilled indebtedness, such amount as would be payable by the Debtor to the Seller under the relevant Contract in respect of CCL or VAT on that unbilled indebtedness if it were invoiced) and includes the right to payment of any interest or finance charges and all other rights of such Seller (including to issue Invoices in respect of unbilled indebtedness) under the Contract.

118

“Documents” means this Deed of Charge, the Agreement and the Guarantee (each as defined in the Agreement) and all other documents entered into pursuant thereto or in connection therewith;

“DTI Security” means, subject to Clause 16 of the Agreement, the security over the Charged Property created pursuant to a debenture between, among others, the Company and the Secretary of State for Trade and Industry dated 26 September 2002 as amended by a deed of amendment dated 28 November 2002;

“Encumbrance” means any mortgage, pledge, lien, charge, assignment, assignation, hypothecation or other security interest or any other agreement or arrangement having the effect of conferring security (including without limitation any sale and leaseback), but excludes for the avoidance of doubt, but without limitation, any rights of set-off or combination of accounts arising under common law, in equity or under any applicable statute or regulation;

“LPA” means the Law of Property Act 1925;

“Policies” means the credit insurance policies that the Seller may take out with an Insurer from time to time in respect of any or all of the Debtors and “Policy” means any one of them.

“Receiver” means any person appointed by the Bank pursuant to any power of appointment contained or referred to in this Deed of Charge to be a receiver or a receiver and manager or where relevant, an administrative receiver of the whole or any part of the Charged Property (whether alone or jointly with any other person);

“Scottish Debt” means a Debt generated by the Seller under a Contract governed by Scottish law.

“Secured Obligations” means all present and future moneys, debts, obligations and liabilities due, owing or incurred by the Obligors to the Bank under the Documents or which the Obligors may now or at any time hereafter owe or incur to the Bank under or pursuant to, any of such Documents, whether actual or contingent, whether alone or jointly or jointly and severally, with any other person and whether as principal, surety or otherwise, including any obligations which are or become void, voidable, unenforceable or ineffective as against the Obligors for any reason whatsoever, whether or not known to the Bank or the Company and “Secured Obligation” shall be construed accordingly; and

“Security” means the security from time to time constituted by or pursuant to this Deed of Charge.

1.2 Construction of certain references

Unless the context otherwise requires, any reference in this Deed of Charge to:

(A) the “Bank” or the “Company” or the “Obligors” shall be construed so as to include their respective successors and any successor of such a successor;

(B) an Event of Default is “continuing” if it has not been remedied or waived by the Bank;

119

(C) a “clause” or a “schedule” shall be construed as a reference to a clause hereof or a schedule hereto; and an agreement, insurance policy or other document shall be construed as a reference to that agreement, insurance policy or other document as amended, supplemented or novated from time to time.

1.3 Headings etc

The headings and sub-headings are inserted for convenience only and shall not affect the construction of this Deed of Charge.

2. Covenant to pay

The Company hereby acknowledges to the Bank that the amount secured by this Deed of Charge and in respect of which this Deed of Charge and the Security hereby created is enforceable is the full amount of the Secured Obligations for the time being and from time to time outstanding. The Company hereby irrevocably and unconditionally covenants with the Bank that it shall pay, perform and discharge all of the Secured Obligations when due in accordance with their terms.

3. Creation of Security

3.1 As a continuing security for the payment, performance and discharge of the Secured Obligations, the Company hereby with full title guarantee and in respect of clause 3.1(B) with absolute warrandice (in each case save in respect of the existence of the DTI Security):

(A) Debts

charges in favour of the Bank by way of first fixed charge all right, title and interest of the Company to and in all the Debts, both present and future, and all proceeds thereof and other rights in respect thereof (to the extent the Company owns them, in each case);

(B) Scottish Debts

charges in favour of the Bank by way of floating charge all of the Scottish Debts generated by the Company both present and future, and all proceeds thereof and other rights in respect thereof not otherwise effectively assigned or held in trust under each Utilisation Notice pursuant to Clause 6.2 of the Agreement;

(C) Collection Account

charges in favour of the Bank by way of first fixed charge all right, title and interest of the Company (if any) to and in the Collection Account and the moneys standing to the credit thereof;

(D) Policies

charges in favour of the Bank by way of first fixed charge all right, title and interest of the Company to and in the Policies (if any exist) and all related proceeds, claims of any kind, returns of premium, other benefits and all other monies payable under such policy; and

120

(E) Billing Process Assets

charges in favour of the Bank by way of first fixed charge all right title and interest of the Company to and in the Billing Process Assets.

3.2 Nature of charges

The charges created under clauses 3.1(A), 3.1(C), 3.1(D) and 3.1(E) are intended to take effect as fixed charges, but to the extent that they are construed as floating charges, then they shall take effect as such.

3.3 Priority of charges

(A) The charges created under clauses 3.1(A), 3.1(C), 3.1(D) and 3.1(E) are first priority charges and, in respect of the Charged Property, shall rank ahead of the DTI Security and any other security attempted to be created over the Charged Property after the date hereof (other than in favour of the Bank).

(B) The charge created under clause 3.1(B) shall rank, in respect of the Scottish Debts, in respect of the Charged Property, in priority to the DTI Security and any other security attempted to be created over the Scottish Debts by the Company after the date hereof, save for any fixed security interest which is expressed to rank in priority and which is granted in favour of the Bank over such Scottish Debts.

4. Conversion of floating charge

4.1 If the charges created by clauses 3.1(A) and/or 3.1(C) and/or 3.1(D) and/or 3.1(E) are construed as floating charges, the Bank may at any time after the occurrence of an Event of Default which is continuing, by notice in writing to the Company convert any such floating charge with immediate effect into a fixed charge as regards any property or assets specified in the notice. Any determination that such charges are floating charges shall not affect their ranking, in respect of the Charged Property, ahead of the DTI Security and any other security as provided in clause 3.3(A).

4.2 Notwithstanding clause 4.1, if:

(A) the Company creates or permits to subsist any Encumbrance (other than the DTI Security) on, over or with respect to the whole or substantially the whole of the Charged Property, or attempts to do so; or

(B) any person carries out, or attempts to carry out, any enforcement or process (including the appointment of a receiver, any distress, execution, taking of possession, forfeiture or sequestration) against any of the Charged Property or an administrator is appointed to the Company,

then if the charges created by clauses 3.1(A) and/or 3.1(C) and/or 3.1(D) and 3.1(E) are construed as floating charges, such floating charges, over the Charged Property the subject of such Encumbrance, enforcement or process shall be deemed to have been automatically converted into a fixed charge, without any notice from the Bank to the Company, immediately before such event occurs.

4.3 The Bank may at any time by notice in writing to the Company reconvert, with immediate effect, any fixed charge referred to in clause 4.1 or clause 4.2 into a floating charge as regards any property or assets specified in the notice.

121

5. Restrictions on dealing

5.1 No Encumbrance on, or dealing with, the Charged Property

(A) The Company will not at any time during the subsistence of the Security create, grant, extend or permit to subsist or attempt to create, grant or extend or permit to subsist any Encumbrance over all or any part of the Charged Property, other than:

(1) the DTI Security; and

(2) any such Encumbrance in favour of the Bank.

(B) The Company shall not, at any time during the subsistence of the Security, sell, transfer, discount, factor, grant or lease or otherwise dispose of all or any part of the Charged Property, other than in favour of the Bank and as otherwise permitted under the Agreement save that Billing Process Assets may be disposed of where they are being upgraded or replaced by other systems.

5.2 Payment into the Collection Account of Debts

Subject to clause 5.3 below, the Company shall use all reasonable endeavours to ensure that, up to and including the date on which the Drawn Facility Amount is permanently reduced to zero and no other amounts are owing by the Obligors to the Bank under the Finance Documents, all amounts paid by Debtors in respect of Debts are paid directly into the Collection Account and shall ensure that:

(A) any other amounts received or recovered by it in respect of any Relevant Debt (whether directly from a Debtor, under a Policy or otherwise) shall be held by the Seller on trust for the Bank absolutely; and

(B) all such other amounts received or recovered by it in respect of any Debt (whether directly from a Debtor, under a Policy or otherwise) shall be swept into the Collection Account on a daily basis.

5.3 The Company shall use all reasonable endeavours to ensure that all payments made by Debtors in respect of Debts whose Invoices were issued prior to the expiry of the Relevant Payment Grace Period for such Debts are made direct into the Collection Account in accordance with Clause 5.2 as soon as is reasonably practicable and in any event on and from the expiry of the Relevant Payment Grace Period.

5.4 Operation of the Accounts

The Company acknowledges and agrees that the Collection Account is an account in the name of the Bank, that only the Bank shall be entitled to operate such Collection Account (but only in accordance with the Documents) and that the Company shall not be entitled to seek to debit any amount from the Collection Account.

6. Covenants

6.1 Company’s obligations

The Company shall from time to time, at the request of the Bank but at its own cost, do any act (including making all filling and registrations) or execute any document which the Bank may consider appropriate in order to maintain, preserve, protect, perfect or realise the Security created or intended to be created by or pursuant to this Deed of Charge and each such document will be in such form and on such terms as the Bank may require.

122

6.2 Notification of Default

The Company shall notify the Bank of any Default, Termination Event or Potential Termination Event (and the steps, if any, being taken to remedy it) in each case promptly upon the Company becoming aware of it.

7. Monitoring the Security

7.1 Assistance

The Company will procure that the Bank, any of its agents, representatives, advisers and, subject to clause 24 of the Agreement, the Bank’s transferees or assigns, are:

(A) allowed access on reasonable notice to inspect the books and all other records and data of the Company relating to Debts, Contracts and collections (including, without limitation, any meter reading data of each relevant Debtor); and

(B) rendered all assistance necessary in order to be able to produce and despatch Invoices to Debtors in respect of Unbilled Debts when exercising its rights under clause 12.

This covenant is without prejudice to the rights of any Receiver of the Billing Process Assets.

7.2 Failure to perform or comply

(A) If at any time the Company fails, or is believed by the Bank to have failed, to perform or comply with any of its material obligations under this Deed of Charge, the Bank may, without prejudice to the terms of this Deed of Charge, take such other steps on or in relation to the Charged Property (including the payment of money) as may in the reasonable opinion of the Bank be required for any of such purposes subject, in the case of the Billing Process Assets, to Clause 10.3.

(B) The Company shall reimburse to the Bank on demand all sums reasonably expended by the Bank in executing such works, doing such things and taking such steps and shall pay interest thereon, from the date of such demand until such sums are reimbursed in full, at the rate of 2% over the Bank’s applicable overnight LIBOR rate.

8. Extension and Variation of the Law of Property Act 1925

8.1 No restriction on consolidation

The restriction on the consolidation of mortgages imposed by section 93(1) of the LPA shall not apply to this Deed of Charge or the Security.

8.2 Secured Obligations

Notwithstanding any other provisions of this Deed of Charge, the Secured Obligations shall be deemed for the purposes of section 101 of the LPA to have become due and payable, and all the powers referred to in clause 9.1 shall arise, on the date of this Deed of Charge but shall only be exercisable in the circumstances referred to in Clause 9.1.

123

8.3 Charges

Sections 103 and 109(1) of the LPA shall not apply to the charges created by this Deed of Charge. All the powers referred to in clause 9.1 may be exercised by the Bank without notice to any Company on or at any time after the occurrence of an Event of Default.

9. Enforcement

9.1 On or at any time after the occurrence of an Event of Default which is continuing, or any corporate action, legal proceeding or other formal procedure is taken for the appointment of an administrator, or such appointment, to the Company, or the appointment of a receiver to any part of the property or undertaking of the Company, the Bank may, without notice to the Company:

(A) take possession of and hold all or any part of the Charged Property; and/or

(B) appoint one or more persons to be:

(1) receiver; and/or

(2) receiver and manager; and/or

(3) (to the extent permitted by law and save to the extent that such appointment is or would be prohibited by section 72A of the Insolvency Act 1986) an administrative receiver,

in each case, of the whole or any part of the Charged Property; and/or

(C) exercise in any manner it considers appropriate all or any of the powers, authorities and discretions:

(1) conferred on mortgagees by the LPA (as varied or extended by this Deed of Charge);

(2) conferred by this Deed of Charge expressly or by implication on any Receiver; and

(3) otherwise conferred by statute or common law on mortgagees or receivers (including, if applicable, the appointment of an administrator under the Insolvency Act 1986).

9.2 The Bank may (subject to paragraph 17 of schedule B1 to the Insolvency Act 1986) exercise any of its powers under clauses 9.1(A) and 9.1(C) whether or not it shall have previously appointed any person to be a Receiver.

9.3 The Bank may

(A) (so far as it is lawfully able) remove any Receiver; and

124

(B) appoint another person or other persons as Receiver or Receivers either in the place of a Receiver who has been so removed or who has ceased to act or to act jointly with any other Receiver.

9.4 The Bank’s powers to appoint a person to be a Receiver shall:

(A) be in addition to, and without prejudice to, all statutory and other powers of the Bank to appoint a Receiver under the LPA (or any other applicable legislation) as extended by this Deed of Charge or otherwise;

(B) be and remain exercisable by the Bank in respect of any part of the Charged Property in respect of which no appointment of any person as a Receiver by the Bank shall from time to time be subsisting and notwithstanding that an appointment by the Bank shall have subsisted and been withdrawn in respect of any part of the Charged Property and/or shall be subsisting in respect of any other part of the Charged Property; and

(C) be without prejudice to any statutory power which the Bank may have to appoint an administrator of the Company under the Insolvency Act 1986 or any other applicable enactment.

9.5 Every appointment of any person to be a Receiver and every removal of any Receiver may be made by deed or by instrument in writing under the hand of any officer or manager of the Bank or any person authorised for such purpose by the Bank or any such officer or manager.

9.6 If at any time two or more persons shall hold office as Receivers of the same part of the Charged Property, each such Receiver shall be entitled (unless the contrary shall be stated in the instrument appointing him) to exercise individually as well as jointly (and to the exclusion of the other or others of them) all the powers, authorities and discretions conferred with respect to such Charged Property on Receivers by this Deed of Charge or by law.

9.7 Except (a) as provided by law and (b) for any liability of the Receiver resulting from any exercise by him of any powers on his own behalf in accordance with clause 10.1, each Receiver shall be deemed at all times and for all purposes to be the agent of the Company which shall be solely responsible for his acts, omissions, defaults, losses and misconduct, for all obligations and liabilities entered into, incurred or adopted by him and for the payment of his remuneration and the Bank will not be responsible, in any circumstance whatsoever, to the Company or to any other person for any of them. No Receiver shall at any time act as agent for the Bank unless the Bank shall expressly appoint the Receiver in writing to be its agent.

9.8 If the Bank or any Receiver shall enter (or shall be deemed to have entered) into possession of the Charged Property or any part thereof, it or he may from time to time and at any time go out of such possession.

9.9 Every Receiver shall be entitled to remuneration for his services. The amount of such remuneration shall:

(A) be settled from time to time by agreement between him and the Bank or, failing any such agreement, fixed by the Bank; and

(B) not be limited to the maximum rate specified in section 109(6) of the LPA.

125

The foregoing shall be subject to section 36 of the Insolvency Act 1986.

10. Powers of Receiver

10.1 Every Receiver shall, in relation to the Charged Property in respect of which he is appointed and subject to any limitations or restrictions expressed in the instrument appointing him but notwithstanding any winding-up or dissolution of the Company, have and be entitled to exercise and in each case, as varied and extended by the provisions of this Deed of Charge (in the name of or otherwise on behalf of the Company or in his own name or otherwise on his own behalf and in each case, at the cost of the Company):

(A) all the powers conferred by the LPA (or any other applicable legislation) on mortgagors and on mortgagees or creditors in possession and on receivers appointed under that Act;

(B) whether or not the Receiver is in fact an administrative receiver, all the powers of an administrative receiver set out in schedule 1 to the Insolvency Act 1986 as if the same were set out in full in this Deed of Charge and all other powers conferred on or exercisable by him by virtue of the provisions of the Insolvency Act 1986;

(C) all the powers otherwise conferred by statute or common law on mortgagees or creditors in possession or receivers;

(D) all the powers and rights of an absolute owner and to do or omit to do anything which the Company itself could do or omit to do prior to the appointment of the Receiver;

(E) the power to do all such other things (including bringing or defending proceedings in the name of or on behalf of the Company) as may seem to him to be necessary or desirable for the maintenance, preservation, protection, perfection and/or realisation of all or any part of the Charged Property and/or of the Security or to be incidental or conducive to (a) any of the functions, powers, authorities or discretions conferred on or vested in him under or by virtue of this Deed of Charge or by law or (b) the exercise of all rights, powers and remedies of the Bank provided by or pursuant to this Deed of Charge or by law (including the realisation of all or any part of the Charged Property) or (c) bringing into his hands any assets of the Company forming part of, or which when got in would be, Charged Property.

10.2 All the powers of a Receiver under this Deed of Charge may be exercised by the Bank at any time after the Security created by or pursuant to this Deed of Charge has become enforceable whether as attorney of the Company or otherwise and whether or not any Receiver shall have been appointed.

10.3 The provisions of Clause 9 and Clauses 10.1 and 10.2 and, in respect of the Billing Process Assets, Clause 7.2(A) are subject to the following:

(A) neither the Receiver nor the Bank shall have any power of sale in respect of the Billing Process Assets; and

(B) neither the Receiver nor the Bank shall be entitled to exercise rights of possession or access in respect of the Billing Process Assets to the exclusion of another party exercising similar rights under any security granted over those assets or to the exclusion of any other entities in the Group which make use of the Billing Process Assets for normal billing or accounting procedures in order to enable them to carry out such procedures.

126

11. Applications of moneys

11.1 All moneys received by any Receiver pursuant to this Deed of Charge shall (subject to the rights and claims of any person having prior rights thereto) be applied in the following order:

(A) firstly, in the payment and discharge of the costs, charges, remuneration, liabilities and expenses of and incidental to the Receiver’s appointment; and

(B) secondly, in or towards reduction of the Drawn Facility Amount;

(C) thirdly, in or towards satisfaction of any fees, costs and expenses payable by the Obligors to the Bank under the Agreement or this Deed of Charge which have fallen due and which remain unpaid for 5 or more Business Days from the due date;

(D) fourthly, in or towards satisfaction of any payments relating to the Facility Charge which have fallen due and which remain unpaid for 5 or more Business Days from the due date; and

(E) fifthly, any balance to the Seller by way of payment to such account as the Seller may specify to the Bank in writing from time to time.

11.2 All moneys from time to time received or recovered by the Bank from the Company or from any person or persons liable to pay the same or from any Receiver or otherwise pursuant to this Deed of Charge may (subject to the rights and claims of any person having prior rights thereto), in the absence of any contrary application in accordance with any of the other provisions of this Deed of Charge, be applied by the Bank (and notwithstanding any purported appropriation by the Company) either as a whole or in such proportions and in such order and at such time or times and otherwise in such manner as the Bank shall think fit:

(A) in accordance with clause 11.1; or

(B) in accordance with clause 11.3.

11.3 Any moneys referred to in clause 11.2 which are to be applied in accordance with this clause 11.3 may be paid by the Bank to the credit of any suspense or other account after which they may be held in such account for so long as the Bank shall think fit pending any further application from time to time of such moneys (as the Bank shall be entitled, but not obliged, to do in its discretion) in accordance with the provisions of clause 11.2.

11.4 Section 109(8) of the LPA will not apply in relation to any Receiver.

12. Power of attorney

The Company irrevocably and by way of security for the performance of the Secured Obligations, appoints the Bank to be its attorney and in its name, on its behalf and as its act and deed to execute, deliver and perfect all documents (including any instruments of transfer) and do all things that the Bank may reasonably consider to be requisite for (a) carrying out any obligation imposed on the Company under the Documents, any Contract

127

or any Policy which the Company has not performed or (b) exercising any of the rights conferred on the Company by the Documents, any Contract, any Policy or by law, which in either case relate to the collection, preservation and/or realisation of the Charged Property (including the issuance of Invoices and the exercise of any other right of a legal owner of the Charged Property), provided that the Bank shall only be entitled to exercise the powers conferred upon it pursuant to this Clause 12 in the circumstances and on the terms set out in Clauses 8, 9 and 18 of the Agreement. The Company shall ratify and confirm all things done or purported to be done and all documents executed by the Bank in the exercise of that power of attorney. This power of attorney shall operate as a general power of attorney under section 10 of the Powers of Attorney Act 1971.

13. Protection of third parties

13.1 The protection given to purchasers from a mortgagee in sections 104 and 107 of the LPA and to persons dealing with an administrative receiver in section 42(3) of the Insolvency Act 1986 shall apply equally to purchasers and any other persons dealing with the Bank or a Receiver and no purchaser or other person dealing with the Bank or any Receiver shall be:

(A) bound to see or enquire whether any of the Secured Obligations have become due and payable or whether any money is due under this Deed of Charge;

(B) bound to see or enquire whether any of the powers of the Bank or such Receiver have become exercisable;

(C) concerned with any propriety or regularity of any dealing by or with the Bank or such Receiver; or

(D) concerned as to the application of any money or other asset paid or transferred to or at the direction of the Bank or such Receiver.

14. Effectiveness of Security

14.1 The Security shall be a continuing security for the Secured Obligations and shall not be considered as satisfied or discharged by any intermediate payment or settlement of the whole or any part of the Secured Obligations or any other matter or thing whatsoever.

14.2 Any release or discharge of the Security or of any of the Secured Obligations shall not release or discharge the Company from any liability to the Bank for the same or any other moneys which may exist independently of this Deed of Charge.

14.3 The Security shall be in addition to and independent of any other security which the Bank may now or at any time in the future hold or take (whether from the Company or any other person) for or in respect of the Secured Obligations or any of them or any other obligations whatsoever and:

(A) shall not operate so as in any way to prejudice, determine, affect or merge in or with any such other security; and

(B) shall not be prejudiced, determined or affected by any such other security or by any release, reassignment or discharge thereof.

The Company confirms that it is not relying on or expecting the Bank to obtain and/or enforce any such security.

128

14.4 Any waiver, consent or approval given by the Bank in relation to this Deed of Charge shall only be effective if given in writing and then only for the purpose and upon any terms and conditions on which it is given.

14.5 Neither the Security nor any remedy of the Bank in respect thereof shall be prejudiced by:

(A) any time or indulgence granted to the Company or any other person; or

(B) any delay or abstention by the Bank in perfecting or enforcing any remedies, securities, guarantees or rights it may now or in the future have from or against the Company or any other person; or

(C) any waiver, release, variation, act, omission, forbearance, unenforceability, indulgence or invalidity of or relating to any such remedy, security, guarantee or right; or

(D) any other act or thing whatsoever which, but for this clause 14.5, would or might prejudice the Security or the right of the Bank to any such remedy except for a reassignment, release or discharge in accordance with the provisions of clause 19.

14.6 The Bank may choose when, where, how and how often to exercise each of its rights, powers and remedies as provided by this Deed of Charge or by law. No failure on the part of the Bank to exercise, or any delay on its part in exercising, any such right, power or remedy shall impair the same or operate or be construed as a waiver thereof, nor shall any single, partial or defective exercise of any such right, power or remedy preclude any further or other exercise thereof or the exercise of any other such right, power or remedy. The rights and remedies provided in this Deed of Charge are cumulative and not exclusive of any rights or remedies provided by law.

14.7 If, at any time, any provision of this Deed of Charge is or becomes illegal, invalid or unenforceable in any respect (or any of the Security intended to be created by or pursuant to this Deed of Charge is ineffective) under any law of any jurisdiction, such illegality, invalidity, unenforceability or ineffectiveness shall not affect or impair:

(A) the legality, validity or enforceability of the remaining provisions or the effectiveness of any of the remaining security under such law; or

(B) the legality, validity or enforceability of such provision or the effectiveness of such security under the law of any other jurisdiction.

14.8 If from time to time the Bank receives or is deemed to have received notice of any subsequent charge or interest or any other event or matter affecting the Charged Property or the Bank’s Security thereon, the Bank may open a new account or accounts in the name of the Company; if the Bank does not open a new account it shall nevertheless be treated as if it had done so at the time when it received notice or was deemed to have received notice and as from that time all payments made by the Company to the Bank shall be credited or be treated as having been credited to the new account and shall not operate to reduce the Secured Obligations at the time when the Bank received notice as aforesaid.

129

15. Assignment

15.1 Subject to clause 24 of the Agreement, the Bank shall be entitled to assign or transfer the whole or any part of the benefit of this Deed of Charge to any person to whom it is entitled to assign its rights pursuant to clause 23 of the Agreement.

15.2 Other than as permitted by clause 22.1 of the Agreement, the Company may not assign or transfer any of its rights or obligations under this Deed of Charge or enter into any transaction or arrangement which would result in any of those rights or obligations passing to or being held in trust for or for the benefit of another person.

16. Costs and expenses

16.1 Costs and expenses (including legal costs and out-of-pocket expenses and, in each case, VAT or any similar tax charged or chargeable in respect thereof) incurred by the Bank in connection with this Deed of Charge shall be paid for by the Company in accordance with Clause 27 of the Agreement.

16.2 The cost of the Company complying with any of its obligations under this Deed of Charge shall be borne by the Company.

17. Indemnity

17.1 The Company agrees to indemnify and keep indemnified the Bank and each Receiver from and against all liabilities, losses, costs and expenses incurred or suffered by any such person in or in connection with or directly or indirectly as a result of:

(A) any of the obligations or undertakings expressed to be binding on or undertaken by the Company in or pursuant to this Deed of Charge not being performed or observed fully and punctually; and/or

(B) any representation or warranty given or made by the Company in or pursuant to this Deed of Charge being incorrect, untrue or misleading in any respect; and/or

(C) the exercise or purported exercise of any of the powers, authorities or discretions vested in any such person under or pursuant to this Deed of Charge; and/or

(D) any matter or thing done or omitted by any such person in any way relating to the Charged Property or the Security in breach of the terms of the Documents,

save where such liabilities, losses, costs and expenses arise as a result of the fraud, gross negligence or wilful misconduct of the person claiming to be so indemnified or any of its officers or employees.

18. Restrictions on liability

18.1 Except to the extent that any such exclusion will be prohibited or rendered invalid by law, the Bank will not in any circumstances whatsoever (whether by reason of taking possession of the Charged Property or any part thereof or for any other reason whatsoever and whether as a mortgagee or creditor in possession or on any other basis whatsoever):

(A) be liable to account to the Company or any other person as a mortgagee or creditor in possession;

130

(B) be liable to account to the Company or any other person for anything except the Bank’s own actual receipts;

(C) be liable to the Company or any other person for any liabilities, losses, costs or expenses arising from or connected with:

(1) any realisation of the Charged Property or any part thereof; or

(2) any act or omission of the Bank or its employees or agents in relation to the Charged Property or any part thereof,

except to the extent that they shall be caused by the fraud, gross negligence or wilful misconduct of the Bank or any of its officers or employees.

All the provisions of clause 18.1 shall apply, mutatis mutandis, in respect of the liability of any Receiver.

19. Redemption of Security

19.1 Upon and subject to the Bank being satisfied that:

(A) the Drawn Facility Amount has been permanently reduced to zero and no other amounts are owing by the Obligors to the Bank under the Documents and it is under no commitment, obligation or liability (whether actual or contingent) to provide financial accommodation to the Company or any other Obligor under or pursuant to the Documents; and

(B) the Bank has no right, or does not intend to exercise any right, to retain the Security in accordance with clause 21.1,

then as soon as reasonably practicable thereafter and at the request and cost of the Company, the Bank shall release or otherwise discharge the Security and pay over any amounts subsequently standing to the credit of the Collection Account to the Company but any such payment, release or discharge shall be subject to clause 20. Any such release will be in such form as the Bank considers appropriate (including on a without recourse and a without warranty basis).

20. Avoidance of payments

20.1 Any settlement, release or discharge between (a) the Company and (b) the Bank or any Receiver shall (whether or not so expressed) be deemed to be conditional upon no right, security, disposition or payment granted or made to the Bank or such Receiver (as the case may be) by the Company or any other person being void, avoided or set aside, either wholly or in part, for any reason whatsoever, including by virtue of any provisions or enactments relating to bankruptcy, insolvency, administration or liquidation for the time being in force.

20.2 In the event of the whole or any part of any such right, security, disposition or payment being so void, avoided or set aside, the Bank or such Receiver (as the case may be) shall be entitled to enforce this Deed of Charge against the Company subsequently as if such settlement, reassignment, retrocession, release or discharge had not occurred and such right, security, disposition or payment (or, as the case may be, the part thereof so void, avoided or set aside) had not been granted or made.

131

21. Retention of Security

21.1 Notwithstanding any other provision of this Deed of Charge or any settlement, reassignment, retrocession, release, discharge or arrangement given or made by the Bank pursuant to a discharge in full of the Secured Obligations, the Bank may retain the Security and all documents of title relating to, and certificates or other documents representing or evidencing ownership of, the Charged Property or any part thereof deposited with it pursuant to this Deed of Charge until the later to occur of (a) the Bank being satisfied that the conditions set out in clauses 19.1(A) have been met and (b) if the Bank reasonably considers, on the basis of independent legal advice, that the conditions set out in clause 19.1(A) are likely to be avoided or invalidated or reduced or required to be restored or paid by virtue of any requirement having the force of law, the expiry of the Retention Period relating to such discharge or, if applicable, of the further period referred to in clause 21.2.

21.2 If at any time during the said Retention Period a petition shall be presented for an order for the winding-up of the Company or a petition, application or notice is filed for the making of an administration order in respect of the Company or the Company shall commence to be wound-up voluntarily or any analogous proceedings shall be commenced in respect of the Company, the Bank may continue to retain the Security and the documents aforesaid for such further period as the Bank, acting reasonably and on the basis of independent legal advice, may determine and the Security and such documents shall be deemed to have continued to have been held as security for the Secured Obligations.

21.3 As used in this clause 21, the expression “Retention Period” means, in relation to any discharge in full of the Secured Obligations, the period beginning on the date on which that discharge was made and ending on the date falling one month after the expiration of the maximum period within which that discharge can be declared void, avoided or reduced by virtue of any applicable law or for any other reason whatsoever.

22. Payments free of deduction

(A) Subject to clause 22(B), all payments made by the Company under the Documents shall be made without set-off or counterclaim and without any deductions or withholdings whatsoever. If the Company is compelled to make any deduction the Company shall pay additional amounts to ensure receipt by the Bank of the full amount the Bank would have received but for the deduction.

(B) If on any day a payment is due from the Company under the Documents to the Bank and a payment is due from the Bank to the Company under the Agreement, only the net sum shall be paid by whichever party owes the greater amount.

23. Value Added Tax

All sums payable by the Company under or pursuant to this Deed of Charge are exclusive of VAT. Accordingly, the Company shall pay such VAT in addition to any sum which would otherwise be due.

24. Notices

Any notice, communication or demand to be given under this Deed shall be served as provided in clause 28 of the Agreement.

132

25. Certificate

Any certificate or determination of the Bank as to the amount of all or any part of the Secured Obligations or any other matter referred to in this Deed of Charge shall, save for manifest error, be conclusive and binding on the Company.

26. Discretion

Except when stated otherwise in this Deed of Charge, any liberty or power which may be exercised, any determination which may be made and any opinion which may be formed hereunder by the Bank or any Receiver may be exercised, made and formed in its or his absolute and unfettered discretion without any obligation to give reasons therefor.

27. Ownership of Deed of Charge

This Deed of Charge is and will remain the property of the Bank.

28. Governing Law and Jurisdiction

This Deed of Charge is governed by English law (save that those terms of this Deed of Charge which are specific to Scottish law shall be construed in accordance with Scottish law). The Company irrevocably agrees that the English courts shall have non-exclusive jurisdiction in relation to any legal action or proceedings arising out of or in connection with this Deed of Charge (“Proceedings”) and waives any objection to Proceedings in such courts on the grounds of venue or on the grounds that Proceedings have been brought in an inappropriate forum.

29. Deed

The Company and the Bank intend this document to be a deed and the Company executes and delivers it as its deed.

IN WITNESS WHEREOF this Deed of Charge has been executed as a deed by the Company and has been signed by or on behalf of the Bank and is intended to be and is hereby delivered as a deed on the date first above written.

EXECUTED and DELIVERED as a DEED
by BRITISH ENERGY GENERATION	)
LIMITED	)
acting by	)
Director
Director/Secretary

133

Address:	British Energy Generation Limited
	3 Redwood Crescent
	Peel Park
	East Kilbride
	G74 5PR
Tel:	+44(0) 13552 62000
Fax:	+44(0) 13552 62567
Attention:	The Group Treasurer

MICHAEL RAYNES

duly authorised for on behalf

of BARCLAYS BANK PLC

in the presence of:

Witness’ signature:

Witness name:

Witness’ address:

Witness’ occupation:

134

DATED: 8 October 2004 Conformed Copy

Deed of Amendment and

Restatement

between

Barclays Bank PLC

as Bank

and

British Energy Generation Limited

as Seller

relating to

a Master Trade Receivables Financing Facility dated 25 August 2004

CityPoint     One Ropemaker Street     London     EC2Y 9SS

T +44 (0)20 7628 2020     F +44 (0)20 7628 2070     DX Box No 12

CONTENTS

1.	Definitions	1
2.	Amendment of the Original Master Trade Receivables Financing Facility Agreement	1
3.	Representations and warranties	1
4.	Miscellaneous	2
5.	Affirmation	2
6.	Costs and expenses	2
7.	Third parties	2
8.	Deed	2
SCHEDULE 1 : AMENDED AND RESTATED MASTER TRADE RECEIVABLES FINANCING FACILITY AGREEMENT		4

i

THIS DEED is dated 8 October 2004 and made

BETWEEN:

(1) BARCLAYS BANK PLC, (the “Bank” which expression shall include its permitted assigns and transferees), registered in England and Wales as company number 1026167 and having its registered office at 54 Lombard Street, London EC3P 3AH; and

(2) BRITISH ENERGY GENERATION LIMITED, (the “Seller” which expression shall include its permitted transferees), registered in England and Wales as company number 3076445 and having its registered office at Barnett Way, Barnwood, Gloucester GL4 3RS.

BACKGROUND:

(A) This Deed is supplemental to a master trade receivables financing facility agreement dated 25 August 2004 and made between the Bank and the Seller (the “Original Master Trade Receivables Financing Facility Agreement”).

(B) The Bank has agreed, subject to the terms of this Deed, to make certain amendments to the Original Master Trade Receivables Financing Facility Agreement that have been requested by the Seller.

NOW IT IS HEREBY AGREED as follows:

1. Definitions

Terms defined in the Original Master Trade Receivables Financing Facility Agreement shall have the same meaning in this Deed and in addition:

“Amended and Restated Master Trade Receivables Financing Facility Agreement” means the amended and restated master trade receivables financing facility agreement in the form set out in the schedule 1 to this Deed.

2. Amendment of the Original Master Trade Receivables Financing Facility Agreement

2.1 With effect from the date of this Deed, the Original Master Trade Receivables Financing Facility Agreement shall be amended and restated on the terms set out in the Amended and Restated Master Trade Receivables Financing Facility Agreement.

2.2 Subject to clause 2.1 and except where inconsistent with the provisions of this Deed, the terms of the Original Master Trade Receivables Financing Facility Agreement are confirmed and shall remain in full force and effect.

3. Representations and warranties

3.1 On the date of this Deed, the Seller makes the representations and warranties set out in Clause 13.1 of the Amended and Restated Master Trade Receivables Financing Facility Agreement (by reference to the facts and circumstances subsisting as at the date hereof) and acknowledges that the Bank has entered into this Deed in reliance on those representations and warranties.

3.2 On the date of this Deed, the Seller also represents and warrants that:

(A) it has the power to enter into and perform, and has taken all necessary action to authorise the entry into, performance and delivery of this Deed and the transactions contemplated herein; and

1

(B) all authorisations, approvals, consents, licences, exemptions, filings, registrations, notarisations and other matters, official or otherwise, required in connection with the entry into, performance, validity and enforceability of this Deed have been obtained or effected and remain in full force and effect and there are no circumstances which indicate that any of the same are likely to be revoked in whole or in part.

3.3 The Seller confirms on the date of this Deed that no Default, Termination Event or Potential Termination Event has occurred and is continuing.

4. Miscellaneous

4.1 With effect from the date of this Deed, the Original Master Trade Receivables Financing Facility Agreement and this Deed shall be read and construed as one document and references in the Original Master Trade Receivables Financing Facility Agreement and in each of the Finance Documents to the Original Master Trade Receivables Financing Facility Agreement shall be read and construed as references to the Original Master Trade Receivables Financing Facility Agreement as supplemented and amended by this Deed.

4.2 Clauses 1 (Definitions and interpretation), 25 (Waivers and Remedies Cumulative), 28 (Notices) and 29 (Governing Law and Jurisdiction) of the Amended Master Trade Receivables Financing Facility Agreement shall apply to this Deed, mutatis mutandis, as if set out in full herein.

4.3 This Deed is a Finance Document.

5. Affirmation

The Seller hereby agrees that, with effect from the date hereof, it shall be bound by the terms of the Amended and Restated Master Trade Receivables Financing Facility Agreement.

6. Costs and expenses

The Seller shall pay to the Bank all reasonable costs and expenses incurred by the Bank in connection with the negotiation, preparation, printing and execution of this Deed and the Amended and Restated Master Trade Receivables Financing Facility Agreement.

7. Third parties

No person, which is not a party to this Deed, may enforce this Deed by virtue of the Contracts (Rights of Third Parties) Act 1999. The parties to this Deed do not require the consent of any third party to vary or rescind this Deed at any time.

8. Deed

Each Party intends this document to be a deed and executes and delivers it as its deed.

IN WITNESS whereof this Deed has been executed and delivered as a deed by the Seller and the Bank on the date stated at the beginning of this Deed.

2

EXECUTED and DELIVERED as a DEED	)
by BRITISH ENERGY GENERATION	)
LIMITED	)
acting by	)

Stephen Billingham

Director

Robert Armour

Director/Secretary

Address:	British Energy Generation Limited
	3 Redwood Crescent
	Peel Park
	East Kilbride
	G74 5PR
Tel:	+44(0) 13552 62000
Fax:	+44(0) 13552 62567
Attention:	The Group Treasurer

EXECUTED and DELIVERED as a DEED by	)
MICHAEL RAYNES	)
duly authorised attorney	)	M J Raynes
for and on behalf of:	)
BARCLAYS BANK PLC	)
in the presence of:

Witness’ signature:

Witness name: I.O. Stuttard

Witness’ address: 28 Coppins Close, Berkhamstead, Herts HP4 3NZ

Witness’ occupation: Bank Official

Address:

c/o Barclays Capital

Structured Trade & Export Finance

5 The North Colonnade

Canary Wharf

London E14 4BB

Tel: +44(0)20 7773 1815

Fax: +44(0)20 7773 1831

Attention: Ian Stuttard

3

SCHEDULE 1: AMENDED AND RESTATED MASTER TRADE RECEIVABLES FINANCING

FACILITY AGREEMENT

4

DATED: 8 November 2004 Conformed Copy

Deed of Amendment

between

Barclays Bank PLC

as Bank

and

British Energy Generation Limited

as Seller

relating to

a Master Trade Receivables Financing Facility dated 25 August 2004 and amended and restated on 8 October 2004

CityPoint     One Ropemaker Street     London     EC2Y 9SS

T +44 (0)20 7628 2020     F +44 (0)20 7628 2070     DX Box No 12

CONTENTS

1.      Definitions	1
2.      Amendment of the Master Trade Receivables Financing Facility Agreement	1
3.      Representations and warranties	1
4.      Amendments	2
5.      Miscellaneous	2
6.      Costs and expenses	2
7.      Third parties	3
8.      Deed	3

i

THIS DEED is dated 8 November 2004 and made

BETWEEN:

(1) BARCLAYS BANK PLC, (the “Bank” which expression shall include its permitted assigns and transferees), registered in England and Wales as company number 1026167 and having its registered office at 54 Lombard Street, London EC3P 3AH; and

(2) BRITISH ENERGY GENERATION LIMITED, (the “Seller” which expression shall include its permitted transferees), registered in England and Wales as company number 3076445 and having its registered office at Barnett Way, Barnwood, Gloucester GL4 3RS.

BACKGROUND:

(A) This Deed is supplemental to a master trade receivables financing facility agreement between the Bank and the Seller dated 25 August 2004 and amended and restated on 8 October 2004 (the “Master Trade Receivables Financing Facility Agreement”).

(B) The Bank has agreed, subject to the terms of this Deed, to make certain amendments to the Master Trade Receivables Financing Facility Agreement that have been requested by the Seller.

NOW IT IS HEREBY AGREED as follows:

1. Definitions

Terms defined in the Master Trade Receivables Financing Facility Agreement shall have the same meaning in this Deed.

2. Amendment of the Master Trade Receivables Financing Facility Agreement

2.1 With effect from the date of this Deed, the Master Trade Receivables Financing Facility Agreement shall be amended in the manner hereinafter appearing.

2.2 Save as amended by this Deed, the parties hereto confirm that the terms and conditions of the Master Trade Receivables Financing Facility Agreement remain and shall continue in full force and effect without prejudice to any rights or liabilities of the parties to the Master Trade Receivables Financing Facility Agreement that have accrued under the Master Trade Receivables Financing Facility Agreement up to and including the date hereof.

3. Representations and warranties

3.1 On the date of this Deed, the Seller represents and warrants that:

(A) it has the power to enter into and perform, and has taken all necessary action to authorise the entry into, performance and delivery of this Deed and the transactions contemplated herein; and

(B) all authorisations, approvals, consents, licences, exemptions, filings, registrations, notarisations and other matters, official or otherwise, required in connection with the entry into, performance, validity and enforceability of this Deed have been obtained or effected and remain in full force and effect and there are no circumstances which indicate that any of the same are likely to be revoked in whole or in part.

1

4. Amendments

4.1 Clause 11.1(B) of the Master Trade Receivables Financing Facility Agreement shall be deleted in its entirety and substituted therefor the following:

“(B) a non-utilisation fee which shall accrue daily on the unutilised portion of the Facility (i.e. £60,000,000 less the Drawn Facility Amount on each day) at a rate of 0.75 per cent. per annum, payable quarterly in arrear during the period from and including 25 October 2004 up to and including the Termination Date;”.

4.2 Clause 19.1(N) of the Master Trade Receivables Financing Facility Agreement shall be deleted in its entirety and substituted therefor the following:

“(N) the Restructuring Date falls after whichever is the later of:

(1) 31 January 2005; and

(2) so long as the Bank remains an Eggborough Lender and has (in that capacity) agreed to an extension of the date by which the Restructuring Date must have occurred in accordance with clause 8.1.4 of the Creditor Restructuring Agreement or, if the Bank is no longer an Eggborough Lender, such an extension has been otherwise consented to in accordance with clause 8.1.4 of the Creditor Restructuring Agreement, the Restructuring Long Stop Date; or”.

4.3 Schedule 3 of the Master Trade Receivables Financing Facility Agreement shall be amended by inserting the following new definitions:

““Restructuring Long Stop Date” has the meaning given to it in clause 8.1.4 of the Creditor Restructuring Agreement.”

5. Miscellaneous

5.1 With effect from the date of this Deed, the Master Trade Receivables Financing Facility Agreement and this Deed shall be read and construed as one document and references in the Master Trade Receivables Financing Facility Agreement and in each of the Finance Documents to the Master Trade Receivables Financing Facility Agreement shall be read and construed as references to the Master Trade Receivables Financing Facility Agreement as amended by this Deed.

5.2 Clauses 25 (Waivers and Remedies Cumulative), 28 (Notices) and 29 (Governing Law and Jurisdiction) of the Master Trade Receivables Financing Facility Agreement shall apply to this Deed, mutatis mutandis, as if set out in full herein.

5.3 This Deed is a Finance Document.

6. Costs and expenses

The Seller shall pay to the Bank all reasonable costs and expenses incurred by the Bank in connection with the negotiation, preparation, printing and execution of this Deed.

2

7. Third parties

No person, which is not a party to this Deed, may enforce this Deed by virtue of the Contracts (Rights of Third Parties) Act 1999. The parties to this Deed do not require the consent of any third party to vary or rescind this Deed at any time.

8. Deed

Each Party intends this document to be a deed and executes and delivers it as its deed.

IN WITNESS whereof this Deed has been executed and delivered as a deed by the Seller and the Bank on the date stated at the beginning of this Deed.

EXECUTED and DELIVERED as a DEED
by BRITISH ENERGY GENERATION	)
LIMITED	)
acting by	)

Stephen Billingham

Director

Robert Armour

Director/Secretary

Address:	British Energy Generation Limited
	3 Redwood Crescent
	Peel Park
	East Kilbride
	G74 5PR
Tel:	+44(0) 13552 62000
Fax:	+44(0) 13552 62567
Attention:	The Group Treasurer

EXECUTED and DELIVERED as a DEED by	)
MICHAEL RAYNES	)
duly authorised attorney	)	M J Raynes
for and on behalf of:	)
BARCLAYS BANK PLC	)
in the presence of:

Witness’ signature:

Witness name: Mabel Liew

Witness’ address: CityPoint, One Ropemaker Street, London EC2Y 9SS, UK

Witness’ occupation: Solicitor

3

Address:

c/o Barclays Capital

Structured Trade & Export Finance

5 The North Colonnade

Canary Wharf

London E14 4BB

Tel: +44(0)20 7773 1815

Fax: +44(0)20 7773 1831

Attention: Ian Stuttard

4

DATED: 1 APRIL 2005	Conformed Copy
FMDBK/AA91515/JD/GAW: LN:1C83AA9_30(4)

Deed of Assumption

between

British Energy Generation Limited

as Original Seller

British Energy Direct Limited

as New Seller

The companies named in schedule 1 hereto

as the Companies

and

Barclays Bank PLC

as Bank

relating to

a Receivables Financing Facility

THIS DEED is dated 1 April 2005 and made

BETWEEN:

(1) BRITISH ENERGY GENERATION LIMITED, registered in England and Wales as company number 3076445 and having its registered office at Barnett Way, Barnwood, Gloucester GL4 3RS (the “Original Seller”);

(2) BRITISH ENERGY DIRECT LIMITED, registered in England and Wales as company number 4935015 and having its registered office at Barnett Way, Barnwood, Gloucester GL4 3RS (the “New Seller”);

(3) THE COMPANIES NAMED IN SCHEDULE 1 HERETO, (the “BE Companies” and, together with the Original Seller and the New Seller, the “Companies” and each a “Company”); and

(2) BARCLAYS BANK PLC, (the “Bank”), registered in England and Wales as company number 1026167 and having its registered office at 54 Lombard Street, London EC3P 3AH.

BACKGROUND:

(A) The Bank has made a debt purchase facility available to the Original Seller on and subject to the terms and conditions of the Agreement.

(B) The BE Companies, the Original Seller and the Bank have entered into the Guarantee.

(C) Pursuant to Clause 22.1 (Changes to the Obligors) of the Agreement, the Original Seller has notified the Bank that it will transfer all of its rights and obligations in its capacity as “Seller” under the Finance Documents to the New Seller.

(D) The Companies wish to amend the terms of the Agreement and the Guarantee to effect the transfer of certain rights and obligations from the Original Seller to the New Seller, and so that the New Seller accedes to the Agreement and to the Guarantee.

NOW IT IS AGREED as follows:

1. Definitions and Construction

1.1.1 In this Deed, terms used in the Agreement and the Guarantee (unless otherwise defined in this Deed) have the same meaning and construction and:

“Agreement” means the Master Trade Receivables Financing Facility Agreement dated 25 August 2004 between the Original Seller and the Bank as the same may have been, or may from time to time be amended, restated, varied, modified, supplemented or novated;

“Deed of Charge” means the deed of charge substantively in the form set out in Schedule 9 to the Agreement;

- 2 -

“Guarantee” means the guarantee entered into by the Original Seller and the BE Companies in favour of the Bank on 25 January 2005, as the same may have been, or may from time to time be, amended, restated, varied, modified, supplemented or novated;

“Guarantor Representations” means the representations and warranties set out in Clauses 13.1(A) to 13.1(D) (inclusive) and 13.11(P) of the Agreement; and

“Relevant Representations” means the representations and warranties set out in Clauses 13.1(A) to 13.1(F) (inclusive), 13.1(H), 13.1(J) to 13.1(L) (inclusive), 13.1(N) and 13.1(P) of the Agreement.

1.1.2 Unless the context otherwise requires, any reference in this document to:

(a) the “Bank”, any “Obligor”, any “Guarantor” or any “Company” shall be construed so as to include its successors in title, permitted assigns and permitted transferees;

(b) a “person” includes any person, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having separate legal personality) or two or more of the foregoing; and

(c) a provision of law is a reference to that provision as amended or re-enacted.

1.1.3 Clause and Schedule headings are for ease of reference only.

2. Terms of Assumption and transfer

2.1 Each Company confirms that it has received a copy of the Agreement and the Guarantee, together with such other documents and information as it has required in connection herewith and therewith.

2.2 With effect from the date on which the Bank notifies the New Seller (who shall immediately notify the Original Seller and the BE Companies of such fact) that it is satisfied that it has received (in form and substance satisfactory to it) the conditions precedent listed in schedule 2 hereto (the “Effective Date”):

(a) the New Seller shall assume, perform and comply with all of the Original Seller’s obligations, and shall have all of the Original Seller’s rights, in each case in its capacity as “Seller”, under or in respect of the Agreement as if originally named as “Seller” in the Agreement;

(b) the Original Seller shall be released from all of its obligations, and shall have no rights, in each case in its capacity as “Seller”, under or in respect of the Agreement;

(c) notwithstanding the release referred to in Clause 2.2(B), the Original Seller agrees to remain bound by the terms of the Agreement in its capacity as an Obligor and the Guarantee in its capacity as a Guarantor and undertakes to perform all the obligations expressed to be undertaken in the Agreement by an Obligor and in the Guarantee by a Guarantor;

- 3 -

(d) the New Seller agrees to be bound by the terms of the Guarantee as if it had been an original party thereto, and undertakes to perform all the obligations expressed to be undertaken under the Guarantee by a Guarantor; and

(e) each other Company consents to the amendments contemplated by this Deed and confirms that their obligations as Obligor and Guarantor in respect of the New Seller and otherwise in respect of the Finance Documents as amended shall remain in full force and effect.

2.4 Each of the Original Seller and the New Seller makes the Relevant Representations on the date of this Deed and on the Effective Date (in each case construing references to “Seller” as being to the Original Seller on the date of this Deed and to the New Seller on the Effective Date), and confirms that these are true and correct in relation to it as at each such date as if made by reference to the facts and circumstances then existing.

2.5 Each of the BE Companies each makes the Guarantor Representations on the date of this Deed and on the Effective Date and confirms that these are true and correct in relation to it as at each such date as if made by reference to the facts and circumstances then existing.

3. Amendments

3.1 With effect from the Effective Date Clause 4.2 (Conditions precedent to the first Utilisation) of the Agreement shall be amended by the inclusion of the following at the end of such Clause:

“(U) a second capacity and true sale legal opinion as to Scottish law of Tods Murray LLP addressed to the Bank;

(V) a second capacity and true sale legal opinion as to English law of Simmons & Simmons addressed to the Bank;

(W) a copy, certified a true copy by or on behalf of each Obligor, of each such law, decree, consent, licence, approval, registration or declaration (if any) as is, in the opinion of counsel to the Bank, necessary to render each of the Finance Documents legal, valid, binding and enforceable, to make each of the Finance Documents admissible in evidence in such company’s jurisdiction of incorporation and to enable such company to perform its obligations under the Finance Documents (including, without limitation, the Seller’s Electricity Supply Licence);

(X) evidence reasonably satisfactory to the Bank that the Seller is entitled to the same rights under the Contracts and the Policies as were held by the Original Seller (including, but not limited to, a supplementary legal due diligence report on a selection of the transfer documentation relating to the Specimen Contracts prepared by Simmons & Simmons and Tods Murray LLP and confirmation that all arrangements for payment by customers into the Collection Account remain in place);

- 4 -

(Y) evidence that the Seller has activated the “Business Master” system (being the Bank’s electronic banking platform which enables the Seller to monitor payments both inwards and outwards from the Collection Account); and

(Z) a priority agreement between the Bank, the Secretary for Trade and Industry and Nuclear Liabilities Fund Limited and a certificate of non-crystallisation, each substantively in the form agreed in relation to the entry by the Original Seller into the Deed of Charge, unless the DTI Security has at that time been released,

and the Seller shall deliver all the documents referred to in Clauses 4.2(U) to 4.2(Z) (inclusive) to the Bank by no later than 30 June 2005 or such later date as the Bank may consent to, such consent not to be unreasonably withheld.”

3.2 With effect from the Effective Date, Schedule 1 to the Agreement shall be amended by insertion of the following definition: ““Original Seller” means British Energy Generation Limited”.

3.3 With effect from the Effective Date, Schedule 1 to the Agreement shall be further amended by deleting the current definition of “Collection Account” and inserting in its place the following: ““Collection Account” means the Sterling account in the name of the Bank opened with Barclays Bank PLC at its branch at 54 Lombard Street numbered 70024090 (sort code 20-32-53) and designated Barclays re: British Energy Direct Limited”.

4. Finance Document

This Deed is a Finance Document.

5. Governing Law

This Deed shall be governed by English law. Each Company irrevocably agrees that the English courts shall have non-exclusive jurisdiction in relation to any legal action or proceedings arising out of or in connection with this Deed (“Proceedings”) and waives any objection to Proceedings in such courts on the grounds of venue or on the grounds that Proceedings have been brought in an inappropriate forum.

6. Deed

Each party to this Deed intends this document to be a deed and each of the Original Seller, the New Seller and the Companies executes and delivers it as its deed.

7. Counterparts

This Deed may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterpart were on a single copy of this Deed.

IN WITNESS WHEREOF this Deed has been executed as a deed by the Companies and has been signed by or on behalf of the Bank and is intended to be and is hereby delivered as a deed on the date first above written.

- 5 -

EXECUTED and DELIVERED as a DEED by		)
ROBERT ARMOUR		)
acting as attorney-in-fact	)	Robert Armour
for and on behalf of		)
BRITISH ENERGY DIRECT LIMITED	)
in the presence of:
Witness’ signature:
Witness name: Jean MacDonald
Witness’ address: Systems House, Alba Campus, Livingston EH54 7EG
Witness’ occupation: Solicitor

Address:	c/o British Energy Group plc
	Systems House
	Alba Campus
	Livingston
	EH54 7EG
Tel:	+44(0) 1506 408880
Fax:	+44(0) 1506 408882
Attention:	The Group Treasurer

EXECUTED and DELIVERED as a DEED by		)
ROBERT ARMOUR		)
acting as attorney-in-fact	)	Robert Armour
for and on behalf of		)
BRITISH ENERGY GENERATION LIMITED	)
in the presence of:
Witness’ signature:
Witness name: Jean MacDonald
Witness’ address: Systems House, Alba Campus, Livingston EH54 7EG
Witness’ occupation: Solicitor

Address:	c/o British Energy Group plc
	Systems House
	Alba Campus
	Livingston
	EH54 7EG
Tel:	+44(0) 1506 408880
Fax:	+44(0) 1506 408882
Attention:	The Group Treasurer

- 6 -

EXECUTED and DELIVERED as a DEED by		)
JEAN MACDONALD		)
acting as attorney-in-fact	)	Jean MacDonald
for and on behalf of		)
BRITISH ENERGY HOLDINGS plc		)
in the presence of:
Witness’ signature:
Witness name: Peter McCall
Witness’ address: Systems House, Alba Campus, Livingston EH54 7EG
Witness’ occupation: Solicitor

Address:	c/o British Energy Group plc
	Systems House
	Alba Campus
	Livingston
	EH54 7EG
Tel:	+44(0) 1506 408880
Fax:	+44(0) 1506 408882
Attention:	The Group Treasurer

EXECUTED and DELIVERED as a DEED by		)
JEAN MACDONALD		)
acting as attorney-in-fact	)	Jean MacDonald
for and on behalf of		)
BRITISH ENERGY GROUP plc	)
in the presence of:
Witness’ signature:
Witness name: Peter McCall
Witness’ address: Systems House, Alba Campus, Livingston EH54 7EG
Witness’ occupation: Solicitor

Address:	Systems House
	Alba Campus
	Livingston
	EH54 7EG
Tel:	+44(0) 1506 408880
Fax:	+44(0) 1506 408882
Attention:	The Group Treasurer

- 7 -

EXECUTED and DELIVERED as a DEED by		)
JEAN MACDONALD		)
acting as attorney-in-fact	)	Jean MacDonald
for and on behalf of		)
BRITISH ENERGY LIMITED		)
in the presence of:
Witness’ signature:
Witness name: Peter McCall
Witness’ address: Systems House, Alba Campus, Livingston EH54 7EG
Witness’ occupation: Solicitor

Address:	c/o British Energy Group plc
	Systems House
	Alba Campus
	Livingston
	EH54 7EG
Tel:	+44(0) 1506 408880
Fax:	+44(0) 1506 408882
Attention:	The Group Treasurer

EXECUTED and DELIVERED as a DEED by		)
JEAN MACDONALD		)
acting as attorney-in-fact	)	Jean MacDonald
for and on behalf of		)
BRITISH ENERGY GENERATION (UK) LIMITED		)
in the presence of:
Witness’ signature:
Witness name: Peter McCall
Witness’ address: Systems House, Alba Campus, Livingston EH54 7EG
Witness’ occupation: Solicitor

Address:	c/o British Energy Group plc
	Systems House
	Alba Campus
	Livingston
	EH54 7EG
Tel:	+44(0) 1506 408880
Fax:	+44(0) 1506 408882
Attention:	The Group Treasurer

- 8 -

EXECUTED and DELIVERED as a DEED by		)
JEAN MACDONALD		)
acting as attorney-in-fact	)	Jean MacDonald
for and on behalf of		)
BRITISH ENERGY INTERNATIONAL		)
HOLDINGS LIMITED		)
in the presence of:
Witness’ signature:
Witness name: Peter McCall
Witness’ address: Systems House, Alba Campus, Livingston EH54 7EG
Witness’ occupation: Solicitor

Address:	c/o British Energy Group plc
	Systems House
	Alba Campus
	Livingston
	EH54 7EG
Tel:	+44(0) 1506 408880
Fax:	+44(0) 1506 408882
Attention:	The Group Treasurer

EXECUTED and DELIVERED as a DEED by		)
JEAN MACDONALD		)
acting as attorney-in-fact	)	Jean MacDonald
for and on behalf of		)
BRITISH ENERGY POWER AND ENERGY	)
TRADING LIMITED		)
in the presence of:
Witness’ signature:
Witness name: Peter McCall
Witness’ address: Systems House, Alba Campus, Livingston EH54 7EG
Witness’ occupation: Solicitor

Address:	c/o British Energy Group plc
	Systems House
	Alba Campus
	Livingston
	EH54 7EG
Tel:	+44(0) 1506 408880
Fax:	+44(0) 1506 408882
Attention:	The Group Treasurer

- 9 -

EXECUTED and DELIVERED as a DEED by		)
JEAN MACDONALD		)
acting as attorney-in-fact	)	Jean MacDonald
for and on behalf of		)
DISTRICT ENERGY LIMITED	)
in the presence of:
Witness’ signature:
Witness name: Peter McCall
Witness’ address: Systems House, Alba Campus, Livingston EH54 7EG
Witness’ occupation: Solicitor

Address:	c/o British Energy Group plc
	Systems House
	Alba Campus
	Livingston
	EH54 7EG
Tel:	+44(0) 1506 408880
Fax:	+44(0) 1506 408882
Attention:	The Group Treasurer

EXECUTED and DELIVERED as a DEED by		)
JEAN MACDONALD		)
acting as attorney-in-fact	)	Jean MacDonald
for and on behalf of		)
BRITISH ENERGY TREASURY FINANCE		)
LIMITED	)
in the presence of:
Witness’ signature:
Witness name: Peter McCall
Witness’ address: Systems House, Alba Campus, Livingston EH54 7EG
Witness’ occupation: Solicitor

Address:	c/o British Energy Group plc
	Systems House
	Alba Campus
	Livingston
	EH54 7EG
Tel:	+44(0) 1506 408880
Fax:	+44(0) 1506 408882
Attention:	The Group Treasurer

- 10 -

EXECUTED and DELIVERED as a DEED by		)
MICHAEL RAYNES		)
duly authorised attorney	)	M.J. Raynes
for and on behalf of:		)
BARCLAYS BANK PLC	)
in the presence of:
Witness’ signature:
Witness name: Carolyn Thomas
Witness’ address: 5 The North Colonnade, Canary Wharf, London E14 4BB
Witness’ occupation: Banker

Address:

c/o Barclays Capital

Structured Trade & Export Finance

5 The North Colonnade

Canary Wharf

London E14 4BB

Tel: +44(0)20 7773 1815

Fax: +44(0)20 7773 1831

Attention: Ian Stuttard

- 11 -

SCHEDULE 1: THE COMPANIES

	Company	Registered Number	Registered Address
1	British Energy Holdings plc	SC270186	British Energy Holdings plc Systems House Alba Campus Livingston EH54 7EG
2	British Energy Group plc	SC270184	British Energy Group plc Systems House Alba Campus Livingston EH54 7EG
3	British Energy Limited	SC162273	British Energy Limited Systems House Alba Campus Livingston EH54 7EG
4	British Energy Generation (UK) Limited	SC117121	British Energy Generation (UK) Limited Systems House Alba Campus Livingston EH54 7EG
5	British Energy International Holdings Limited	SC138614	British Energy International Holdings Limited Systems House Alba Campus Livingston EH54 7EG
6	British Energy Power and Energy Trading Limited	SC200887	British Energy Power and Energy Trading Limited Systems House Alba Campus Livingston EH54 7EG

- 12 -

	Company	Registered Number	Registered Address
7	District Energy Limited	02362017	District Energy Limited Barnett Way Barnwood Gloucester GL4 7RS
8	British Energy Treasury Finance Limited	SC251425	British Energy Treasury Finance Limited Systems House Alba Campus Livingston EH54 7EG

SCHEDULE 2: CONDITIONS PRECEDENT

1.2 Certified copies of the memorandum, articles of association and certificate of incorporation of the Original Seller and the New Seller.

1.3 A copy of the resolution of the board of directors of the Original Seller and the New Seller approving the terms of, and the transactions contemplated by, this Deed and authorising a certain person or persons to sign this Deed.

1.4 A certificate of the New Seller (signed by an authorised signatory) confirming that entering into and performing its obligations under this Deed, the Agreement (as amended by this Deed) and the Guarantee would not cause any borrowing and/or guaranteeing or similar limit binding on it to be exceeded.

1.5 A certificate of the Original Seller and the New Seller (each signed by an authorised signatory of the respective company) certifying that each copy document relating to it specified in paragraphs 2 and 3 above are correct, complete and in full force and effect as at a date no earlier than the date of this Deed.

1.6 A certificate of the Original Seller and the New Seller (each signed by an authorised signatory of the respective company) certifying that it has obtained all authorisations, approvals, consents, licences, exemptions, filings, registrations, notarisations and other matters, official or otherwise, required in connection with the entry into, performance, validity and enforceability of this Deed and, in the case of the New Seller, the other Finance Documents to which it has acceded.

- 13 -

1.7 A specimen of the signature of each person authorised by the Original Seller and the New Seller to sign this Deed on behalf of it and to sign and/or send all documents and notices to be signed and/or sent by it under this Deed and the Agreement (as amended).

- 14 -

EX-4.17

Exhibit 4.17

CONFORMED COPY

DEBENTURE

DATED 8TH SEPTEMBER, 2000

Between

EGGBOROUGH POWER LIMITED

BRITISH ENERGY PLC

BRITISH ENERGY POWER AND ENERGY TRADING LIMITED

- and -

BARCLAYS BANK PLC

as Security Trustee

THIS DEBENTURE IS ENTERED INTO

SUBJECT TO AND WITH THE BENEFIT OF

THE TERMS OF AN INTERCREDITOR

AGREEMENT DATED 8TH SEPTEMBER, 2000

ALLEN & OVERY

London

TABLE OF CONTENTS

		Page
Clause
1.	Interpretation	1
2.	Fixed Security	6
3.	Floating Charge	10
4.	Covenants for Title	11
5.	Representations and Warranties	11
6.	General Undertakings	13
7.	Property Undertakings	15
8.	Security Accounts	18
9.	When Security Becomes Enforceable	18
10.	Enforcement of Security	19
11.	Receiver	20
12.	Powers of Receiver	21
13.	Application of Proceeds	23
14.	Expenses and Indemnity	24
15.	Delegation	25
16.	Further Assurances	25
17.	Power of Attorney	26
18.	Miscellaneous	26
19.	Release	28
20.	Governing Law	28
Schedule
1.	Real Property	29
2.	Specific Patents and Trademarks	30
3.	Relevant Agreements	31
4.	Form of letters to the Account Bank	32
	Part I - Form of notice to the Account Bank	32
	Part II - Form of acknowledgement of the Account Bank	34
	Part III - Form of letter from the Security Trustee to the Account Bank	35
5.	Forms of Notice of Assignment	37
	Part I - Form of Notice of Assignment to Insurers	37
	Part II - Form of Letter of Acknowledgement from Insurer	39
	Part III - Form of Notice of Assignment in respect of Relevant Agreements	40
	Part IV - Form of Acknowledgement of Relevant Party	42
	Part V - Form of Notice of Assignment in respect of Settlement Arrangements	43
	Part VI - Form of Acknowledgement of Pool Funds Administrator to the Security Trustee	45
Signatories		46

THIS DEBENTURE is dated 8th September, 2000 between:

(1) EGGBOROUGH POWER LIMITED (Registered number 03782700) (the “Chargor”);

(2) BRITISH ENERGY PLC (Registered number 162273) (“BE”); and

(3) BRITISH ENERGY POWER AND ENERGY TRADING LIMITED (Registered number SC200887) (“BET”); and

(4) BARCLAYS BANK PLC (the “Security Trustee”) as agent and trustee for the Finance Parties (as defined in the Credit Agreement referred to below), BE and BET.

WHEREAS:

(A) The Chargor enters into this Debenture in connection with the Credit Agreement (as defined below), the Subordinated Loan Agreement (as defined below) and the Deed of Payment.

(B) It is intended that this Debenture takes effect as a deed notwithstanding the fact that a party may only execute this Debenture under hand.

IT IS AGREED as follows:

1. INTERPRETATION

1.1 Definitions

In this Debenture:

“Act”

means the Law of Property Act 1925.

“Balancing and Settlement Code”

means the document setting out balancing and settlement arrangements established by NGC pursuant to its transmission licence.

“Certificate of Title”

means any certificate of title in relation to the Mortgaged Property provided by Clifford Chance LLP to the Security Trustee.

“Charged Security Assets”

means those Security Assets subject to the first fixed charge in Clause 2.1(b) (Creation of first fixed security).

“Credit Agreement”

means the £550,000,000 project finance credit agreement dated 13th July, 2000 (as amended and restated on 8th September, 2000) between, inter alia, the parties to this Debenture (other than BE and BET).

“Deed of Payment Liabilities”

means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of the Chargor to BET under the Deed of Payment together with all costs charges and expenses incurred in connection with the protection, preservation or enforcement of its rights under the Deed of Payment or any other document securing any such liability. The term “Deed of Payment” includes all amendments and supplements including supplements providing for further advances.

“Discharge Date”

has the meaning given to it in the Intercreditor Agreement.

“Energy Review White Paper”

means the document entitled “Conditions of Review of Energy Sources for Power Generation and Government response to fourth and fifth Reports of the Trade and Industry Committee” issued by the Department of Trade and Industry in October 1988 (CM 4071), as supplemented by the paper entitled “The New Electricity Trading Arrangements” published by Ofgem in 1999.

“Excepted Relevant Agreements”

(a) the Pooling and Settlement Agreement;

(b) the Ancillary Services Agreement;

(c) the Air Gas Production Connection Agreement;

(d) the Air Gas Production Electricity Supply Agreement;

(e) the Air Gas Production On-Site Supply Agreement;

(f) the Saint Gobain Electricity Supply Agreement;

(g) the Saint Gobain Connection Agreement;

(h) the Saint Gobain UK Parent Guarantee;

(i) the Ash Marketing Agreement;

(j) the Gale Common Sharing Agreement;

(k) the Insurances in respect of business interruption or loss of availability; and

2

(l) the Master Connection and Use of System Agreement,

(in each case including any supplements, amendments or replacements thereof).

“Fixtures”

means all fixtures and fittings (including trade fixtures and fittings) and fixed plant and machinery on the Mortgaged Property.

“Group Shares”

means any stocks, shares, debentures, bonds, warrants, coupons or other securities and investments in any member of the Group owned (either now or in the future) by the Chargor from time to time.

“Intellectual Property Rights”

means all know-how, patents, trade marks, service marks, designs, business names, topographical or similar rights, copyrights and other intellectual property monopoly rights and any interests (including by way of licence) in any of the foregoing (in each case whether registered or not and including all applications for the same).

“Majority Senior Creditors”

has the meaning given to that term in the Intercreditor Agreement.

“Mortgaged Property”

means all freehold or leasehold property the subject of any security created by this Debenture.

“Mortgaged Security Assets”

means those Security Assets subject to the first legal mortgage in Clause 2.1(a) (Creation of first fixed security).

“NGC”

means The National Grid Company plc, a company incorporated under the laws of England and Wales.

“Pooling and Settlement Agreement”

means the Pooling and Settlement Agreement for the Electronic Industry of England and Wales dated 30th March, 1990 between the parties named in the agreement as amended.

“Premises”

means all buildings and erections included in the definition of “Security Assets”.

3

“Project Account”

has the meaning given to it in the Accounts Agreement.

“Receiver”

means a receiver and manager or (if the Security Trustee so specifies in the relevant appointment) a receiver, in either case, appointed under this Debenture.

“Related Rights”

means any dividend or interest paid or payable in relation to any Share and any rights, moneys or property accruing or offered at any time in relation to any Shares by way of redemption, substitution, exchange, bonus or preference, under option rights or otherwise.

“Relevant Agreements”

means the agreements listed in Schedule 3.

“Saint Gobain UK Parent Guarantee”

means the guarantee dated 23rd October, 1998 granted by Saint-Gobain UK Limited in favour of the Borrower in respect of Saint-Gobain’s obligations under the Saint-Gobain Connection Agreement.

“Secured Liabilities”

means Secured Senior Liabilities and Secured Subordinated Liabilities.

“Secured Senior Liabilities”

means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of the Chargor to any Finance Party under each Finance Document together with all costs, charges and expenses incurred by any Finance Party in connection with the protection, preservation or enforcement of its respective rights under the Finance Documents or any other document securing any such liability except for any obligation which, if it were so included, would result in this Debenture constituting unlawful financial assistance under Sections 151 and 152 of the Companies Act 1985. The term “Finance Document” includes all amendments and supplements including supplements providing for further advances.

“Secured Subordinated Liabilities”

means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of the Chargor to BE under the Subordinated Loan Agreement together with all costs, charges and expenses incurred by BE in connection with the protection, preservation or enforcement of its rights under the Subordinated Loan Agreement or any other document securing any such liability. The term “Subordinated Loan Agreement” includes all amendments and supplements including supplements providing for further advances.

4

“Security Account”

means any account established under Clause 8 (Security Accounts).

“Security Assets”

means all assets of the Chargor the subject of any security created by this Debenture.

“Security Period”

means the period beginning on the date of this Debenture and ending on the date on which the Security Trustee is satisfied that all the Secured Liabilities and the Deed of Payment Liabilities have been unconditionally and irrevocably paid and discharged in full.

“Shares”

means the Group Shares and any other stocks, shares, debentures, bonds or other securities and investments.

“Subordinated Loan Agreement”

means the subordinated loan agreement dated 13th July, 2000 between the Chargor as borrower and BE as the lender executed pursuant to the Sponsor Undertaking.

1.2 Construction

(a) Capitalised terms defined in the Credit Agreement have, unless expressly defined in this Debenture, the same meaning in this Debenture.

(b) The provisions of Clause 1.2 (Construction) of the Credit Agreement apply to this Debenture as though they were set out in full in this Debenture except that references to the Credit Agreement are to be construed as references to this Debenture.

(c) The terms of the other Finance Documents, the Subordinated Loan Agreement and the Deed of Payment and of any side letters between any Parties in relation to any Finance Document are incorporated in this Debenture to the extent required to ensure that any purported disposition of the Mortgaged Property contained in this Debenture is a valid disposition in accordance with Section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989.

(d) If the Security Trustee considers that an amount paid by any Obligor to a Finance Party, BE or BET under a Finance Document, the Subordinated Loan Agreement, or the Deed of Payment (as the case may be) is capable of being avoided or otherwise set aside on the liquidation or administration of that Obligor or otherwise, then that amount shall not be considered to have been irrevocably paid for the purposes of this Debenture.

(e) For the avoidance of doubt, this Debenture (or any part hereof) shall not constitute unlawful financial assistance for the purposes of the proviso to the definition of “Secured Liabilities” and “Deed of Payment Liabilities” in Clause 1.1 to the extent that it constitutes financial assistance within the meaning of the Sections therein cited but the provisions of Section 155-158 of the Companies Act 1985 have been complied with in respect of the giving of such financial assistance. The Chargor confirms that it has complied with the provisions of Sections 155-158 of the Companies Act 1985 in respect of the provision by it of any financial assistance (as that term is defined in the Companies Act 1985).

5

(f) A person who is not a party to this Debenture may not enforce its terms under the Contracts (Rights of Third Parties) Act 1999.

1.3 Certificates

A certificate of the Security Trustee setting forth the amount of any Secured Liability due from the Chargor shall be conclusive evidence of such amount against the Chargor in the absence of manifest error.

2. FIXED SECURITY

2.1 Creation of first fixed security

The Chargor, as security for the payment of all the Secured Senior Liabilities, charges in favour of the Security Trustee for the benefit of the Finance Parties:

(a) by way of a first legal mortgage:

(i) all the property specified in Schedule 1; and

(ii) all estates or interests in any freehold or leasehold property (except any Security Assets specified in sub-paragraph (i) above) now belonging to it; and

(b) by way of first fixed charge:

(i) (to the extent that they are not the subject of a mortgage under paragraph (a) above) all present and future estates or interests in any freehold or leasehold property belonging to it;

(ii) all plant and machinery now or in the future owned by the Chargor and its interest in any plant or machinery in its possession;

(iii) its interest now or in the future in all the Shares and their Related Rights;

(iv) all moneys standing to the credit of any account (including the Project Accounts but excluding the Revenue Account) and, to the extent the Chargor has any interest therein on the Security Accounts with any person and the debts represented by them and all Authorised Investments made from such Project Accounts, Investment Proceeds and Income (all as defined in the Accounts Agreement) arising in respect of such Authorised Investments and all rights to receive the same;

(v) to the extent not effectively assigned under clause 2.2(a), all benefits in respect of the Insurances and all claims and returns of premiums in respect of them;

6

(vi) all of the Chargor’s present and future book and other debts, the proceeds of the same and all other moneys due and owing to the Chargor and the benefit of all claims, rights, securities, receivables and guarantees of any nature enjoyed or held by it in relation to any of the foregoing;

(vii) (to the extent that they do not fall within any other sub-paragraph of this paragraph (b) and are not effectively assigned under clause 2.2(a)) all of the Chargor’s rights and benefits under the Relevant Agreements, any distributorship or similar agreements entered into by it now, or in the future (including, for the avoidance of doubt, any new agreement which the Chargor may enter into pursuant to the Balancing and Settlement Code) any letters of credit issued in its favour and all bills of exchange and other negotiable instruments held by it;

(viii) any beneficial interest, claim or entitlement of the Chargor in any pension fund;

(ix) its present and future goodwill;

(x) the benefit of all present and future licences, permissions, consents and authorisations (statutory or otherwise) held in connection with its business or the use of any Security Asset specified in any other sub-paragraph in this Clause and the right to recover and receive all compensation which may be payable to it in respect of them;

(xi) its present and future uncalled capital; and

(xii) its present and future Intellectual Property Rights (including the patents and trademarks specified in Schedule 2).

2.2 Creation of second fixed security

The Chargor, as security for the payment of all the Secured Subordinated Liabilities, charges in favour of the Security Trustee for the benefit of BE:

(a) by way of a second legal mortgage, all the Mortgaged Security Assets; and

(b) by way of second fixed charge, all the Charged Security Assets.

2.3 Charge of Revenue Account

(a) Creation of first fixed security

The Chargor, as security for the payment of all Deed of Payment Liabilities, charges in favour of the Security Trustee for the benefit of BET, all moneys standing to the credit of the Revenue Account and the debts represented by it, together with all Authorised Investments made from the Revenue Account, all Investment Proceeds and Income arising in respect of such Authorised Investments and all rights to receive the same.

7

(b) Creation of second fixed security

The Chargor, as security for the payment of the Senior Secured Liabilities, charges in favour of the Security Trustee for the benefit of the Finance Parties, all moneys standing to the credit of the Revenue Account and the debts represented by it, together with all Authorised Investments made from the Revenue Account, all Investment Proceeds and Income arising in respect of such Authorised Investments and all rights to receive the same.

2.4 Assignments

(a) The Chargor as continuing security for the payment, discharge and performance of the Secured Liabilities, hereby assigns and agrees to assign to the Security Trustee (as agent and trustee as aforesaid) (i) all its right, title and interest (if any) in and to each Relevant Agreement and (ii) all of its present and future rights under and in respect of the Insurances.

(b) The Chargor as continuing security for the payment, discharge and performance of the Secured Liabilities, hereby assigns and agrees to assign to the Security Trustee all of its rights over receivables arising under the Settlement Arrangements (as defined in the Pooling and Settlement Agreement).

(c) The Chargor, shall forthwith give notice of each such assignment of its right, title and interest (if any):

(i) under and in respect of the Insurances and in the Insurance Proceeds by sending a notice in the form of Part 1 of Schedule 5 (with such amendments as the parties may agree) duly completed to each insurer of the Insurances;

(ii) in and to the Relevant Agreements by sending a notice substantially in the form of Part III of Schedule 5 (with such amendments as the parties may agree) to each of the other parties thereto or if any such agreement is entered into after the date of this Debenture, on the date that it is entered into; and

(iii) over the receivables arising under the Settlement Arrangements (as defined in the Pooling and Settlement Agreement) by sending a notice substantially in the form of Part V of Schedule 5 (with such amendments as the parties may agree) to the Pool Funds Administrator,

and the Chargor shall use its reasonable endeavours to procure that within 14 days of the date hereof (or, in the case of paragraphs (i) and (ii) above, if later, the date of entry into such Insurances, or Relevant Agreements), each such other party delivers a letter of undertaking to the Security Trustee in the form of Part II of Schedule 5 (in the case of Insurances) or in the form of Part IV of Schedule 5 (in the case of Relevant Agreements), or in the form of Part VI of Schedule 5 (in the case of the Pooling and Settlement Agreement) in each case with such amendments as the Security Trustee may agree.

(d) To the extent that any such right, title and interest described in paragraphs (a) and (b) of this Clause 2.4 is not assignable or capable of assignment, the assignment thereof purported to be effected shall operate as:

(i) in the case of the Insurances, an assignment of any and all proceeds of the Insurances received by each Chargor; and

8

(ii) in the case of the Relevant Agreements, an assignment of any and all damages, compensation, remuneration, profit, rent or income which any Chargor may derive therefrom or be awarded or entitled to in respect thereof,

in each case as continuing security for the payment, discharge and performance of the Secured Liabilities.

(e) Prior to the occurrence of a Default, which is continuing, (i) the Security Trustee shall permit the Chargor to exercise the rights of the Chargor (other than to receive payment of money) under any Relevant Agreement (other than the Excepted Relevant Agreements, PROVIDED THAT the exercise of these rights in the manner proposed would not result in an Event of Default under the terms of the Finance Documents, and (ii) any payments received by the Security Trustee under or in respect of such Relevant Agreements by virtue of this Debenture shall be paid by the Security Trustee to a Project Account in accordance with the terms of the Accounts Agreement save to the extent required by the terms of the Credit Agreement and the Intercreditor Agreement to be applied against any of the Secured Liabilities or otherwise.

2.5 Limited Release

(a) Prior to the occurrence of a BET Event which is continuing:

(i) the Security Trustee shall permit the Chargor to exercise the rights of the Chargor (including the right to receive money) in respect of the Excepted Relevant Agreements (including, in the case of the Pooling and Settlement Agreement and any Settlement Arrangements entered into pursuant thereto); and

(ii) the Chargor shall be entitled to instruct the counterparties to the Excepted Relevant Agreements to make payments due thereunder directly into the Revenue Account.

(b) Each of the Security Trustee (on behalf of the Finance Parties) and BE acknowledges and confirms that any moneys paid directly into the Revenue Account in accordance with Clause 2.5(a) above shall be released from the security constituted by this Debenture.

(c) Upon the occurrence of a BET Event which is continuing, the Chargor shall give notice to the counterparties to the Excepted Relevant Agreements to make payments into the Operating Account or any other Project Account or Security Account.

2.6 Miscellaneous

(a) A reference in this Debenture to a charge or mortgage of any freehold or leasehold property includes:

(i) all buildings and Fixtures on that property;

(ii) the proceeds of sale of any part of that property; and

(iii) the benefit of any covenants for title given or entered into by any predecessor in title of the Chargor in respect of that property or any moneys paid or payable in respect of those covenants.

9

(b) The fact that no details of properties or patents and trademarks or agreements are included in the relevant Schedule does not affect the validity or enforceability of any security created by this Debenture.

(c) Without prejudice to Clause 2.1(b)(vi) (Creation of first fixed security), Clause 2.2(b) (Creation of second fixed security), Clause 2.3 (a) (Creation of first fixed security) and Clause 2.3 (b) (Creation of second fixed security) (Charge of Revenue Account) if, pursuant to Clause 8.3 (Withdrawals), or the terms of the Accounts Agreement, the Chargor is entitled to withdraw the proceeds of any book and other debts standing to the credit of a Security Account and/or a Project Account and/or the Revenue Account and, as a result, those proceeds are in any way released from the fixed charges created pursuant to Clause 2.1(b)(vi) (Creation of first fixed security), Clause 2.2(b) (Creation of second fixed security), Clause 2.3 (a) (Creation of first fixed security) and Clause 2.3 (b) (Creation of second fixed security) (Charge of Revenue Account) and stand subject to the floating charges created pursuant to Clause 3.1 (Creation of first floating charge), Clause 3.2 (Creation of second floating charge), Clause 3.3 and Clause 3.4, the release will in no way derogate from the subsistence and continuance of the fixed charges on all other outstanding book and other debts of the Chargor and the proceeds of those debts.

3. FLOATING CHARGE

3.1 Creation of first floating charge

The Chargor, as security for the payment of all of the Secured Senior Liabilities, charges in favour of the Security Trustee for the benefit of the Finance Parties by way of a first floating charge all its assets (for the avoidance of doubt, excluding the Revenue Account and the debts represented by it, together with all Authorised Investments made from the Revenue Account, all Investment Proceeds and Income arising in respect of such Authorised Investments and all rights to receive the same) not otherwise effectively mortgaged or charged by way of the first fixed mortgage or charge by Clause 2.1 (Creation of first fixed security).

3.2 Creation of second floating charge

The Chargor, as security for the payment of all the Secured Subordinated Liabilities, charges in favour of the Security Trustee for the benefit of BE by way of a second floating charge all its assets (for the avoidance of doubt, excluding the Revenue Account and the debts represented by it, together with all Authorised Investments made from the Revenue Account, all Investment Proceeds and Income arising in respect of such Authorised Investments and all rights to receive the same) not otherwise effectively mortgaged or charged by way of the second fixed mortgage or charge by Clause 2.2 (Creation of second fixed security).

3.3 Creation of first floating charge - Revenue Account

The Chargor, as security for the payment of all of the Deed of Payment Liabilities, charges in favour of the Security Trustee for the benefit of BET by way of a first floating charge all the moneys standing to the credit of the Revenue Account and the debts represented by it, together with all Authorised Investments made from the Revenue Account, all Investment Proceeds and Income arising in respect of such Authorised Investments and all rights to receive the same not otherwise effectively mortgaged or charged by way of the first fixed mortgage or charge by Clause 2.3(a) (Creation of first fixed security).

10

3.4 Creation of second floating charge - Revenue Account

The Chargor, as security for the payment of all of the Senior Secured Liabilities, charges in favour of the Security Trustee for the benefit of the Finance Parties by way of a second floating charge all the moneys standing to the credit of the Revenue Account and the debts represented by it, together with all Authorised Investments made from the Revenue Account, all Investment Proceeds and Income arising in respect of such Authorised Investments and all rights to receive the same not otherwise effectively mortgaged or charged by way of the second fixed mortgage or charge by Clause 2.3(b) (Creation of second fixed security).

3.5 Conversion

(a) The Security Trustee may, by notice to the Chargor, in accordance with the other Finance Documents, convert each floating charge created by this Debenture into a fixed charge as regards all or any of the Chargor’s assets specified in the notice if:

(i) an Event of Default is outstanding; or

(ii) the Security Trustee reasonably considers those assets to be in danger of being seized or sold under any form of distress, attachment, execution or other legal process or to be otherwise in jeopardy.

(b) Each floating charge hereby created shall, in accordance with the other Finance Documents (in addition to the circumstances in which the same will occur under general law) automatically be converted into a fixed charge over the assets, rights and property of the Chargor in the convening of any meeting of the members of the Chargor to consider a resolution to wind the Chargor up (or not to wind the Chargor up).

4. COVENANTS FOR TITLE

Each mortgage, charge and assignment created under this Debenture is made by the Chargor with full title guarantee in accordance with the Law of Property (Miscellaneous Provisions) Act 1994.

5. REPRESENTATIONS AND WARRANTIES

5.1 Representations and Warranties

The Chargor makes the representations and warranties set out in this Clause 5 to each Finance Party.

5.2 Certificate of Title

(a) The information provided to the lawyers who prepared any Certificate of Title for the purpose of that Certificate of Title was true in all material respects at the date it was expressed to be given;

(b) the information referred to in paragraph (a) above was at the date it was expressed to be given complete and did not omit any information which, if disclosed, would be reasonably likely to materially and adversely affect the decision of a bank considering whether to enter into the Credit Agreement as a Bank; and

11

(c) since the date of any information referred to in paragraph (a) above nothing has occurred which renders that information untrue or misleading in any material respect and which, if disclosed, would be reasonably likely to materially and adversely affect the decision of a person considering whether to enter into the Credit Agreement.

5.3 The Mortgaged Property

Save as disclosed in any Certificate of Title:

(a) the Chargor is the legal and beneficial owner of the Mortgaged Property;

(b) there subsists no breach of any law or regulation which affects or would be reasonably likely to affect materially the value of the Mortgaged Property;

(c) there are no covenants, agreements, stipulations, reservations, conditions, interest, rights or other matters whatsoever affecting the Mortgaged Property;

(d) nothing has arisen or has been created or is subsisting which would be an overriding interest over the Mortgaged Property;

(e) no facilities necessary for the enjoyment and use of the Mortgaged Property are enjoyed by the Mortgaged Property on terms entitling any person to terminate or curtail its use;

(f) the Chargor has received no notice of any adverse claims by any person in respect of the ownership of the Mortgaged Property or any interest in it, nor has any acknowledgement been given to any person in respect of the Mortgaged Property; and

(g) the Mortgaged Property is free from any Security Interest or any tenancies or licences.

5.4 Security

This Debenture creates those Security Interests it purports to create and is not liable to be avoided or otherwise set aside on the liquidation or administration of the Chargor or otherwise.

5.5 Intellectual Property Rights

(a) The Intellectual Property Rights owned by the Chargor are all of the Intellectual Property Rights required by it in order for it to carry on its business as it is now being conducted and the Chargor does not, in carrying on its business, infringe any Intellectual Property Rights of any third party.

(b) The Intellectual Property Rights owned by the Chargor are free of any Security Interests (save for those created by or pursuant to this Debenture) and any other rights or interests (including any licences) in favour of third parties.

12

(c) To its knowledge, no Intellectual Property Right owned by the Chargor is being infringed, nor is there any threatened infringement of any Intellectual Property Right.

5.6 Environmental matters

(a) Save as disclosed in writing prior to the date hereof, the Chargor has obtained all applicable Environmental Licences and has at all times complied in all material respects with the terms of those Environmental Licences and all other applicable Environmental Law.

(b) No Dangerous Substance has been used, disposed of, generated, stored, transported, dumped, deposited, buried or emitted at, on, from or under any premises (whether or not owned, leased, occupied or controlled by the Chargor) in circumstances where this would be reasonably likely to result in a liability on the Chargor.

5.7 Times for making representations and warranties

The representations and warranties set out in this Clause 5 are made on the date of this Debenture and are deemed to be repeated by the Chargor on each date during the Security Period with reference to the facts and circumstances then existing.

6. GENERAL UNDERTAKINGS

6.1 Duration

The undertakings in this Clause 6 remain in force throughout the Security Period.

6.2 Restrictions on dealing

The Chargor shall not:

(a) create or permit to subsist any Security Interest on any Security Asset other than any Security Interest created by this Debenture or any Permitted Security Interest; or

(b) sell, transfer, grant, or lease or otherwise dispose of any Security Asset, except for the disposal in the ordinary course of trade of any Security Asset subject to the floating charges created under Clauses 3.1 and 3.3 (Creation of first floating charge) and Clause 3.2 and 3.4 (Creation of second floating charge).

6.3 Book debts and receipts

The Chargor shall:

(a) get in and realise the Chargor’s:

(i) securities to the extent held by way of temporary investment;

(ii) book and other debts and other moneys; and

(iii) royalties, fees and income of like nature in relation to any Intellectual Property Right owned by it,

13

in the ordinary course of its business and hold the proceeds of the getting in and realisation until payment into a Project Account in accordance with the Accounts Agreement or into a Security Account in accordance with (b) below upon trust for the Security Trustee; and

(b) save to the extent that the Security Trustee otherwise agrees, or to the extent paid into the Project Accounts in accordance with the Accounts Agreement, pay the proceeds of getting in and realisation into a Security Account.

6.4 Relevant Agreements

(a) The Chargor shall not, without the prior written consent of the Security Trustee, agree to:

(i) any material amendment to;

(ii) the termination or abandonment of; or

(iii) waive compliance with any material provision of;

any Relevant Agreement.

(b) The Chargor shall duly and promptly perform its obligations and diligently pursue its rights under any Relevant Agreement.

6.5 Deposit of Shares

The Chargor shall:

(a) deposit with the Security Trustee, or as the Security Trustee may direct, all certificates and other documents of title or evidence of ownership in relation to the Shares and their Related Rights; and

(b) execute and deliver to the Security Trustee all share transfers and other documents which may be requested by the Security Trustee in order to enable the Security Trustee or its nominees to be registered as the owner or otherwise obtain a legal title to the Shares and their Related Rights.

6.6 Environmental matters

The Company shall:

(a) comply in all material respects with (i) the terms and conditions of all Environmental Licences applicable to it and (ii) all other applicable Environmental Law; and

(b) promptly upon receipt of the same, notify the Security Trustee of any Environmental Claim, which would, if substantiated, be reasonably likely to have a Material Adverse Affect.

14

6.7 Intellectual Property Rights

The Chargor shall:

(a) make such registrations and pay such fees, registration taxes and similar amounts as are necessary to keep its Intellectual Property Rights in force;

(b) if requested to do so by the Security Trustee, make entries in any public register of its Intellectual Property Rights which either record the existence of this Debenture or the restrictions on disposal effected by this Debenture;

(c) take such steps as are necessary (including the institution of legal proceedings) to prevent third parties infringing those Intellectual Property Rights and (without prejudice to paragraph (a) above) take all other steps which are reasonably practicable to maintain and preserve its interests in them; and

(d) not, without the prior consent of the Security Trustee:

(i) sell, transfer, license or otherwise dispose of all or any part of those Intellectual Property Rights; or

(ii) permit any Intellectual Property Right which is registered to be abandoned or cancelled, to lapse or to be liable to any claim of abandonment for non-use or otherwise.

7. PROPERTY UNDERTAKINGS

7.1 Duration

The undertakings in this Clause 7 remain in force throughout the Security Period.

7.2 Repair

The Chargor shall keep:

(a) the Premises in good and substantial repair and condition; and

(b) the Fixtures and all plant, machinery, implements and other effects owned by it and which are in or upon the Premises or elsewhere in a good state of repair and in good working order and condition.

7.3 Insurance

The Chargor shall insure the Premises and all its other assets of an insurable nature in the Premises in accordance with the terms of the Credit Agreement.

7.4 Compliance with leases

The Chargor shall:

(a) perform all the terms on its part contained in any lease or leases comprised within the Mortgaged Property; and

15

(b) not do or permit to be done any act as a result of which any such lease or leases would be reasonably likely to become liable to forfeiture or otherwise be determined.

7.5 Acquisitions and legal mortgage

(a) The Chargor shall:

(i) notify the Security Trustee forthwith upon the acquisition by the Chargor of any freehold or leasehold property; and

(ii) on demand made to the Chargor by the Security Trustee and at the cost of the Chargor, execute and deliver to the Security Trustee a legal mortgage in favour of the Security Trustee of any freehold or leasehold property which becomes vested in it after the date of this Debenture in any form which the Security Trustee may reasonably require.

(b) In the case of any leasehold property in relation to which the consent of the landlord in whom the reversion of that lease is vested is required in order for the Chargor to perform any of its obligation under paragraph (a)(ii) above, the Chargor shall not be required to perform that obligation unless and until it has obtained the landlord’s consent (which it shall use its reasonable endeavours to do).

7.6 Compliance with applicable laws and regulations

The Chargor shall perform all its obligations under any law or regulation in any way applicable to or affecting any Security Asset.

7.7 Notices

The Chargor shall, within 14 days after the receipt by the Chargor of any application, requirement, order or notice served or given by any public or local or any other authority with respect to the Security Assets (or any part of them):

(a) give notice to the Security Trustee within seven days after receipt of such application, requirement, order or notice;

(b) deliver a copy to the Security Trustee; and

(c) inform the Security Trustee of the steps taken or proposed to be taken to comply with the relevant requirement.

7.8 Leases

The Chargor shall not, without the prior consent of the Security Trustee, grant or agree to grant (whether in exercise or independently of any statutory power) any lease or tenancy of the Mortgaged Property or any part of it or accept a surrender of any lease or tenancy or (except where necessary for the operation and maintenance of the Plant) confer upon any person any contractual licence or right to occupy the Mortgaged Property.

16

7.9 H.M. Land Registry

The Chargor shall in respect of any freehold or leasehold property which is acquired after the date of this Debenture by the Chargor, the title to which is registered at H.M. Land Registry or the title to which is required to be so registered, give H.M. Land Registry written notice of this Debenture and procure that notice of this Debenture is duly noted in the Register to each such title.

7.10 Deposit of title deeds

The Chargor shall deposit with the Security Trustee all deeds and documents of title relating to the Mortgaged Property and all Local Land Charges, Land Charges and Land Registry Search Certificates and similar documents received by or on behalf of the Chargor. The Security Trustee is entitled to hold the above deeds and documents during the Security Period.

7.11 Access

The Chargor shall permit the Security Trustee and any person nominated by it at all reasonable times with reasonable notice (subject to the Chargor’s operating requirements) to enter upon any part of the Mortgaged Property and view the state of it.

7.12 Investigation of title

The Chargor shall grant the Security Trustee or its lawyers on request all facilities within the power of the Chargor to enable the Security Trustee or its lawyers to carry out investigations of title to the Mortgaged Property and other property which is or may be subject to this security and enquiries into matters in connection with the Mortgaged Property or that other property as may be carried out by a prudent mortgagee. Any such investigations and enquiries shall be at the expense of the Chargor.

7.13 Report on Title

The Chargor shall, forthwith on demand by the Security Trustee, provide the Security Trustee with a report as to the title of the Chargor to the Mortgaged Property and other property which is or may be subject to this security and related matters concerning those items which may properly be sought to be covered by a prudent mortgagee in a lawyer’s report of this nature.

7.14 Power to remedy

In case of default by the Chargor in performing any material term affecting the Mortgaged Property and the Chargor failing to remedy such default upon request by the Security Trustee so to do within the time period stated by the Security Trustee, the Chargor shall permit the Security Trustee or its agents and contractors:

(a) to enter on the Mortgaged Property; and

(b) to comply with or object to any notice served on the Chargor in respect of the Mortgaged Property; and

17

(c) to take any action as the Security Trustee may reasonably consider necessary or desirable to prevent or remedy any breach of any such term or to comply with or object to any such notice.

8. SECURITY ACCOUNTS

8.1 Accounts

(a) All Security Accounts must be maintained at a branch of the Account Bank.

(b) The Security Trustee may open a Security Account at any time after a Default has occurred and is continuing and the Borrower shall do all such acts and things as the Security Trustee may request in connection with opening the same.

8.2 Interest

The Security Accounts shall bear interest at the rate reasonably determined by the Security Trustee.

8.3 Withdrawals

(a) Except with the prior consent of the Security Trustee, the Chargor shall not withdraw any moneys standing to the credit of a Security Account.

(b) The Security Trustee (or a Receiver) may (subject to the payment of any claims having priority to this security) withdraw amounts standing to the credit of a Security Account to meet an amount due and payable under the Finance Documents when it is due and payable and, after the Discharge Date, an amount due and payable under the Subordinated Loan Agreement and/or the Deed of Payment.

8.4 Notice

(a) The Chargor shall forthwith give notice to the Account Bank (and forthwith on any change in the identify of the Account Bank, give notice to the new Account Bank) of this Debenture in the form of Schedule 4 Part 1 and use reasonable endeavours to procure, to the extent that such notice is not acknowledged in any Account Agreement, that the Account Bank acknowledges such notice in accordance with Schedule 4 Part 2.

(b) As soon as reasonably practicable after receipt by it of such acknowledgement, the Security Trustee will deliver a notice substantially in the form set out in Schedule 4 Part 3.

9. WHEN SECURITY BECOMES ENFORCEABLE

The security constituted by this Debenture shall become immediately enforceable upon the occurrence and continuance of an Event of Default and the power of sale and other powers conferred by Section 101 of the Act, as varied or amended by this Debenture, shall be immediately exercisable upon and at any time after the occurrence and continuance of any Event of Default. After the security constituted by this Debenture has become enforceable, the Security Trustee may in its absolute discretion enforce all or any part of the security in any manner it sees fit or as the Majority Senior Creditors direct.

18

10. ENFORCEMENT OF SECURITY

10.1 General

For the purposes of all powers implied by statute, the Secured Liabilities and Deed of Payment Liabilities are deemed to have become due and payable on the date of this Debenture and Section 103 of the Act (restricting the power of sale) and Section 93 of the Act (restricting the right of consolidation) do not apply to the security constituted by this Debenture. The statutory powers of leasing conferred on the Security Trustee are extended so as to authorise the Security Trustee to lease, make agreements for leases, accept surrenders of leases and grant options as the Security Trustee may think fit and without the need to comply with any provision of section 99 or 100 of the Act.

10.2 Shares

After the security constituted by this Debenture has become enforceable, the Security Trustee may exercise (in the name of the Chargor and without any further consent or authority on the part of the Chargor) any voting rights and any powers or rights which may be exercised by the person or persons in whose name any Share and its Related Rights are registered or who is the holder of any of them or otherwise (including all the powers given to trustees by Section 10(3) and (4) of the Trustee Act, 1925 as amended by Section 9 of the Trustee Investment Act, 1961 in respect of securities or property subject to a trust). Until that time, the voting rights, powers and other rights in respect of the Shares shall (if exercisable by the Security Trustee) be exercised in any manner which the Chargor may direct in writing.

10.3 Contingencies

If the Security Trustee enforces the security constituted by this Debenture at a time when no amounts are due under the Finance Documents, the Subordinated Loan Agreement or the Deed of Payment but at a time when amounts may or will become so due, the Security Trustee (or the Receiver) may pay the proceeds of any recoveries effected by it into a Security Account.

10.4 No liability as mortgagee in possession

Neither the Security Trustee nor any Receiver will be liable, by reason of entering into possession of a Security Asset, to account as mortgagee in possession or for any loss on realisation or for any default or omission for which a mortgagee in possession might be liable.

10.5 Security Trustee of the Chargor

Each Receiver is deemed to be the agent of the Chargor for all purposes and accordingly is deemed to be in the same position as a Receiver duly appointed by a mortgagee under the Act. The Chargor alone shall be responsible for his contracts, engagements, acts, omissions, defaults and losses and for liabilities incurred by him and the Finance Parties, BE and/or BET shall not incur any liability (either to the Chargor or to any other person) by reason of the Security Trustee making his appointment as a Receiver or for any other reason.

19

10.6 Privileges

Each Receiver and the Security Trustee is entitled to all the rights, powers, privileges and immunities conferred by the Act on mortgagees and receivers when such receivers have been duly appointed under the Act, except that Section 103 of the Act does not apply.

10.7 Protection of third parties

No person (including a purchaser) dealing with the Security Trustee or a Receiver or its or his agents will be concerned to enquire:

(a) whether the Secured Liabilities or Deed of Payment Liabilities have become payable; or

(b) whether any power which the Security Trustee or the Receiver is purporting to exercise has become exercisable; or

(c) whether any money remains due under the Finance Documents, the Subordinated Loan Agreement or the Deed of Payment; or

(d) how any money paid to the Security Trustee or to the Receiver is to be applied.

10.8 Redemption of prior Mortgages

At any time after the security constituted by this Debenture has become enforceable, the Security Trustee may:

(a) redeem any prior Security Interest against any Security Asset; and/or

(b) procure the transfer of that Security Interest to itself; and/or

(c) settle and pass the accounts of the prior mortgagee, chargee or encumbrancer; any accounts so settled and passed shall be conclusive and binding on the Chargor.

All principal moneys, interest, costs, charges and expenses of and incidental to any such redemption and/or transfer shall be paid by the Chargor to the Security Trustee on demand.

11. RECEIVER

11.1 Appointment of Receiver

(a) At any time after the security constituted by this Debenture becomes enforceable or, if the Chargor so requests the Security Trustee in writing, at any time, the Security Trustee may without further notice appoint by deed, under seal or in writing under its hand any one or more persons to be a Receiver of all or any part of the Security Assets in like manner in every respect as if the Security Trustee had become entitled under the Act to exercise the power of sale conferred under the Act.

(b) Section 109(1) of the Act shall not apply to this Debenture.

20

11.2 Removal

The Security Trustee may by writing under its hand (subject to any requirement for an order of the court in the case of an administrative receiver) remove any Receiver appointed by it and may, whenever it deems it expedient, appoint a new Receiver in the place of any Receiver whose appointment may for any reason have terminated.

11.3 Remuneration

The Security Trustee may fix the remuneration of any Receiver appointed by it and the maximum rate specified in Section 109(b) of the Act shall not apply.

11.4 Relationship with Security Trustee

To the fullest extent permitted by law, any right, power or discretion conferred by this Debenture (either expressly or impliedly) upon a Receiver of the Security Assets may after the security created by this Debenture becomes enforceable be exercised by the Security Trustee in relation to any Security Asset without first appointing a Receiver or notwithstanding the appointment of a Receiver.

12. POWERS OF RECEIVER

12.1 General

(a) Each Receiver has, and is entitled to exercise, all of the rights, powers and discretions set out below in this Clause 12 in addition to those conferred by the Act on any receiver appointed under the Act.

(b) If there is more than one Receiver holding office at the same time, each Receiver may (unless the document appointing him states otherwise) exercise all of the powers conferred on a Receiver under this Debenture individually and to the exclusion of any other Receivers.

(c) Each Receiver has all the rights, powers and discretions set out in Schedule 1 to the Insolvency Act, 1986.

(d) A Receiver who is an administrative receiver of the Chargor has all the rights, powers and discretions of an administrative receiver under the Insolvency Act 1986.

12.2 Possession

A Receiver may take immediate possession of, get in and collect any Security Assets.

12.3 Carry on business

A Receiver may carry on the business of the Chargor as he thinks fit.

21

12.4 Protection of assets

A Receiver may:

(a) make and effect all repairs and insurances and do all other acts which the Chargor might do in the ordinary conduct of its business as well for the protection as for the improvement of the Security Assets;

(b) commence and/or complete any building operations on the Mortgaged Property; and

(c) apply for and maintain any planning permission, building regulation approval or any other permission, consent or licence,

in each case as he may think fit.

12.5 Employees

A Receiver may appoint and discharge managers, officers, agents, accountants, servants, workmen and others for the purposes of this Debenture upon such terms as to remuneration or otherwise as he may think proper and discharge any such persons appointed by the Chargor.

12.6 Borrow money

A Receiver may raise and borrow money either unsecured or on the security of any Security Asset either in priority to the security constituted by this Debenture or otherwise and generally on any terms and for whatever purpose which he thinks fit. No person lending that money is concerned to enquire as to the propriety or purpose of the exercise of that power or to check the application of any money so raised or borrowed.

12.7 Sale of assets

A Receiver may sell, exchange, convert into money and realise any Security Asset by public auction or private contract and generally in any manner and on any terms which he thinks proper. The consideration for any such transaction may consist of cash, debentures or other obligations, shares, stock or other valuable consideration and any such consideration may be payable in a lump sum or by instalments spread over such period as he thinks fit. Fixtures, other than landlords fixtures, may be severed and sold separately from the property containing them without the consent of the Chargor.

12.8 Leases

A Receiver may let any Security Asset for any term and at any rent (with or without a premium) which he thinks proper and may accept a surrender of any lease or tenancy of any Security Asset on any terms which he thinks fit (including the payment of money to a lessee or tenant on a surrender).

12.9 Compromise

A Receiver may settle, adjust, refer to arbitration, compromise and arrange any claims, accounts, disputes, questions and demands with or by any person who is or claims to be a creditor of the Chargor or relating in any way to any Security Asset.

22

12.10 Legal Actions

A Receiver may bring, prosecute, enforce, defend and abandon all actions, suits and proceedings in relation to any Security Asset which may seem to him to be expedient.

12.11 Receipts

A Receiver may give valid receipts for all moneys and execute all assurances and things which may be proper or desirable for realising any Security Asset.

12.12 Subsidiaries

A Receiver may form a Subsidiary of the Chargor and transfer to that Subsidiary any Security Asset.

12.13 Delegation

A Receiver may delegate his powers in accordance with Clause 15 (Delegation).

12.14 Other powers

A Receiver may:

(a) do all other acts and things which he may consider desirable or necessary for realising any Security Asset or incidental or conducive to any of the rights, powers or discretions conferred on a Receiver under or by virtue of this Debenture; and

(b) exercise in relation to any Security Asset all the powers, authorities and things which he would be capable of exercising if he were the absolute beneficial owner of the same,

and may use the name of the Chargor for any of the above purposes.

13. APPLICATION OF PROCEEDS

13.1 Ranking

The Security Trustee (on behalf of the Finance Parties), BE and BET agree that:

(a) if no BET Event is continuing the Secured Senior Liabilities, the Secured Subordinated Liabilities and the Deed of Payment Liabilities shall rank in the following order:

(i)	First	the Secured Senior Liabilities and (with respect only to liabilities secured pursuant to Clauses 2.3(a) and 3.3) the Deed of Payment Liabilities; and
(ii)	Second	the Secured Subordinated Liabilities; and

23

(b) if a BET Event is continuing, the Senior Secured Liabilities, the Subordinated Secured Liabilities and the Deed of Payment Liabilities shall rank in the following order:

(i)	First	the Senior Secured Liabilities
(ii)	Second	the Subordinated Secured Liabilities and (with respect only liabilities secured pursuant to Clauses 2.3(a) and 3.3) the Deed of Payment Liabilities

(c) at all times, the security constituted by this Debenture (other than in respect of the charge created pursuant to Clauses 2.3, 3.3 and 3.4) in favour of the Finance Parties and BE shall rank in the following order:

(i)	First	the Finance Parties; and
(ii)	Second	BE;

(d) if no BET Event is continuing, the security constituted by this Debenture in favour of BET and the Finance Parties in respect of the charge created pursuant to Clauses 2.3, 3.3 and 3.4 shall rank as follows:

(i)	First	BET;
(ii)	Second	the Finance Parties;

(e) if a BET Event is continuing, the security constituted by this Debenture, in favour of BET and the Finance Parties, in respect of the charge created pursuant to Clauses 2.3, 3.3 and 3.4 shall rank as follows:

(i)	First	the Finance Parties;
(ii)	Second	BET.

13.2 Application of Proceeds

Any moneys received by the Security Trustee or any Receiver after the security constituted by this Debenture has become enforceable shall be applied in the order of priority set out in the Intercreditor Agreement (but without prejudice to the right of any Finance Party, BE or BET to recover any shortfall from the Chargor).

13.3 Good Discharge

An acknowledgement of receipt signed by the relevant person to whom payments are to be made under Clause 13 shall be a good discharge of the Security Trustee.

14. EXPENSES AND INDEMNITY

The Chargor shall forthwith on demand pay all costs and expenses (including legal fees) incurred in connection with this Debenture by any Finance Party, Major Project Party, Receiver, attorney, manager, agent or other person appointed by the Security Trustee under this Debenture, and keep each of them indemnified against any failure or delay in paying the same (including any arising from any actual or alleged breach by the Chargor of any applicable Environmental Law or applicable Environmental Licence).

24

15. DELEGATION

The Security Trustee and any Receiver may delegate by power of attorney or in any other manner to any person any right, power or discretion exercisable by them under this Debenture. Any such delegation may be made upon the terms (including power to sub-delegate) and subject to any regulations which the Security Trustee or such Receiver (as the case may be) may think fit. Neither the Security Trustee nor any Receiver will be in any way liable or responsible to the Chargor for any loss or liability arising from any act, default, omission or misconduct on the part of any such delegate or sub-delegate unless caused by the gross negligence or wilful default of the Security Trustee or, as the case may be, the Receiver.

16. FURTHER ASSURANCES

16.1 General

The Chargor shall, at its own expense, take whatever action the Security Trustee or a Receiver may require for:

(a) perfecting or protecting the security intended to be created by this Debenture over any Security Asset;

(b) facilitating the realisation of any Security Asset or the exercise of any right, power or discretion exercisable, by the Security Trustee or any Receiver or any of its or their delegates or sub-delegates in respect of any Security Asset, after such time as the Security Interest constituted by this Debenture shall have become enforceable.

including the execution of any transfer, conveyance, assignment or assurance of any property whether to the Security Trustee or to its nominees, and the giving of any notice, order or direction and the making of any registration, which in any such case, the Security Trustee may think expedient.

25

16.2 Legal Charge

Without prejudice to the generality of Clause 16.1, the Chargor will forthwith at the request of the Security Trustee (acting reasonably) execute a legal mortgage, charge or assignment over all or any of the Security Assets subject to or intended to be subject to any fixed security hereby created in favour of the Security Trustee (as agent and trustee as aforesaid) in such form as the Security Trustee may require.

16.3 Changes to Industry Documents

If as a result of (a) any restructuring of the United Kingdom’s wholesale electricity market that is substantially the same as that recommended by the Energy Review White Paper or (b) any other change in the manner of regulating the generation, transmission, distribution and supply of electricity in England and Wales:

(i) any of the Industry Documents currently in force are amended or replaced (in whole or in part); or

(ii) the Borrower enters into or accedes to the Balancing and Settlement Code or any agreement or arrangement referred to therein; or

(iii) the Borrower enters into any other arrangement regulating the generation, transmission, distribution and supply of electricity in England and Wales,

the Borrower shall:

(A) promptly give notice in writing to the Security Trustee on becoming a party to any arrangement arising as a result of paragraphs (i)-(iii), above; and

(B) execute and deliver in favour of the Finance Parties such further or additional Security Documents in relation to any rights of the Borrower under such arrangements referred to in paragraphs (i)-(iii), above, insofar as permitted by law or by such arrangements and as the Majority Senior Creditors may reasonable require.

17. POWER OF ATTORNEY

The Chargor, by way of security, irrevocably and severally appoints the Security Trustee, each Receiver and any of their delegates or sub-delegates to be its attorney to take any action which the Chargor is obliged to take under this Debenture, including under Clause 16 (Further Assurances). The Chargor ratifies and confirms whatever any attorney does or purports to do pursuant to its appointment under this Clause.

18. MISCELLANEOUS

18.1 Covenant to pay

The Chargor shall pay or discharge the Secured Liabilities and the Deed of Payment Liabilities in the manner provided for in the Finance Documents, the Subordinated Loan Agreement and the Deed of Payment.

26

18.2 Continuing security

The security constituted by this Debenture is continuing and will extend to the ultimate balance of all the Secured Liabilities and the Deed of Payment Liabilities, regardless of any intermediate payment or discharge in whole or in part.

18.3 Additional security

The security constituted by this Debenture is in addition to and is not in any way prejudiced by any other security now or subsequently held by any Finance Party for any Secured Senior Liability, by BE for any Secured Subordinated Liability or by BET for any Deed of Payment Liabilities.

18.4 Tacking

(a) Each Bank shall perform its obligations under the Credit Agreement (including any obligation to make available further advances).

(b) BE shall perform its obligations under the Subordinated Loan Agreement (including any obligation to make available further advances).

(c) BET shall perform its obligations under the Deed of Payment (including any obligation to make available further advances).

18.5 New Accounts

If a Finance Party, BE or BET receives, or is deemed to be affected by, notice, whether actual or constructive, of any subsequent charge or other interest affecting any Security Asset and/or the proceeds of sale of any Security Asset, the Finance Party or, as the case may be, BE or BET may open a new account with the Chargor. If the Finance Party or, as the case may be, BE or BET does not open a new account, it shall nevertheless be treated as if it had done so at the time when it received or was deemed to have received notice. As from that time all payments made to the Finance Party or, as the case may be, BE or BET will be credited or be treated as having been credited to the new account and will not operate to reduce any amount for which this Debenture is security.

18.6 Time deposits

Without prejudice to any right of set-off any Finance Party may have under any other Finance Document or otherwise, if any time deposit matures on any account the Chargor has with any Finance Party at a time within the Security Period when:

(a) this security has become enforceable; and

(b) no amount of the Secured Senior Liabilities is due and payable,

that time deposit shall automatically be renewed for any further maturity which that Finance Party considers appropriate.

27

18.7 Notice of assignment

This Debenture constitutes notice in writing to the Chargor of any charge or assignment of a debt owed by the Chargor to any other member of the Group contained in any other Security Document.

18.8 H.M. Land Registry

The Chargor applies to the Chief Land Registrar for a restriction in the following terms to be entered on the Register of Title relating to any Mortgaged Property registered at H.M. Land Registry and against which this Debenture may be noted:

“Except under an order of the Registrar, no disposition or dealing by the proprietor of the land is to registered without the consent of the proprietor for the time being of the Debenture dated [            ], 2000 between Eggborough Power Limited, British Energy Plc, British Energy Power and Energy Trading Limited and Barclays Bank PLC”.

19. RELEASE

Upon the expiry of the Security Period (but not otherwise), the Finance Parties or, as the case may be, BE or BET shall, at the request and cost of the Chargor, take whatever action is necessary to release the Security Assets from the security constituted by this Debenture.

20. GOVERNING LAW

This Debenture is governed by English law.

This Debenture has been entered into as a deed on the date stated at the beginning of this Debenture.

28

SCHEDULE 1

REAL PROPERTY

The freehold land and buildings known as Eggborough Power Station, Eggborough, Goole, North Yorkshire, comprised in a transfer dated 20 February 2000 made between (1) National Power Plc and (2) the Chargor (then known as Boron Limited), the title to which is in course of registration at H M Land Registry with Title Number NYK 233369.

The freehold land comprising Gale Common, North Yorkshire, comprised in a transfer dated 3 March 2000 made between (1) National Power Plc and (2) the Chargor (then known as Boron Limited), the title to which is in course of registration at H M Land Registry with Title Numbers NYK 234230 and NYK 67029.

29

SCHEDULE 2

SPECIFIC PATENTS AND TRADEMARKS

30

SCHEDULE 3

RELEVANT AGREEMENTS

(1) the Capacity and Tolling Agreement;

(2) the CTA Guarantee;

(3) the agreement dated 15 November 1999 between National Power Plc and the Chargor for the sale of the business relating to the Eggborough Power Station by National Power Plc to the Chargor.

(4) the Pooling and Settlement Agreement;

(5) the Ancillary Services Agreement;

(6) the Air Gas Production Connection Agreement;

(7) the Air Gas Production Electricity Supply Agreement;

(8) the Air Gas Production On-Site Supply Agreement;

(9) the Saint Gobain Electricity Supply Agreement;

(10) the Saint Gobain Connection Agreement;

(11) the Ash Marketing Agreement;

(12) the Insurances in respect of business interruption or loss of availability;

(13) the Master Connection and Use of System Agreement;

(14) the Intercompany Loan Agreement;

(15) the Saint Gobain UK Parent Guarantee;

(16) the ISDA Master Agreement dated as of 6th October, 2000 between the Borrower and Barclays Bank PLC and the schedule thereto and all confirmations thereunder;

(17) the Service Contract;

(18) the Hedging Agreement entered into now or at any time in the future; and

(19) the Gale Common Sharing Agreement

(in each case including any supplements, amendments or replacements thereof).

31

SCHEDULE 4

FORM OF LETTERS TO THE ACCOUNT BANK

PART I

FORM OF NOTICE TO THE ACCOUNT BANK

[On the letterhead of the Chargor]

To:        [Account Bank]

[DATE]

Dear Sirs,

Debenture (“Debenture”) dated [            ] between Eggborough Power Limited, British Energy Plc, British Energy Power and Energy Trading Limited and Barclays Bank PLC

This letter constitutes notice to you that, by the Debenture (a copy of which is attached), we have charged (by way of first and second fixed charges) to Barclays Bank PLC (the “Security Trustee”) [all moneys standing to the credit of any account maintained by us with you (other than the Revenue Account)] [the Revenue Account] (the “Accounts”) and the debts represented by them.

We irrevocably instruct and authorise you to:

(a)	(i)	disclose to the Security Trustee on request to you by the Security Trustee any information relating to any Account maintained with you; and
	(ii)	comply with the terms of any written notice or instructions relating to the Debenture or moneys standing to the credit of any Accounts maintained with you and the debts represented by them, received by you from the Security Trustee,
	without any reference to or further authority from us and without any enquiry by you as to the justification for the disclosure or, as the case may be, validity of the notice or instructions;
(b)	hold all sums from time to time standing to the credit of any Account maintained with you to the order of the Security Trustee; and
(c)	pay or release all or any part of the moneys standing to the credit of the Accounts maintained with you in accordance with the written instructions of the Security Trustee.

We are not permitted to withdraw any amount from any of the Accounts maintained with you without the prior written consent of the Security Trustee.

The instructions in this letter may not be revoked or amended without the prior written consent of the Security Trustee.

This letter is governed by English law.

32

Please confirm your agreement to the above by sending the attached acknowledgement to the Security Trustee with a copy to ourselves.

Yours faithfully,

(Authorised Signatory)

Eggborough Power Limited

33

PART II

FORM OF ACKNOWLEDGEMENT OF THE ACCOUNT BANK

[On the letterhead of the Account Bank]

To:	Barclays Bank PLC
	as Security Trustee for the Finance Parties (as defined in the Debenture), British Energy Plc and British Energy Power and Energy Trading Limited

[DATE]

Dear Sirs,

Debenture (“Debenture”) dated [            ] between Eggborough Power Limited, British Energy Plc, British Energy Power and Energy Trading Limited and Barclays Bank PLC

We confirm receipt from Eggborough Power Limited (the “Company”) of a notice dated [                    ] of a charge upon the terms of the Debenture over all moneys standing to the credit of [any of the Company’s accounts with us (other than the Revenue Account)] [the Revenue Account] (the “Accounts”) and the debts represented by them.

We confirm that we:

(a) accept the instructions contained in the notice and undertake to comply with the notice;

(b) have not received notice of the interest of any third party in any of the Accounts maintained with us;

(c) have neither claimed or exercised nor will claim or exercise any security interest, set-off, counter-claim or other right in respect of any of the Accounts maintained with us, the moneys in those Accounts or the debts represented by them; and

(d) shall not permit any amount to be withdrawn from any of the Accounts maintained with us without your prior written consent.

The Accounts maintained with us are:

[Specify accounts and account numbers]

This letter is governed by English law.

Yours faithfully,

(Authorised signatory)

[Account Bank]

34

PART III

FORM OF LETTER FROM THE SECURITY TRUSTEE TO THE ACCOUNT BANK

[On the letterhead of the Security Trustee]

To:        [Account Bank]

[DATE]

Dear Sirs,

We refer to:

(a) the notice to you dated [        ] from Eggborough Power Limited (the “Company”) concerning the accounts (the “Accounts”) of the Company with you [(other than the Revenue Account)];

(b) the Debenture dated [        ] (the “Debenture”) between the Company, British Energy Plc, British Energy Power and Energy Trading Limited and Barclays Bank PLC; and

(c) the acknowledgement dated [            ] issued by you to [            ] in response to the notice.

We confirm that we consent to the following transactions in relation to the Accounts [in accordance with the terms of your mandate from the Company so far as those terms are not inconsistent with this letter]:

(i) you may collect and pay to the credit of any Account, the proceeds of credits for the account of the Company;

(ii) you may make payments to third parties or to other Accounts in the name of the Company on the instructions of the Company and debit the amounts involved to any Account;

(iii) you may debit to any Account amounts due to you by the Company; and

(iv) in order to enable you to make available net overdraft facilities on the Accounts, you may set-off debit balances on any of the following Accounts against credit balances on any of the following Accounts;

(iv) you may make such withdrawals and transfers on behalf of the Company as permitted by the Accounts Agreement.

[Specify accounts and account numbers]

The consents in this letter will remain in effect until you receive notice from us withdrawing any or all of them. In this event they shall be withdrawn to the extent stated in the notice.

35

If the consent referred to in paragraph (a)(iv) above is withdrawn, you may immediately set off debit balances and credit balances on the Accounts existing immediately prior to the receipt by you of the notice.

This letter is governed by English law.

Please acknowledge receipt of this letter by signing and returning to us the enclosed copy of this letter.

Yours faithfully,

(Authorised signatory)

Barclays Bank PLC

Receipt acknowledged

(Authorised signatory)

[Account Bank]

36

SCHEDULE 5

FORMS OF NOTICE OF ASSIGNMENT

PART I

FORM OF NOTICE OF ASSIGNMENT TO INSURER(S)

[Note: A separate notice of assignment must be sent to, and acknowledged by, each Insurer where there is more than one.]

To:        [Name and address of Insurer] [Date:                    ,    ]

Dear Sirs,

Notice of Assignment and instructions

Re: Insurance Policy [                    ] (the “Insurance”)

Eggborough Power Limited (the “Assignor”) HEREBY GIVES NOTICE (this “Notice”) that by a debenture (the “Debenture”) originally dated [            ], 2000, between Eggborough Power Limited, British Energy Plc and British Energy Power and Energy Trading Limited and Barclays Bank PLC as security trustee (the “Security Trustee”), a copy of which is attached hereto, the Assignor has assigned by way of security to the Security Trustee all of the Assignor’s present and future rights under and in respect of the Assigned Insurances and its present and future rights, title and interest in the Insurance Proceeds (but not, for the avoidance of doubt, in the contracts comprising the Assigned Insurances themselves) (the “Assigned Property”). The assignments under the Debenture extend to (but are not limited to) the Assignor’s rights under the above policy issued by you.

Capitalised terms shall bear the same meaning in this Notice as in the Debenture.

Please note that:

(i) only the Security Trustee may agree to waive any right vested in the Assignor under the Insurance;

(ii) the terms and conditions of the Insurance may not be amended in any manner without the prior agreement of the Security Trustee;

(iii) you are authorised to disclose to the Security Trustee on request any information relating to the Assigned Property or any claim under it to which the Assignor is entitled as an insured party;

(iv) the Security Trustee (or any person appointed by the Security Trustee as its agent or delegate) has been irrevocably appointed by the Assignor as its attorney to do all things which the Assignor could do in relation to the Assigned Insurances after the occurrence of an Event of Default, and you are requested to follow any instruction properly given to you by such attorney after such an Event of Default has occurred. In the event of a conflict in your instructions, those given by the Security Trustee (or any other attorney appointed by us under the Debenture) shall prevail;

37

(v) any notice given by you under or in respect of the Insurance should be sent to the Security Trustee at the address given below (or to such other address as the Security Trustee may notify to you from time to time) with a copy to the Assignor;

(vi) the Security Trustee has assumed no obligation to you under or in respect of the Insurance and the Assignor continues to be responsible to you for the performance of its obligations hereunder;

(vii) these instructions may not be varied, except with the written consent of the Security Trustee.

Please acknowledge receipt of this Notice and the Debenture by (i) countersigning and returning to the Security Trustee a copy of this Notice and sending a duplicate of your acknowledgement to us at [Address], (ii) endorsing a copy of this notice of assignment on the above referred to policy issued by you, and (iii) confirming that you have not received notice of any other assignment of any interest in the Insurances.

This Notice is governed by English law.

Eggborough Power Limited

c.c. Barclays Bank PLC

38

PART II

FORM OF ACKNOWLEDGEMENT FROM INSURER

To:	Barclays Bank PLC
	as Security Trustee for the Finance Parties
	(as defined in the Debenture dated [    ], 2000
	granted to it by, the company
	named as chargor in the Debenture),
	British Energy Plc and British Energy Power and Trading Limited

Dear Sirs,

Re: Insurance Policy No:[            ] (the “Policy”) and notice of assignment dated [            ] (the “Notice”)

We acknowledge receipt of the attached Notice and, insofar as may be required, we consent to the assignment to which the Notice refers. We agree to follow the instructions to us contained in that notice and confirm that we have endorsed a copy of the Notice on the Policy.

We confirm that (i) the policy to which this notice refers is in full force and effect, (ii) that we are not aware of breach by the Assignor of the Policy or of any duty owed to us in respect thereof, (iii) that we have not received any other notice of assignment relating to the Policy and (iv) we will make payments due under or in respect of the Policy as provided therein.

For and on behalf of [the Insurer] Date:                    ,[2000]

39

PART III

FORM OF NOTICE OF ASSIGNMENT IN RESPECT OF RELEVANT AGREEMENTS

(OTHER THAN POOLING AND SETTLEMENT AGREEMENT)

To:        [Relevant party]

[Date]

Dear Sirs,

We hereby give you notice that, by a first priority Debenture dated [    ], 2000 (the “Debenture”), made by, Eggborough Power Limited (the “Chargor”) in favour of British Energy Plc (“BE”), British Energy Power and Energy Trading Limited (“BET”) and Barclays Bank PLC (the “Security Trustee”) as agent and trustee for the Finance Parties referred to in the Debenture, BE and BET there has been assigned by the Chargor to the Security Trustee as first and subsequent priority mortgagee and assignee all the Chargor’s rights, title and interest in and to [insert details of Relevant Agreement] (the “Agreement”), and to the extent (if any) not effectively so assigned, there has been granted to the Security Trustee (as agent and trustee as aforesaid) a fixed charge over all of the Chargor’s rights and benefits under the Agreement.

On behalf of the Chargor, we hereby irrevocably instruct and authorise you:

(a) to disclose to the Security Trustee with a copy to the Chargor and without any further authority from the Chargor and without any enquiry by you as to the justification for such disclosure, such information relating to the Agreement as the Security Trustee may at any time and from time to time request;

(b) to pay all monies payable by you to the Chargor pursuant to the Agreement to the Chargor’s account with The Royal Bank of Scotland Plc [in the case of Excepted Relevant Agreements) (the Revenue Account, Account No. 20437948 / [in the case of other Relevant Agreements) (the Operating Account, Account No. 0821543) unless and until you receive notice from the Security Trustee to the contrary, in which event you should make all future payments as directed by the Security Trustee. This authority and instruction is irrevocable without the prior written consent of the Security Trustee; and

(c) to comply with the terms of any written notice or instructions in any way relating to, or purporting to relate to, the Debenture, the sums payable to the Chargor from time to time under the Agreement or the debts represented thereby which you receive at any time from the Security Trustee without any reference to or further authority from the Chargor and without any enquiry by you as to the justification for or validity of such notice or instruction.

Notwithstanding the assignment referred to above or the making of any payment by you to the Security Trustee pursuant to it, the Chargor shall remain liable under the Agreement to perform all the obligations assumed by it thereunder and neither the Security Trustee nor any receiver nor any delegate appointed by it shall be at any time under any obligation or liability to you under or in respect of the Agreement.

40

Please also acknowledge receipt of this letter and confirm that you will pay all sums due under the Agreement as directed herein and comply with the other provisions of this letter by signing the acknowledgement attached to this Notice of Assignment and returning the duplicate copy to [insert name and address of Security Trustee], thereby giving to the Security Trustee for the Finance Parties and BE the further undertakings therein set out.

Please note that these instructions are not to be revoked or amended without the prior written consent of the Security Trustee.

This letter shall be governed by and construed in accordance with English law.

Yours faithfully,

For and on behalf of

Eggborough Power Limited

Enc.

c.c. Barclays Bank PLC

41

PART IV

FORM OF ACKNOWLEDGEMENT OF [RELEVANT PARTY]

To:	Barclays Bank PLC
	as Security Trustee
	for the Finance Parties
	(as defined in the Debenture
	dated [            ], 2000 granted
	to it by the Chargor), British Energy Plc
	and British Energy Power and Trading Limited.

Dear Sirs,

We confirm receipt from Eggborough Power Limited (the “Chargor”) of a notice dated [            ] (the “Notice”) of a charge upon the terms of a Debenture dated [            ], 2000 over all of the Chargor’s rights, title and interest in and to [insert details of Relevant Agreement] (the “Agreement”).

We confirm that:

(i) we accept the instructions and authorisations contained in the Notice and we undertake to pay all sums hereafter to become due to the Chargor in respect of the Agreement as directed in that Notice and otherwise to act in accordance with and comply with the terms of the Notice;

(ii) we have not received notice of the interest of any third party in or to the Agreement; and

(iii) we shall not permit any sums to be paid to the Chargor or any other persons under or pursuant to the Agreement without your prior written consent save in accordance with the Notice, and in particular with paragraph (b) thereof.

This letter shall be governed by and construed in accordance with English law.

Yours faithfully,

On behalf of

[Relevant party]

c.c. [Eggborough Power Limited]

42

PART V

FORM OF NOTICE OF ASSIGNMENT IN RESPECT OF

SETTLEMENT ARRANGEMENTS

(AS DEFINED IN THE POOLING AND SETTLEMENT AGREEMENT)

To:        [Pool Funds Administrator]

[Date]

Dear Sirs,

We hereby give you notice that, by a first priority Debenture dated [    ], 2000 (the “Debenture”), made by Eggborough Power Limited (the “Chargor”) in favour of British Energy Plc (“BE”), British Energy Power and Energy Trading Limited (“BET”) and Barclays Bank PLC (the “Security Trustee”) as agent and trustee for itself and the Finance Parties referred to in the Debenture, BET and BE there has been assigned by the Chargor to the Security Trustee as first and subsequent priority mortgagee and assignee all the Chargor’s rights over the receivables arising under the Settlement Arrangements (as defined in the Pooling and Settlement Agreement dated [            ] (the “Pooling and Settlement Agreement”)).

On behalf of the Chargor, we hereby instruct and authorise you:

(a) to disclose to the Security Trustee with a copy to the Chargor and without any further authority from the Chargor and without any enquiry by you as to the justification for such disclosure, such information relating to the Pooling and Settlement Agreement as the Security Trustee may at any time and from time to time request;

(b) to pay all monies payable by you to the Chargor pursuant to the Pooling and Settlement Agreement to the Chargor’s account with The Royal Bank of Scotland Plc (the Revenue Account, Account No. 20437948) unless and until you receive notice from the Security Trustee to the contrary, in which event you should make all future payments as directed by the Security Trustee. This authority and instruction is irrevocable without the prior written consent of the Security Trustee; and

(c) to comply with the terms of any written notice or instructions in any way relating to, or purporting to relate to, the Debenture, the sums payable to the Chargor from time to time under the Pooling and Settlement Agreement or the debts represented thereby which you receive at any time from the Security Trustee without any reference to or further authority from the Chargors or any of them and without any enquiry by you as to the justification for or validity of such notice or instruction.

Notwithstanding the assignment referred to above or the making of any payment by you to the Security Trustee pursuant to it, the Chargor shall remain liable under the Pooling and Settlement Agreement to perform all the obligations assumed by them thereunder and neither the Security Trustee nor any receiver nor any delegate appointed by them shall be at any time under any obligation or liability to you under or in respect of the Pooling and Settlement Agreement.

43

Please also acknowledge receipt of this letter and confirm that you will pay all sums due under the Pooling and Settlement Agreement as directed herein and comply with the other provisions of this letter by signing the acknowledgement attached to this Notice of Assignment and returning the duplicate copy to [insert name and address of Security Trustee].

Please note that these instructions are not to be revoked or amended without the prior written consent of the Security Trustee.

This letter shall be governed by and construed in accordance with English law.

Yours faithfully,

Eggborough Power Limited

Enc.

c.c. Barclays Bank PLC

44

PART VI

FORM OF ACKNOWLEDGEMENT OF POOL FUNDS ADMINISTRATOR

To:	Barclays Bank PLC
	as Security Trustee
	for the Finance Parties
	(as defined in the Debenture
	dated [            ], 2000 granted
	to it by the Chargor), British Energy Plc
	and British Energy Power and Energy Trading Limited

Dear Sirs,

We confirm receipt from Eggborough Power Limited (the “Chargor”) of a notice dated [            ] (the “Notice”) of a charge upon the terms of a Debenture dated as [            ], 2000 over all the Chargors’ rights over the receivables arising under the Settlement Arrangements (as defined in the Pooling and Settlement Agreement dated [            ] (the “Pooling and Settlement Agreement “)).

We confirm that:

(i) we accept the instructions and authorisations contained in the Notice and we undertake to pay all sums hereafter to become due to the Chargors in respect of the Pooling and Settlement Agreement as directed in the Notice and otherwise to act in accordance with and comply with the terms of the Notice;

(ii) we have not received notice of the interest of any third party in or to the Pooling and Settlement Agreement or over the receivables arising under the Settlement Arrangements (as defined in the Pooling and Settlement Agreement); and

(iii) we shall not permit any sums to be paid to the Chargor or any other persons under or pursuant to the Pooling and Settlement Agreement without your prior written consent, save in accordance with the Notice, and in particular with paragraph (b) thereof.

This letter shall be governed by and construed in accordance with English law.

Yours faithfully,

On behalf of

Pool Funds Administrator

c.c. Eggborough Power Limited

45

SIGNATORIES

SIGNED as a deed by GORDON BOYD		)
as attorney for EGGBOROUGH POWER		)
LIMITED in the		)	GORDON BOYD
			(as attorney for Eggborough Power Limited)
presence of		)
Witness’s signature:	WILLIAM GREEN
Name:	WILLIAM GREEN
Address:	37A HERVEY ROAD
	BLACKHEATH
SIGNED as a deed by GORDON BOYD		)
as attorney for BRITISH ENERGY		)	GORDON BOYD
PLC in the presence of		)	(as attorney for British Energy PLC)
Witness’s signature:	WILLIAM GREEN
Name:	WILLIAM GREEN
Address:	37A HERVEY ROAD
	BLACKHEATH
SIGNED as a deed by		)
as attorney for BRITISH ENERGY		)	GORDON BOYD
POWER AND ENERGY TRADING		)	(as attorney for British Energy Power
LIMITED in the presence of		)	and Energy Trading Limited)
Witness’s signature:	WILLIAM GREEN
Name:	WILLIAM GREEN
Address:	37A HERVEY ROAD
	BLACKHEATH

The Security Trustee

BARCLAYS BANK PLC
By:	ANDREW VINE

46

EX-4.18

Exhibit 4.18

CONFORMED COPY

ASSIGNMENT OF SHARE PURCHASE

AGREEMENT AND TAX DEED OF COVENANT

DATED 8TH SEPTEMBER, 2000

BETWEEN

EGGBOROUGH POWER (HOLDINGS) LIMITED

- and -

BARCLAYS BANK PLC

as Security Trustee

ALLEN & OVERY

London

INDEX

Clause		Page
1.	Interpretation	1
2.	Assignment	3
3.	Representations and Warranties	3
4.	General Undertakings	5
5.	Receipts Account	6
6.	When Security becomes Enforceable	7
7.	Enforcement of Security	7
8.	Receiver	8
9.	Powers of Receiver	9
10.	Application of Proceeds	10
11.	Expenses and Indemnity	11
12.	Delegation	11
13.	Further Assurances	11
14.	Power of Attorney	11
15.	Waiver, Remedies Cumulative	12
16.	Miscellaneous	12
17.	Severability	13
18.	Counterparts	13
19.	Release	13
20.	Governing Law and Jurisdiction	13
Schedules
1.	Notices of Assignment	15
	Part I - Notice of Assignment - Share Purchase Agreement	15
	Part II - Notice of Assignment - Tax Deed of Covenant	16
Signatories		17

THIS ASSIGNMENT is dated 8th September, 2000 between:

(1) EGGBOROUGH POWER (HOLDINGS) LIMITED (registered number SC201083) (the “Company”); and

(2) BARCLAYS BANK PLC (the “Security Trustee”) as agent and trustee for the Finance Parties.

WHEREAS:

(A) The Company enters into this Assignment in connection with the obligations of the Borrower under the Credit Agreement (which terms are defined below).

(B) It is intended that this Assignment takes effect as a deed notwithstanding the fact that a party may only execute this document under hand.

IT IS AGREED as follows:

1. INTERPRETATION

1.1 Definitions

In this Assignment:

“Act”

means the Law of Property Act 1925.

“Borrower”

means Eggborough Power Limited.

“Credit Agreement”

means the credit agreement dated 13th July, 2000 (as amended and restated on 8th September, 2000) between, among others, the Finance Parties and the Borrower.

“Notice of Assignment”

means the notice of assignment substantially in the form set out in Schedule 1.

“Receipts Account”

means a bank account to be opened in the name of the Security Trustee.

“Receiver”

means a receiver and manager or (if the Security Trustee so specifies in the relevant appointment) a receiver, in either case, appointed under this Assignment.

“Secured Liabilities”

means:

(a) all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of any of the Obligors or Major Project Parties to the Finance Parties under the Finance Documents; and

(b) all costs and expenses incurred by the Finance Parties in connection with the enforcement of, or the preservation of, its rights against any of the Obligors or Major Project Parties;

except for any obligation which, if it were so included, would result in this Assignment contravening Sections 151 and 152 of the Companies Act 1985.

“Security Assets”

means all assets of the Company which are the subject of any security created by this Assignment.

“Security Interest”

means any mortgage, pledge, lien, charge, assignment by way of security, hypothecation or security interest or any other agreement or arrangement having the effect of conferring security.

“Security Period”

means the period beginning on the date of this Assignment and ending on the date on which the Security Trustee, acting reasonably, is satisfied that all the Secured Liabilities have been unconditionally and irrevocably paid and discharged in full.

“Share Purchase Agreement”

means the share purchase agreement dated 16th November, 1999, and entered into between National Power and the Company.

“Tax Deed of Covenant”

means a tax deed of covenant dated 3rd March 2000 between National Power and the Company.

1.2 Construction

(a) Terms defined in the Credit Agreement or the Account Agreement have, unless expressly defined in this Assignment, the same meaning in this Assignment.

(b) The provisions of Clause 1 (Construction) of the Credit Agreement apply to this Assignment as though they were set out in full in this Assignment except that references to the Credit Agreement are to be construed as references to this Assignment.

2

(c) If the Security Trustee considers that an amount paid by an Obligor or Major Project Party to a Finance Party under a Finance Document is capable of being avoided or set aside on the liquidation or administration of that Obligor or Major Project Party or otherwise, then that amount will not be considered to have been irrevocably paid for the purpose of this Assignment.

(d) A person who is not a party to this Assignment may not enforce its terms under the Contracts (Rights of Third Parties) Act 1999.

2. ASSIGNMENT

(a) The Company, with full title guarantee and as continuing security for the payment of all the Secured Liabilities by the Borrower, assigns by way of security to the Security Trustee absolutely and, as security for payment of all Secured Liabilities, charges to the Security Trustee by way of first fixed charge:

(i) all of the Company’s rights, title, interest and benefits under the Share Purchase Agreement and the Tax Deed of Covenant; and

(ii) in relation to the foregoing, all of the Company’s book and other debts, the proceeds of the same and all other moneys due and owing to the Company and the benefit of all rights, securities and guarantees of any nature enjoyed or held by it.

(b) The Company shall forthwith give notice of the assignment of its rights, title, interest and benefit in and to the Share Purchase Agreement and the Tax Deed of Covenant by sending notices to National Power substantially in the form of Schedule 1.

(c) To the extent that any such rights, title, interest and benefit described in paragraph (a) of this Clause 2 is not assignable or capable of assignment, the assignment thereof purported to be effected shall operate on an assignment of any and all damages, compensation remuneration, profit, rent or income which the Company may derive therefrom or be awarded or entitled to in respect thereof.

(d) Without prejudice to paragraph (a) above, if, pursuant to Clause 5 (Receipts Account), the Company is entitled to withdraw the proceeds or part proceeds of any book and other debts standing to the credit of the Receipts Account and, as a result, those proceeds or part proceeds are in any way released from the fixed charge created pursuant to paragraph (a) above and stand subject to a floating charge, the release will in no way derogate from the subsistence and continuance of the fixed charge on all other outstanding book and other debts of the Company and the proceeds or remaining proceeds of those debts which are assigned and charged in Clause 2(a) and 2(c) above.

3. REPRESENTATIONS AND WARRANTIES

3.1 Representations and warranties

The Company makes the representations and warranties set out in this Clause 3 to the Security Trustee.

3

3.2 Powers and Authority

The Company has the power to enter into and perform, and has taken all necessary action to authorise the entry into, performance and delivery of, this Assignment and the transactions contemplated by this Assignment.

3.3 Legal Validity

This Assignment constitutes its valid, legally binding and enforceable obligations.

3.4 Authorisations

All authorisations required in connection with the entry into, performance, validity and enforceability of, and the transactions contemplated by, this Assignment have been obtained or effected and are in full force and effect.

3.5 Non-conflict

The entry into and performance by it of, and the transactions contemplated by, this Assignment do not and will not:

(a) conflict with any applicable law or regulation or judicial or official order to which it is subject; or

(b) conflict with the constitutional documents of the Company; or

(c) conflict with any document which is binding upon the Company or any asset of the Company.

3.6 Security

This Assignment creates those Security Interests it purports to create and is not liable to be avoided or otherwise set aside on the liquidation or administration of the Company or otherwise.

3.7 Security Assets

(a) The Company is the legal and beneficial owner of the Security Assets.

(b) Each of the Security Assets, and the debt represented by them is free from:

(i) any Security Interest (other than the Security Interests created by this Assignment); and

(ii) any interests or claims of third parties.

3.8 Share Purchase Agreement

(a) Payments by National Power to the Borrower under the Share Purchase Agreement are not subject to rights of set-off or similar rights.

4

(b) The Share Purchase Agreement is the legal, valid and binding obligation of it and (so far as it is aware) of each other party to it.

(c) The Company is not in default of any of its obligations under the Share Purchase Agreement.

(d) There is no prohibition on assignment in the Share Purchase Agreement and the Company’s entering into this Assignment will not constitute a breach of the Share Purchase Agreement.

3.9 Tax Deed of Covenant

(a) Payments by National Power to the Borrower under the Tax Deed of Covenant are not subject to rights of set-off or similar rights.

(b) The Tax Deed of Covenant is the legal, valid and binding obligation of it and (so far as it is aware) of each other party to it.

(c) The Company is not in default of any of its obligations under the Tax Deed of Covenant.

(d) There is no prohibition on assignment in the Tax Deed of Covenant and the Company’s entering into this Assignment will not constitute a breach of the Tax Deed of Covenant.

3.10 Times for making representations and warranties

The representations and warranties set out in this Clause 3 are made on the date of this Assignment and are deemed to be repeated by the Company on each date during the Security Period with reference to the facts and circumstances then existing.

4. GENERAL UNDERTAKINGS

4.1 Duration

The undertakings in this Clause 4 remain in force throughout the Security Period.

4.2 Security Assets

(a) Subject to subparagraph (b) below, the Company shall deliver to, and deposit with, the Security Trustee, or as the Security Trustee may direct, all certificates and other documents evidencing or relating to the Security Assets.

(b) The Company shall if a Default is continuing:

(i) get in and realise the Company’s debts and other moneys receivable by it under the Share Purchase Agreement and the Tax Deed of Covenant and hold the proceeds of the getting in and realisation (until payment into the Receipts Account if required in accordance with paragraph (ii) below) upon trust for the Security Trustee; and

(ii) save to the extent that the Security Trustee otherwise agrees, pay the proceeds of the getting in and realisation into the Receipts Account.

5

(c) The Company authorises the Security Trustee to:

(i) complete, execute and serve any demands, notices and certificates as it considers appropriate including, without limitation, all Notices of Assignment; and

(ii) in the case of negotiable instruments, endorse all documents necessary to constitute the Security Trustee the holder of the documents.

4.3 The Share Purchase Agreement and Tax Deed of Covenant

(a) The Company shall not amend or waive any provision of or terminate the Share Purchase Agreement or the Tax Deed of Covenant without the prior written consent of the Security Trustee and shall duly and promptly perform its obligations and diligently pursue its rights under the Share Purchase Agreement and the Tax Deed of Covenant.

(b) The Company shall supply the Security Trustee and any Receiver with copies of the Share Purchase Agreement and the Tax Deed of Covenant and information and documentation relating to the Share Purchase Agreement and the Tax Deed of Covenant requested by the Security Trustee or any Receiver.

(c) The Company shall use its reasonable endeavours to procure that National Power will perform all its obligations under the Share Purchase Agreement and the Tax Deed of Covenant in accordance with its terms.

(d) The Company shall not take any action which would reasonably be likely to jeopardise the existence, enforceability or collectability of the Security Assets.

4.4 Restrictions on dealing

The Company shall not:

(a) create or permit to subsist any Security Interest on any Security Asset other than the Security Interests created by this Assignment; or

(b) sell, transfer, grant, or lease or otherwise dispose of any Security Asset.

5. RECEIPTS ACCOUNT

5.1 Interest

Amounts standing to the credit of the Receipts Account shall bear interest at a rate considered by the Security Trustee to be a fair market rate.

5.2 Withdrawals

(a) Except with the prior consent of the Security Trustee, the Company shall not withdraw any moneys standing to the credit of the Receipts Account.

(b) The Security Trustee (or a Receiver) may (subject to the payment of any claims having priority to this security) withdraw amounts standing to the credit of the Receipts Account to meet an amount due and payable under the Finance Documents.

6

6. WHEN SECURITY BECOMES ENFORCEABLE

The security constituted by this Assignment shall become immediately enforceable upon the occurrence and continuance of an Event of Default and the power of sale and other powers conferred by Section 101 of the Act, as varied or amended by this Assignment, shall be immediately exercisable upon and at any time after the occurrence and continuance of any Event of Default. After the security constituted by this Assignment has become enforceable, the Security Trustee may in its absolute discretion enforce all or any part of the security in any manner it sees fit.

7. ENFORCEMENT OF SECURITY

7.1 General

For the purposes of all powers implied by statute, the Secured Liabilities are deemed to have become due and payable on the date of this Assignment and Section 103 of the Act (restricting the power of sale) and Section 93 of the Act (restricting the right of consolidation) do not apply to the security constituted by this Assignment.

7.2 Contingencies

If the Security Trustee enforces the security constituted by this Assignment at a time when no Secured Liabilities amounts are due but at a time when Secured Liabilities may or will become so due, the Security Trustee (or the Receiver) may pay the proceeds of any recoveries effected by it into a suspense account with the Security Trustee or such other bank as may be designated for this purpose by the Security Trustee.

7.3 No liability as mortgagee in possession

Neither the Security Trustee nor any Receiver will be liable, by reason of entering into possession of a Security Asset, to account as mortgagee in possession or for any loss on realisation or for any default or omission for which a mortgagee in possession might be liable.

7.4 Agent of the Company

Each Receiver is deemed to be the agent of the Company for all purposes and accordingly is deemed to be in the same position as a Receiver duly appointed by a mortgagee under the Act. The Company alone shall be responsible for its contracts, engagements, acts, omissions, defaults and losses and for liabilities incurred by him and the Bank shall not incur any liability (either to the Company or to any other person) by reason of the Bank making its appointment as a Receiver or for any other reason.

7.5 Privileges

Each Receiver and the Security Trustee is entitled to all the rights, powers, privileges and immunities conferred by the Act on mortgagees and receivers when such receivers have been duly appointed under the Act, except that Section 103 of the Act does not apply.

7

7.6 Protection of third parties

No person (including a purchaser) dealing with the Security Trustee or a Receiver or its or his agents will be concerned to enquire:

(a) whether the Secured Liabilities have become payable; or

(b) whether any power which the Security Trustee or the Receiver is purporting to exercise has become exercisable; or

(c) whether any Secured Liabilities remain due; or

(d) how any money paid to the Security Trustee or to the Receiver is to be applied.

7.7 Redemption of prior Mortgages

At any time after the security constituted by this Assignment has become enforceable, the Security Trustee may:

(a) redeem any prior Security Interest against any Security Asset; and/or

(b) procure the transfer of that Security Interest to itself; and/or

(c) settle and pass the accounts of the prior mortgagee, chargee or encumbrancer; any accounts so settled and passed shall be conclusive and binding on the Company.

All principal moneys, interest, costs, charges and expenses of and incidental to any such redemption and/or transfer shall be paid by the Company to the Security Trustee on demand.

8. RECEIVER

8.1 Appointment of Receiver

At any time after the security constituted by this Assignment becomes enforceable, or if the Company so requests the Security Trustee in writing, at any time, the Security Trustee may without further notice appoint under seal or in writing under its hand any one or more persons to be a Receiver of all or any part of the Security Assets in like manner in every respect as if the Security Trustee had become entitled under the Act to exercise the power of sale conferred under the Act.

8.2 Removal

The Security Trustee may by writing under its hand (subject to any requirement for an order of the court in the case of an administrative receiver):

(a) remove any Receiver appointed by it; and

(b) may, whenever it deems it expedient, appoint a new Receiver in the place of any Receiver whose appointment may for any reason have terminated.

8

8.3 Remuneration

The Security Trustee may fix the remuneration of any Receiver appointed by it and the maximum rate specified in Section 109(6) of the Act shall not apply.

8.4 Relationship with Security Trustee

To the fullest extent permitted by law, any right, power or discretion conferred by this Assignment (either expressly or impliedly) upon a Receiver of the Security Assets may after the security created by this Assignment becomes enforceable be exercised by the Security Trustee in relation to any Security Asset without first appointing a Receiver or notwithstanding the appointment of a Receiver.

9. POWERS OF RECEIVER

9.1 General

(a) Each Receiver has, and is entitled to exercise, all of the rights, powers and discretions set out below in this Clause 10 in addition to those conferred by the Act on any receiver appointed under the Act.

(b) If there is more than one Receiver holding office at the same time, each Receiver may (unless the document appointing him states otherwise) exercise all of the powers conferred on a Receiver under this Assignment individually and to the exclusion of any other Receivers.

(c) Each Receiver has all the rights, powers and discretions set out in Schedule 1 to the Insolvency Act, 1986.

(d) A Receiver who is an administrative receiver of the Company has all the rights, powers and discretions of an administrative receiver under the Insolvency Act 1986.

9.2 Possession

A Receiver may take immediate possession of, get in and collect any Security Assets.

9.3 Carry on business

A Receiver may carry on the business of the Company as it relates to the Security Assets as he thinks fit.

9.4 Employees

A Receiver may appoint and discharge managers, officers, agents, accountants, servants, workmen and others for the purposes of this Assignment upon such terms as to remuneration or otherwise as he may think proper and discharge any such persons appointed by the Company.

9.5 Borrow money

A Receiver may raise and borrow money either unsecured or on the security of any Security Asset either in priority to the security constituted by this Assignment or otherwise and generally on any terms and for whatever purpose which he thinks fit. No person lending that money is concerned to enquire as to the propriety or purpose of the exercise of that power or to check the application of any money so raised or borrowed.

9

9.6 Sale of assets

A Receiver may sell, exchange, convert into money and realise any Security Asset by public auction or private contract and generally in any manner and on any terms which he thinks proper. The consideration for any such transaction may consist of cash, debentures or other obligations, shares, stock or other valuable consideration and any such consideration may be payable in a lump sum or by instalments spread over such period as he thinks fit.

9.7 Compromise

A Receiver may settle, adjust, refer to arbitration, compromise and arrange any claims, accounts, disputes, questions and demands with or by any person who is or claims to be a creditor of the Company or relating in any way to any Security Asset.

9.8 Legal actions

A Receiver may bring, prosecute, enforce, defend and abandon all actions, suits and proceedings in relation to any Security Asset which may seem to him to be expedient.

9.9 Receipts

A Receiver may give valid receipts for all moneys and execute all assurances and things which may be proper or desirable for realising any Security Asset.

9.10 Delegation

A Receiver may delegate his powers in accordance with Clause 12 (Delegation).

9.11 Other powers

A Receiver may:

(a) do all other acts and things which he may consider desirable or necessary for realising any Security Asset or incidental or conducive to any of the rights, powers or discretions conferred on a Receiver under or by virtue of this Assignment; and

(b) exercise in relation to any Security Asset all the powers, authorities and things which he would be capable of exercising if he were the absolute beneficial owner of the same,

and may use the name of the Company for any of the above purposes.

10. APPLICATION OF PROCEEDS

Any moneys received by the Security Trustee after the security constituted by this Assignment has become enforceable shall be applied in the following order of priority (but without prejudice to the right of the Security Trustee to recover any shortfall from the Company):

(a) in satisfaction of, or provision for, all costs and expenses incurred by the Security Trustee;

10

(b) in or towards payment of the Secured Liabilities or such part or them as is then due and payable; and

(c) in payment of the surplus (if any) to the Company or other person entitled to it.

11. EXPENSES AND INDEMNITY

The Company shall forthwith on demand pay all costs and expenses (including legal fees) incurred in connection with this Assignment by the Security Trustee, any Receiver, attorney, manager, agent or other person appointed by the Security Trustee under this Assignment, and keep each of them indemnified against any failure or delay in paying the same.

12. DELEGATION

The Security Trustee and any Receiver may delegate by power of attorney or in any other manner to any person any right, power or discretion exercisable by them under this Assignment. Any such delegation may be made upon the terms (including power to sub-delegate) and subject to any regulations which the Security Trustee or such Receiver (as the case may be) may think fit. Neither the Security Trustee nor any Receiver will be in any way liable or responsible to the Company for any loss or liability arising from any act, default, omission or misconduct on the part of any such delegate or sub-delegate unless caused by the Security Trustee or, as the case may be, the Receiver.

13. FURTHER ASSURANCES

The Company shall, at its own expense, take whatever action the Security Trustee or a Receiver may require for:

(a) perfecting or protecting the security intended to be created by this Assignment;

(b) facilitating the realisation of any Security Asset or the exercise of any right, power or discretion exercisable by the Security Trustee or any Receiver or any of its or their delegates or sub-delegates in respect of any Security Asset after such time as the security constituted by this Assignment shall have become enforceable,

including the execution of any transfer, conveyance, assignment or assurance of any property whether to the Security Trustee or to its nominees, and the giving of any notice, order or direction and the making of any registration, which in any such case, the Security Trustee may think expedient.

14. POWER OF ATTORNEY

The Company, by way of security, irrevocably and severally appoints the Security Trustee, each Receiver and any of their delegates or sub-delegates to be its attorney to take any action which the Company is obliged to take under this Assignment, including under Clause 13 (Further Assurances). The Company ratifies and confirms whatever any attorney does or purports to do pursuant to its appointment under this Clause.

11

15. WAIVER, REMEDIES CUMULATIVE

The rights of the Security Trustee under this Assignment:

(a) may be exercised as often as necessary;

(b) are cumulative and not exclusive of its rights under the general law;

(c) may be waived only in writing and specifically.

Delay in exercising or non-exercise of any right is not a waiver of that right.

16. MISCELLANEOUS

16.1 Covenant to pay

The Company shall pay or discharge the Secured Liabilities in the manner provided for in the Finance Documents.

16.2 Continuing security

The security constituted by this Assignment is continuing and will extend to the ultimate balance of all the Secured Liabilities, regardless of any intermediate payment or discharge in whole or in part.

16.3 Additional security

The security constituted by this Assignment is in addition to and is not in any way prejudiced by any other security now or subsequently held by the Security Trustee for any Secured Liability.

16.4 Tacking

The Security Trustee agrees on behalf of the Finance Parties that each Finance Party shall perform its obligations under the Credit Agreement (including any obligation to make available further advances).

16.5 No liability on Security Trustee

The Security Trustee is not liable for any loss of any kind (including any loss arising from changes in exchange rates) which may occur as a result of the exercise or purported exercise of, or any delay or neglect to exercise, any of its rights under this Assignment.

16.6 New Accounts

If the Security Trustee receives, or is deemed to be affected by, notice, whether actual or constructive, of any subsequent charge or other interest affecting any Security Asset and/or the proceeds of sale of any Security Asset, the Security Trustee may open a new account with the Company. If the Security Trustee does not open a new account, it shall nevertheless be treated as if it had done so at the time when it received or was deemed to have received notice. As from that time all payments made to the Security Trustee will be credited or be treated as having been credited to the new account and will not operate to reduce any amount for which this Assignment is security.

12

16.7 Time Deposits

Without prejudice to any right of set-off any Finance Party may have under any other Finance Document or otherwise, if any time deposit matures on any account the Company has with any Finance Party at a time within the Security Period when:

(a) this security has become enforceable; and

(b) no amount of the Secured Liabilities is due and payable,

that time deposit shall automatically be renewed for any further maturity which that Finance Party considers appropriate.

17. SEVERABILITY

If any provision of this Assignment is or becomes illegal, invalid or unenforceable in any jurisdiction, that shall not affect:

(a) the legality, validity or enforceability in that jurisdiction of any other provision of this Assignment; or

(b) the legality, validity or enforceability in other jurisdictions of that or any other provisions of this Assignment.

18. COUNTERPARTS

This Assignment may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Assignment.

19. RELEASE

Upon the expiry of the Security Period (but not otherwise), the Security Trustee shall:

(a) at the request and cost of the Company, take whatever action is necessary to re-assign to the Company absolutely the Security Assets not applied by the Security Trustee towards payment of the Secured Liabilities; and

(b) notify in writing the Borrower of the termination of this Assignment and the re-assignment absolutely to the Company of the Security Assets.

20. GOVERNING LAW AND JURISDICTION

20.1 Governing Law

This Assignment is governed by English law.

13

20.2 Jurisdiction

(a) For the benefit of the Security Trustee, the Company agrees that the High Courts of Justice in London, and all appellate courts therefrom have jurisdiction to settle any disputes which may arise out of or in connection with this Assignment and that any suit, action or proceedings (together “Proceedings”) in connection with this Assignment may be brought in the High Courts of Justice in London and all appellate courts therefrom and accordingly submits to the jurisdiction of the High Courts of Justice in London and all appellate courts therefrom.

(b) The Company hereby irrevocably and unconditionally agrees that nothing in this Assignment shall affect the right to serve process in any manner permitted by law.

This Assignment has been entered into as a deed on the date stated at the beginning of this Assignment.

14

SCHEDULE 1

Part I

NOTICE OF ASSIGNMENT - SHARE PURCHASE AGREEMENT

TO:	National Power
FROM:	Barclays Bank plc.
DATED:	, 2000

Dear Sirs,

Share Purchase Agreement dated 16th November, 1999 between yourselves and Eggborough

Power (Holdings) Limited (the “Company”)

(the “Agreement”)

This letter constitutes notice to you that the Company has assigned to us all its rights and benefits under the Agreement. Notwithstanding the assignment, the Company remains liable to perform all its obligations under the Agreement, if any, and we shall have no liability in respect of those obligations.

Please pay all moneys payable by you to the Company under the Agreement to the account number: [            ], sort code: [            ], reference: [            ], attention: [            ], with [            ] or such other account number and/or bank as we may otherwise instruct you in writing.

Please acknowledge receipt of this Notice of Assignment by signing the duplicate of this Notice of Assignment and returning the same to us for the attention of [            ].

Yours faithfully

For and on behalf of

Barclays Bank plc

[on copy]

We acknowledge receipt of the Notice of Assignment from Barclays Bank plc on                     , 2000.

We confirm that we have not received any prior notice of assignment in relation to the same and agree to pay any monies payable by us to the Company under the Agreement to the above account and bank or as you shall otherwise instruct us in writing.

for and on behalf of

National Power

15

SCHEDULE 1

Part II

NOTICE OF ASSIGNMENT - TAX DEED OF COVENANT

TO:	National Power
FROM:	Barclays Bank plc
DATED:	, 2000

Dear Sirs,

Tax Deed of Covenant dated 3rd March, 2000 between yourselves and Eggborough Power

(Holdings) Limited (the “Company”)

(the “Deed”)

This letter constitutes notice to you that the Company has assigned to us all its rights and benefits under the Deed. Notwithstanding the assignment, the Company remains liable to perform all its obligations under the Deed, if any, and we shall have no liability in respect of those obligations.

Please pay all moneys payable by you to the Company under the Deed to the account number: [            ], sort code: [            ], reference: [            ], attention: [            ], with [            ] or such other account number and/or bank as we may otherwise instruct you in writing.

Please acknowledge receipt of this Notice of Assignment by signing the duplicate of this Notice of Assignment and returning the same to us for the attention of [            ].

Yours faithfully

For and on behalf of

Barclays Bank plc

[on copy]

We acknowledge receipt of the Notice of Assignment from Barclays Bank plc on [            ], 2000.

We confirm that we have not received any prior notice of assignment in relation to the same and agree to pay any monies payable by us to the Company under the Deed to the above account and bank or as you shall otherwise instruct us in writing.

for and on behalf of

National Power

16

SIGNATORIES

EXECUTED as a deed by	)	GORDON BOYD
	)	(as attorney for Eggborough Power (Holdings) Limited)
EGGBOROUGH POWER	)
(HOLDINGS) LIMITED	)
acting by GORDON BOYD	)
as its attorney	)

BARCLAYS BANK PLC
By:	ANDREW VINE

17

EX-4.19

Exhibit 4.19

CONFORMED COPY

MORTGAGE OF SHARES

DATED 8TH SEPTEMBER, 2000

BETWEEN

EGGBOROUGH POWER (HOLDINGS) LIMITED

and

BARCLAYS BANK PLC

as Security Trustee

ALLEN & OVERY

London

CONTENTS

Clause		Page
1.	Interpretation	1
2.	Security	2
3.	Preservation of Security	3
4.	Representations and Warranties	5
5.	Undertakings	6
6.	When Security becomes Enforceable	7
7.	Enforcement of security	7
8.	Receiver	9
9.	Powers of Receiver	9
10.	Application of Proceeds	11
11.	Expenses and Indemnity	11
12.	Delegation	11
13.	Further assurances	12
14.	Power of Attorney	12
15.	Waivers and remedies cumulative	12
16.	Miscellaneous	13
17.	Changes to the Parties	13
18.	Severability	14
19.	Counterparts	14
20.	Notices	14
21.	Release	15
22.	Governing Law and jurisdiction	15

THIS MORTGAGE OF SHARES is dated 8th September, 2000 between:

(1) EGGBOROUGH POWER (HOLDINGS) LIMITED (Registered number SC201083) (the “Chargor”); and

(2) BARCLAYS BANK PLC (the “Security Trustee”) as agent and trustee for the Finance Parties.

WHEREAS:

(A) The Chargor enters into this Mortgage of Shares in connection with the Credit Agreement (as defined below).

(B) It is intended that this Mortgage of Shares takes effect as a deed notwithstanding the fact that a party may only execute this Mortgage of Shares under hand.

IT IS AGREED as follows:

1. INTERPRETATION

1.1 In this Mortgage of Shares:

“Act”

means the Law of Property Act 1925.

“Credit Agreement”

means the £550,000,000 credit agreement dated 13th July, 2000 (as amended and restated on 8th September, 2000) between (among others), the Borrower and the Security Trustee.

“Default Rate”

means the rate specified in Clause 9.4 (Default interest) of the Credit Agreement.

“Permitted Transfer”

means any sale, transfer, grant or disposal of any shares of the Borrower which are or may become held by the Chargor provided that the Chargor’s shareholding in the Borrower does not fall below 51 per cent. of the total issued share capital of the Borrower at any time as a result of such sale, transfer, grant or disposal.

“Receiver”

means a receiver and manager or (if the Security Trustee so specifies in the relevant appointment) a receiver, in either case, appointed under this Mortgage of Shares.

“Related Rights”

means any dividend or interest paid or payable in relation to any Shares and any rights, moneys or property accruing or offered at any time in relation to any Shares by way of redemption, substitution, exchange, bonus or preference, under option rights or otherwise.

“Secured Liabilities”

means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of each Obligor to the Finance Parties under each Finance Document except for any obligation which, if it were so included, would result in this Mortgage of Shares contravening Section 151 of the Companies Act 1985. For the purpose of this definition, the term “Finance Document” includes all amendments and supplements including supplements providing for further advances.

“Security Assets”

means the Shares and all other assets of the Chargor which are the subject of any security created by this Mortgage of Shares.

“Security Period”

means the period beginning on the date of this Mortgage of Shares and ending on the date on which the Security Trustee is satisfied that all the Secured Liabilities have been unconditionally and irrevocably paid and discharged in full.

“Shares”

means:

(a) the 1,000,001 ordinary shares of £1 each in the share capital of the Borrower together with all the shares in the Borrower in which the Chargor has an interest in the future; and

(b) any other stocks, shares, debentures, bonds or other securities and investments in the Borrower legally and/or beneficially owned by the Chargor or in which the Chargor has an interest.

1.2 (a) Capitalised terms defined in the Credit Agreement have, unless expressly defined in this Mortgage of Shares, the same meaning herein.

(b) The provisions of Clause 1.2 of the Credit Agreement apply to this Mortgage of Shares as though they were set out in full herein except that references to the Credit Agreement are to be construed as references to this Mortgage of Shares.

(c) A reference in this Mortgage of Shares to assets includes, unless the context otherwise requires, present and future assets.

(d) A person who is not a party to this Mortgage of Shares may not enforce its terms under the Contracts (Rights of Third Parties) Act 1999.

2. SECURITY

2.1 General

The Chargor as security for the payment of all the Secured Liabilities and with full title guarantee charges in favour of the Security Trustee:

(a) by way of a first equitable mortgage or a first fixed charge, all the Shares; and:

2

(b) by way of a first fixed charge, all Related Rights.

2.2 Distribution

Notwithstanding the creation of an equitable mortgage of the Shares and Related Rights under Clause 2.1 or the creation of a legal mortgage or charge of the Shares and Related Rights under Clause 13.2, the Chargor shall be entitled to receive and retain any Distributions made to it in accordance with Clause 17.27 (Distributions) of the Credit Agreement.

3. PRESERVATION OF SECURITY

3.1 Continuing security

The security constituted by this Mortgage of Shares is continuing and will extend to the ultimate balance of all the Secured Liabilities regardless of any intermediate payment or discharge in whole or in part.

3.2 Additional security

The security constituted by this Mortgage of Shares is in addition to and is not in any way prejudiced by any other security now or subsequently held by the Security Trustee for any Secured Liability.

3.3 Waiver of defences

The obligations of the Chargor under this Mortgage of Shares will not be affected by an act, omission, matter or thing which, but for this provision, would reduce, release or prejudice any of its obligations under this Mortgage of Shares or prejudice or diminish those obligations in whole or in part including (whether or not known to it or the Security Trustee):

(a) any time or waiver granted to, or composition with, the Borrower or other person;

(b) the release of any other person under the terms of any composition or arrangement with any creditor of any member of the Group;

(c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, the Borrower or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

(d) any incapacity or lack of powers, authority or legal personality of or dissolution or change in the members or status of the Borrower or any other person;

(e) any variation (however fundamental) or replacement of a Finance Document or any other document or security so that references to that Finance Document in this Mortgage of Shares shall include each variation or replacement;

3

(f) any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security, to the intent that the Chargor’s obligations under this Mortgage of Shares shall remain in full force and be construed accordingly, as if there were no unenforceability, illegality or invalidity; or

(g) any postponement, discharge, reduction, non-provability or other similar circumstance affecting any obligation of the Borrower under a Finance Document resulting from any insolvency, liquidation or dissolution proceedings or from any law, regulation or order so that each such obligation shall for the purposes of the Chargor’s obligations under this Mortgage of Shares be construed as if there were no such circumstance.

3.4 Immediate recourse

The Chargor waives any right it may have of first requiring the Security Trustee (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before enforcing this Mortgage of Shares.

3.5 Appropriations

The Security Trustee (or any trustee or agent on its behalf) may at any time during the Security Period:

(a) refrain from applying or enforcing any other moneys, security or rights held or received by the Finance Parties or the Security Trustee (or any other trustee or agent on their behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and the Chargor shall not be entitled to the benefit of the same; and

(b) hold in a suspense account any moneys received on an enforcement of this Mortgage of Shares without liability to pay interest on those moneys.

3.6 Non-competition

The Chargor shall not at any time during the Security Period, after a claim has been made under this Mortgage of Shares or after this Mortgage of Shares becomes enforceable:

(a) be subrogated to any rights, security or moneys held, received or receivable by the Finance Parties or the Security Trustee (or any other trustee or agent on their behalf) or be entitled to any right of contribution or indemnity in respect of any action taken, payment made or moneys received on account of the Chargor’s liability under this Mortgage of Shares;

(b) claim, rank, prove or vote as a creditor of any other Obligor or their respective estates in competition with the Security Trustee; or

(c) receive, claim or have the benefit of any payment, distribution or security from or on account of the Borrower or any other Obligor, or exercise any right of set-off as against any Obligor.

4

Unless the Security Trustee otherwise directs, the Chargor shall hold in trust for and forthwith pay or transfer to the Security Trustee any payment or distribution or benefit of security received by it contrary to this Clause 3.6 or as directed by the Security Trustee.

3.7 Reinstatement

(a) Where any discharge (whether in respect of the obligations of the Borrower, this Mortgage of Shares, any other security or otherwise) is made in whole or in part or any arrangement is made on the faith of any payment, security or other disposition which is avoided or must be restored on insolvency, liquidation or otherwise without limitation, this security and the liability of the Chargor under this Mortgage of Shares shall continue as if the discharge or arrangement had not occurred.

(b) The Security Trustee may concede or compromise any claim that any payment, security or other disposition is liable to avoidance or restoration.

4. REPRESENTATIONS AND WARRANTIES

4.1 Representations and warranties

The Chargor makes the representations and warranties set out in this Clause 4 to the Security Trustee.

4.2 Powers and authority

It has the power to enter into and perform, and has taken all necessary action to authorise the entry into, performance and delivery of, this Mortgage of Shares and the transactions contemplated by this Mortgage of Shares.

4.3 Legal validity

This Mortgage of Shares constitutes, or when executed in accordance with its terms will constitute, its legal, valid and binding obligation enforceable in accordance with its terms.

4.4 Consents

All authorisations required in connection with the entry into, performance, validity and enforceability of this Mortgage of Shares and the transactions contemplated by this Mortgage of Shares have been obtained or effected and are in full force and effect.

4.5 Non-conflict

The entry into and performance by it of, and the transactions contemplated by, this Mortgage of Shares do not and will not:

(a) conflict with any applicable law or regulation or judicial or official order to which it is subject; or

(b) conflict with its constitutional documents; or

(c) conflict with any document which is binding upon it.

5

4.6 Security

This Mortgage of Shares creates those Security Interests it purports to create and is not liable to be avoided or otherwise set aside on the liquidation or administration of the Chargor or otherwise.

4.7 Security Assets

(a) The Shares and, to the extent applicable, the other Security Assets are fully paid.

(b) The Chargor is the sole legal and beneficial owner of the Security Assets.

(c) The Shares represent the whole of the issued share capital of the Borrower.

(d) There are no agreements, rights or other matters whatsoever which would reasonably be likely to adversely affect the existence, enforceability or collectability of the Security Assets.

(e) The Security Assets are free from any Security Interest other than the Security Interest created by this Mortgage of Shares.

4.8 Times for making representations and warranties

The representations and warranties set out in this Clause 4 are made on the date of this Mortgage of Shares and are deemed to be repeated by the Chargor on each date during the Security Period with reference to the facts and circumstances then existing.

5. UNDERTAKINGS

5.1 Duration

The undertakings in this Clause 5 remain in force throughout the Security Period.

5.2 Deposit of Shares

The Chargor shall:

(a) deposit with the Security Trustee, or as the Security Trustee may direct, all certificates and other documents of title or evidence of ownership in relation to the Shares and their Related Rights; and

(b) execute and deliver to the Security Trustee all share transfers and other documents which may be requested by the Security Trustee in order to enable the Security Trustee or its nominees to be registered as the owner or otherwise obtain a legal title to the Shares and their Related Rights at any time after a Default has occurred and is continuing.

5.3 Restrictions on dealing

The Chargor shall not:

(a) create or permit to subsist any Security Interest on any Security Asset other than the Security Interest created by this Mortgage of Shares; or

6

(b) sell, transfer or otherwise dispose of, any Security Asset other than a Permitted Transfer; or

(c) take or permit the taking of any action which would reasonably be likely to result in the rights attaching to any of the Security Assets being altered or further shares in the Borrower being issued.

5.4 Calls and other obligations

(a) The Chargor shall pay all calls or other payments due and payable in respect of any of the Security Assets and if the Chargor fails to do so the Security Trustee may pay the calls or other payments on behalf of the Chargor. The Chargor shall forthwith on demand reimburse the Security Trustee for any payment made by the Security Trustee pursuant to this paragraph (a) together with interest at the Default Rate from the date of payment by the Security Trustee up to and including the date of reimbursement by the Chargor.

(b) The Chargor shall promptly copy to the Security Trustee and comply with all requests for information which is within its knowledge and which are made under section 212 of the Companies Act 1985 or any similar provision contained in any articles of association or other constitutional document relating to any of the Security Assets and if it fails to do so the Security Trustee may elect to provide such information as it may have on behalf of the Chargor.

(c) The Chargor shall comply with all other conditions and obligations assumed by it in respect of any of the Security Assets.

(d) The Security Trustee is not obliged to carry out any obligation of the Chargor in respect of the Security Assets or to make any payment, or to make any enquiry as to the nature or sufficiency of any payment received by it or the Chargor, or to present or file any claim or take any other action to collect or enforce the payment of any amount to which it may be entitled under this Mortgage of Shares.

6. WHEN SECURITY BECOMES ENFORCEABLE

The security constituted by this Mortgage of Shares shall become immediately enforceable and the power of sale and other powers conferred by Section 101 of the Act, as varied or amended by this Mortgage of Shares, shall be immediately exercisable upon and at any time after the occurrence and continuance of an Event of Default. After the security constituted by this Mortgage of Shares has become enforceable, the Security Trustee may in its absolute discretion enforce all or any part of the security as it sees fit.

7. ENFORCEMENT OF SECURITY

7.1 General

(a) For the purposes of all powers implied by statute, the Secured Liabilities are deemed to have become due and payable on the date of this Mortgage of Shares.

(b) Section 103 of the Act (restricting the power of sale) and Section 93 of the Act (restricting the right of consolidation) do not apply to the security constituted by this Mortgage of Shares.

7

7.2 Shares

After the security constituted by this Mortgage of Shares has become enforceable, the Security Trustee may exercise (in the name of the Chargor and without any further consent or authority on the part of the Chargor) any voting rights and any powers or rights which may be exercised by the person or persons in whose name any Share or its Related Rights are registered or who is the holder of any of them or otherwise (including all the powers given to trustees by Section 10(3) and (4) of the Trustee Act, 1925 as amended by Section 9 of the Trustee Investment Act, 1961 in respect of securities or property subject to a trust).

7.3 Contingencies

If the Security Trustee enforces the security constituted by this Mortgage of Shares at a time when no amounts are due under the Finance Documents but at a time when amounts may or will become so due, the Security Trustee (or the Receiver) may pay the proceeds of any recoveries effected by it into a suspense account.

7.4 No liability as mortgagee in possession

Neither the Security Trustee nor any Receiver will be liable, by reason of entering into possession of a Security Asset, to account as mortgagee in possession or for any loss on realisation or for any default or omission for which a mortgagee in possession might be liable.

7.5 Agent of the Chargor

Each Receiver is deemed to be the agent of the Chargor for all purposes and accordingly is deemed to be in the same position as a Receiver duly appointed by a mortgagee under the Act. The Chargor alone shall be responsible for his contracts, engagements, acts, omissions, defaults and losses and for liabilities incurred by him and the Security Trustee shall not incur any liability (either to the Chargor or to any other person) by reason of the Security Trustee making his appointment as a Receiver or for any other reason.

7.6 Privileges

Each Receiver and the Security Trustee is entitled to all the rights, powers, privileges and immunities conferred by the Act on mortgagees and receivers when such receivers have been duly appointed under the Act, except that Section 103 of the Act does not apply.

7.7 Protection of purchaser

No person (including a purchaser) dealing with the Security Trustee or a Receiver or its agents will be concerned to enquire:

(a) whether the Secured Liabilities have become payable; or

(b) whether any power which the Security Trustee or the Receiver is purporting to exercise has become exercisable; or

(c) whether any money remains due under the Finance Documents; or

(d) how any money paid to the Security Trustee or the Receiver is to be applied.

8

8. RECEIVER

8.1 Appointment of Receiver

At any time after the security constituted by this Mortgage of Shares becomes enforceable, or if the Chargor so requests the Security Trustee in writing, at any time, the Security Trustee may without further notice appoint under seal or in writing under its hand any one or more persons to be a Receiver of all or any part of the Security Assets in like manner in every respect as if the Security Trustee had become entitled under the Act to exercise the power of sale conferred under the Act.

8.2 Removal

The Security Trustee may by writing under its hand (subject to any requirement for an order of the court in the case of an administrative receiver):

(a) remove any Receiver appointed by it; and

(b) may, whenever it deems it expedient, appoint a new Receiver in the place of any Receiver whose appointment may for any reason have terminated.

8.3 Remuneration

The Security Trustee may fix the remuneration of any Receiver appointed by it and the maximum rate specified in Section 109(6) of the Act shall not apply.

8.4 Relationship with Security Trustee

To the fullest extent permitted by law, any right, power or discretion conferred by this Mortgage of Shares (either expressly or impliedly) upon a Receiver of the Security Assets may after the security created by this Mortgage of Shares becomes enforceable be exercised by the Security Trustee in relation to any Security Asset without first appointing a Receiver or notwithstanding the appointment of a Receiver.

9. POWERS OF RECEIVER

9.1 General

(a) Each Receiver has, and is entitled to exercise, all of the rights, powers and discretions set out below in this Clause 9 in addition to those conferred by the Act on any receiver appointed under the Act.

(b) If there is more than one Receiver holding office at the same time, each Receiver may (unless the document appointing him states otherwise) exercise all of the powers conferred on a Receiver under this Mortgage of Shares individually and to the exclusion of any other Receivers.

(c) Each Receiver has all the rights, powers and discretions set out in Schedule 1 to the Insolvency Act, 1986.

(d) A Receiver who is an administrative receiver of the Chargor has all the rights, powers and discretions of an administrative receiver under the Insolvency Act 1986.

9

9.2 Possession

A Receiver may take immediate possession of, get in and collect any Security Assets.

9.3 Carry on business

A Receiver may carry on the business of the Chargor as it relates to the Security Assets as he thinks fit.

9.4 Employees

A Receiver may appoint and discharge managers, officers, agents, accountants, servants, workmen and others for the purposes of this Mortgage of Shares upon such terms as to remuneration or otherwise as he may think proper and discharge any such persons appointed by the Chargor.

9.5 Borrow money

A Receiver may raise and borrow money either unsecured or on the security of any Security Asset either in priority to the security constituted by this Mortgage of Shares or otherwise and generally on any terms and for whatever purpose which he thinks fit. No person lending that money is concerned to enquire as to the propriety or purpose of the exercise of that power or to check the application of any money so raised or borrowed.

9.6 Sale of assets

A Receiver may sell, exchange, convert into money and realise any Security Asset by public auction or private contract and generally in any manner and on any terms which he thinks proper. The consideration for any such transaction may consist of cash, debentures or other obligations, shares, stock or other valuable consideration and any such consideration may be payable in a lump sum or by instalments spread over such period as he thinks fit.

9.7 Compromise

A Receiver may settle, adjust, refer to arbitration, compromise and arrange any claims, accounts, disputes, questions and demands with or by any person who is or claims to be a creditor of the Chargor or relating in any way to any Security Asset.

9.8 Legal actions

A Receiver may bring, prosecute, enforce, defend and abandon all actions, suits and proceedings in relation to any Security Asset which may seem to him to be expedient.

9.9 Receipts

A Receiver may give valid receipts for all moneys and execute all assurances and things which may be proper or desirable for realising any Security Asset.

10

9.10 Delegation

A Receiver may delegate his powers in accordance with Clause 12 (Delegation).

9.11 Other powers

A Receiver may:

(a) do all other acts and things which he may consider desirable or necessary for realising any Security Asset or incidental or conducive to any of the rights, powers or discretions conferred on a Receiver under or by virtue of this Mortgage of Shares; and

(b) exercise in relation to any Security Asset all the powers, authorities and things which he would be capable of exercising if he were the absolute beneficial owner of the same,

and may use the name of the Chargor for any of the above purposes.

10. APPLICATION OF PROCEEDS

Any moneys received by the Security Trustee or any Receiver after the security constituted by this Mortgage of Shares has become enforceable shall be applied in the following order of priority (but without prejudice to the right of the Security Trustee to recover any shortfall from the Chargor):

(a) in satisfaction of, or provision for, all costs and expenses incurred by the Security Trustee or any Receiver (including but not limited to costs and expenses incurred by the Security Trustee or any Receiver in the course of carrying on the business of the Chargor as it relates to the Security Assets) and of all remuneration due to any Receiver under this Mortgage of Shares;

(b) in or towards payment of the Secured Liabilities or such part of them as is then due and payable; and

(c) in payment of the surplus (if any) to the Chargor or other person entitled to it.

11. EXPENSES AND INDEMNITY

The Chargor shall forthwith on demand pay all costs and expenses (including legal fees) incurred in connection with this Mortgage of Shares by the Security Trustee or any Receiver, attorney, manager, agent or other person appointed by the Security Trustee under this Mortgage of Shares and keep each of them indemnified against any failure or delay in paying the same.

12. DELEGATION

The Security Trustee and any Receiver may delegate by power of attorney or in any other manner to any person any right, power or discretion exercisable by the Security Trustee under this Mortgage of Shares. Any such delegation may be made upon the terms (including power to subdelegate) and subject to any regulations which the Security Trustee or the Receiver may think fit. Neither the Security Trustee nor any Receiver will be in any way

11

liable or responsible to the Chargor for any loss or liability arising from any act, default, omission or misconduct on the part of any such delegate or sub-delegate unless caused by the gross negligence or wilful default of the Security Trustee or, as the case may be, the Receiver.

13. FURTHER ASSURANCES

13.1 General

The Chargor shall, at its own expense, take whatever action the Security Trustee or a Receiver may require for:

(a) perfecting or protecting the security intended to be created by this Mortgage of Shares over any Security Asset; and

(b) facilitating the realisation of any Security Asset or the exercise of any right, power or discretion exercisable by the Security Trustee or any Receiver or any of its delegates or sub-delegates in respect of any Security Asset after such time as the Security constituted by this Mortgage of Shares shall have become enforceable,

including the execution of any transfer, conveyance, assignment or assurance of any property whether to the Security Trustee or to its nominees, and the giving of any notice, order or direction and the making of any registration, which in any such case, the Security Trustee may think expedient.

13.2 Legal Charge

Without prejudice to the generality of Clause 13.1, the Chargor will forthwith at the request of the Security Agent (acting reasonably) execute a legal mortgage, charge or assignment over all or any of the Security Assets subject to or intended to be subject to any fixed security hereby created in favour of the Security Agent (as agent and trustee as aforesaid) in such form as the Security Agent may require but containing terms no more onerous than those in this Mortgage of Shares.

14. POWER OF ATTORNEY

The Chargor, by way of security, irrevocably and severally appoints the Security Trustee, each Receiver and any of its delegates or sub-delegates to be its attorney to take any action which the Chargor is obliged to take under this Mortgage of Shares, including under Clause 13 (Further Assurances). The Chargor ratifies and confirms whatever any attorney does or purports to do pursuant to its appointment under this Clause.

15. WAIVERS AND REMEDIES CUMULATIVE

The rights of the Security Trustee under this Mortgage of Shares:

(a) may be exercised as often as necessary;

(b) are cumulative and are not exclusive of its rights under the general law; and

(c) may be waived only in writing and specifically.

12

Delay in exercising or non-exercise of any such right is not a waiver of that right.

16. MISCELLANEOUS

16.1 Covenant to Pay

The Chargor shall pay or discharge the Secured Liabilities in the manner provided for in the Finance Documents

16.2 Tacking

The Security Trustee agrees on behalf of the Finance Parties that the Finance Parties shall perform its obligations under the Credit Agreement (including any obligation to make available further advances).

16.3 New Accounts

If the Security Trustee receives, or is deemed to be affected by, notice, whether actual or constructive, of any subsequent charge or other interest affecting any Security Asset and/or the proceeds of sale of any Security Asset, the Security Trustee may open a new account with the Chargor. If the Security Trustee does not open a new account, it shall nevertheless be treated as if it had done so at the time when it received or was deemed to have received notice. As from that time all payments made to the Security Trustee will be credited or be treated as having been credited to the new account and will not operate to reduce any amount for which this Mortgage of Shares is security.

16.4 Certificates

A certificate or determination by the Security Trustee of a rate or amount under the Finance Documents is, in the absence of manifest error, conclusive evidence of the matter to which it relates.

16.5 Stamp duties

The Chargor will pay and forthwith on demand indemnify the Security Trustee against any liability it incurs in respect of any stamp, registration and similar tax which is or becomes payable in connection with the entry into, performance or enforcement of this Mortgage of Shares to the extent that the Security Trustee has not been so reimbursed under the Credit Agreement.

17. CHANGES TO THE PARTIES

17.1 Transfers by the Chargor

The Chargor may not assign, transfer, novate or dispose of its rights and/or obligations under this Mortgage of Shares.

17.2 Transfers by Security Trustee

The Security Trustee may assign, transfer, novate or dispose of all or any part of its rights and/or obligations under this Mortgage of Shares to a successor Security Trustee appointed in accordance with Clause 13.11 of the Intercreditor Agreement or to any person or persons after the Security constituted by this Mortgage of Shares shall have become enforceable.

13

18. SEVERABILITY

If a provision of this Mortgage of Shares is or becomes illegal, invalid or unenforceable in any jurisdiction, that shall not affect:

(a) the validity or enforceability in that jurisdiction of any other provision of this Mortgage of Shares; or

(b) the validity or enforceability in other jurisdictions of that or any other provision of this Mortgage of Shares.

19. COUNTERPARTS

This Mortgage of Shares may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Mortgage of Shares.

20. NOTICES

20.1 Giving of notices

All notices or other communications under or in connection with this Mortgage of Shares shall be given in writing and, unless otherwise stated, may be made by facsimile. Any such notice will be deemed to be given as follows:

(a) if by letter, when delivered; and

(b) if by facsimile, when received in legible form.

However, a notice given in accordance with the above but received on a non-working day or after business hours in the place of receipt will only be deemed to be given on the next working day in that place.

20.2 Addresses for notices

(a) The address and facsimile number of the Chargor are:

Eggborough Power (Holdings) Limited

10 Lochside Place

Edinburgh

Lothian E12 9DF

Facsimile No: 0131 527 2179 (Attention: Company Secretary) and 0131 527 2102 (Attention: Group Treasurer)

or such other as the Chargor may notify to the Security Trustee by not less than five Business Days’ notice; and

14

(b) The address and facsimile number of the Security Trustee are:

Barclays Bank PLC

5 The North Colonnade

Canary Wharf

London E14 4BB

Facsimile No: 020 7773 1840

or such other as the Security Trustee may notify to the Chargor by not less than five Business Days’ notice.

21. RELEASE

(a) Subject to Clause 21(b) below, upon the expiry of the Security Period (but not otherwise), the Security Trustee shall, at the request and cost of the Chargor, take whatever action is necessary to release the Security Assets from the security constituted by this Mortgage of Shares (including returning all certificates and other documents of title or evidence of ownership relating to such Security Assets).

(b) In the case of a Permitted Transfer of any Shares, the Security Trustee shall, at the request and cost of the Chargor, take whatever action is necessary to release such Shares and all Related Rights thereto from the security constituted by this Mortgage of Shares (including returning all relevant certificates and other documents of title or evidence of ownership relating to such Shares and Related Rights) provided that the transferee shall have entered into a mortgage of the transferred Shares and Related Rights in favour of the Security Trustee substantially in the form of this Mortgage.

22. GOVERNING LAW AND JURISDICTION

22.1 Governing Law

This Mortgage of Shares is governed by English law.

22.2 Jurisdiction

(a) For the benefit of the Security Trustee, the Chargor agrees that the High Courts of Justice in London, and all appellate courts therefrom have jurisdiction to settle any disputes which may arise out of or in connection with this Mortgage of Shares and that any suit, action or proceedings (together “Proceedings”) in connection with this Mortgage of Shares may be brought in the High Courts of Justice in London and all appellate courts therefrom and accordingly submits to the jurisdiction of the High Courts of Justice in London and all appellate courts therefrom.

(b) The Chargor hereby irrevocably and unconditionally agrees that nothing in this Mortgage of Shares shall affect the right to serve process in any manner permitted by law.

22.3 No limitation

Nothing in this Clause 22 shall limit the right of the Security Trustee to take Proceedings against the Chargor in any other court of competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction, whether concurrently or not.

15

This Mortgage of Shares has been entered into as a deed on the date stated at the beginning of this Mortgage of Shares.

EXECUTED as a deed by	)
EGGBOROUGH POWER (HOLDINGS) LIMITED	)
acting by GORDON BOYD	)
as its attorney	)

GORDON BOYD

As attorney for Eggborough Power (Holdings) Limited

BARCLAYS BANK PLC
By:	ANDREW VINE

16

EX-4.20

Exhibit 4.20

HEADS OF AGREEMENT

British Energy plc

Ad Hoc Bondholder Committee

Polygon Investment Partners LLP

Polygon Global Opportunities Master Fund

and

Polygon Investment Partners LP

Purpose:	A legally binding Heads of Agreement providing for, subject to the terms set out here, full and final settlement of all disputes arising out of or in connection with the Restructuring between (1) the Company and Polygon and (2) the Committee and Polygon. Polygon will procure that Vidacos Nominees Limited (“Vidacos”) will take all necessary steps required of it to give effect to these Heads of Agreement.
Parties:	British Energy plc (the “Company”), the Ad Hoc Bondholder Committee, comprising Cargill Financial Markets Plc, Duquesne Capital Management LLC and QDRF Master Limited (the “Committee”) (being the Ad Hoc Committee for the purposes of the CRA), Polygon Investment Partners LLP, Polygon Global Opportunities Master Fund and Polygon Investment Partners LP, on behalf of themselves and funds under management (together “Polygon”).
Definitions:	Definitions used in the Creditor Restructuring Agreement (the “CRA”) have the same meaning in this Heads of Agreement.
Further Documentation:	Following signature by the Parties the Committee’s counsel will deliver drafts of any further agreements to Polygon as are necessary to amplify these binding Heads of Agreement (“Further Agreements”). The Parties agree to negotiate in good faith to finalise and enter into the Further Agreements.
English Litigation:	The Committee and Polygon (in respect of its application to strike out the Proceedings (as defined below)) agree to procure that the English proceedings against Polygon and Vidacos (the “Proceedings”) are stayed, without prejudice to Polygon’s application to strike out the Proceedings, pending:
	(i)	In the event that the Requisitioned Resolutions (as defined below) are not passed at the Requisitioned EGM (as defined below) or any adjournment thereof and the Restructuring is completed, the Proceedings will be discontinued as against Polygon and Vidacos, upon completion.

(ii)	In the event that the Requisitioned Resolutions are not passed at the Requisitioned EGM or any adjournment thereof and the Restructuring does not complete before either 31 January 2005 or, if the Restructuring Long Stop Date is extended, before the date of such extension but in any event no later than 30 April 2005 (the “Extended Long Stop Date”), the Proceedings will be discontinued as against Polygon and Vidacos on 31 January 2005 or such Extended Long Stop Date provided that Polygon has not committed a material breach of any of the terms of these Heads of Agreement or the Further Agreements.
(iii)	In the event that the Requisitioned Resolutions are passed at the Requisitioned EGM or any adjournment thereof and the Restructuring is completed the Proceedings will be discontinued as against Polygon and Vidacos upon completion provided that Polygon has not committed a material breach of any of the terms of these Heads of Agreement or the Further Agreements.
(iv)	In the event that the Requisitioned Resolutions are passed at the Requisitioned EGM or any adjournment thereof and the Restructuring does not complete before either 31 January 2005 or any Extended Long Stop Date, the Proceedings will not be discontinued as against Polygon and Vidacos and the stay will be lifted and the Proceedings continued after the later of 31 January 2005 or any Extended Long Stop Date.
(v)	If the Requisitioned EGM is adjourned and before such meeting reconvenes: (a) the Restructuring is completed before the later of 31 January 2005 or any Extended Long Stop Date, the Proceedings will be discontinued as against Polygon and Vidacos upon completion; and (b) the Restructuring is not completed before the later of 31 January 2005 or any Extended Long Stop Date, the Proceedings will be discontinued as against Polygon and Vidacos on the later of 31 January 2005 or any Extended Long Stop Date provided that Polygon has not committed a material breach of any of the terms of these Heads of Agreement or the Further Agreements.

- 2 -

	Polygon undertakes not to object to any consent order entered in relation to the Committee action against the Company.
New York Litigation:	The Company consents to immediate entry of an order dismissing the US proceedings with prejudice and the withdrawal of the Company’s complaint and will cause its counsel to take prompt action to give effect to such actions.
Restructuring:	(i)	in respect of the EGM requisitioned on behalf of Polygon and another entity (the “Requisitioned EGM”), Polygon undertakes to vote against and procure that Vidacos votes against and in each case delivers a form of proxy to the Chairman of the Company voting against each of the resolutions set out in the Company’s Circular dated 24 September 2004 (the “Requisitioned Resolutions”) in respect of any ordinary shares legally or beneficially owned, and, if proposed by the Chairman of the Company, vote in favour of an adjournment of the Requisitioned EGM.
	(ii)	Polygon agrees not to initiate any Court, regulatory or governmental process, or to appear in any Court or participate in any process in relation to the Members’ or Creditors’ Scheme or delisting of Company shares or ADRs and not to take any other step or commence any proceedings whatsoever (including encouraging or supporting, directly or indirectly, any such step or proceedings by any other person or entity) in relation to the Restructuring, save for circumstances in which Polygon reasonably believes, having been advised in writing by Leading Counsel, that a failure to appear in a particular Court or respond to any regulatory or governmental process would expose it to liability for contempt of Court or other equivalent sanction.
	(iii)	Polygon agrees not to transfer legal or beneficial 3 ownership of its Relevant Shares (as defined below) prior to the Requisitioned EGM save upon the proposed transferee entering into a legally binding undertaking to vote against the Requisitioned Resolutions and undertaking to the Company and the Committee in the terms of this paragraph (iii), such undertaking to be binding on subsequent transferees and on terms reasonably satisfactory to the Company and the Committee and subject to the Company’s and the Committee’s prior written approval, such approval not to be unreasonably withheld or delayed.

- 3 -

(iv)	Polygon agrees to reasonably cooperate in any application that the Company may wish to make to adjourn or cancel the Requisitioned EGM including providing witness statements in reasonable terms in support of any such application and appearing at any hearing and making reasonable submissions in support of the application.
(v)	Polygon will take no further steps, directly or indirectly, to challenge or impede the Restructuring including lobbying shareholders, MPs and government ministers and lobbying regulatory bodies (including UKLA, DTI, FSA, European Commission).
(vi)	Polygon agrees to, as soon as reasonably practicable but in any event within three business days, shut down permanently and to withhold all support for, and participation in the BE Fair Website (www.be-fair.org) and not to support or establish, directly or indirectly any other website that seeks directly or indirectly to promote any activity or dialogue regarding the Restructuring, and to remove from any other website over which they exercise control, including those maintained in the domain name of Polygon, any reference to the Restructuring.
(vii)	Polygon shall not act, directly or indirectly, whether alone or in concert with others to advise or encourage others to act in a way which could reasonably be expected to frustrate, impede or make more difficult the Restructuring or its consummation.
(viii)	Until the earlier of completion of the Restructuring or the Extended Long Stop Date, Polygon shall, and shall procure that its proxy solicitor and advisers shall, retain and keep confidential all information (from any source, including from the internet) regarding the Company, including but not limited to shareholders of the Company, the Requisitioned EGM, the Requisitioned Resolutions, the CRA and/or the Restructuring (collectively, the “Information”); and Polygon will not provide at any time any Information to any person or entity save to the extent

- 4 -

		that it is required to do so by Court order or order of a competent regulatory or governmental authority. In the event of an anticipated Court, regulatory or governmental order or direction requiring disclosure of information, Polygon undertakes to use reasonable endeavours to give the Company and the Committee prior notice of the prospective hearing and to liaise with the Company and the Committee counsel in relation to such Court proceeding and to take all reasonable steps to contest such Court, regulatory or governmental order or direction.
	(ix)	Until the earlier of completion of the restructuring or the Extended Long Stop Date, Polygon and/or its advisers and proxy solicitor shall retain and will not destroy any documents or information currently in its possession, custody or control, regarding any dealings, communications, agreements or arrangements entered into with Brandes Investment Partners LLC and/or its affiliates concerning the Requisitioned EGM, the Requisitioned Resolutions, the CRA, the Company or the Restructuring. Polygon, its advisers and its proxy solicitor will keep all such documents and information confidential and will not provide them to any person or entity save to the extent that it is required to do so by Court order or order of a competent regulatory or governmental authority.
Costs:	Polygon agrees to pay its own costs and expenses in relation to all above steps and in relation to the Proceedings and the New York litigation. Polygon will not be responsible for the costs and expenses of the Company or the Committee in relation to the above steps or in relation to the Proceedings and the New York litigation.
Announcement:	Upon signature of this Heads of Agreement, the agreed announcements will be released in the form initialled in advance.
Non Disparagement	Polygon will not either directly or indirectly publish or otherwise make any statement concerning the Company Released Parties (as defined below) or the Committee Released Parties (as defined below) which is intended to or might reasonably be expected to disparage, be detrimental to or otherwise critical of the Company Released Parties or the Committee Released Parties.

- 5 -

	The Company will not either directly or indirectly publish or otherwise make any statement concerning Polygon Released Parties (as defined below) which is intended to or might reasonably be expected to disparage, be detrimental to or otherwise critical of Polygon Released Parties.
	The Committee will not either directly or indirectly publish or otherwise make any statement concerning Polygon Released Parties which is intended to or might reasonably be expected to disparage, be detrimental to or otherwise critical of Polygon Released Parties.
	For the avoidance of doubt it is agreed that any statement of fact (as opposed to speculation, opinion or conjecture) which is true and accurate will not constitute a breach of this Non Disparagement paragraph.
Releases:	The Further Agreements shall record more fully and completely the mutual releases, waivers and covenants not to sue (the “Releases”) granted hereby in respect of all and any claims (actual or potential) in and relating to the subject matter of the Proceedings, the New York litigation, the CRA, the Restructuring and any interest which Polygon has or had at any time in the Company or its securities, for the benefit of the Committee, the Company, Polygon and their respective directors, members, officers, advisers, partners, employees, independent contractors and nominees and, in relation to Polygon, its investors in their capacity as investors in Polygon, save to the extent that Brandes Investment Partners LLC or any of its affiliates is an investor in Polygon (the “Released Parties”), in each case without prejudice to any rights of the Committee against the Company under the CRA. The Releases of Polygon by the Committee and the Company in connection with the Proceedings will take effect on the date the Proceedings are discontinued as provided under the paragraph above entitled English Litigation. The Release of Polygon by the Company in connection with the New York litigation will take effect upon execution hereof and otherwise the Releases will take effect on the date that the Proceedings are discontinued as provided under the paragraph above entitled English Litigation.

- 6 -

Representations, Warrants and Undertakings	Each Party represents and warrants that:
	(i)	it has the power to enter into, perform and deliver and has taken all necessary action to authorise its entry into, performance and delivery of these Heads of Agreement and the actions contemplated by these Heads of Agreement;
	(ii)	the execution by it of these Heads of Agreement and the exercise of its rights and the performance of its obligations under these Heads of Agreement
		(a)	does not constitute and will not result in any breach of applicable law, any of its constitutive documents or any agreement to which it is party; and
		(b)	its obligations under these Heads of Agreement are valid and binding obligations, enforceable in accordance with the terms of these Heads of Agreement.
	Save as set forth herein Polygon represents and warrants that, save as already publicly disclosed by Polygon on its Schedule 13D filing as amended, there are no agreements or undertakings with any other third party in relation to the use, voting, acquisition, retention or disposal of its beneficial interests in the Company’s Ordinary Shares, “A” Shares or Debt (as defined below), including as to the exercise of any rights arising from those interests.
	Polygon represents that it owns ADRs in respect of 100 ADSs evidencing 7,500 Ordinary Shares and 37,000,000 Ordinary Shares (the “Relevant Shares”) and that Polygon has no legal or beneficial interest, direct or indirect, in any Bond, PPA Claim or interest in the EPL Facility Agreement (Bond, PPA Claim or interest in the EPL Facility Agreement being the “Debt”) or “A” Shares and neither has nor controls any voting rights in any equity securities or Debt held legally or beneficially by any third party.
	Polygon covenants that its legal advisers, including counsel, will not be released or made available to assist or advise any other person or entity, other than the Polygon Released Parties, in connection with the Restructuring, the Proceedings or the New York litigation.

- 7 -

The Committee covenants that neither it nor any of its advisers will initiate, advise or assist any other entity to initiate, advise or assist in any Court, regulatory or governmental process against Polygon in relation to the subject matter of the Restructuring, the Proceedings, the New York litigation, the CRA or any interest which Polygon has or had at any time in the Company or its securities, including encouraging or supporting, directly or indirectly, any such effort by any other person or entity in relation to the Restructuring, save for circumstances in which the Committee reasonably believes, having obtained a written opinion from Leading Counsel, that any failure to appear in any court or respond to any regulatory or governmental process would expose it to liability for contempt of Court or other equivalent sanction.

The Committee represents that, so far as it is aware, save in relation to any actual or potential claims already notified in writing to Polygon, there are no other actual, pending or threatened bondholder claims which bondholders have asserted they intend to pursue following settlement of the Proceedings on reasonable commercial terms.

The Company covenants that it will not bring and that it will not allow its advisers to use the Company’s confidential information to bring, any Court actions or regulatory or governmental process against Polygon in relation to the subject matter of the Restructuring, the Proceedings, the CRA, the New York litigation or in relation to any interest which Polygon has or had at any time in the Company or its securities, including encouraging or supporting, directly or indirectly, any such effort by any other person or entity in relation to the Restructuring, save for circumstances in which the Company reasonably believes that such action is required by law or regulation and provided that for the avoidance of doubt the Company shall be entitled to request disclosure of interests in shares in accordance with section 212 of the Companies Act 1985 (as amended) and the Company’s articles of association.

The above representations, covenants and warranties will be repeated at the date of the signing of the definitive settlement agreement and shall survive execution and delivery of these Heads of Agreement.

English law, exclusive submission to English jurisdiction.

- 8 -

Signed by	on behalf of Ad Hoc Bondholder Committee
Signed by	on behalf of Polygon Investment Partners LLP
Signed by	on behalf of Polygon Global Opportunities Master Fund
Signed by	on behalf of Polygon Investment Partners LP
Signed by	on behalf of British Energy PLC

- 9 -

British Energy Plc

30 September 2004

Announcement made on 30 September 2004 by Polygon Investment Partners (Polygon)

British Energy plc (“the Company”) welcomes today’s announcement by Polygon of its decision to withdraw its support for its requisitioned Extraordinary General Meeting on 22 October 2004 (EGM). Having considered the Company’s recent circulars, Polygon has stated that they now believe there is no commercial logic for it supporting the resolutions to be considered at the requisitioned EGM and consequently have confirmed that they will vote against the resolutions.

The Company is withdrawing its action against Polygon in the United States and the bondholders have agreed terms to stop the English litigation insofar as it relates to Polygon. This agreement involves no payment by any party to any other party. The terms of the restructuring agreed between the Company and certain creditors in October 2003 have not been amended.

From this the British Energy Board continues to believe that the Agreed Restructuring is in the best interests of the Company and shareholders as a whole and the Board reiterates its unanimous recommendation to all shareholders of the Company to vote against the resolutions proposed for the requisitioned EGM.

- 10 -

POLYGON PRESS RELEASE

Polygon Investment Partners LLP (“Polygon”) announces today that in light of British Energy plc’s recent shareholder circulars, including with regard to the Company’s intention to delist and sell its assets, Polygon has agreed to vote the Ordinary Shares of British Energy owned by it against the proposed resolutions at the requisitioned Extraordinary General Meeting and not to further oppose the restructuring. The Bondholders and British Energy have agreed to stop all outstanding legal actions against Polygon.

In the circumstances, Polygon believes that there is no commercial logic in proceeding with the EGM or supporting the proposed resolutions.

- 11 -

	Citigate Dewe Rogerson
For immediate release	30 September 004

British Energy: a statement

The Ad Hoc Committee of bondholders (the “bondholders”) notes the announcement today from Polygon Investment Partners LLP (“Polygon”) and from British Energy plc.

The bondholders welcome Polygon’s decision to vote against the resolutions to be proposed at the forthcoming Extraordinary General Meeting.

The bondholders confirm that terms have been agreed regarding the settlement of the English litigation insofar as it relates to Polygon. The litigation will continue against Brandes Investment Partners LLC and the other defendants.

Ends

For further information

Citigate Dewe Rogerson Patrick Donovan Chris Barrie (07968 727 289) Toby Mountford 020 7638 9571

- 12 -

EX-4.21

Exhibit 4.21

EXECUTION VERSION

BRITISH ENERGY GROUP PLC

WARRANT INSTRUMENT

RELATING TO WARRANTS TO SUBSCRIBE FOR

ORDINARY SHARES OF 98 PENCE EACH IN

BRITISH ENERGY GROUP PLC

CONTENTS

Clause		Page
1.	Interpretation	1
2.	Warrants	2
3.	Certificates	2
4.	Registration and Transfer	2
5.	Modifications to the Warrant Instrument	3
6.	Availability of Instrument	3
7.	Benefit of instrument	3
8.	Governing Law	4
SCHEDULE		5
Part 1		5
Part 2		30
Part 3		32
Part 4		35

THIS WARRANT INSTRUMENT is executed on                     2005

BY BRITISH ENERGY GROUP PLC, a company incorporated in Scotland (registered no. SC270184), whose registered office is at Systems House, Alba Campus, Livingston EH54 7EG (the “Company”).

WHEREAS:

(A) The Company has determined by a resolution of a duly constituted committee of its Board of Directors (being duly empowered and authorised by the Memorandum and Articles) to issue up to 29,527,187 Warrants each entitling the holder thereof to subscribe for one Ordinary Share at the applicable Subscription Price (subject to adjustment as provided in the Conditions of such Warrants set out in Part 1 of Schedule hereto) and has determined to constitute the same in the manner hereinafter appearing.

(B) The Company has determined to execute this Warrant Instrument in connection with the issue of the Warrants.

THIS DEED WITNESSES as follows:

1. INTERPRETATION

1.1 In this Warrant Instrument, except to the extent that the context otherwise requires:

1.1.1 “Conditions” means the terms and conditions set out in Part 1 of the Schedule as modified from time to time in accordance with the provisions set out in this Warrant Instrument and the Conditions and “Condition” refers to the relative numbered paragraph of the Conditions;

1.1.2 “Warrant Instrument” means this Warrant Instrument and the Schedule (as modified from time to time in accordance with the terms of this Warrant Instrument and the Conditions) and includes any instrument which is executed in accordance with the provisions of this Warrant Instrument and expressed to be supplemental to it;

1.1.3 words and expressions defined in the Conditions shall, unless there is something in the subject matter or context inconsistent therewith, have the same meaning in this Warrant Instrument;

1.1.4 references in this Warrant Instrument to Clauses and the Schedule shall be construed as references to the Clauses of and the Schedule to this Warrant Instrument. The Schedule forms part of this Warrant Instrument. The headings in this Warrant Instrument do not affect its interpretation; and

1.1.5 a statutory provision includes a reference to the statutory provision as modified or re-enacted or both from time to time before the date of this Warrant Instrument and any subordinate legislation made under the statutory provision (as so modified or re-enacted) before the date of this Warrant Instrument.

- 1 -

2. WARRANTS

2.1 The Company hereby creates and grants to the persons to whom the Warrants are allotted (or to those persons to whom such Warrants are effectively transferred and on whose behalf a valid application is made for registration as the holders thereof) up to 29,527,187 Warrants in aggregate with rights to subscribe at any time and from time to time during the Subscription Period for Ordinary Shares at the applicable Subscription Price in force on the relevant Subscription Date, all as more particularly set out in the Conditions.

2.2 The Warrants are constituted by and issued subject to and with the benefit of this Warrant Instrument. Each registered Warrantholder will be bound by and deemed to have notice of all the matters set out in this Warrant Instrument.

2.3 The Company shall perform and observe the Conditions set out in Part 1 of the Schedule hereto and the Warrants shall be held subject to the Conditions all of which shall be deemed to be incorporated in this Warrant Instrument and shall be binding on the Company and the Warrantholders and all persons claiming through or under them respectively.

3. CERTIFICATES

3.1 The Warrants upon issue may be held in certificated or uncertificated form. Warrants held in uncertificated form shall be held through CREST. Certificated Warrants registered in a Warrantholder’s name will be evidenced by a Warrant Certificate issued by the Company and the Company shall comply with the terms of the Warrant Certificates. Every Warrant Certificate shall be under the securities seal of the Company which shall be affixed in such manner as shall be permitted by the Articles, or otherwise executed on behalf of the Company as determined by the Directors of the Company. Every holder of Warrants in certificated form shall be entitled to receive one Warrant Certificate for the Warrant(s) held by him but joint holders shall be entitled to only one Warrant Certificate in respect of the Warrants held jointly by them which Warrant Certificate shall be delivered to the joint holder whose name stands first in the Register of Warrantholders.

3.2 If a Warrant Certificate is mutilated, defaced, lost, stolen or destroyed it may be replaced at the Specified Office upon payment by the claimant of such costs incurred in connection therewith and on such terms as to evidence and indemnity as the Registrar and the Company may reasonably require. Mutilated or defaced Warrant Certificates must be surrendered before replacements will be issued.

4. REGISTRATION AND TRANSFER

4.1 The Company shall be entitled to appoint such person or persons as the Company thinks fit as the Registrar and to remove any such person or persons and make a new appointment in their stead. The Company shall forthwith give a notice of any change in the identity or address of the Registrar in writing to the Warrantholders. The Company shall procure that the Registrar maintains a register of Warrantholders.

- 2 -

4.2 Warrants in certificated form shall be transferable in multiples of one Warrant by instrument of transfer in any usual or common form or such other form as may be approved by the Company.

4.3 Warrants held in uncertificated form shall be transferable in multiples of one Warrant in accordance with the CREST Regulations. Title to the Warrants held in uncertificated form is recorded on the Operator register maintained by the Operator and title to the Warrants will pass upon registration of the transfer in the Operator register in accordance with CREST Regulations.

4.4 Subject to the provisions of Part 4 of the Schedule, the Warrants are freely transferable. The provisions of Part 4 of the Schedule relating to the transfer, transmission and registration of the Warrants shall have full effect as if the same had been incorporated herein.

5. MODIFICATIONS TO THE WARRANT INSTRUMENT

5.1 Any modification to this Warrant Instrument may be effected only by instrument in writing executed by the Company and expressed to be supplemental hereto, and, save in the case of a modification which is of a formal, minor or technical nature or made to correct a manifest error or which does not alter or abrogate all or any rights attaching to the Warrants, only if it shall first have been sanctioned by an Extraordinary Resolution of Warrantholders.

5.2 A memorandum of every such supplemental deed shall be endorsed on this Warrant Instrument.

5.3 Notice of every modification to this Warrant Instrument shall be given by the Company to the Warrantholders in accordance with Condition 10.

6. AVAILABILITY OF INSTRUMENT

6.1 Every Warrantholder shall be entitled to inspect a copy of this Warrant Instrument at the Specified Office (or such other address as the Directors of the Company may from time to time notify the Warrantholders of) during normal business hours (Saturdays, Sundays and public holidays excepted), and shall be entitled to receive a copy of this Warrant Instrument against payment of such charges as the Directors of the Company may impose in their absolute discretion.

7. BENEFIT OF INSTRUMENT

7.1 The Company hereby acknowledges and covenants that the benefit of the covenants, obligations and conditions on the part of or binding upon it contained in this Warrant Instrument hereto shall enure to the benefit of each and every Warrantholder from time to time.

7.2 Each Warrantholder shall be entitled severally to enforce the covenants, obligations and conditions referred to in Clause 7.1 against the Company insofar as each such Warrantholder’s Warrants are concerned, without the need to join the allottee of any such Warrant or any intervening or other Warrantholder in the proceedings for such enforcement.

- 3 -

8. GOVERNING LAW

8.1 This Warrant Instrument shall be governed by, and construed in accordance with, the Law of Scotland.

8.2 The Scottish Courts have exclusive jurisdiction to settle any dispute arising out of or in connection with this Warrant Instrument and the Company and each Warrantholder irrevocably submit to the exclusive jurisdiction of the Scottish Courts.

8.3 The Company and each Warrantholder irrevocably waive any objection to the English Courts on grounds that they are an inconvenient or inappropriate forum to settle any such dispute.

IN WITNESS whereof this Warrant Instrument has been executed as a deed the day and year first above written.

Executed as a deed by	)
Robert Armour	)
as attorney for	)
BRITISH ENERGY GROUP PLC	)

in the presence of	_________________________
Signature of witness	_________________________
Name of witness	_________________________
Address of witness	_________________________
Occupation of witness	_________________________

- 4 -

SCHEDULE

Part 1

CONDITIONS OF THE WARRANTS

1. Definitions

In these Conditions, except to the extent that the context otherwise requires:

“30-day period” has the meaning given in Condition 4.12;

“Act” means the Companies Act 1985;

“Articles” means the Articles of Association of the Company for the time being;

“British Energy” means British Energy plc (registered no. 162273);

“Board of Directors” or “Board” means the board of directors of the Company for the time being;

“Business Day” means a day (other than a Saturday, Sunday or public holiday) on which commercial banks and foreign exchange markets are open for business in London;

“certificated” means a security which is not in uncertificated form;

“Company” means British Energy Group plc (registered no. 270184);

“Conditions” means the terms and conditions applicable to the Warrants as set out herein as the same may from time to time be modified in accordance with the provisions set out in the Warrant Instrument and herein and “Condition” refers to the relative numbered paragraph of the Conditions;

“Contribution Agreement” means the contribution agreement entered into pursuant to the Restructuring between the Company, Holdings plc, British Energy Generation Limited, British Energy Generation (UK) Limited, The Secretary of State for Trade and Industry and Nuclear Generation Decommissioning Fund Limited (to be renamed Nuclear Liabilities Fund Limited);

“Convertible Shares” means the convertible shares of 10p each in the capital of the Company as defined and described in the Articles or of such other nominal value as may result from any subdivision or consolidation thereof and all other (if any) shares or stock resulting from any sub-division, consolidation or reclassification of such shares;

“CREST” means the system enabling title to securities to be evidenced and transferred in uncertificated form operated by CREST Co. Limited in accordance with the CREST Regulations;

- 5 -

“CREST Regulations” means the Uncertificated Securities Regulations 2001 (SI 2001/3755), as amended;

“Dealing Day” means a day on which the Relevant Stock Exchange is open for business;

“Expert” has the meaning given in Condition 7;

“Extraordinary Resolution” means a resolution passed at a meeting of the Warrantholders duly convened and held and carried by a majority consisting of not less than three-fourths of the votes cast upon a show of hands or, if a poll is duly demanded, by a majority consisting of not less than three-fourths of the votes cast on a poll;

“Holdings plc” means British Energy Holdings plc (registered no. 270186);

“Memorandum” means the Memorandum of Association of the Company from time to time;

“New Bonds” means the £700 million nominal bonds to be issued by Holdings plc pursuant to the Restructuring;

“Official List” means the official list maintained by the United Kingdom Listing Authority for the purposes of Part VI of the Financial Services and Markets Act 2000;

“Operator” means CREST Co. Limited or any additional or alternative operator from time to time approved by the Company in relation to the Warrants and in accordance with the CREST Regulations;

“Operator register” means the Operator register of corporate securities (as defined in the CREST Regulations);

“Ordinary Shares” means the ordinary shares in the capital of the Company of 10p each as defined and described in the Articles or of such other nominal value as may result from any subdivision or consolidation thereof and all other (if any) shares or stock resulting from any sub-division, consolidation or reclassification of such shares;

“Register” means the register of Warrantholders required to be maintained pursuant to Clause 4 of the Warrant Instrument;

“Registrar” means Lloyds TSB Registrars or any other person who is appointed by the Company to maintain the Register at any time;

“Relevant Stock Exchange” means at any time, in respect of the Ordinary Shares, the Official List and/or, as the context requires, the market for listed securities of The Stock Exchange or, if the Ordinary Shares are not at that time so listed, the principal stock exchange or securities market on which the Ordinary Shares are then listed or quoted or dealt in;

- 6 -

“Restructuring” means the restructuring of the British Energy group as more particularly described in the Scheme Document;

“Restructuring Effective Date” means the date on which the Restructuring becomes effective as more particularly described in the Scheme Document;

“Scheme Document” means a circular sent to shareholders of British Energy dated 29 November 2004 setting out restructuring proposals in relation to a scheme of arrangement between British Energy and its shareholders or a disposal of the business and assets of British Energy;

“Shareholders” means the holders from time to time of the Shares;

“Shares” means the Ordinary Shares and the Convertible Shares;

“Specified Office” means the office of the Registrar specified below or any other office of the Registrar which may from time to time be notified to Warrantholders in accordance with Condition 10;

“Subscription Date” means the Business Day next following the date on which the requirements relating to the exercise of the Warrants in Condition 2 have been complied with in full or, if later, the date on which payment is actually received by the Company in accordance with Condition 2;

“Subscription Notice” means a notice substantially in the form shown in Part 3 of the Schedule which must be completed in order to exercise the Warrant comprised in that Warrant Certificate or, in the case of Warrants held in uncertificated form, such form of notification as complies with Condition 2.4;

“Subscription Period” means the period commencing on (and including) the date following the day upon which Warrants are first issued under the Warrant Instrument and expiring on (and including) the fifth anniversary of the date of issue (or, if that is not a Business Day, the preceding Business Day);

“Subscription Price” means the amount payable in respect of an Ordinary Share for which a Warrantholder is entitled upon exercise of a Warrant to require the subscription, such amount being 98p or such other amount as may from time to time be applicable in accordance with the provisions contained in the Conditions;

“Subscription Rights” means the subscription rights in respect of Ordinary Shares granted by the Company to Warrantholders pursuant to the Warrant Instrument, or such of those rights as are for the time being outstanding;

“Subsidiary” means any subsidiary within the meaning of section 736 of the Act;

“The Stock Exchange” means the London Stock Exchange plc or any other body to which its functions have been transferred (or, to the extent the Ordinary Shares are no longer listed, quoted or admitted to trading on the London Stock Exchange plc, such other body on which the Ordinary Shares are listed, quoted or admitted to trading);

- 7 -

“uncertificated” means a security which is for the time being recorded on the relevant Operator register as being held in CREST, and title to which, by virtue of the CREST Regulations, may be transferred by way of CREST;

“Warrant Certificates” means the certificates (in registered form) to be issued in respect of the Warrants substantially in the form shown in Part 2 of the Schedule, as from time to time modified in accordance with the provisions set out herein;

“Warrant Instrument” means the instrument dated prior to the Restructuring Effective Date and executed by the Company under which the Warrants are constituted;

“Warrant” means the rights created by the Warrant Instrument entitling the registered holder of each Warrant, by way of exercise thereof during the Subscription Period, to subscribe for Ordinary Shares on the terms set out in the Warrant Instrument and the Conditions; and

“Warrantholder” means, in relation to any Warrant, the person or persons who is or are, for the time being the registered holder or joint holders of such Warrant.

2. Subscription Rights

2.1 Each Warrant gives the holder thereof the right to subscribe for one Ordinary Share at the Subscription Price, payable in full on subscription, provided that the Subscription Price and the number and nominal value of the Ordinary Shares to which the Warrant relates shall be subject to adjustment as provided in Condition 4.

2.2 Each Warrant is exercisable in accordance with the procedures described in Conditions 2.3 and 2.4 on any day during the Subscription Period.

2.3 In order to exercise the Subscription Rights in whole or in part, in respect of Warrants held in certificated form, a Warrantholder must lodge the Warrant Certificate(s), (or such other evidence as the directors of the Company for the time being (the “Directors”) may reasonably require as proof of the title of the person exercising the Subscription Rights) together with the duly completed Subscription Notice at the Specified Office accompanied either by a remittance for the aggregate Subscription Price applicable on the Subscription Date or, in the absolute discretion of the Board, an undertaking to pay such sum by a date specified by the Board in its absolute discretion.

2.4 In respect of Warrants held in uncertificated form, the Subscription Rights shall be exercised (and treated by the Company as exercised) if the Operator receives:

2.4.1 a properly authenticated dematerialised instruction in the form from time to time prescribed by the Directors and that is addressed to the Company, is attributable to the system-member who is the holder of the Warrants concerned and that specifies (in accordance with the form prescribed by the Directors as aforesaid) the number of Warrants in respect of which the Subscription Rights are to be exercised; and

- 8 -

2.4.2 payment in settlement of the aggregate Subscription Price for the Ordinary Shares, such payment to be made through CREST in accordance with its rules, or by any other means permitted by the Directors, provided always that:

(A) subject always to the facilities and requirements of the relevant system concerned, the Directors may in their discretion permit the holder of any Warrants in uncertificated form to exercise his right to subscribe for Ordinary Shares by such other means as the Directors may approve;

(B) the Directors may in their discretion require, in addition to receipt of a properly authenticated dematerialised instruction as referred to above, the holder of any Warrants in uncertificated form to complete and deliver to the Registrar on the relevant Subscription Date, a notice in such form as may from time to time be prescribed by the Directors and notified to Warrantholders in accordance with Condition 10;

(C) for the avoidance of doubt, the form of the properly authenticated dematerialised instruction as referred to above may be such as to divest the holder of the Warrants concerned of the power to transfer such Warrants to another person; and

(D) all notices, instructions and any other provisions required to be complied with pursuant to this Condition 2.4 shall be subject always to the facilities and requirements of CREST, the CREST Regulations and the Operator.

2.5 Exercising Warrantholders must also comply with any applicable legal requirements.

2.6 Once received by the Company, a Subscription Notice may not be withdrawn save with the consent of the Directors. A Subscription Notice shall be invalid and of no effect if in respect of the Warrantholder exercising his Subscription Rights the Company is advised that the allotment or issue of Ordinary Shares would or might infringe the laws of any jurisdiction outside the United Kingdom or would or might require compliance with any governmental or other consent or any registration, filing or other formality, which the Company is unable to comply with or regards as unduly onerous to comply with. In such circumstances, the Company will instead allot and issue the Ordinary Shares to which such Warrantholder would otherwise be entitled as soon as possible after the Subscription Date at the best price which can reasonably be obtained in the market at the time of issue, and account for the proceeds of such issue, after the deduction of the Subscription Price and all expenses and commission, including any value added tax payable thereon, to the Warrantholder as follows:

2.6.1 in the case of a Warrant held in uncertificated form, to the Warrantholder’s cash memorandum account with the Operator in accordance with the rules of the Operator; and

- 9 -

2.6.2 in the case of a Warrant held in certificated form, by cheque despatched by post to the Warrantholder (in accordance with the instructions contained in the Subscription Notice but at the risk of the exercising Warrantholder),

provided in all cases that entitlements of under £3.00 shall be retained for the benefit of the Company and that no proceeds shall be paid to the Warrantholder until all money laundering and other checks which are required to be performed pursuant to applicable law and regulation have been completed. In the absence of bad faith or wilful default, neither the Company, the Directors nor the nominee shall have any liability for any loss or damage arising as a result of the timing or terms of such sale.

3. Issue, Allotment and Listing

3.1 In the case of the exercise of Warrants in certificated form, Ordinary Shares arising on exercise of any such Warrants shall be allotted not later than 14 Business Days after and with effect from the relevant Subscription Date. Certificates in respect of Ordinary Shares issued pursuant to the exercise of Warrants will be issued free of charge and despatched by post, at the risk of the person(s) entitled thereto, not later than 28 Business Days after the Subscription Date to the person in whose name, and at the address in respect of which, the Warrants to which the certificate relates are registered on the relevant Subscription Date (or, if more than one, to the first named) or (subject as provided by law and to the payment by the Warrantholder of stamp duty, stamp duty reserve tax or any like tax as may be applicable) to such other person(s) (being not more than four in number) as may be named in the Form of Nomination on the reverse of the Warrant Certificate or as may be available from the Registrar (or, if more than one, to the first named). In the event of exercise of only some of the Warrants represented by a Warrant Certificate, the Registrar shall in due course issue free of charge and at the risk of the person(s) entitled thereto a new Warrant Certificate for the balance of the Warrants remaining exercisable.

3.2 In the case of Warrants in uncertificated form, Ordinary Shares arising on exercise of any such Warrants shall be allotted with effect from the relevant Subscription Date and issued in uncertificated form and credited by the Operator (in accordance with the instructions of the Company and in compliance with the CREST Regulations) within 14 Business Days after the Subscription Date to the CREST stock accounts of the person or persons designated in the relevant Subscription Notice.

3.3 No fractions of an Ordinary Share will be issued (including, for the avoidance of doubt, by virtue of a Retroactive Adjustment (as defined in Condition 4.6)) on the exercise of any Warrant and no refund will be made to a Warrantholder exercising his Subscription Rights in respect of that part of the relevant subscription moneys which represents such a fraction (if any), provided that if more than one Warrant is exercised at the same time by the same holder then, for the purposes of determining the number of Ordinary Shares issuable upon the exercise of such Warrants and whether (and, if so, what) fraction of an Ordinary Share arises, the number of Ordinary Shares arising on the exercise of each Warrant shall first be aggregated.

- 10 -

3.4 Ordinary Shares issued pursuant to the exercise of Warrants will not rank for any dividends or other distributions declared, made or payable by reference to a record date prior to the relevant Subscription Date but, subject thereto, will rank in full for all dividends and other distributions declared, made or paid by reference to a record date on or after the Subscription Date and otherwise pari passu in all respects with the Ordinary Shares in issue at that date.

3.5 Application will be made to The Stock Exchange for the Ordinary Shares to be issued pursuant to the exercise of a Warrant to be admitted to the Official List and the Company undertakes to use all reasonable endeavours to obtain the admission thereof as soon as is reasonably practicable after the relevant Subscription Date.

3.6 Within 7 days following the expiry of the Subscription Period or, if earlier, the 30-day period (as defined in Condition 4.12) the Company shall appoint a trustee who, provided that in his opinion the net proceeds of sale after deduction of all costs and expenses incurred by him, including any value added tax payable thereon, will exceed the costs of subscription, shall within the period of 14 days following the expiry of the Subscription Period or, if earlier, the 30-day period either (i) exercise all the Subscription Rights which shall not have been exercised on the terms on which the same could have been exercised on the last day of the Subscription Period and sell in the market the Ordinary Shares acquired on such subscription or (ii) (if it appears to the trustee that doing so is likely to realise greater net proceeds for Warrantholders) accept any offer available to Warrantholders for the purchase of the Warrants. The trustee shall distribute pro rata the proceeds less the Subscription Price and such other costs and expenses to the persons entitled thereto as follows:

3.6.1 in the case of a Warrant held in uncertificated form, to the relevant Warrantholder’s cash memorandum account with the Operator in accordance with the rules of the Operator; and

3.6.2 in the case of a Warrant held in certificated form, by cheque despatched by post to the relevant Warrantholder (to the address of the relevant Warrantholder recorded in the Register at the risk of the relevant Warrantholder),

provided in all cases that entitlements of under £3.00 shall be retained for the benefit of the Company. If the trustee shall not so exercise the Subscription Rights as aforesaid (and so that his decision in respect thereof shall be final and binding on all holders of outstanding Warrants), the outstanding Warrants shall lapse.

3.7 The trustee referred to in Condition 3.6 above shall have no liability of any nature whatsoever where he has acted honestly and reasonably and shall have no responsibility for the safe custody of, or to earn any interest on, any unpaid or unclaimed money.

- 11 -

4. Adjustment of Subscription Price

4.1 The Subscription Price shall from time to time be adjusted in accordance with the provisions of this Condition and so that if the event giving rise to such adjustment shall be such as would be capable of falling within more than one of the paragraphs 4.1.1 to 4.1.9 of this Condition 4.1 it shall fall within the first of the applicable paragraphs to the exclusion of the remaining paragraphs:

4.1.1 Consolidation or Subdivision: If and whenever the nominal value of the Shares is altered as a result of consolidation or subdivision of the share capital of the Company, the Subscription Price shall be adjusted by multiplying the Subscription Price in force immediately prior to such alteration by the following fraction:

 A 

B

where:

A is the nominal amount of one Share immediately after such alteration; and

B is the nominal amount of one Share immediately before such alteration.

Such adjustment shall become effective on the date the alteration takes effect.

4.1.2 Capitalisation of Profits or Reserves: If and whenever the Company issues any Shares credited as fully paid to the shareholders by way of capitalisation of profits or reserves (including an issue by way of a Scrip Dividend (as defined below) other than where the Market Value (as defined below) of the Shares issued in respect of each existing Share does not exceed the amount of the cash dividend (or the relevant part thereof where scrip is offered in place of part of the cash dividend)) in respect of each existing Share, the Subscription Price shall be adjusted:

(a) in the case of an issue of Shares other than by way of a Scrip Dividend by multiplying the Subscription Price in force immediately prior to such issue by the following fraction:

 A 

B

   where:

A is the aggregate nominal amount of the issued Shares immediately before such issue; and

B is the aggregate nominal amount of the issued Shares immediately after such issue;

- 12 -

(b) in the case of an issue by way of a Scrip Dividend, by multiplying the Subscription Price in force immediately prior to such issue by the following fraction:

 A + B 

A + C

   where:

A is the aggregate nominal amount of the Shares in issue immediately before such issue;

B is the aggregate nominal amount of Shares issued by way of such Scrip Dividend multiplied by a fraction of which the numerator is the amount of the cash dividend per Share or the relevant part thereof as referred to above and the denominator is the amount per Share in respect of such cash dividend or the relevant part thereof used for the purpose of determining the nominal amount of Shares to be issued by way of such Scrip Dividend; and

C is the aggregate nominal amount of Shares issued by way of such Scrip Dividend.

   For the purposes of this paragraph 4.1.2:

(a) “Scrip Dividend” means an issue of Shares paid up out of profits or reserves (including any share premium account or capital redemption reserve) and issued instead of the whole or any part of a cash dividend which the shareholders would or could otherwise have received and

(b) “Market Value” means the price or value of the Shares stated in, or calculated in accordance with the provisions and at the time of, the circular or other document relating to the relevant Scrip Dividend issued by the Company to its shareholders and used for the purpose of determining the nominal amount of Shares to be issued by way of such Scrip Dividend.

   Such adjustment shall become effective on the date of issue of such Shares.

4.1.3 Capital Distribution: If and whenever the Company pays or makes any Capital Distribution (as defined below) to the Shareholders (except where the Subscription Price falls to be adjusted under paragraph 4.1.2 above), the Subscription Price shall be adjusted by multiplying the Subscription Price in force immediately prior to such Capital Distribution by the following fraction:

A – B

A

- 13 -

where:

A is the Current Market Price (as defined below) of one Ordinary Share on the last Dealing Day preceding the date on which the Capital Distribution is publicly announced; and

B is the Fair Market Value (as defined below) on the date of such announcement, as determined in good faith by the Expert, of the portion of the Capital Distribution attributable to one Ordinary Share.

Such adjustment shall become effective on the record date for the Capital Distribution to which it relates.

4.1.4 Rights Issues of Shares or Options over Shares: If and whenever the Company issues Shares to Shareholders as a class by way of rights, or issues or grants to shareholders, by way of rights, options, warrants or other rights to subscribe for or purchase any Shares, in each case at a price per Share which is less than 95 per cent. of the Current Market Price per Ordinary Share on the last Dealing Day preceding the date of the announcement of the terms of the issue or grant of such Shares, options, warrants or other rights, the Subscription Price shall be adjusted by multiplying the Subscription Price in force immediately prior to such issue or grant by the following fraction:

A + B

A + C

where:

A is the number of Shares in issue immediately before such announcement;

B is the number of Shares which the aggregate amount (if any) payable for the Shares issued by way of rights or for the options or warrants or other rights issued by way of rights and for the total number of Shares comprised therein would purchase at such Current Market Price per Ordinary Share; and

C is the aggregate number of Shares issued or, as the case may be, comprised in the issue or grant.

Such adjustment shall become effective on the first date on which the Ordinary Shares are traded ex-rights, ex-options or ex-warrants on the Relevant Stock Exchange.

4.1.5 Rights Issues of other Securities: If and whenever the Company issues any securities (other than Shares or options, warrants or other rights to subscribe for or purchase Shares) to Shareholders as a class by way of rights or grants to Shareholders as a class by way of rights any options, warrants or other rights to subscribe for or purchase any securities of the Company (other than Shares or options, warrants or other rights to subscribe for or purchase any

- 14 -

Shares), the Subscription Price shall be adjusted by multiplying the Subscription Price in force immediately prior to such issue or grant by the following fraction:

A – B

A

where:

A is the Current Market Price of one Ordinary Share on the last Dealing Day preceding the date on which the terms of such issue or grant are publicly announced; and

B is the Fair Market Value on the date of such announcement, as determined in good faith by the Expert, of the portion of the rights attributable to one Share.

Such adjustment shall become effective on the first date on which the Ordinary Shares are traded ex-rights, ex-options or ex-warrants on the Relevant Stock Exchange.

4.1.6 Issues at less than Current Market Price: If and whenever the Company issues wholly for cash any Shares (other than Ordinary Shares issued on the exercise of the conversion rights attached to the Convertible Shares, on the exercise of Warrants or on the exercise of any rights of conversion into, or exchange or subscription for or purchase of, Ordinary Shares) or grants wholly for cash any options, warrants or other rights to subscribe for or purchase Shares in each case at a price per Ordinary Share in respect of which the aggregate consideration receivable (whether at the time of grant or upon exercise of the rights to subscribe for or purchase such Share) is less than 95 per cent. of the Current Market Price on the last Dealing Day preceding the date of announcement of the terms of such issue or grant, the Subscription Price shall be adjusted by multiplying the Subscription Price in force immediately prior to such issue by the following fraction:

A + B

A + C

where:

A is the number of Shares in issue immediately before the issue of such additional Shares or grant of such options, warrants or other rights;

B is the number of Shares which the aggregate consideration receivable for the issue of such additional Shares or, as the case may be, for the Shares to be issued or otherwise made available upon the exercise of any such options, warrants or other rights would purchase at such Current Market Price per Ordinary Share; and

- 15 -

C is the maximum number of Shares to be issued pursuant to such issue of such additional Shares or upon the exercise of such options, warrants or other rights.

Such adjustment shall become effective on the date of issue of such additional Shares or, as the case may be, the grant of such options, warrants or other rights.

4.1.7 Other Issues at less than Current Market Price: If and whenever the Company or any of its Subsidiaries or (at the direction or request of or pursuant to any arrangements with the Company or any of its Subsidiaries) any other company, person or entity issues wholly for cash any securities (other than the New Bonds or Convertible Shares) which by their terms of issue carry rights of conversion into, or exchange or subscription for, or purchase of, Shares (or shall grant any such rights in respect of existing securities so issued) or carry rights which may entitle such securities to be redesignated as Shares (other than the Convertible Shares), and the consideration per Share receivable upon conversion, exchange, subscription or redesignation is less than 95 per cent. of the Current Market Price per Ordinary Share on the last Dealing Day preceding the date of announcement of the terms of issue of such securities or the terms of such grant, the Subscription Price shall be adjusted by multiplying the Subscription Price in force immediately prior to such issue by the following fraction:

A + B

A + C

where:

A is the number of Shares in issue immediately before such issue;

B is the number of Shares which the aggregate consideration (if any) receivable for the Shares to be issued upon conversion or exchange or upon exercise of the right of subscription or purchase attached to such securities or, as the case may be, for the Shares to be issued or to arise from any such redesignation would purchase at such Current Market Price per Ordinary Share; and

C is the maximum number of Shares to be issued upon conversion or exchange of such securities or upon the exercise of such rights of subscription or purchase attached thereto at the initial conversion, exchange, subscription or purchase price or rate or, as the case may be, the maximum number of Shares to be issued or to arise from any such redesignation.

Such adjustment shall become effective on the date of issue of such securities.

- 16 -

4.1.8 Modification of rights: If and whenever there shall be any modification of the rights of conversion, exchange, subscription or purchase attaching to any such securities as are mentioned in paragraph 4.1.7 above (other than in accordance with the terms (including terms as to adjustment) applicable to such securities) so that following such modification the consideration per Share receivable upon conversion, exchange, subscription or purchase is less than 95 per cent. of the Current Market Price per Ordinary Share on the last Dealing Day preceding the date of announcement of the proposals for such modification, the Subscription Price shall be adjusted by multiplying the Subscription Price in force immediately prior to such modification by the following fraction:

A + B

A + C

where:

A is the number of Shares in issue immediately before such modification;

B is the number of Shares which the aggregate consideration (if any) receivable by the Company for the Shares to be issued upon conversion or exchange or upon exercise of the right of subscription or purchase attached to such securities, in each case as so modified, would purchase at such Current Market Price per Ordinary Share or, if lower, the existing conversion, exchange, subscription or purchase price of such securities; and

C is the maximum number of Shares to be issued upon conversion or exchange of such securities or upon the exercise of such rights of subscription or purchase attached thereto at the modified conversion, exchange, subscription or purchase price or rate but giving credit in such manner as the Expert considers appropriate for any previous adjustment under this paragraph or paragraph 4.1.7 above.

Such adjustment shall become effective on the date of modification of the rights of conversion, exchange or subscription attaching to such securities.

4.1.9 Other Offers to Shareholders: If and whenever the Company or any of its Subsidiaries or (at the direction or request of or pursuant to any arrangements with the Company or any of its Subsidiaries) any other company, person or entity offers any securities in connection with which Shareholders as a class are entitled in their capacity as such to participate in arrangements whereby such securities may be acquired by them (except where the Subscription Price falls to be adjusted under paragraph 4.1.4 above (or would fall to be so adjusted if the relevant issue or grant was at a price less than 95 per cent. of the Current Market Price per Ordinary Share on the relevant Dealing Day) or under paragraph 4.1.5 above), the Subscription Price shall be adjusted by multiplying the Subscription Price in force immediately prior to such issue by the following fraction:

A – B

A

- 17 -

where:

A is the Current Market Price of one Ordinary Share on the last Dealing Day preceding the date on which the terms of such offer are publicly announced; and

B is the Fair Market Value on the date of such announcement, as determined in good faith by the Expert, of the portion of the relevant offer attributable to one Ordinary Share.

Such adjustment shall become effective on the first date on which the Ordinary Shares are traded ex-rights on the Relevant Stock Exchange.

4.1.10 Other events: Should the Board of Directors (in its absolute discretion) decide that an adjustment to the Subscription Price ought reasonably and properly be made because of a particular event (a “Relevant Event”) and that either:

(a) the Conditions (other than this paragraph 4.1.10) do not provide for an adjustment to the Subscription Price on the occurrence of the Relevant Event; or

(b) the Conditions (other than this paragraph 4.1.10) do provide for such adjustment to the Subscription Price on the occurrence of the Relevant Event but the Board of Directors believe that such adjustment does not produce a fair and commercial result,

then the Expert will be asked by the Board of Directors to determine what adjustments (if any) to the Subscription Price are fair and reasonable to take account of the Relevant Event and bearing in mind the adjustments set out in paragraphs 4.1.1 to 4.1.9 above in relation to the circumstances contemplated thereby.

4.2 For the purpose of any calculation of the consideration receivable pursuant to paragraphs 4.1.6, 4.1.7 and 4.1.8 of Condition 4.1 above, the following provisions shall apply:

4.2.1 the aggregate consideration receivable for Shares issued for cash shall be the amount of such cash provided that in no case shall any deduction be made for any commission or any expenses paid or incurred by the Company for any underwriting of the issue or otherwise in connection therewith;

4.2.2 (1) the aggregate consideration receivable for the Shares to be issued upon the conversion or exchange of any securities shall be deemed to be the consideration received or receivable by the Company for any such securities;

- 18 -

and (2) the aggregate consideration receivable for the Shares to be issued upon the exercise of rights of subscription attached to any securities shall be deemed to be that part (which may be the whole) of the consideration received or receivable by the Company for such securities which is attributed by the Company to such rights of subscription or, if no part of such consideration is so attributed, the Fair Market Value of such rights of subscription as at the date of the announcement of the terms of issue of such securities (as determined in good faith by the Expert), plus in the case of each of (1) and (2) above, the additional minimum consideration (if any) to be received by the Company upon the conversion or exchange of such securities, or upon the exercise of such rights of subscription attached thereto (the consideration in all such cases to be determined subject to the proviso in paragraph 4.2.1); and (3) the consideration per Share receivable by the Company upon the conversion or exchange of, or upon the exercise of such rights of subscription attached to, such securities shall be the aggregate consideration referred to in (1) or (2) above (as the case may be) converted into sterling if such consideration is expressed in a currency other than sterling at such rate of exchange as may be determined in good faith by the Expert to be the spot rate ruling at the close of business on the date of announcement of the terms of issue of such securities, divided by the number of Shares to be issued upon such conversion or exchange or exercise at the initial conversion, exchange or subscription price or rate.

4.3 For the purposes of this Condition 4:

4.3.1 “Capital Distribution” means any dividend, distribution or other payment made by the Company, whether in cash, securities of the Company or property or assets of the Company but only if and to the extent that the Board of Directors of the Company in its sole discretion characterises such dividend, distribution or payment (a “Distribution”) as a return or distribution of capital by the Company; provided that, if as a result of any change in current law or in the current interpretation of existing law, the Board of Directors is unable in its sole discretion to characterise a Distribution as a return or distribution of capital by the Company then such Distribution shall be a Capital Distribution if it would constitute a return or distribution of capital by the Company under both (i) United Kingdom taxation laws and (ii) United Kingdom generally accepted accounting principles (“UK GAAP”) (and assuming for the purposes of this clause (ii), that immediately prior to the beginning of the fiscal year in which such Distribution takes place, the Company does not have any Retained Earnings). For the purposes of this definition “Retained Earnings” means, at any time, the aggregate of the consolidated cumulative net profits, less the aggregate of consolidated net losses (after taxation but including any net realised gains (less any losses) made on the disposal of investments and extraordinary items) of the Company for all periods subsequent to the date of its formation and up to that time calculated in accordance with UK GAAP by reference to the audited

- 19 -

consolidated profit and loss accounts for such periods of the Company and its subsidiary undertakings required to be consolidated therein in accordance with UK GAAP. For the purposes of this definition any securities or property or other assets (other than cash) forming part of a Distribution shall be valued at the fair market value thereof as at the date of the Distribution, as determined in good faith by the Expert except that in the case of Shares forming part of a Distribution the fair market value thereof shall be the number of such Shares multiplied by the Current Market Price per Ordinary Share at the date of the Distribution;

4.3.2 “Current Market Price” means in respect of an Ordinary Share at a particular date, the average of the bid and offer quotations published by the Relevant Stock Exchange for one Ordinary Share for the five consecutive Dealing Days (in respect of which such quotations are published) ending on the Dealing Day (in respect of which such quotations are published) immediately preceding such date, provided that if at any time during the said five day period the Ordinary Shares shall have been quoted ex-dividend or ex-any other entitlement and during some other part of that period the Ordinary Shares shall have been quoted cum-dividend or cum-any other entitlement then:

(c) if the Ordinary Shares to be delivered do not rank for the dividend or entitlement in question, the quotations on the dates on which the Ordinary Shares shall have been quoted cum-dividend or cum-any other entitlement shall for the purpose of this definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend or other cash entitlement or, as the case may be, the value (as determined by the Expert) of any entitlement or dividend (where that is other than cash) per Share (excluding, in the case of a dividend in cash, any associated tax credit and less the tax (if any) falling to be deducted on payment thereof to a resident of the United Kingdom); or

(d) if the Ordinary Shares to be delivered do rank for the dividend or entitlement in question, the quotations on the dates on which the Ordinary Shares shall have been quoted ex-dividend or ex-any other entitlement shall for the purpose of this definition be deemed to be the amount thereof increased by such similar amount,

and provided further that if the Ordinary Shares on each of the said five Dealing Days have been quoted cum-dividend or cum-any other entitlement in respect of a dividend or entitlement which has been declared or announced but the Ordinary Shares to be delivered do not rank for that dividend or entitlement, the quotations on each of such dates shall for the purposes of this definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend or other cash entitlement, or as the case may be, the value (as determined by the Expert) of any entitlement or dividend (where that is other than cash) per Ordinary Share (excluding, in the case of a dividend in cash, any associated tax credit and less the tax (if any) falling to be deducted on payment thereof to a resident of the United Kingdom);

- 20 -

4.3.3 “Fair Market Value” means, with respect to any property on any date, the fair market value of that property as determined by the Expert, provided that:

(a) the fair market value of a Share on any date shall be the Current Market Price of an Ordinary Share on that date;

(b) the fair market value of a cash dividend paid or to be paid per Share shall be the amount of such cash dividend per Share determined as at the date of announcement of such dividend; and

(c) where options, warrants or other rights are publicly traded in a market of adequate liquidity (as determined by the Expert) the fair market value of such options, warrants or other rights shall equal the arithmetic mean of the daily closing prices of such options, warrants or other rights during the period of five trading days on the relevant market commencing on the first such trading day such options, warrants or other rights are publicly traded,

in each case converted into pounds sterling (if expressed in a currency other than pounds sterling) at such rate of exchange as may be determined in good faith by the Expert to be the spot rate ruling at the close of business on that date (or if no such rate is available on that date, the equivalent rate on the immediately preceding day on which such a rate is available);

4.3.4 references to the “issue” of Shares shall include the transfer and/or delivery of Shares by the Company or any of its Subsidiaries, whether newly issued and allotted or previously existing; and

4.3.5 shares held by the Company or any of its Subsidiaries shall not be considered as or treated as “in issue”.

4.4 Where more than one event which gives or may give rise to an adjustment to the Subscription Price occurs within such a short period of time that in the opinion of the Expert the foregoing provisions would need to be operated subject to some modification in order to give the intended result, such modification shall be made to the operation of the foregoing provisions as may be advised by the Expert to be in their opinion appropriate in order to give such intended result.

4.5 No adjustment will be made to the Subscription Price when Ordinary Shares or other securities (including rights or options) are issued, offered or granted to employees (including directors holding executive office) of the Company or any Subsidiary or any associated company of the Company or any Subsidiary pursuant to any employees’ share scheme (as defined in Section 743 of the Act or any modification or re-enactment thereof).

- 21 -

4.6 If the Subscription Date in relation to any Warrant shall be after the record date for any such issue, distribution, grant or offer (as the case may be) as is mentioned in paragraphs 4.1.1 to 4.1.5 and 4.1.9, or any such issue as is mentioned in paragraphs 4.1.6 and 4.1.7 of Condition 4 which is made to the shareholders or any of them, but before, in each case the relevant adjustment becomes effective under this Condition 4 (such adjustment, a “Retroactive Adjustment”), the Company will, conditional upon the Retroactive Adjustment becoming effective, issue and allot to the exercising Warrantholder in accordance with provisions of Condition 3 and the instructions contained in the Subscription Notice such additional number of Ordinary Shares as, together with the Ordinary Shares issued or to be issued on exercise of the relevant Warrant, is equal to the number of Ordinary Shares which would have been required to be issued on exercise of such Warrant if the adjustment to the Subscription Price had in fact been made immediately after the relevant record date. Such additional Ordinary Shares will be allotted as at, and within 1 month after, the relevant adjustment to the Subscription Price takes place or the date of issue of Ordinary Shares if the adjustment results from the issue of Ordinary Shares.

4.7 If any doubt shall arise as to the appropriate adjustment to the Subscription Price (including, without limitation, pursuant to paragraph 4.1.10 above) a certificate of the Expert shall be conclusive and binding on all concerned.

4.8 The Subscription Price may not be reduced so that, on exercise of Warrants, Ordinary Shares would fall to be issued at a discount to their par value.

4.9 No adjustment shall be made to the Subscription Price when the adjustment would be less than one per cent. of the Subscription Price then in effect and on any adjustment, the resultant Subscription Price shall be rounded down to the nearest one penny. Any adjustment not required to be made, and any amount by which the Subscription Price is rounded down, shall be carried forward and taken into account in any subsequent adjustment.

4.10 Whenever the Subscription Price is adjusted in accordance with this Condition 4 (other than by reason of a consolidation of the share capital of the Company as referred to in paragraph 4.1.1) the number of Ordinary Shares for which a Warrantholder is entitled to subscribe shall be increased at the same time as such adjustment takes effect. The number of additional Ordinary Shares to which a Warrantholder shall be entitled shall be the number of existing Ordinary Shares for which that Warrantholder is entitled to subscribe at the date that the adjustment to the Subscription Price takes effect multiplied by the following fraction:

X – Y

Y

Where:

X

is the Subscription Price immediately before the adjustment; and

Y

is the Subscription Price immediately after the adjustment.

- 22 -

For the avoidance of doubt, the adjustment contemplated by this Condition 4.10 shall be effected by adding to the number of Ordinary Shares for which a Warrantholder would be entitled to subscribe immediately prior to such adjustment, the number of Ordinary Shares resulting from the foregoing calculations.

4.10A Whenever the Subscription Price is adjusted in accordance with this Condition 4 by reason of a consolidation of the share capital of the Company as referred to in paragraph 4.1.1 the number of Ordinary Shares for which a Warrantholder is entitled to subscribe shall be decreased at the same time as such adjustment takes effect. The number of Ordinary Shares to which a Warrantholder shall be entitled shall be reduced by a number equal to the product of the number of existing Ordinary Shares for which that Warrantholder is entitled to subscribe at the date that the adjustment to the Subscription Price takes effect and before adjustment pursuant to this Condition 4.10A multiplied by the following fraction:

Y – X

Y

Where:

X

is the Subscription Price immediately before the adjustment; and

Y

is the Subscription Price immediately after the adjustment.

For the avoidance of doubt, the adjustment contemplated by this Condition 4.10A shall be effected by deducting from the number of Ordinary Shares for which a Warrantholder would be entitled to subscribe immediately prior to such adjustment, the number of Ordinary Shares resulting from the foregoing calculations.

4.11 If an effective resolution is passed on or before the last day of the Subscription Period for the voluntary winding up of the Company then:

4.11.1 if such winding up shall be for the purpose of a reconstruction or amalgamation pursuant to a scheme or arrangement to which an Extraordinary Resolution of Warrantholders shall have consented, the terms of such scheme or arrangement shall be binding on all the Warrantholders;

4.11.2 in any other case, the Company shall forthwith publish a notice stating that a resolution for the voluntary winding up of the Company has been passed and a Warrantholder shall be entitled at any time within three months after the date such notice is published to elect by notice in writing to the Specified Office to

- 23 -

be treated as if he had, immediately before the date of the passing of the winding up resolution, exercised his Warrants and that Warrantholder shall be entitled to receive out of the assets which would otherwise be available in the liquidation to the holders of Ordinary Shares such a sum (if any) as he would have received had he been the holder of and paid for the Ordinary Shares to which he would have become entitled by virtue of such exercise, after deducting from such sum an amount equal to the moneys which would have been payable by him in respect of such Ordinary Shares if he had exercised his Warrants but nothing contained in this paragraph shall have the effect of requiring a Warrantholder to make any actual payment to the Company; and

4.11.3 if in connection with such winding up the members of the Company approve in accordance with its Articles or section 110 of the Insolvency Act 1986 (i) a distribution of assets in specie to the members, (ii) the vesting in trustees of the whole or any part of the assets of the Company on trust for the benefit of the members or any of them, (iii) a transfer of the whole or part of the Company’s business or property as is referred to in section 110 of the Insolvency Act 1986, or (iv) any similar arrangement, then for the purposes of this paragraph 4.11.3, the sum that the Warrantholder would have received had he been the holder of the Ordinary Shares to which he would have become entitled by virtue of his Subscription Rights shall be such sum as is determined by the Directors on such basis of valuation and valued at such date as the Directors determine with confirmation from the Expert that each such determination is fair and reasonable.

Subject to the foregoing, the Subscription Rights shall lapse on liquidation of the Company.

4.12 If at any time an offer is made to all holders of Ordinary Shares (or all such holders other than the offeror and/or any company controlled by the offeror and/or persons acting in concert with the offeror) to acquire the whole or any part of the issued ordinary share capital of the Company and the Company becomes aware that as a result of such offer the right to cast a majority of the votes which may ordinarily be cast on a poll at a general meeting of the Company has or will become vested in the offeror and/or such companies or persons as aforesaid, the Company shall give notice to the Warrantholders of such vesting within 14 days of its becoming so aware and each Warrantholder shall be entitled, at any time within the period of 30 days immediately following the date of such notice (the “30-day period”), to exercise his Subscription Rights on the terms (subject to any adjustments pursuant to Condition 4.1) on which the same could have been exercised if they had been exercisable on the day on which the Company shall become aware as aforesaid. If the Subscription Period ends during the 30-day period it shall be extended to the last Business Day of the 30-day period. If the Warrantholder does not exercise his right within the 30-day period, the Warrants shall be treated in accordance with Condition 3.6.

- 24 -

5. Undertakings

5.1 The Company undertakes that, for so long as the Warrants remain exercisable, it will subject as provided in Condition 5.2:

5.1.1 at all times keep available for issue free from pre-emptive rights out of its authorised but unissued capital such number of Ordinary Shares as would enable all of the Warrants and all other rights of subscription for and conversion into such Ordinary Shares to be satisfied in full;

5.1.2 not, without the consent of an Extraordinary Resolution of the Warrantholders, issue or pay up any securities by way of capitalisation of profits or reserves (other than (i) by the issue of fully paid Ordinary Shares and/or Convertible Shares to holders, (ii) by the issue of Ordinary Shares and/or Convertible Shares paid up in full out of distributable profits or reserves or share premium account and issued in lieu of the whole or any part of a cash dividend or (iii) by the issue of fully paid equity share capital (as defined in Section 744 of the Act, “Equity Share Capital”) (other than Ordinary Shares) to the holders of Equity Share Capital of the same class and other persons entitled thereto);

5.1.3 not, without the consent of an Extraordinary Resolution of Warrantholders, modify the rights attaching to the Ordinary Shares or any ordinary share capital with respect to voting, dividends or liquidation or issue any other Equity Share Capital with rights which are more favourable than the rights attaching to the Ordinary Shares but so that nothing in this paragraph 5.1.3 shall prevent (i) the issue of any Equity Share Capital to employees (including directors holding executive office) of the Company or of any Subsidiary or any associated company of the Company or of any Subsidiary pursuant to any employees’ share scheme (which is now in existence or which may be approved by the Company in general meeting) or (ii) any consolidation or subdivision of the Ordinary Shares or the conversion of any Ordinary Shares into stock or vice versa or (iii) without prejudice to any rule of law or legislation (including regulations made under Section 207 of the Companies Act 1989 or any other provision of that or any other legislation), the conversion of Ordinary Shares into, or the issue of any Ordinary Shares in, uncertificated form (or the conversion of Ordinary Shares in uncertificated form to certificated form) or the amendment of the Articles to enable title to securities of the Company (including Ordinary Shares) to be evidenced and transferred without a written instrument or any other alteration to the Articles made in connection with the matters described in this paragraph or which are supplemental or incidental to any of the foregoing (including any amendments made to enable or facilitate procedures relating to such matters and amendments dealing with the rights and obligations of holders of securities (including Ordinary Shares) dealt with under such procedures) or (iv) any modification to the rights attached to the Ordinary Shares which is not, in the opinion of the Expert, materially prejudicial to the interests of the Warrantholder or (v) any issue of Equity Share Capital where such issue results in an adjustment to the Subscription Price (or would, but for the fact that the adjustment would be less than one per cent.);

- 25 -

5.1.4 procure that, without the consent of an Extraordinary Resolution of Warrantholders, no securities (whether issued by the Company or any Subsidiary of the Company or otherwise procured by the Company or any Subsidiary of the Company to be issued) issued without rights to convert into or exchange or subscribe for Ordinary Shares shall subsequently be granted such rights exercisable at a price per Ordinary Share which is less than 95 per cent. of the Current Market Price per Ordinary Share on the last Dealing Day preceding the date of the announcement of the proposed inclusion of such rights unless the same gives rise (or would, but for the fact that the adjustment would be less than one per cent. of the Subscription Price then in effect, give rise) to an adjustment to the Subscription Price;

5.1.5 procure that at no time shall there be in issue Ordinary Shares of different nominal values;

5.1.6 not take any action which would result in any adjustment of the Subscription Price if, after giving effect thereto, the Subscription Price would, but for the proviso that the Subscription Price shall not be reduced below the par value of the Ordinary Shares, be decreased to such an extent that Ordinary Shares to be issued on exercise of Warrants would fall to be issued below their par value or otherwise could not, under any applicable law then in effect, be legally issued as fully paid; and

5.1.7 not, without the consent of an Extraordinary Resolution of the Warrantholders, reduce its issued share capital, share premium account or capital redemption reserve or any uncalled liability in respect thereof, except (a) pursuant to the terms of issue of the relevant share capital or (b) by means of a purchase or redemption of share capital of the Company to the extent permitted by applicable law or (c) as permitted by Section 130(2) of the Act or (d) a reduction of the share premium account which requires the confirmation of the Court and which does not involve the return, either directly or indirectly, of an amount standing to the credit of the share premium account of the Company and in respect of which the Company shall have tendered to the Court such undertaking as it may require prohibiting, so long as any of the Warrants remains outstanding, the distribution (except by way of capitalisation issue) of any reserve which may arise in the books of the Company as a result of such reduction or (e) where the reduction does not involve any distribution of assets and is effected by way of cancellation for the purposes of a scheme of arrangement pursuant to Section 425 of the Act or (f) by way of transfer of reserves as permitted under applicable laws or (g) solely in relation to a change in the currency in which the nominal amount of the Ordinary Shares is expressed or (h) where the reduction is permitted by applicable law and the Expert has determined that the interests of Warrantholders would not be prejudiced by such reduction or (i) where the

- 26 -

reduction results in (or would, but for the fact that the adjustment would be less than one per cent. of the Subscription Price then in effect, result in) an adjustment to the Subscription Price.

5.2 Nothing in this Condition 5 shall prevent, and no adjustment to the Subscription Price shall be made under any provisions of any of the Conditions as a result of:

5.2.1 any actions taken by the Company to effect the capital reduction described in the Scheme Document;

5.2.2 any issue of Ordinary Shares or New Bonds pursuant to the Restructuring; or

5.2.3 entering into the Contribution Agreement or any issue of Convertible Shares pursuant to the terms of the Contribution Agreement or any conversion of such Convertible Shares.

6. Meetings of Warrantholders

6.1 All or any of the rights for the time being attached to the Warrants may from time to time (whether or not the Company is being wound up) be altered or abrogated by the Company with the sanction of an Extraordinary Resolution of the Warrantholders or otherwise in accordance with the terms of the Warrant Instrument. All the provisions of the Articles for the time being of the Company as to General Meetings shall apply mutatis mutandis as though the Warrants were a class of shares forming part of the capital of the Company but so that:

6.1.1 the necessary quorum shall be the Warrantholders present (in person or by proxy) holding Warrants giving the right to subscribe for at least one third in nominal amount of the Ordinary Shares attributable to the outstanding Warrants;

6.1.2 every Warrantholder present in person or by proxy at any such meeting shall be entitled on a poll to one vote for every Ordinary Share for which he is entitled to subscribe;

6.1.3 any Warrantholder present in person or by proxy may demand or join in demanding a poll;

6.1.4 at any adjourned meeting those Warrantholders present in person or by proxy shall be a quorum (whatever the number of Warrants held or represented by them); and

6.1.5 the period of notice of any meeting of Warrantholders (other than an adjourned meeting) shall be at least 21 clear days.

6.2 A resolution in writing signed by or on behalf of the holders of not less than 75 per cent. of the Warrants who for the time being are entitled to receive notice of a meeting in accordance with the provisions herein contained shall for all purposes be as valid and effectual as an Extraordinary Resolution passed at a meeting of such Warrantholders duly convened and held in accordance with the provisions herein

- 27 -

contained. Such resolution in writing may be contained in one document or in several documents in like form each signed by or on behalf of one or more of the Warrantholders.

7. Determinations by the Expert

7.1 Any determination or adjustment made pursuant to the Conditions by the Expert shall be made by the Expert as an expert and not as an arbiter and any such determination or adjustment made by them shall be final and binding on the Company and each of the Warrantholders (save in the case of manifest error). For the purposes of the Conditions “Expert” means an independent investment bank of international repute in London selected by the Company.

8. Tax

8.1 The Company will pay any United Kingdom stamp, issue, registration or similar taxes (i) imposed on the Company in the United Kingdom in connection with the issue of Ordinary Shares on exercise of the Subscription Rights, except where the Ordinary Shares are issued to a person whose business is, or includes, issuing depositary receipts, or a nominee of or agent for such a person, or a person whose business is, or includes, the provision of clearance services for the purchase or sale of chargeable securities, or a nominee of or agent for such a person, or (ii) payable upon the Warrant Instrument being produced in evidence in any proceedings in connection with the enforcement of the Warrant Instrument, the Warrants or the Subscription Rights.

8.2 For the avoidance of doubt, the Company is not responsible for the payment of any taxes, duties and other governmental charges as may be payable in relation to the transfer of a Warrant.

9. Purchase by Company

9.1 The Company may at any time purchase Warrants at any price in the open market or by tender or private treaty. Warrants so purchased shall be cancelled.

10. Notices and Governing Law

10.1 Each notice or other communication under these Conditions shall be sent:

10.1.1 to any Warrantholder holding Warrants in certificated form in the manner and to the address provided for in Part 4 of the Schedule to the Warrant Instrument;

10.1.2 to any Warrantholder holding Warrants in uncertificated form by delivery of the relevant notice to the Operator for transmission to Warrantholders;

10.1.3 to the Registrar by letter to the Specified Office; and

10.1.4 to the Company by letter to its registered office from time to time.

- 28 -

10.2 Warrantholders are deemed to have notice of all the provisions of the Warrant Instrument and such provisions are binding on them. Copies of the Warrant Instrument will be available for inspection at the Specified Office.

10.3 The Warrants shall be governed by, and construed in accordance with, the Law of Scotland.

10.4 The Scottish Courts have exclusive jurisdiction to settle any dispute arising out of or in connection with the Warrants and the Company and each Warrantholder irrevocably submit to the exclusive jurisdiction of the Scottish Courts.

10.5 The Company and each Warrantholder irrevocably waive any objection to the Scottish Courts on grounds that they are an inconvenient or inappropriate forum to settle any such dispute.

SPECIFIED OFFICE

Registrar

Lloyds TSB Registrars

The Causeway

Worthing BN99 6DA

- 29 -

Part 2

FORM OF WARRANT CERTIFICATE

[On the face of Warrant Certificate]

Number of Warrants:

Warrant Certificate Number:

BRITISH ENERGY GROUP PLC

(Registered in Scotland (registered number SC270184)

WARRANTS TO SUBSCRIBE FOR ORDINARY SHARES

The Subscription Price per Ordinary Share (subject to adjustment): 98p

THIS IS TO CERTIFY THAT [            ]

is/are the registered holder(s) of [            ] warrants (“Warrants”) of British Energy Group plc (the “Company”) and accordingly is/are entitled in respect of the Warrants to subscribe during the Subscription Period for Ordinary Shares at the applicable Subscription Price (all as defined in the Conditions set out in the Schedule to the Warrant Instrument referred to below) subject to the Articles of Association of the Company.

The Warrants comprised herein have been issued subject to and with the benefit of an instrument dated [            ] 2005 (the “Warrant Instrument”, as from time to time amended or supplemented) and executed by the Company, which is enforceable severally by each Warrantholder (as defined in the Warrant Instrument) against the Company insofar this Warrant is concerned subject as provided in the Warrant Instrument. Such Warrant Instrument (together with any instruments supplemental thereto and copies of the Memorandum and Articles of Association of the Company) is and will be available for inspection by Warrantholders at the Specified Office throughout the Subscription Period (each as defined in the said Conditions). Warrantholders will be deemed to have notice of all the provisions contained in the said Warrant Instrument (and any instruments supplemental thereto) and may obtain copies thereof upon request to the Company or the Registrar.

- 30 -

This Warrant and the Ordinary Share(s) to be issued upon its exercise have not been registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and this Warrant may not be exercised by or on behalf of any U.S. person unless registered under the Securities Act or an exemption from such registration is available. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act.

No transfer of all or any of the Warrants comprised herein will be registered without production of this Warrant Certificate (as defined in the Conditions).

Correspondence regarding the Warrants comprised herein should be addressed to the Registrar, Lloyds TSB Registrars Scotland, P.O. Box 28448, Finance House, Orchard Brae, Edinburgh EH4 1WQ.

In Witness whereof the Company has caused this Warrant Certificate to be duly executed in its name and on its behalf by facsimile signature of a duly authorised officer.

[On the reverse of the Warrant Certificate will be printed the Subscription Notice]

- 31 -

Part 3

WARRANT SUBSCRIPTION NOTICE

in relation to warrants to subscribe for ordinary shares in

BRITISH ENERGY GROUP PLC

When completed this Subscription Notice should be submitted, together with the payment referred to below, to the Registrar, Lloyds TSB Registrars Scotland, P.O. Box 28448, Finance House, Orchard Brae, Edinburgh EH4 1WQ.

To:

British Energy Group plc (“the Company”)

I/We, the registered holder(s) of the Warrant(s) referred to in the Warrant Certificate printed overleaf hereby give notice of my/our wish to exercise all/[] of my/our Warrant(s) to require the Company to allot to me/us                             [Note(1)] the Ordinary Shares of the Company in accordance with the Conditions accompanying the Warrant Certificate.

I/We enclose my/our payment for £                     [Note(2)] in favour of [            ], being payment of the full Subscription Price for the total number of such Ordinary Shares.

EITHER:

[Delete Part A or Part B as appropriate]

PART A

I/We hereby direct you to allot the Ordinary Shares of the Company to be issued pursuant hereto to me/us and I/we agree to accept such Ordinary Shares subject to the Memorandum and Articles of Association of the Company. I/We hereby authorise and request the entry of my/our name(s) in the Register of shareholders in respect thereof.

I/We hereby authorise the despatch of (i) a certificate in respect of the Ordinary Shares of the Company to be allotted to me/us, and (ii) a Warrant Certificate in my/our name(s) for any balance of my/our Warrants remaining exercisable, by post at my/our risk to:

Name	[Note (3)]
Address

- 32 -

PART B

I/We hereby authorise and direct you to allot the Ordinary Shares of the Company to be issued pursuant hereto to the person(s) who is/are named in and who has/have signed the acceptance(s) in the form(s) of nomination enclosed herewith [Note (4)].

PART C

I/We hereby certify that neither the holder nor the beneficial owner of each of the Warrants specified overleaf nor any of the persons to whom Ordinary Shares are to be allotted is a U.S. person or a person located within the United States (as such terms are defined in Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”)).

If the above certificate cannot be given, it should be deleted and the exercising Warrantholder should produce with this Subscription Notice evidence satisfactory to the Company (including, if the Company so requests, an opinion of counsel and an investment letter) that the relevant person or persons is/are “accredited investor(s)” (as defined in Rule 501 under the Securities Act) and that an exemption from the Securities Act and any applicable US state blue sky or securities law is available in respect of the Ordinary Shares to be issued on such exercise. The exercising Warrantholder will be responsible for any costs incurred in so satisfying the Company.

The understanding in the certification set out above shall apply, mutatis mutandis, to Ordinary Shares acquired upon exercise of the Warrants to which this Subscription Notice relates.

Signature(s) of Warrantholder

In the case of joint holdings all Warrantholders must sign. In the case of a corporation this form must be under its Common Seal or under the hand of some officer or attorney of the corporation duly authorised in that behalf.

Dated this                     day of                     200[  ].

Note	(1)	Please insert here the number of Ordinary Shares in respect of which the Warrants are being exercised. If no number is inserted, all of the Warrants comprised in the Warrant Certificate printed overleaf will be treated as being exercised.
Note	(2)	Please complete. The amount payable is the Subscription Price applicable on the Subscription Date multiplied by the amount of Warrants being exercised. If in doubt as to the applicable Subscription Price per Ordinary Share or the current number of Warrants comprised in any Warrant Certificate, please enquire of the Registrar. Payment must be made in sterling for same day value in favour of the Company.

- 33 -

Note	(3)	The address specified should be outside the United States of America, its territories and possessions, any State of the United States and the District of Columbia. If this space is left blank the Share Certificate, Warrant Certificate (if any) and cheque (if any) will be despatched by post at the risk of the person(s) entitled thereto to the registered address outside the United States of America, its territories and possessions, any State of the United States and the District of Columbia of the (first-named) holder.
Note	(4)	If it is desired to nominate some other person(s) as the allottee(s) of the Ordinary Shares, application should be made to the Registrar for the appropriate nomination form(s) which must be completed and lodged with this Subscription Notice. Any such allottment shall be subject as provided by law and to the payment by the Warrantholder of stamp duty, stamp duty reserve tax or any like tax as may be applicable. Unless the Company otherwise agrees, it shall not be required to allot any Ordinary Shares to, or to a nominee for, (a) Euroclear or any other person whose business includes the provision of clearance services for the purpose of the Finance Act 1986 of the United Kingdom or (b) a person, or agent for a person, whose business is or includes issuing depository receipts within the meaning of section 93 of the Finance Act 1986 of the United Kingdom.

- 34 -

Part 4

PROVISIONS AS TO TRANSFER,

TRANSMISSION AND OTHER MATTERS

1. An accurate register of the Warrants (the “Register”) will be kept by the Warrant Registrar and there shall be entered in the Register:

(a) the names and addresses of the holders for the time being of the Warrants;

(b) the amount of the Warrants held by every registered holder; and

(c) the date at which the name of every such registered holder is entered in respect of the Warrants standing in his name.

2. Any change of name or address on the part of any Warrantholder shall forthwith be notified to the Company which shall cause the Register to be altered accordingly. The Warrantholders or any of them and any person authorised by any such holder shall be at liberty at all reasonable times during office hours to inspect the Register and to take copies of or extracts from the same or any part thereof.

3. Any person (including for the avoidance of doubt the Company) shall be entitled to treat the registered holder of any Warrant as the absolute owner thereof for all purposes notwithstanding any notice of ownership or writing thereon or notice of previous loss or theft or of trust or other interest therein (except as ordered by a Court of competent jurisdiction or required by law) and shall not (except as aforesaid) be bound to recognise any equitable or other claim to or interest in such Warrant.

4. Every Warrantholder will be recognised by the Company as entitled to his Warrants free from any set-off or cross-claim on the part of the Company against the original or any intermediate holder of the Warrants.

5. Every transfer of Warrant shall be made by instrument of transfer in the usual common form or in any other form which may be approved by the Company.

6. The instrument of transfer of a Warrant shall be signed by or on behalf of the transferor but need not be signed by or on behalf of the transferee. The transferor shall be deemed to remain the holder of the Warrant until the name of the transferee is entered in the Register in respect thereof.

7. The Company may decline to recognise any instrument of transfer unless such instrument is deposited at the Specified Office or such other place as the Company may appoint accompanied by the Warrant Certificate to which it relates. The Company may waive production of any certificate upon evidence satisfactory to them of its loss or destruction.

8. No fee shall be charged for any registration of a transfer of a Warrant.

9. No fee shall be charged for the registration of any other document which in the opinion of the Company requires registration.

- 35 -

10. The transfer books and the Register may be closed for such period as the Company may from time to time direct, but so that the same may not be closed for a longer period in aggregate than thirty days in any one year (excluding weekends and public holidays).

11. Any transfer made while the Register is so closed shall, as between the Company and the person claiming under the transfer (but not otherwise), be considered as made immediately after the reopening of the Register.

12. The registration of a transfer shall be conclusive evidence of the approval by the Company of the transfer.

13. In the case of the death of a Warrantholder the survivors or survivor where the deceased was a joint holder, and the executors or administrators of the deceased where he was a sole or only surviving holder, shall be the only persons recognised by the Company as having any title to his Warrants, but nothing herein contained shall release the estate of a deceased holder (whether sole or joint) from any liability in respect of any Warrant solely or jointly held by him.

14. Subject to any other provision herein contained any person becoming entitled to a Warrant in consequence of the death or bankruptcy of a Warrantholder or otherwise than by transfer may be registered himself as holder of the Warrant.

15. Subject to any other provision herein contained, if the person so becoming entitled shall elect to be registered himself, he shall deliver or send to the Company a notice in writing signed by him stating that he so elects. All the limitations, restrictions and provisions herein contained relating to the right to transfer and the registration of transfers of Warrants shall be applicable to any such notice of transfer as aforesaid as if the death or bankruptcy of the Warrantholder had not occurred and the notice of transfer were a transfer executed by such Warrantholder.

16. A person becoming entitled to a Warrant in consequence of the death or bankruptcy of a Warrantholder shall be entitled to receive and may give good discharge for any monies payable in respect thereof, but shall not be entitled to receive notices of or to attend or vote at meetings of the Warrantholders or, save as aforesaid, to any of the rights or privileges of a Warrantholder until he shall have become a Warrantholder in respect of the Warrant.

17. Every Warrantholder shall register with the Company an address to which notices can be sent and if any Warrantholder shall fail so to do notice may be given to such Warrantholder by sending the same in any of the manners hereinafter mentioned to his last known place of business or residence or, if there be none, by posting the same for three days at the registered office for the time being of the Company. A Warrantholder whose registered address is not within the United Kingdom and who gives to the Company an address within the United Kingdom at which notices or other documents may be served on him, shall be entitled to have notices or other documents served on him at that address but, unless he does so, shall not be entitled to receive any notice or other document from the Company.

- 36 -

18. A notice given subject to the provisions of this paragraph may be given by personal delivery or prepaid letter by first class post. In proving service thereof it shall be sufficient to prove that the envelope or wrapper containing the notice was properly addressed and stamped and was deposited in a post box or at the post office.

19. A notice given pursuant to the provisions of paragraph 18 of this Part 4 of the Schedule:

19.1.1 delivered to the registered address shall be deemed to have been served at the time of delivery;

19.1.2 sent by prepaid letter by first class post to an address in the United Kingdom shall be deemed to have been served on the day following its posting.

20. All notices given pursuant to the provisions of paragraph 18 of this Part of the Schedule with respect to Warrants standing in the names of joint holders shall be given to whichever of such persons is named first in the Register and such notice so given shall be sufficient notice to all the holders of such Warrants.

21. Any person who by operation of law, transfer or other means whatsoever shall become entitled to any Warrant shall be bound by every notice in respect of such Warrant which prior to his name and address being entered on the Register shall be duly given to the person from whom he derives his title to such Warrant.

22. Any notice given pursuant to the provisions of paragraph 18 of this Part 4 of the Schedule or document delivered or sent by post or left at the registered address of any Warrantholder in pursuance of these presents shall, notwithstanding such Warrantholder be then deceased and whether or not the Company has notice of his death, be deemed to have been duly served in respect of any Warrants whether held solely or jointly with other persons by such Warrantholder until some other person be registered in his stead as the holder or joint holder thereof and such service shall for all purposes of these presents be deemed a sufficient service of such notice or document on his or her executors or administrators and all persons (if any) jointly interested with him in any such Warrant.

23. When a given number of days’ notice or notice extending over any other period is required to be given, the day of service shall be counted in such number of days or other period but the day upon which such notice will expire shall not be included in such number of days or other period. The signature to any notice to be given by the Company may be written or printed.

- 37 -

EX-4.22

Exhibit 4.22

DATED      January, 2005

THE SECRETARY OF STATE FOR TRADE AND INDUSTRY

NUCLEAR GENERATION DECOMMISSIONING FUND LIMITED

(to be renamed Nuclear Liabilities Fund Limited)

BRITISH ENERGY GENERATION (UK) LIMITED

BRITISH ENERGY GENERATION LIMITED

BRITISH ENERGY GROUP PLC

- AND -

BRITISH ENERGY HOLDINGS PLC

NUCLEAR LIABILITIES FUNDING AGREEMENT

CONTENTS

Clause		Page
1.	INTERPRETATION	3
2.	EXISTING FUNDS OF NLF	27
3.	NLF PAYMENT OBLIGATIONS	28
4.	SECRETARY OF STATE PAYMENT OBLIGATION	34
5.	DESIGNATED ACCOUNTS	38
6.	EXCLUDED LIABILITIES	39
7.	MINIMUM PERFORMANCE STANDARD	40
8.	OPERATIONAL CHANGES	43
9.	COMPENSATION FOR KEY OPERATIONAL CHANGES	50
10.	STRATEGY APPROVAL PROCESS	53
11.	ANNUAL LIABILITIES REPORT	58
12.	DISTRIBUTION OF NLF SURPLUS	64
13.	PAYMENTS BY NLF ON FINAL DISCHARGE OF QUALIFYING LIABILITIES	65
14.	ESCALATION	66
15.	INTEREST	66
16.	ADMINISTRATION OF NLF	67
17.	ADMINISTRATION COSTS	68
18.	INVESTMENT POLICY	69
19.	CAPACITY OF NDA	70
20.	REPRESENTATIONS AND WARRANTIES	70
21.	COVENANTS	71
22.	EVENTS OF DEFAULT	77
23.	EFFECT OF DEFAULT EVENT	79

24.	NLF DEFAULT EVENT	82
25.	DEDUCTION OR WITHHOLDING	82
26.	LIABILITY	83
27.	REMEDIES AND WAIVERS	83
28.	INVALIDITY	84
29.	NO PARTNERSHIP	84
30.	CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999	84
31.	FURTHER ASSURANCE	84
32.	ENTIRE AGREEMENT	84
33.	ASSIGNMENT	85
34.	CONDUCT OF PROCEEDINGS	89
35.	ACCESS TO INFORMATION	90
36.	NOTICES	91
37.	ANNOUNCEMENTS	93
38.	CONFIDENTIALITY	93
39.	COSTS AND EXPENSES	95
40.	COUNTERPARTS	95
41.	CHOICE OF GOVERNING LAW	95
42.	DISPUTE RESOLUTION	95
43.	JURISDICTION	97
44.	AGENT FOR SERVICE	98
45.	VARIATION	99

Schedule 1	Power Stations	100
Schedule 2	Decommissioning	102
Schedule 3	Discharge of Uncontracted Liabilities	104
Schedule 4	Excluded Liabilities	106
Schedule 5	Determination of Liabilities and Compensation	109
Schedule 6	Annual Liabilities Report	112
Schedule 7	NLF Approved Payment Criteria	1
Schedule 8	Funds Review Procedure	2
Schedule 9	Investment Policy	4
Schedule 10	Deeds of Adherence and Release	8
Schedule 11	Designated Accounts	16

NUCLEAR LIABILITIES FUNDING AGREEMENT

DATE: 14 January, 2005

PARTIES:

1. THE SECRETARY OF STATE FOR TRADE AND INDUSTRY of One Victoria Street, London SW1H 0ET (the “Secretary of State”);

2. NUCLEAR GENERATION DECOMMISSIONING FUND LIMITED of 16 Rothesay Place, Edinburgh EH3 7SQ (registered in Scotland No. SC164685) (to be renamed Nuclear Liabilities Fund Limited) (“NLF”);

3. BRITISH ENERGY GENERATION (UK) LIMITED of Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC117121) (“BEG(UK)”);

4. BRITISH ENERGY GENERATION LIMITED of Barnett Way, Barnwood, Gloucester, England GL4 7RS (registered in England No. 03076445) (“BEG”);

5. BRITISH ENERGY GROUP PLC of Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC270134) (“BE plc”); AND

6. BRITISH ENERGY HOLDINGS PLC of Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC270186) (“Holdings”).

BACKGROUND

(A) In 1996 the Secretary of State privatised certain parts of the nuclear generation industry in the United Kingdom through a sale of shares in British Energy Plc (“British Energy”).

(B) To facilitate the privatisation, a segregated fund was established for the purpose of providing arrangements for funding certain nuclear decommissioning liabilities of BEG and BEG(UK), and for this purpose the Nuclear Trust (as defined herein) and NLF were established.

(C) BEG is the owner and operator of those Power Stations described in Part 1 of Schedule 1 (Power Stations) and BEG(UK) is the owner and operator of those Power Stations described in Part 2 of Schedule 1 (Power Stations).

(D) The Trustees (as defined herein) are the registered holders of all the ordinary shares of £1 each in the capital of NLF. These shares are held for the purposes of the Nuclear Trust. The Secretary of State and the Secretary of State for Scotland jointly hold one special share in the capital of NLF and British Energy holds one special share in the capital of NLF.

(E) In September 2002, British Energy initiated discussions with the Secretary of State with a view to seeking immediate financial support and to enable a longer term restructuring of British Energy to take place. In November 2002, British Energy announced the principles of a restructuring of the Group with its significant financial creditors which, together with other proposals agreed between British Energy and the Secretary of State, were intended to lead to a solvent restructuring of British Energy.

(F) British Energy, certain other members of the British Energy group and its significant financial creditors entered into a creditors’ restructuring agreement dated as of 30 September 2003 (the “Creditor Restructuring Agreement”) under the terms of which a solvent restructuring of the British Energy group would be effected. The solvent restructuring of the British Energy group to be thereby effected involved, inter alia, the creation of a new ultimate parent company, BE plc and a new wholly-owned subsidiary of BE plc, Holdings. BE plc and Holdings are the holding companies of British Energy, BEG and BEG (UK).

(G) The proposals agreed between the Secretary of State and British Energy in connection with the restructuring of British Energy included a change to the manner in which the decommissioning liabilities of the Group are to be funded and a proposal for the funding of the uncontracted nuclear liabilities of the Group. The proposals provide, among other things, for the Group to make additional contributions to NLF to meet the Costs of Decommissioning and the Costs of Discharging Uncontracted Liabilities (each as defined herein) and for the Secretary of State to make good any shortfall in the funds of NLF to meet qualifying liabilities.

(H) It was agreed by British Energy, BEG, BEG(UK), NLF and the Trustees that new arrangements relating to the Nuclear Trust, NLF and the Nuclear Decommissioning Agreement be entered into to enable the proposals agreed between British Energy and the Secretary of State to be implemented.

(I) On 1 October 2003, British Energy, BEG, BEG (UK), certain other members of the British Energy group, NLF and the Secretary of State entered into an agreement (the “Government Restructuring Agreement”) under the terms of which they agreed to enter into the agreements that constitute the Liabilities Documents (as defined herein) including, amongst other agreements, this Agreement.

(J) Subject to the conditions set out in the Government Restructuring Agreement (which have been satisfied in full or waived in accordance with the terms thereof), the parties have agreed, inter alia, to terminate the Nuclear Decommissioning Agreement and to enter into this Agreement and the other Liabilities Documents.

2

THE PARTIES AGREE as follows:

1. INTERPRETATION

1.1. In this Agreement (including the recitals):

“Accepted Standards”	means practices and procedures both considered by and acceptable to the Licensing Authority, the Environment Agency and the Scottish Environment Protection Agency and each of the procedures and instructions referenced as “implementation documents” within the nuclear site licence compliance schedules in respect of each of the Licensed Sites;
“Accounts”	means, in respect of a Financial Period, the annual consolidated audited accounts of the Group;
“Actuary”	means the actuarial adviser to NLF from time to time;
“Administration Costs”	means NDA Administration Costs, NLF Administration Costs and Secretary of State Administration Costs;
“Advisers”	means each of the Actuary, the Investment Manager, the Auditor, the Financial Adviser and such other advisers as NLF may appoint from time to time;
“Affiliate”	has the meaning given in the terms and conditions of the Bonds;
“Annual Liabilities Report”	means the annual report to be produced and delivered by the Licensees in accordance with clause 11 (Annual Liabilities Report) in the form or substantially in the form set out in Schedule 6 (Annual Liabilities Report) or in such other form as may be agreed by NDA and the Licensees;
“Anticipatory Change”	means an Operational Change which is reasonably anticipated to be required to be implemented in order for the Licensee to continue Operating at a Power Station in compliance with Applicable Law and Accepted Standards or any condition of any Licence or other permission, authorisation or consent given by a Regulator in circumstances where a Regulator has not expressly required such change to be made, but shall exclude an Operational Change that results or will result in an economic benefit to the Licensee to the extent that a reasonable and prudent operator of the Power Station who did not have the benefit of the Liabilities Documents and who bore responsibility for, and the costs of, the Discharge of Qualifying Liabilities, would not have made such Operational Change if such economic benefit would not have been achieved;
“Anticipatory Key Operational Change Notice”	has the meaning given in clause 8.5(A);

3

“Applicable Law”	means all applicable laws, statutes, regulations, rules, codes, directives and orders, including common law duties and legally enforceable policies, practices and guidelines, conditions of any grant of approval, permission, consent, authority or licence by any court, statutory body or other governmental authority and judicial, arbitral, administrative and regulatory judgments, orders, decisions, directives and rulings;
“Approved Decommissioning Strategy”	means, in relation to a Power Station, the strategy from time to time for Decommissioning the Power Station as set out in the Decommissioning Plans approved by NDA from time to time in accordance with clause 10 (Strategy Approval Process);
“Approved Persons”	means, in relation to the Discharge of a Qualifying Liability:
	(A)	the Licensee responsible for Discharging the Qualifying Liability;
	(B)	any other person who:
		(i)	in the opinion of NDA, has all necessary regulatory approvals or consents and the necessary technological, civil engineering and other relevant expertise available to it to undertake the Discharge of any Qualifying Liability; and
		(ii)	has the prior written consent of NDA and the relevant Licensee (which the Licensee shall not unreasonably withhold or delay) to represent itself as an Approved Person in relation to the Discharge of such Qualifying Liability; or
	(C)	the Secretary of State or a Station Purchaser as defined in the Option Agreement, in respect of any Costs of Discharging Liabilities for which she or it becomes liable as a consequence of the Option Agreement or the exercise of any rights thereunder;

4

“Approved Uncontracted Liabilities Discharge Strategy”	means, in relation to a Power Station or Licensee, the strategy for the Discharge of Uncontracted Liabilities arising in relation to the Power Station or Operations at a Power Station or in relation to the Licensee, in each case as set out in the Uncontracted Liabilities Discharge Plans approved by NDA from time to time in accordance with clause 10 (Strategy Approval Process);
“Associate”	has the meaning given in section 435 of the Insolvency Act 1986, save that section 435(4) shall be read as if the words “or was formerly employed or with whom he is or was formerly engaged under a contract for services” were inserted at the end of section 435(4);
“Attributable Overhead”	means an internal cost, or the appropriate proportion of an internal cost, of a Licensee which is properly and directly attributable to:
	(A)	the Decommissioning of a Power Station carried out in accordance with the Approved Decommissioning Strategy; or
	(B)	to the Discharge of Uncontracted Liabilities carried out in accordance with the Approved Uncontracted Liabilities Discharge Strategy;
“Auditor”	means the auditor of NLF from time to time;
“Authority”	has the meaning given in the Utilities Act 2000;
“Balancing and Settlement Code”	means the latest version of the Balancing and Settlement Code maintained by the National Grid Company PLC under Condition 3 of the Standard Conditions of the Electricity Transmission Licence;
“BE Liabilities”	has the meaning given in paragraph 1 of Schedule 4 (Excluded Liabilities);
“Benefit”	has the meaning given in clause10.1(B)(i);
“BE Parties”	means each of the Licensees, BE plc and Holdings and any other company that is, from time to time, party to this Agreement and that in any case is also a member of the Group;

5

“BETTA”	means the proposals by the Gas and Electricity Markets Authority for a Great Britain-wide set of arrangements in respect of the electricity industry in its consultation paper entitled “The Development of British Electricity Trading and Transmission Arrangements (BETTA), published by Ofgem on 12 December 2001 (as further clarified and discussed in the Ofgem/DTI consultation paper published by Ofgem/DTI on 20 May 2002 entitled “The Development of British Electricity Trading and Transmission Arrangements (BETTA) - an Ofgem/DTI Consultation Paper, Report on Consultation and Next Steps”), or any updated, amended or replacement proposals which are designed in whole or in part to secure the wholesale trading of electricity on a consistent basis throughout Great Britain and the extension of the applicability of the Balancing and Settlement Code, to apply in Scotland in place of existing arrangements in Scotland;
“BETTA “Go Live””	means the date and time at which the wholesale trading of electricity under BETTA is first permitted;
“BNFL”	means British Nuclear Fuels plc (company number 1002607) whose registered office is at Risley, Warrington, Cheshire WA3 6AS or its successors or permitted assignees, including any person to whom it (or its successors or permitted assignees) may assign or transfer any of its rights or obligations under the BNFL Historic Contracts in accordance with the terms thereof;
“BNFL Ancillary Agreements”	has the meaning given in the Historic Liabilities Funding Agreement;
“BNFL Historic Contracts”	has the meaning given in the Historic Liabilities Funding Agreement;
“BNFL Historic Fuel Contracts”	has the meaning given in the Historic Liabilities Funding Agreement;
“Bonds”	means the £550,000,000 of 7 per cent. guaranteed bonds due 2005-2022 to be issued by Holdings pursuant to the terms of the Trust Deed;
“British Energy”	has the meaning given in Recital (A);
“British Energy Contributions”	means the payment or contribution by the Licensees or other members of the Group (as the case may be) to NLF of:

6

	(A)	the Decommissioning Payments;
	(B)	the PWR Fuel Payments;
	(C)	the NLF Bonds; and
	(D)	the NLF Payments,
	in each case in accordance with the terms of the Contribution Agreement;
“Business Day”	means a day (other than a Saturday or a Sunday) on which banks are open for business (other than solely for trading and settlement in euro) in London and Edinburgh;
“Capital Stock”	has the meaning given in the terms and conditions of the Bonds;
“Claim”	has the meaning given in clause 34.1;
“Closure Date”	means:
	(A)	in relation to a Power Station, the date on which the Power Station permanently ceases to generate electricity for delivery in bulk to the National Grid (or the Scottish System, in respect of the Scottish Stations) from (i) in the case of the Power Station known as Sizewell “B” (as described in paragraph 6 of Part 1 of Schedule 1 (Power Stations), its nuclear reactor, and (ii) in the case of each other Power Station, both of its nuclear reactors and references to “Closure” of a Power Station and to a Power Station being “Closed” and cognate expressions shall be construed accordingly; and
	(B)	in relation to a reactor, the date on which the reactor permanently ceases to generate electricity for delivery in bulk to the National Grid (or the Scottish System, in respect of the Scottish Stations);
“Connection and Use of System Code”	means the latest version of the Connection and Use of System Code maintained by the National Grid Company PLC under Condition C7 of the Standard Conditions of the Electricity Transmission Licence;

7

“Contribution Agreement”	means the agreement entered into on the same date as this Agreement between the Secretary of State, NLF, BEG(UK), BEG, BE plc and Holdings pursuant to which BEG and BEG(UK) agree to make the British Energy Contributions;
“Costs” or “Costs of Discharging Liabilities”	means each of Costs of Decommissioning and Costs of Discharging Uncontracted Liabilities and such other costs as are deemed in this Agreement to be Costs of Discharging Liabilities (including the costs referred to in the proviso to paragraph 1(A) of Schedule 4 (Excluded Liabilities) and paragraphs 1(D), (E), (F) and (H) of Schedule 4 (Excluded Liabilities));
“Costs of Decommissioning”	means, at a given time in relation to a Power Station, costs and expenses, including Attributable Overheads in relation to the Power Station, incurred or, as the context requires, to be incurred, to carry out and complete Decommissioning in relation to that Power Station in accordance with the Approved Decommissioning Strategy for the Power Stations, and including the amount (but taking account of any enacted or announced changes in rates) of any Value Added Tax referable to such Costs of Decommissioning to the extent that such Value Added Tax is reasonably expected to be not recoverable (whether by a Licensee or the representative member of its Value Added Tax group registration), and for the purposes of calculating or estimating any future cost, expense or Value Added Tax to be incurred, amounts shall (unless the provisions of this Agreement expressly require otherwise) be calculated in the money values applicable at the time of calculation and on an undiscounted basis;
“Costs of Discharging Uncontracted Liabilities”	means, at a given time, costs and expenses, including Attributable Overheads, incurred or, as the context requires, to be incurred to carry out and complete the Discharge of Uncontracted Liabilities in accordance with the Approved Uncontracted Liabilities Discharge Strategy, and including the amount (but taking account of any enacted or announced changes in rates) of any Value Added Tax referable to such Costs of Discharging Uncontracted Liabilities to the extent that such Value Added Tax is reasonably expected to be not recoverable (whether by a Licensee or the representative member of its Value Added Tax group registration), and for the purposes of calculating or estimating any future cost, expense or Value Added Tax to be incurred, amounts shall (unless the provisions of this Agreement expressly require otherwise) be calculated in the money values applicable at the time of calculation and on an undiscounted basis;

8

“Creditor Restructuring Agreement”	has the meaning given in Recital (F);
“CTA Documentation”	has the meaning given in the Trust Deed;
“CTA Global Bond”	Means the £150,000,000 7 per cent. guaranteed bonds to be represented by a global bond certificate and issued by Holdings;
“Decommissioning”	has the meaning given in Schedule 2 (Decommissioning);
“Decommissioning Only Environmental Works”	means Environmental Works:
	(i)	which are required as part of Decommissioning; and
	(ii)	which relate to an Environmental Matter which would not have been the subject of required Environmental Works, but for the fact that Closure has occurred and Decommissioning is being carried out.
“Decommissioning Payments”	has the meaning given in the Contribution Agreement;
“Decommissioning Plans”	means, in relation to a Power Station, such of the plans, reports and other documents produced by the Licensee of the Power Station or any other member of the Group setting out the basis of, methods for, and estimated costs of, Decommissioning the Power Station (as each such plan, report and other document may be amended, varied, renewed, updated or replaced from time to time) as NDA reasonably requires to enable it to carry out its obligations under this Agreement, including in connection with assessing applications for funding Costs of Discharging Liabilities and with approving the Decommissioning strategy (including the overall contracting strategy described in clause 10.1(D)(i) to be adopted in relation to a Power Station;
“Deed of Adherence”	means a deed of adherence in the form or substantially in the form set out in Part 1 of Schedule 10 (Deeds of Adherence and Release);
“Deed of Release”	means a deed of release in the form or substantially in the form set out in Part 3 of Schedule 10 (Deeds of Adherence and Release);

9

“Default Event”	has the meaning given in clause 22.1;
“Defaulting Party”	has the meaning given in clause 22.1;
“Designated Account”	has the meaning given in clause 5 (Designated Accounts);
“Discharge of Qualifying Liabilities”	means the discharge of the Costs of Discharging Liabilities;
“Discharge of Uncontracted Liabilities”	has the meaning given in paragraph 1 of Schedule 3 (Discharge of Uncontracted Liabilities);
“Dispute”	has the meaning given in clause 42.1;
“Disqualified Capital Stock”	has the meaning given in the terms and conditions of the Bonds;
“Disqualified Liabilities”	has the meaning given in paragraph 2 of Schedule 4 (Excluded Liabilities);
“Documents”	has the meaning given in clause 21.1(A)(i);
“Eggborough Plant”	has the meaning given in the terms and conditions of the Bonds;
“Eggborough Subsidiaries”	has the meaning given in the terms and conditions of the Bonds;
“Electricity Generation Licence”	means a licence to generate electricity issued pursuant to section 6(1)(a) of the Electricity Act 1989;
“Electricity Supply Licence”	means a licence to supply electricity issued pursuant to section 6(1)(d) of the Electricity Act 1989;

10

“Environment”	means
	(A)	land, including surface land, sub-surface strata, sea bed and river bed under water (as defined in paragraph (ii);
	(B)	water, including coastal and inland waters, surface waters, ground waters and water in drains and sewers;
	(C)	air, including air inside buildings and in other natural and man-made structures above or below ground; and
	(D)	any and all living organisms or systems supported by those media, including humans.
“Environmental Matters”	means
	(A)	pollution or contamination;
	(B)	the release, spillage, deposit, escape, discharge, leak or emission of, Hazardous Materials or Waste;
	(C)	exposure of any person to Hazardous Materials or Waste;
	(D)	all matters related to health and safety at work;
	(E)	the creation or existence of any noise, vibration, radiation, common law or statutory nuisance, or other adverse impact on the Environment; and
	(F)	any other matters relating to human health and safety or the condition, protection, maintenance, restoration or replacement of the Environment arising directly or indirectly out of the manufacturing, processing, treatment, keeping, handling, use, possession, supply, receipt, sale, purchase, transportation or presence of Hazardous Materials or Waste.
“Environmental Works”	means the carrying out of (i) inspection, investigation, sampling and monitoring works, and (ii) any works, including the installation, operation, repair or replacement of plant or equipment, in order to remove, remediate or contain any Environmental Matter or in order to prevent an Environmental Matter from arising;

11

“Estimated Asset Value”	means, at a given time in relation to an asset of NLF (including net current assets), the mid-market value of the asset or such other value as the Actuary considers appropriate in accordance with best actuarial practice;
“Estimated Liabilities”	means, at a given date, the aggregate of:
	(A)	the estimated Net Present Value of all outstanding Costs of Discharging Liabilities, as determined in accordance with Schedule 8 (Funds Review Procedure); and
	(B)	the aggregate of NLF’s liability in respect of any Tax relating to the period on or before such date which has accrued but which has not been paid;
“Estimated Tax on NLF Assets”	means, at a given time, the aggregate of any Tax liabilities that NLF would incur (taking account of any losses, reliefs or allowances available) if all assets owned by it were disposed of at that date for the Estimated Asset Values calculated in accordance with the provisions of Schedule 8 (Funds Review Procedure);
“Excluded Liabilities”	has the meaning given to it in clause 6.1;
“Expert”	means an expert appointed in accordance with clause 42 (Dispute Resolution);
“Euro”	means the lawful currency of the member states of the European Union that adopt the single currency in accordance with the treaty establishing the European Community, as amended by the Treaty on European Union;
“Financial Adviser”	means the financial adviser to NLF from time to time;
“Financial Indebtedness”	has the meaning given in the terms and conditions of the Bonds;
“Financial Periods”	means accounting periods for its consolidated annual audited accounts adopted from time to time by the Ultimate Parent Company in accordance with the Companies Act 1985;
“Fund Review”	has the meaning given in Schedule 8 (Funds Review Procedure);
“Funding Threshold”	has the meaning given in clause 12.1(A);

12

“Gas Shipper’s Licence”	means a licence to arrange for the transportation of gas issued pursuant to section 7A(2) of the Gas Act 1986;
“Government Restructuring Agreement”	has the meaning given in Recital (I);
“Grid Code”	means the latest version of the Grid Code maintained by the National Grid Company PLC under Condition 7 of the Standard Conditions of the Electricity Transmission Licence;
“Group”	means the Ultimate Parent Company and its Subsidiaries from time to time;
“Guarantee”	means the guarantee and indemnity entered into on the same date as this Agreement between the Guarantors, the Secretary of State and NLF pursuant to which the Guarantors guarantee the obligations of other members of the Group under the Liabilities Documents;
“Guarantor”	means any person who from time to time is a guarantor under the Guarantee;
“Hazardous Material”	means anything which alone or in combination with other things is capable of causing harm or damage to property or to man or to the environment or any other organism supported by the environment including, without limitation, any hazardous or toxic substances or pollutants;
“Historic Fuel”	has the meaning given in the Historic Liabilities Funding Agreement;
“Historic Liabilities”	has the meaning given in the Historic Liabilities Funding Agreement;
“Historic Liabilities Funding Agreement”	means the agreement entered into on the same date as this Agreement between the Secretary of State, BEG, BEG(UK), BE plc and Holdings pursuant to which the Secretary of State agrees to meet certain payment obligations of BEG(UK) and BEG under the BNFL Historic Contracts;
“HMG Approved Payment Criteria”	has the meaning given in clause 4.5;
“Holding Company”	means:
	(A)	any holding company within the meaning of section 736 of the Companies Act 1985; and

13

	(B)	any parent undertaking (as defined in section 258 of the Companies Act 1985);
“Increased Liabilities”	has the meaning given in clause10.1(B)(i);
“Incremental Historic Liabilities”	has the meaning given in the Historic Liabilities Funding Agreement;
“Independent Director”	means a director appointed as an independent director of NLF by the Independent Trustees (as defined in the Nuclear Trust) in accordance with the articles of association of NLF;
“INES”	means the International Nuclear Event Scale developed by the International Atomic Energy Agency and the Nuclear Energy Agency of the Organisation for Economic Co-operation and Development, as such scale may be amended or replaced from time to time;
“Investment Manager”	means the investment manager of NLF from time to time;
“Investment Policy”	means the policy for determining the investments in which NLF may invest its assets, as set out in Schedule 9 (Investment Policy);
“Key Exercise of Rights”	has the meaning given in the Historic Liabilities Funding Agreement;
“Key Operational Change”	means an Operational Change which will, or could reasonably be expected to, result in:
	(A)	an increase in Costs of Discharging Liabilities on a Net Present Value basis of £10,000,000 or more; or
	(B)	an increase in Costs of Discharging Liabilities on an undiscounted basis of £25,000,000 or more; or
	(C)	payments having to be made in respect of Costs of Discharging Liabilities on an undiscounted basis of £5,000,000 or more within a period of five years beginning on the proposed date of implementation of the Operational Change;
“Liabilities Documents”	means each of this Agreement, the Historic Liabilities Funding Agreement, the Contribution Agreement, the Option Agreement, the Nirex Option Agreement and the Guarantee;

14

“LIBOR”	means, in relation to any amount:
	(A)	the British Bankers’ Association interest settlement rate for the offering of three months’ sterling deposits displayed on the appropriate Telerate screen page at or about 11.00 a.m. London time on the date on which LIBOR is to be determined (the “Screen Rate”); or
	(B)	if no Screen Rate is available, the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to NLF at its request that were quoted by the principal London offices of Barclays Bank plc and National Westminster Bank plc to leading banks in the London interbank market at or about 11:00 a.m. London time on the date on which LIBOR is to be determined;
“Licence”	means a nuclear site licence granted in relation to a Power Station pursuant to section 1 of the Nuclear Installations Act 1965;
“Licensed Site”	means, in relation to a Power Station, the licensed site (within the meaning of section 26 of the Nuclear Installations Act 1965) at which the Power Station is located;
“Licensee”	means from time to time each of:
	(A)	BEG and BEG(UK); and
	(B)	any person who satisfies the criteria set out in clause 33.2 and who has executed a Deed of Adherence; and
	(C)	any person deemed to be Licensee for the purposes of this Agreement in accordance with clause 33.3;
“Licensee Change”	means an Operational Change (other than a Regulator-required Change, an Anticipatory Change, a Secretary of State Change or a Net Cost Operational Change) implemented or proposed to be implemented by a Licensee;
“Licensee Compensation Amount”	has the meaning given in clause 9.7;

15

“Licensee Director”	means a director appointed as a licensee director of NLF in accordance with the articles of association of NLF;
“Licensee Key Operational Change Notice”	has the meaning given in clause 8.6(A);
“Licensee’s Cost of Borrowing”	means:
	(A)	the actual cost to the Group of making new short-term borrowings (which shall, unless otherwise provided herein, be unsecured); or
	(B)	where no such actual cost can be determined, the cost implied by bond yields and credit default swap prices relating to the Group or, where no such yields or prices are available, relating to a comparable credit;
“Licensing Authority”	means the Health and Safety Executive or such other authority as is from time to time responsible for the issue of a Licence;
“Local Liaison Consultative Committee”	means the committee established at each Power Station comprising representatives of the Licensee, local residents, local government and emergency services;
“London Stock Exchange”	means London Stock Exchange plc;
“Loss”	has the meaning given in clause 16.2(C);
“Memorandum of Understanding”	means any memorandum of understanding entered into by NDA and the Regulators pursuant to which NDA and the Regulators set out their common understanding of the principles to apply in connection with the interaction of NDA and the Regulators in dealing with matters relating to the Discharge of Qualifying Liabilities;
“Minimum Performance Standard”	means, in relation to the Operation of a nuclear power generating station and the carrying out of activities and functions ancillary thereto, the application of practices, methods and activities in good faith, in compliance with all Applicable Law and Accepted Standards;
“MPS Failure Notice”	has the meaning given in clause 7.8;

16

“NDA”	means:
	(A)	the Nuclear Decommissioning Authority established by The Energy Act 2004, to the extent that such Authority is designated from time to time for the purposes of this Agreement and notified in writing by the Secretary of State to the Ultimate Parent Company and the Licensees following the coming into force of the legislation establishing that Authority; or
	(B)	such other governmental body or authority as is designated from time to time for the purposes of this Agreement and notified in writing by the Secretary of State to the Ultimate Parent Company and the Licensees; or
	(C)	except to the extent so designated and notified in accordance with paragraph (A) or paragraph (B) above, the Secretary of State;
“NDA Administration Costs”	means costs incurred by NDA which are directly attributable to the subject matter of this Agreement and the other Liabilities Documents, including, to the extent so incurred:
	(A)	the reasonable costs for time spent by employees of NDA;
	(B)	the fees and out-of-pocket expenses and outlays of NDA; and
	(C)	the fees and outlays of NDA’s professional advisers;
“Net Cost”	means the sum of:
	(A)	costs and expenses, including attributable overheads;
	(B)	reductions in income; and
	(C)	any Value Added Tax referable to (A) and (B) to the extent that such Value Added Tax is reasonably expected to be not recoverable (whether by a Licensee or the representative member of its Value Added Tax group registration);

17

“Net Cost Operational Change”	means an Operational Change (other than a Regulator-required Change, an Anticipatory Change or a Secretary of State Change or a Licensee Change) which will result in, or could reasonably be expected to result in, a decrease in Costs of Discharging Liabilities but which will also result in, or could reasonably be expected to result in, a Licensee incurring a net cost;
“Net Present Value” or “NPV”	has the meaning given in clause 1.2(N);
“New Bonds”	means the £700,000,000 7 per cent. guaranteed bonds due 2005-2022 to be issued by Holdings pursuant to the Trust Deed, comprising the Bonds and the CTA Global Bond;
“New Fuel”	has the meaning given in the Historic Liabilities Funding Agreement;
“Nirex Option Agreement”	means the agreement entered into on the same date as this Agreement between the Secretary of State, BEG, BEG(UK), BE plc and Holdings pursuant to which BEG and BEG(UK) each grant an option to the Secretary of State to acquire their respective interests in shares of, and loans to, United Kingdom Nirex Limited;
“NLF Administration Costs”	means costs in connection with the proper administration and running of NLF and the Nuclear Trust, including:
	(A)	the remuneration, out-of-pocket expenses and outlays of the Independent Directors and the Licensee Directors;
	(B)	the costs of appointing and remuneration of employees of NLF;
	(C)	the fees and out-of-pocket expenses and outlays of the Trustees, including arrangements relating to real property and other assets;
	(D)	the fees and outlays of each of the Advisers and NLF’s legal and other professional advisers;
	(E)	insurance premiums (including for insurances effected for the benefit of the Trustees, the Independent Directors and the Licensee Directors in connection with the performance of their duties); and

18

	(F)	any inheritance tax charged on the assets of the Nuclear Trust and any applicable Value Added Tax (to the extent not recoverable),
	but excluding Costs of Discharging Liabilities, Licensee Compensation Amounts and any other financial liabilities of NLF to the Licensees;
“NLF Approved Payment Criteria”	has the meaning given in clause 3.4;
“NLF Bonds”	means £275,000,000 Bonds to be issued by Holdings to NLF under the Contribution Agreement;
“NLF Compensation Amount”	has the meaning given in clause 9.2;
“NLF Default Event”	has the meaning given in clause 24.1;
“NLF Payment Date”	has the meaning given in clause 3.6;
“NLF Payments”	has the meaning given in the Contribution Agreement;
“NLF Payment Obligation”	means an obligation of NLF to make payment to the Licensees or any other Approved Person in accordance with the terms of this Agreement, including Licensee Compensation Amounts and Costs of Discharging Liabilities but excluding any obligation of NLF to make payment to the Licensees or any other Approved Person arising as a result of a breach of this Agreement by NLF (other than as specified in clause 3.7(B));
“NLF Surplus”	has the meaning given in clause 12.3;
“Notice of Dispute”	has the meaning given in clause 42.1;
“Nuclear Decommissioning Agreement”	means the agreement dated 29 March 1996 between BEG, BEG(UK), British Energy Plc, NLF and the Trustees pursuant to which BEG and BEG(UK) agreed, among other things, to make payments to NLF for funding the decommissioning liabilities of BEG and BEG(UK) (as amended from time to time);
“Nuclear Liabilities Documentation”	has the meaning given in the terms and conditions of the Bonds;

19

“Nuclear Trust”	means the trust established by a deed of trust dated 27 March 1996 by British Energy Plc and the Secretary of State, as subsequently amended, including by way of a deed of amendment entered into on or about the date of this Agreement;
“NUPER”	means the database of incidents referred to as the “Nuclear Plant Event Review Database” maintained by the Group for recording events which are required to be notified, reported and investigated in accordance with the conditions of a Licence;
“Operation”	means any operation carried out at a Power Station, including:
	(A)	the maintenance, examination, testing and operating of the Power Station and its plant;
	(B)	spent fuel handling;
	(C)	decommissioning;
	(D)	the management and discharge of nuclear-related liabilities; and
	(E)	any activity or function ancillary to any of the above, and “Operational”, “Operating” and “Operate” shall be construed accordingly;
“Operational Change”	means, in relation to a Power Station:
	(A)	the modification or removal of, or change or amendment to, a safety case, process, practice or procedure; or
	(B)	the introduction in whole or part of any new safety case, process, practice or procedure; or
	(C)	the modification, replacement, removal or decommissioning of, or change to, any building or fixed or moveable plant (or part thereof) which was installed or commissioned at the Power Station; or
	(D)	the construction, installation or commissioning of any building or fixed or moveable plant at the Power Station; or
	(E)	the carrying out at the Power Station of any non-routine task, including any experiments;

20

“Operational Liabilities Notice”	has the meaning given in clause 8.9;
“Option Agreement”	means the agreement entered into on the same date as this Agreement between the Secretary of State, BEG, BEG(UK), BE plc and Holdings pursuant to which BEG and BEG(UK) each grant an option to the Secretary of State to acquire the Power Stations;
“Part One”	means part one of an Annual Liabilities Report, containing backward-looking financial and other information;
“Part Two”	means part two of an Annual Liabilities Report, containing forward-looking financial and other information;
“Permit”	has the meaning given in 21.2(B)(xvii);
“Permitted Business”	has the meaning given in the terms and conditions of the Bonds;
“Permitted Investments”	has the meaning given in the terms and conditions of the Bonds;
“Permitted Payments”	has the meaning given in the terms and conditions of the Bonds;
“Power Station”	means each nuclear power station described in Parts 1 and 2 of Schedule 1 (Power Stations) and references to a Power Station or Power Stations of a Licensee are to the Power Station or Power Stations listed under the Licensee’s name in Schedule 1 (Power Stations) and references to a Licensee of a Power Station are to the relevant Licensee listed in Schedule 1 (Power Stations) as Schedule 1 may be amended from time to time pursuant to paragraph 5 of Part 1 of Schedule 10 (Deeds of Adherence and Release);
“Proceedings”	means any proceeding, suit or action arising out of or in connection with this Agreement;
“PWR Fuel”	means the nuclear fuel from time to time loaded into the Sizewell B Power Station reactor;
“PWR Fuel Payments”	has the meaning given in the Contribution Agreement;

21

“Regulators”	means each of the Licensing Authority, the Environment Agency, the Scottish Environment Protection Agency, the Health and Safety Executive and the Office for Civil Nuclear Security;
“Regulator-required Change”	means an Operational Change which is required by a Regulator or necessary in order to comply with Applicable Law;
“Regulator-required Key Operational Change Notice”	has the meaning given in clause 8.4(A);
“Relevant Event”	has the meaning given in clause 7.6;
“Renewables Obligation Certificate”	has the meaning given in the terms and conditions of the Bonds;
“Restructuring Date”	has the meaning given in the Creditor Restructuring Agreement;
“Restructuring Principles Date”	means 28 November 2002;
“Retail Price Index”	means the General Index of Retail Prices (All Items) published in the Monthly Digest of Statistics by the Central Statistical Office of the United Kingdom or, in the event that the Retail Price Index is discontinued or the basis of its calculation is modified, the parties shall adopt such alternative index as shall be specified in replacement by the body in the United Kingdom responsible for the production of such statistics or, in the absence of such alternative being specified, such index as may be agreed by NDA and the Licensees or, in the absence of agreement within 15 Business Days, such index as determined by the Expert in accordance with clause 42 (Dispute Resolution);
“Review Notice”	has the meaning given in clause 11.4(C);
“Scheduled Closure Date”	means, in relation to a Power Station, the date set out opposite that Power Station in Column 2 of Part 3 of Schedule 1 or such other date as is notified to NDA in accordance with clause 10 (Strategy Approval Process);

22

“Scottish Grid Code”	means in respect of any Scottish Station the code required to be maintained by the relevant Scottish Transmission Licensee under condition 7 of the standard conditions of its Scottish Transmission Licence approved by the Authority and from time to time revised with the approval of the Authority;
“Scottish Stations”	means the Power Stations known as Hunterson B (as described in paragraph 7 of Part 1 of Schedule 1 (Power Stations)) and Torness (as described in paragraph 8 of Part 1 of Schedule 1 (Power Stations);
“Scottish System”	means the system comprised (wholly or mainly) of high voltage circuits, plant and apparatus maintained by SPT Transmission plc and Scottish Hydro-Electric Transmission Limited for the bulk transfer of electricity from one power station to a sub-station or to another power station or between sub-stations or to or from an interconnector;
“Scottish Transmission Licence”	means a licence issued pursuant to Section 6(1)(b) of the Electricity Act 1989 in respect of an authorised area (as defined in that Act) all or part of which is situated within Scotland;
“Scottish Transmission Licensee”	means in respect of any Scottish Station, the person to whom a Scottish Transmission Licence, in respect of the authorised areas in which the Scottish Station is situated;
“Secretary of State Administration Costs”	means costs incurred by the Secretary of State which are directly attributable to the subject matter of this Agreement or the Historic Liabilities Funding Agreement, including, to the extent so incurred:
	(A)	the reasonable costs for time spent by employees of the Secretary of State;
	(B)	the fees and out-of-pocket expenses and outlays of the Secretary of State; and
	(C)	the fees and outlays of the Secretary of State’s professional advisers;

23

“Secretary of State Change”	means an Operational Change (other than a Net Cost Operational Change) which will result in, or could reasonably be expected to result in, a decrease in Costs of Discharging Liabilities on a Net Present Value basis of £10,000,000 or more and which the Secretary of State or NDA requires a Licensee to make in accordance with clause 8.7;
“Secured Basket”	has the meaning given in the terms and conditions of the Bonds;
“SERS”	means the Site Event Reporting System of that name as maintained by the Group from time to time;
“Service Document”	means a claim form, application notice, order, judgement or other document relating to any Proceedings;
“Settlement Agreement for Scotland”	has the meaning given to it in the standard conditions of the Scottish Transmission Licence;
“Sizewell B”	means the Power Station known as Sizewell B (as described in paragraph 6 of Part 1 of Schedule 1;
“Subsidiary”	means:
	(A)	any subsidiary within the meaning of section 736 of the Companies Act 1985; and
	(B)	any subsidiary undertaking (as defined in section 258 of the Companies Act 1985);
“Tax”	includes any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature, and any interest or penalty in respect thereof and “Taxation” shall be construed accordingly;
“TPL Option”	has the meaning given in the Creditor Restructuring Agreement;
“Trading Arrangements”	has the meaning given in the terms and conditions of the Bonds;
“Trustees”	means the trustees of the Nuclear Trust from time to time;
“Trust Deed”	means the trust deed constituting the New Bonds between Holdings (as Issuer), the Law Debenture Trust Corporation p.l.c. (as Trustee) and certain members of the Group (as Guarantors);

24

“UK GAAP”	means generally accepted accounting principles applicable in the United Kingdom including Financial Reporting Standards and Statements of Standard Accounting Practices issued by the Accounting Standards Board Limited or, if applicable, International Financial Reporting Standards issued by the International Accounting Standards Board and International Accounting Standards issued by the International Accounting Standards Committee and adopted by the International Accounting Standards Board;
“Ultimate Parent Company”	means, in relation to BEG and BEG(UK), BE plc or such other person from time to time as is the Holding Company of BEG and BEG(UK) and is not itself a Subsidiary of any other person (but excluding the Secretary of State, NLF, the Nuclear Trust and any Government Entity (as defined in clause 33.7(F) below));
“Uncontracted Liabilities Discharge Plans”	means such of the plans, reports and other documents produced by a Licensee or any other member of the Group setting out the basis of, methods for, and estimated costs of, Discharging Uncontracted Liabilities of the Licensee (as each such plan, report and paper and other document may be amended, varied, renewed, updated or replaced from time to time) as NDA reasonably requires to enable it to carry out its obligations under this Agreement, including in connection with assessing applications for funding Costs of Discharging Liabilities and with approving the strategy for Discharging Uncontracted Liabilities (including the overall contracting strategy described in clause 10.1(D)(i);
“Value Added Tax”	means value added tax charged in accordance with the provisions of the Value Added Tax Act 1994, and any other tax on value or turnover which is enacted in addition to or in substitution for it;
“Waste”	means any waste including anything which is abandoned, unwanted or surplus, irrespective of whether it is capable of being recovered or recycled or has any value; and
“Working Hours”	means 9.30 a.m. to 5.30 p.m. on a Business Day.

1.2. Unless otherwise stated:

(A) references to any “party” shall be construed so as to include its successors in title, permitted assigns and permitted transferees;

25

(B) references to a “company” shall be construed so as to include any company, corporation or other body corporate, wherever and however incorporated or established;

(C) references to a “person” shall be construed so as to include any individual, firm, company, government, state or agency of a state, local or municipal authority or government body or any joint venture, association or partnership (whether or not having separate legal personality);

(D) any reference to a “day” (including within the phrase “Business Day”) shall mean a period of 24 hours running from midnight to midnight;

(E) references to times are to London time;

(F) a reference to any statute or statutory provision shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted;

(G) a reference to any other document referred to in this Agreement is a reference to that other document as amended, varied, novated or supplemented at any time;

(H) the schedules form part of this Agreement and shall have the same force and effect as if expressly set out in the body of this Agreement, and reference to this Agreement shall include the schedules;

(I) a reference to a clause, sub-clause, paragraph or a schedule is a reference to a clause, sub-clause or paragraph of, or a schedule to, this Agreement;

(J)	(i)	the rule known as the ejusdem generis rule shall not apply and accordingly general words introduced by the word “other” shall not be given a restrictive meaning by reason of the fact that they are preceded by words indicating a particular class of acts, matters or things; and
	(ii)	general words shall not be given a restrictive meaning by reason of the fact that they are followed by particular examples intended to be embraced by the general words;

(K) references to any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official, or any legal concept or thing shall in respect of any jurisdiction other than England be deemed to include what most nearly approximates in that jurisdiction to the English legal term;

(L) a reference to “cost” or “expense” of any person shall not include any amount paid or payable in respect of Value Added Tax that is recoverable by that person or the representative member of its Value Added Tax group registration;

(M) references to Value Added Tax being “recoverable” shall mean credit (as input tax) being allowable in respect of the

26

relevant amount of Value Added Tax, in accordance with the Value Added Tax Act 1994 and any regulations made thereunder, or (in the case of any other tax on value or turnover which is enacted in addition to or in substitution of value added tax charged in accordance with that Act) relief having corresponding economic effect being allowable;

(N) where any provision of this Agreement requires the calculation of a “Net Present Value” or “NPV”, the amount shall be calculated in accordance with this Agreement using generally accepted methodologies for the calculation of net present values. Where this Agreement does not specify who is to perform the calculation and the parties are unable to agree the calculation, the calculation shall be referred to an Expert for determination;

(O) words importing the singular only shall include the plural and vice versa;

(P) words importing any gender shall include all other genders;

(Q) words importing natural persons shall include corporations,

(R) any reference in this Agreement to the “Scottish System” shall be deemed to be a reference to the high voltage transmission system in operation in Scotland following BETTA “Go Live” and the parties shall, prior to BETTA “Go Live”, seek to agree any other appropriate amendments relating to the implementation of BETTA; and

(S) With effect from the date (if any) that the United Kingdom adopts the Euro as its lawful currency in substitution for sterling:

(i) payments falling due under this Agreement shall be made by the payer to the recipient in Euros;

(ii) no payments which would have been payable in sterling under this Agreement but for the adoption of the Euro by the United Kingdom as its lawful currency shall be made in sterling or national currency units;

(iii) all amounts stated in sterling shall be converted into Euros at the fixed conversion rate provided for by the laws of England; and

(iv) all amounts required to be calculated in sterling shall be calculated in Euros.

1.3. All headings and titles are inserted for convenience only. They are to be ignored in the interpretation of this Agreement.

2. EXISTING FUNDS OF NLF

Each of the parties to this Agreement acknowledges and agrees that the assets of NLF accrued up to and including the Restructuring Date shall be available to, and applied by, NLF in the discharge of its obligations under and in accordance with the terms of this Agreement, including for the Discharge of Qualifying Liabilities.

27

3. NLF PAYMENT OBLIGATIONS

Undertaking

3.1. NLF undertakes to each Licensee to make payments to Approved Persons to meet the Costs of Discharging Liabilities and Licensee Compensation Amounts on the terms of this Agreement and otherwise to comply with the terms of this Agreement.

3.2. Without prejudice to the obligation of NLF to make applications to the Secretary of State under clause 4 (Secretary of State Payment Obligation), the liability of NLF in respect of its payment obligations under this Agreement (whether in respect of Costs of Discharging Liabilities, Licensee Compensation Amounts or otherwise) will at all times be limited to the assets available to NLF after payment out of those assets of all liabilities and amounts charged on those assets. Without prejudice to NLF’s liability for any breach by it of clause 4 (Secretary of State Payment Obligation), NLF shall not be in breach of a payment obligation under this Agreement to the extent that the assets available for the purpose of discharging its payment obligations are insufficient to make the payment.

3.3. Each Licensee undertakes to NLF and the Secretary of State that amounts paid by NLF and/or the Secretary of State to the Licensee in respect of Costs of Discharging Liabilities in accordance with the terms of this Agreement shall be applied by the Licensee solely for the purpose of discharging such Costs and, pending or in default of such application, shall be held on trust for NLF in accordance with clause 5 (Designated Accounts) except to the extent that the Licensee is being reimbursed for costs already incurred and paid by it.

Application Procedure

3.4. Any application by an Approved Person for payment in respect of Costs of Discharging Liabilities must satisfy the following criteria (the “NLF Approved Payment Criteria”) as at the date of the application (save for the criteria detailed at clause 3.4(D) below) and the date of payment by NLF:

(A) the application is made to NDA in writing and for a specified sum, excluding any Value Added Tax and/or any other addition required by legislation and referable to such Costs of Discharging Liabilities (unless the application is accompanied by written confirmation from the applicant reasonably satisfactory to NDA that such Value Added Tax and/or other addition is not recoverable by the applicant (or the representative member of its Value Added Tax group registration) in which case it shall be included);

(B) the application is accompanied by written or permanent materials reasonably satisfactory to NDA (including, where applicable, copies of any invoices in respect of the sums which are the subject of the application) substantiating:

(i) the calculation of the sum in respect of which the application is made; and

28

(ii) (a) the date on which the sum in respect of which the application is made will become due and payable (not being less than 10 Business Days after the date of the application), or (b) that the sum represents a Cost which has been paid or incurred by the applicant;

(C) at the same time as the application is made to NDA, notice is given to NLF of the sum in respect of which the application is made and the date on which the relevant Costs have or are expected to become due and payable;

(D) NDA has confirmed in writing that it is reasonably satisfied, in relation to the application, that:

(i) the technical specifications of the works proposed or undertaken (a) are in accordance with the Approved Decommissioning Strategy or the Approved Uncontracted Liabilities Discharge Strategy, or (b) if NDA has not approved a Decommissioning Plan or an Uncontracted Liabilities Discharge Plan which covers such works in accordance with clause 10 (Strategy Approval Process) prior to the application for payment being made, are otherwise acceptable to NDA;

(ii) the sum applied for in respect of such works (a) is a Cost of Discharging Liabilities or is otherwise acceptable to NDA pursuant to clause 3.4(D)(i)(b) above, and (b) is within the detailed budgeted cost of such works taken into account in the then most recently completed Part Two, or represents an amount payable under a contract which has, if required, been approved by NDA under clause 10 (Strategy Approval Process), or is otherwise considered by NDA, acting reasonably, to have been properly incurred in carrying out such works; and

(iii) the application is not, in whole or in part, in respect of a liability, cost or expense which (a) is an Excluded Liability, or (b) has arisen as a result of any matter which is the subject of an MPS Failure Notice, an Operational Liabilities Notice, a Review Notice or a notice pursuant to clause 11.4(A) and NDA and the Licensee have yet to agree or determine whether the matter gives rise to a Disqualified Liability.

In connection with its obligations under this clause 3.4(D):

(a) NDA shall either provide NLF and the Approved Person with written confirmation that it is satisfied that the application complies with the criteria set out in paragraphs (i) to (iii) inclusive above or give notice of its refusal to give such written confirmation and in either case shall use its reasonable endeavours to do so:

(1) in respect of applications made prior to the submission of Part Two of the first Annual Liabilities Report pursuant to clause 11.1(A), within such time period as is reasonably agreed by NDA and the Licensees;

29

(2) in respect of applications where (i) the technical specifications of the works proposed or undertaken are in accordance with the Approved Decommissioning Strategy or the Approved Uncontracted Liabilities Discharge Strategy; and (ii) the sum applied for in respect of such works is within the detailed budgeted cost of such works taken into account in the then most recently completed Part Two or represents an amount payable under a contract which has, if required, been approved by NDA under clause 10 (Strategy Approval Process), within 10 Business Days; and

(3) in respect of all other applications, within 30 Business Days,

after the Approved Person’s application is submitted;

(b) NDA shall not be obliged to give such written confirmation within the relevant time period referred to in paragraph (a) above where the application is in respect of (i) a liability, cost or expense details of which should have been set out in an Annual Liabilities Report delivered or deliverable to NDA prior to the date of application but which details have not been so disclosed, or (ii) details of the liability, cost or expense were contained in an Annual Liabilities Report submitted to NDA but such details were either materially misleading or omitted material facts such that it was not, and should not have been, reasonably apparent to NDA that further details or investigations were necessary; and

(c) in the event that the NDA does not give such confirmation within the period referred to in (a) above it shall, within such time period, also give notice to the Approved Person making the application of the grounds for its failure to give the confirmation. Without prejudice to the provisions of clause 3.5, the NDA and the relevant Approved Person shall meet, at the request of the Approved Person to discuss, in good faith, what steps are required to be taken in order that the NDA will be able to give the required confirmation. In such circumstances, the Approved Person may, following discussion with the NDA re-submit such application, in which case the provisions of this clause 3.4 shall apply, save that where the application has been resubmitted following discussion with the NDA, the time period in clause 3.4(D)(a) shall be:

(i) in respect of applications falling within clause 3.4(D)(a)(1), within such time period as is reasonably agreed with the Licensees;

30

(ii) in respect of all applications falling within clause 3.4(D)(a)(2), within 30 Business Days of the initial application; and

(iii) in respect of applications falling within clause 3.4(D)(a)(3), within 50 Business Days of the initial application.

(E) the applicant provides a certificate signed by a suitably qualified and authorised officer or employee of the Licensee or Approved Person, as the case may be, to NDA in substantially the form set out in Schedule 7 (NLF Approved Payment Criteria) stating that:

(i) the applicant was or will be at the time the works were or will be undertaken the holder of all necessary regulatory approvals or consents to carry out the works proposed or (as the case may be) undertaken (including, where required, a Licence relating to the relevant Power Station);

(ii) where the works have not yet been completed, the applicant has, or has retained, the necessary technological and civil engineering expertise to enable it to carry out the works; and

(iii) if any consent or agreement is required for the applicant to represent itself as an Approved Person pursuant to this Agreement, that consent or agreement has been duly obtained.

Disputes

3.5. If no agreement can be reached between an Approved Person and NDA within 50 Business Days from the date of the application as to whether NDA should be satisfied under clause 3.4(D) or as to whether the other NLF Approved Payment Criteria have been met in respect of that application, any disputed or unresolved question may be referred by the Approved Person or NDA to the Expert for determination in accordance with clauses 42.4 to 42.11. On the basis of the Expert’s determination of such question (and all relevant matters agreed between NDA and the Approved Person), the Expert will determine whether the written confirmation should be given or, as the case may be, whether the other NLF Approved Payment Criteria have been met.

Payment

3.6. An application made by an Approved Person to NDA that satisfies the NLF Approved Payment Criteria shall, subject to clause 3.2, lead to a payment by NLF on a non-discretionary basis by the later of:

(A) 10 Business Days of receipt by NLF of the written confirmation from NDA referred to in clause 3.4(D)(a); and

(B) 5 Business Days before the due date for payment as described in clause 3.4(B)(ii)(a), (the “NLF Payment Date”),

31

such payment to be made in accordance with the terms of this clause 3 (NLF Payment Obligations), provided that if NLF has insufficient assets available for the purpose of discharging its payment obligations in respect of which written confirmation from NDA is received:

(C) NLF shall, as soon as reasonably practicable, make an application in respect of the shortfall in funds to the Secretary of State in accordance with clause 4 (Secretary of State Payment Obligation); and

(D) NLF shall make payment of the shortfall to the relevant Approved Person as soon as reasonably practicable after receipt of funds from the Secretary of State to meet such shortfall but not earlier than 5 Business Days before the due date for payment as described in clause 3.4(B)(ii)(a).

Payment Procedures

3.7.	(A)	If an application is made by a Licensee or another Approved Person pursuant to this clause 3 (NLF Payment Obligations) in respect of the Discharge of Qualifying Liabilities, NLF shall make payment pursuant to this clause 3 (NLF Payment Obligations) either by reimbursement of Costs already incurred, or by way of stage payments against evidence of due completion of relevant parts of the works in question (including, where applicable, a copy of the invoice in respect of the expenditure or costs incurred), and in either case net of retentions or deductions by NLF which are required by law. NLF shall have no obligation to make any payment for works in advance of those works being undertaken or prior to the date on which the sum which is the subject of the application is incurred or becomes due and payable.
	(B)	Where an Approved Person has satisfied the NLF Approved Payment Criteria and suffers interest or any other payment penalty under a written contract with another person as a result of late payment by NLF, or a failure by NDA or Secretary of State to take any action under this Agreement when required, the Licensee shall notify NLF of the amount of such payment penalty together with written evidence thereof. Payment of such amount shall be made by NLF to that Approved Person as soon as reasonably practicable and in any event within 5 Business Days of receipt of the notice by NLF except that, in circumstances where NLF has insufficient funds to meet such late payment penalty, such 5 Business Day period shall not apply and the provisions of clause 4 (Secretary of State Payment Obligation) shall apply.

3.8. Where a payment is to be made by NLF in respect of a Cost of Discharging Liabilities already incurred or to be incurred by a Licensee or another Approved Person, NLF will make payment of the relevant sum by transfer of cleared funds to the Designated Account of the Licensee or to an account of the other Approved Person (or, if the Secretary of State has required such Approved Person to open a Designated Account, to such Designated Account), details of which shall be provided by the Licensee or, as the case may be, the other Approved Person at the time of application.

3.9. Where an application for payment is made in respect of an amount (whether in whole or in part) owed by a Licensee or another Approved Person to a third party, the application must so state, giving full details. NLF will for the purposes of this clause 3

32

(NLF Payment Obligations) make payment of the relevant sum by transfer of cleared funds to the Designated Account of the Licensee or the other Approved Person. In satisfaction of NLF’s obligation to make payment to the Designated Account of a Licensee or the other Approved Person in respect of an amount owed by the Licensee or the other Approved Person to a third party, NLF may make payment of the relevant sum direct to the third party on completion of the relevant works and upon receipt of written confirmation from the third party addressed to NLF and the Licensee or the other Approved Person that it accepts such payment in satisfaction of the debt obligation which is the subject matter of the application.

Excluded Liabilities

3.10. Each Licensee acknowledges that the payment of any amount by NLF or the Secretary of State under this clause 3 (NLF Payment Obligations) which is subsequently agreed or determined to have been paid in respect of an Excluded Liability shall not be treated as an acceptance or admission by NLF or the Secretary of State that such amount was a Cost of Discharging Liabilities and not an Excluded Liability, and shall not affect a Licensee’s obligation under this Agreement to indemnify NLF and the Secretary of State in respect of any such Excluded Liability.

Assumption by Secretary of State

3.11. Notwithstanding the foregoing provisions of this clause 3 (NLF Payment Obligations), the parties agree that on and from the first to occur of:

(A) the later of (i) the date on which no further British Energy Contributions are due to NLF and no further British Energy Contributions can become due and payable to NLF, and (ii) the date on which NLF ceases to have any assets available to it for the Discharge of Qualifying Liabilities (other than any amounts to be paid by the Secretary of State pursuant to clause 4 (Secretary of State Payment Obligation)); or

(B) the passing by NLF of a resolution for its winding up (other than in the context of a solvent reconstruction or reorganisation in either case on terms previously approved in writing by the Secretary of State and the Licensees) or the making by a court of competent jurisdiction of an order (which is not rescinded) for the winding up or dissolution of NLF,

the Secretary of State undertakes that she shall assume the payment obligations of NLF under this Agreement (without the limitation in clause 3.2) and shall be entitled, by notice in writing to the Licensees, to exercise (or designate that NDA may exercise) such of the rights of NLF under this Agreement as are specified in the notice. Accordingly, the Licensees and other Approved Persons (other than the Secretary of State) shall be entitled to apply directly to the Secretary of State for payment in respect of Costs of Discharging Liabilities. If the Secretary of State assumes the payment obligations of NLF under this Agreement following an event described in paragraph (B), the Secretary of State shall be subrogated to the relevant Licensee’s rights against NLF.

33

Review

3.12. The Secretary of State, NLF and the Licensees shall meet as soon as reasonably practicable after the first to occur of (a) the later of the two dates referred to in clause 3.11(A) or (b) the event referred to in clause 3.11(B) to discuss:

(A) the performance of the future obligations of NLF under this Agreement and the other Liabilities Documents; and

(B) the extent to which the other obligations of NLF under this Agreement and the other Liabilities Documents should be assumed by the Secretary of State, NDA or such other person as the parties think fit.

4. SECRETARY OF STATE PAYMENT OBLIGATION

Undertaking

4.1. The Secretary of State undertakes to each Licensee that if NLF would otherwise have insufficient assets available to satisfy the NLF Payment Obligations as they fall due and payable, she will make such payments to NLF in accordance with, and subject to, the terms of this Agreement as are necessary to ensure that NLF has sufficient assets available to satisfy, as they fall due and payable, all NLF Payment Obligations. Without prejudice to any outstanding applications to the Secretary of State pursuant to this clause 4, which shall remain unaffected, the obligations of the Secretary of State under this undertaking shall cease upon the assumption by the Secretary of State of the payment obligations of NLF under clause 3.11.

4.2. The undertakings given by the Secretary of State to make payments under this Agreement are given, as the case may be:

(A) to the extent permitted by paragraph 1 of Schedule 12 to the Electricity Act 1989, under that paragraph; and

(B) to the extent permitted by section 1 of the Electricity (Miscellaneous Provisions) Act 2003, under that section.

4.3. Each Licensee undertakes to the Secretary of State that any amounts payable by the Secretary of State to NLF (or, where applicable, to a Licensee or any other person) in respect of Costs of Discharging Liabilities in accordance with the terms of this Agreement and which are received by the Licensee shall be applied by the Licensee solely for the purpose of discharging such Costs and, pending or in default of such application, shall be held on trust for NLF in accordance with clause 5 (Designated Accounts) except to the extent that the Licensee is being reimbursed for Costs already incurred and paid by it.

34

Application Procedure

4.4. NLF shall promptly (and in any event within 5 Business Days) following receipt of a notice under clause 3.4(C) from an Approved Person or determination of a Licensee Compensation Amount pursuant to clause 9.7:

(A) send to the Secretary of State a copy of its most recent asset valuation report prepared by the Investment Manager, if such report indicates that the assets available to NLF will not be sufficient to discharge the Costs or Licensee Compensation Amount to which the notice or determination relates, together with a copy of such notice or determination;

(B) make a conditional application, for payment by the Secretary of State of the shortfall described in clause 4.4(A), pursuant to the undertaking given by the Secretary of State in clause 4.1 in relation to an NLF Payment Obligation if, having regard to the asset valuation report described in clause 4.4(A), it reasonably believes that:

(i) on the NLF Payment Date (a) NLF will not have or does not have any assets available to it for the purpose of discharging the NLF Payment Obligation in respect of which the conditional application is made, or (b) the value of the assets available to NLF for the purpose of discharging the NLF Payment Obligation will be, or are reasonably expected to be, less than the amount of the NLF Payment Obligation in respect of which the conditional application is made; and

(ii) NLF will be unable to discharge the NLF Payment Obligation in full unless NLF receives payment from the Secretary of State pursuant to such undertaking; and

upon such application by NLF, the Secretary of State shall promptly instruct her financial adviser to review the conditional application and report to the Secretary of State thereon within 10 Business Days of her instruction.

4.5. NLF shall promptly (and in any event within 5 Business Days) following the later of:

(A) (except in relation to a Licensee Compensation Amount), receipt by NLF of written confirmation from NDA in accordance with clause 3.4(D) or an Expert’s determination under clause 3.5 that such a written confirmation should have been given; and

(B) 10 Business Days from receipt by the Secretary of State of the conditional application described in clause 4.4(B),

35

make an unconditional application, on the bases described in clause 4.4(B)(i) and (ii) on behalf of a Licensee, for payment of an amount equal to the estimated shortfall between the amount of the NLF Payment Obligation and the assets available to the NLF at the NLF Payment Date. Such application must satisfy the following criteria (the “HMG Approved Payment Criteria”) as at the date of the application and the date of payment by the Secretary of State:

(i) the application shall be made to the Secretary of State in writing and specify:

(a) the amount which the Secretary of State is required to pay in respect of the relevant NLF Payment Obligation; and

(b) the date on which NLF wishes the Secretary of State to make payment of such amount, such date not being less than 5 Business Days after the date of the application;

(ii) (except in relation to a Licensee Compensation Amount), the application shall be accompanied by the written confirmation provided by NDA to NLF under clause 3.4(D) or details of the relevant Expert determination under clause 3.5;

(iii) the Secretary of State shall have received the report of her financial adviser as referred to in clause 4.4(B); and

(iv) the application shall be accompanied by a certificate approved by the board of directors of NLF and signed by two directors (one of whom shall be an Independent Director), certifying that:

(a) on the NLF Payment Date (a) NLF will not or did not have any assets available to it for the purpose of discharging the NLF Payment Obligation in respect of which the application is made, or (b) the value of the assets available to NLF for the purpose of discharging the NLF Payment Obligation will be, or are reasonably expected to be or were, less than the amount of the NLF Payment Obligation in respect of which the application is made;

(b) NLF will be unable to discharge the NLF Payment Obligation in full unless it receives payment from the Secretary of State of the sum specified in the application; and

(c) the amount specified in the application for payment by the Secretary of State is the minimum amount required, or reasonably expected to be required, by NLF to enable it to discharge the NLF Payment Obligation.

Payment

4.6. An application made by NLF pursuant to clause 4.5 shall lead to a payment by the Secretary of State on a non-discretionary basis in accordance with clause 4.7 only if it meets the HMG Approved Payment Criteria. If the Secretary of State reasonably believes that the HMG Approved Payment Criteria have not been met, she will promptly request NLF to provide such further items as she in her reasonable opinion believes are required in order to satisfy such HMG Approved Payment Criteria, and NLF will respond to her request within 5 Business Days thereof, following the end of which period, the payment above referenced shall be made within a further 3 Business Days thereof.

Payment Procedure

4.7. Payments to be made by the Secretary of State to NLF will be made:

(A) by transfer of cleared funds to an account of NLF, details of which shall be provided by NLF at the time of application; and

36

(B) as soon as reasonably practicable but no later than the date referred to in clause 4.5(i)(b).

4.8. If the Secretary of State gives her consent in writing, NLF may direct that any amount to be paid to it by the Secretary of State under this clause 4 (Secretary of State Payment Obligation) be paid on its behalf:

(A) to a Licensee or other Approved Person directly, by way of payment to the Designated Account of the Licensee or to the other Approved Person (as the case may be) in satisfaction of NLF’s obligation to make payment of such amount to the Licensee or the other Approved Person; or

(B) to another third party (other than a Licensee or Approved Person) directly, by way of payment to such account as NLF notifies in writing to the Secretary of State, provided that payment by the Secretary of State direct to the third party will not be made before written confirmation which is satisfactory to the Secretary of State is received from the third party by the Secretary of State and NLF that the third party accepts such payment in satisfaction of the debt obligation of the Approved Person which is the subject matter of the application.

Enforcement

4.9. Notwithstanding any other term of this Agreement, NLF acknowledges and agrees that the undertaking given by the Secretary of State to the Licensees under this clause 4 (Secretary of State Payment Obligation) is given for the benefit of the Licensees and not NLF and NLF shall not be entitled to enforce the undertaking.

Excluded Liabilities

4.10. Each Licensee acknowledges that the payment of any amount by the Secretary of State under this clause 4 (Secretary of State Payment Obligation) which is subsequently agreed or determined to have been made in respect of an Excluded Liability shall not be treated as an acceptance or admission by NLF or the Secretary of State that such amount was a Cost of Discharging Liabilities and not an Excluded Liability, and shall not affect a Licensee’s obligation under this Agreement to indemnify NLF and the Secretary of State in respect of any such Excluded Liability.

Payments no Longer Required

4.11. NLF shall promptly notify the Secretary of State if, following receipt of any amount applied for under this clause 4 (Secretary of State Payment Obligation), the amount is no longer required by NLF (whether in whole or part) for it to discharge the NLF Payment Obligation in respect of which it was paid (whether following discharge of the NLF Payment Obligation in respect of which such application was made or not). The Secretary of State may, by notice in writing to NLF, require NLF to repay the amount overpaid by the Secretary of State (together with any interest thereon). If the Secretary of State gives such a notice, NLF shall make payment of the overpaid amount in full (together with any interest thereon) to the Secretary of State within 10 Business Days of receipt of such request.

37

Review

4.12.  (A) At any time any of the Licensees or NDA may request a review of clause 3 (NLF Payment Obligations) and this clause 4 (Secretary of State Payment Obligation). Each of them shall use its reasonable endeavours to complete the review within three months of the review being requested and shall, in the conduct of the review:

(i) submit a paper to the other parties detailing the implementation of these clauses in the period since the Restructuring Date and/or any proposals for improving the operation of these clauses; and

(ii) meet not less than twice to discuss in good faith the papers prepared under this clause and any proposals for improving the operation of clause 3 (NLF Payment Obligations) and this clause 4 (Secretary of State Payment Obligation).

(B) The parties agree that the carrying out of a review pursuant to clause 4.12(A) does not prevent a party requesting a further review thereafter (in which case the provisions of clause 4.12(A) shall apply mutatis mutandis); provided that a review may not be requested within three years after completion of the previous review.

5. DESIGNATED ACCOUNTS

5.1. As a condition to any payment being made under this Agreement to a Licensee by NLF or the Secretary of State, the Licensee shall open and maintain an account (a “Designated Account”) in accordance with the provisions of this clause 5 (Designated Accounts).

5.2. In respect of the Designated Account opened by a Licensee, the Licensee shall:

(A) hold all amounts (other than Licensee Compensation Amounts and reimbursements of amounts in respect of Costs already incurred and paid by the Licensee) paid by NLF or the Secretary of State under this Agreement into the Designated Account on trust for NLF (or, following the assumption by the Secretary of State of the payment obligation of NLF under clause 3.11, the Secretary of State) pending payment of such amount to the relevant payee in the discharge of Costs of Discharging Liabilities;

(B) label the account as a “trust account” and clearly designate the account as being for the benefit of NLF and the Secretary of State;

(C) not commingle any funds in the Designated Account with its own property and ensure that the Designated Account satisfies all the requirements necessary to constitute a trust account that is not available to its creditors in insolvency;

38

(D) give notice to the bank with whom the account is held in the form set out in Schedule 11 (Designated Accounts) and procure that the bank delivers an acknowledgement of such notice in the form set out in Schedule 11 (Designated Accounts); and

(E) give details of the Designated Account to NLF and the Secretary of State.

5.3. Notwithstanding any other terms of this Agreement, each Licensee acknowledges and agrees that it will not in any circumstances or at any time:

(A) have any right in, or right to receive, any sum payable or paid by NLF or the Secretary of State to any other person under this Agreement;

(B) demand that any sum payable or paid by NLF to any other person or by the Secretary of State to NLF or any other person under this Agreement be made directly to it; or

(C) make any claim or take or initiate any action to require or compel NLF or the Secretary of State to pay to it any sum due to NLF or another person under this Agreement.

5.4. As a further condition to any payment being made under this Agreement by NLF or the Secretary of State to an Approved Person other than a Licensee or the Secretary of State, NLF may require that the Approved Person opens and maintains a Designated Account and, in relation to the Designated Account, confirms in writing to the Secretary of State and NLF in the same terms as set out in clauses 5.2 and 5.3.

5.5. The parties acknowledge that the relevant payee for the purposes of clause 5.2(A) may be the holder of the Designated Account and agree that, in this circumstance, clause 5.2(A) shall not prevent such Designated Account holder from drawing on the Designated Account for that purpose.

6. EXCLUDED LIABILITIES

6.1. “Excluded Liabilities” comprise:

(A) the BE Liabilities; and

(B) the Disqualified Liabilities,

provided that any liability which is both a BE Liability and a Disqualified Liability shall be treated as a Disqualified Liability for the purposes of this Agreement.

6.2. Except to the extent that NLF or the Secretary of State (with the approval of Her Majesty’s Treasury) (i) assumes responsibility for any Excluded Liabilities in accordance with the terms of this Agreement, or (ii) otherwise agrees with a Licensee that it will assume responsibility for any Excluded Liabilities, including pursuant to the Option Agreement:

(A) any and all Excluded Liabilities shall be for the account of the Licensees;

39

(B) neither NLF nor the Secretary of State shall have any liability in respect of any Excluded Liabilities; and

(C) the Licensees shall keep indemnified NLF and the Secretary of State from and against any loss, cost, expense, liability, claim or damage (together, a “Loss”) which NLF or the Secretary of State properly and reasonably incurs or suffers, directly or indirectly, as a result of the Licensees not meeting or discharging an Excluded Liability, including (i) any Loss arising in respect of any amount paid by the Secretary of State to NLF under this Agreement which would not have been paid had the Licensees met or discharged such Excluded Liability, (ii) any Loss arising in respect of any amount not repaid by NLF to the Secretary of State under this Agreement which would have been repaid by NLF to the Secretary of State had the Licensees met or discharged such Excluded Liability, (iii) any Loss incurred or suffered by the Crown in relation to any Excluded Liability upon the acquisition by it or any other person of any Power Station or other property of a Licensee or (iv) any Loss incurred or suffered by the Crown in relation to any Excluded Liability upon the acquisition by it by operation of law of any Power Station or any other property of a Licensee following a Default Event.

6.3. Any amount paid by a Licensee pursuant to the indemnity given by it in this clause 6.3 or in any other clause of this Agreement (save clause 17.1) shall be disregarded for the purposes of clause 17.2 of this Agreement.

7. MINIMUM PERFORMANCE STANDARD

Compliance with Standard

7.1. Unless specifically permitted by the terms of this Agreement not so to comply, each Licensee undertakes to NLF and the Secretary of State that, for so long as any Costs of Discharging Liabilities remain to be paid, settled or discharged, it shall comply with the Minimum Performance Standard in the Operation of its Power Stations.

7.2. Notwithstanding clause 27 (Remedies and Waivers), except in the case of fraud, where a Licensee fails to comply with the Minimum Performance Standard, its liability under this Agreement for such failure shall be limited solely to the liabilities expressed in this Agreement to arise upon the occurrence of such a failure.

Deemed Compliance and Non-Compliance

7.3. For the purposes of this Agreement ((i) other than for the purposes of clause 7.4 and (ii) in relation to clause 7.3(B) only, other than for the purposes of clause 7.6), each Licensee shall be deemed to have complied with, or be in compliance with, the Minimum Performance Standard in respect of Operations at each Power Station:

(A) at any time up to but excluding the Restructuring Principles Date; and

(B) on and after the Restructuring Principles Date, to the extent that its Operations at each Power Station were or (as the case may be) are consistent with the way in which it Operated that Power Station immediately prior to the Restructuring Principles Date.

40

7.4. Notwithstanding clause 7.3, a Licensee shall not be deemed to have complied with the Minimum Performance Standard by virtue of Operating at a Power Station after the Restructuring Principles Date in a manner consistent with the way in which it Operated at the Power Station immediately prior to the Restructuring Principles Date if:

(A) there is or was a change in circumstance or there occurs or occurred any event after the Restructuring Principles Date as a result of which the Licensee should change or should have changed the way in which it Operates or Operated at the Power Station in order to comply with the Minimum Performance Standard; or

(B) the manner in which it Operated at the Power Station immediately prior to the Restructuring Principles Date was in breach of any Applicable Law or Accepted Standards, and

a Licensee shall be deemed to be failing to comply with the Minimum Performance Standard if and to the extent it Operates at a Power Station, or carries on its business on or after the Restructuring Principles Date in breach of any Applicable Law or any Accepted Standards.

7.5. The parties agree that failure to comply with the Minimum Performance Standard by reason of NDA not approving a Key Operational Change shall not constitute a failure to comply with the Minimum Performance Standard for the purposes of this Agreement.

Relevant Events

7.6. Any increase in Costs of Discharging Liabilities arising as a result of the occurrence of a Relevant Event shall, save as otherwise provided in this Agreement, be treated as a Disqualified Liability. For the purposes of this Agreement, the following constitute “Relevant Events”:

(A) a Licensee failing (or being deemed to fail by this Agreement) to comply with the Minimum Performance Standard and as a result of such failure there being or will be or is reasonably likely to be an increase in the Net Present Value of Costs of Discharging Liabilities of £100,000 or more; or

(B) a Licensee implementing a Licensee Change which results in or will result in or is reasonably likely to result in an increase in the Net Present Value of Costs of Discharging Liabilities of £100,000 or more.

Notification of INES Events and Material MPS Failures

7.7. Each Licensee undertakes to disclose in writing to NDA, promptly after it becomes aware of such event, any event which:

(A) is or could reasonably be classified as a level 2 or higher event on INES, and any such disclosure shall include an analysis of whether such event is reasonably expected by the Licensee to give rise to any increase in the Costs of Discharging Liabilities; or

41

(B) is or may constitute a failure to comply with the Minimum Performance Standard and as a result of such failure there is, will be or is reasonably likely to be an increase in the Net Present Value of Costs of Discharging Liabilities of £1,000,000 or more.

Any disclosures under this clause 7.7 shall include a preliminary assessment of the approximate amount and timing of such increases.

MPS Failure Notice

7.8. In addition to and notwithstanding clause 7.7, if NDA believes there has or may have been a Relevant Event falling within clause 7.6(A), NDA shall be entitled to serve a notice on the Licensee (an “MPS Failure Notice”) within three months after NDA actually becomes aware that such failure has or may have occurred. If NDA believes that a Relevant Event falling within clause 7.6(B) has or may have occurred, NDA shall be entitled to serve a notice on the Licensee in accordance with clause 8.9.

7.9. Following receipt of an MPS Failure Notice from NDA, the Licensees and the Ultimate Parent Company shall, in relation to each matter specified in the notice, comply with clause 11.6, and the provisions of clause 11.7 shall apply in relation to each matter specified in such notice.

Emergencies, Applicable Law and Regulatory Requirements

7.10. Notwithstanding any other provision of this Agreement, the parties acknowledge and agree that:

(A) nothing in this Agreement shall prevent a Licensee from taking such action as it considers necessary:

(i) in an emergency to prevent, mitigate or remedy any event that may prejudice the safety of employees or the public or may harm the environment; or

(ii) to comply with any Applicable Law, including (without limitation) to prevent, mitigate or remedy any breach of a limitation or condition of a Licence or of an authorisation issued under the Radioactive Substances Act 1993,

provided that, if the occurrence of the emergency or the taking of any action under paragraph (i) or (ii) above gives rise to an increase in Costs of Discharging Liabilities, the terms of this Agreement shall apply in determining whether the increase in Costs constitutes an Excluded Liability or not; and

(B) the Licensees are not required, pursuant to this Agreement, to do any act or omit to do any act if:

(i) any Regulator would consider such act or omission unacceptable; or

42

(ii) the act or omission would cause the Licensee to be in breach of any Applicable Law; and

(C) nothing in this Agreement shall oblige NLF, NDA or the Secretary of State to monitor a Licensee’s compliance with the Minimum Performance Standard.

8. OPERATIONAL CHANGES

Notification of Proposed Operational Changes

8.1. Each Licensee shall be obliged promptly to notify NDA and the Secretary of State of any proposed Operational Change which is, or should reasonably be, expected by the Licensee to give rise to an increase in the Net Present Value of Costs of Discharging Liabilities of £1,000,000 or more. For the purposes of this Agreement, in determining the amount of an increase in the Net Present Value of Costs of Discharging Liabilities that a proposed Operational Change has resulted in, would result in, or should reasonably be expected to result in, the increase in Costs of Discharging Liabilities in relation to a Power Station or a Licensee as a result of a proposed Operational Change shall be aggregated with the increase in Costs of Discharging Liabilities in relation to all other Power Stations or Licensees in respect of which the same Operational Change is, or is proposed to be, implemented (whether or not the proposed change is implemented at the same time or at different times in relation to each Power Station or Licensee).

Restriction on Implementing Operational Changes

8.2. Subject to clause 7.10, a Licensee shall not implement an Operational Change which is required to be notified to NDA and the Secretary of State in accordance with clause 8.1 unless the Licensee provides a certificate to NDA and the Secretary of State signed by one of its directors or the relevant Power Station Manager certifying:

(A) that, to the best of the Licensee’s knowledge and belief, having taken all reasonable care to ensure that such is the case, the proposed Operational Change is not a Key Operational Change; and

(B) whether the Operational Change is a Regulator-required Change, an Anticipatory Change or a Licensee Change.

8.3. Subject to clause 7.10, except as otherwise permitted by the following provisions of this clause 8 (Operational Changes), each Licensee undertakes to NLF and the Secretary of State not to make or implement any Key Operational Change unless:

(A) if the Key Operational Change is a Regulator-required Change, the Licensee has complied with the provisions of clause 8.4; or

(B) if the Key Operational Change is an Anticipatory Change, the Licensee has complied with the provisions of clause 8.5; or

43

(C) if the Key Operational Change is a Licensee Change, the Licensee has complied with the provisions of clause 8.6.

Regulator-required Changes

8.4. In relation to a proposed Regulator-required Change which is a Key Operational Change:

(A) the Licensee shall give notice in writing to NDA (a “Regulator-required Key Operational Change Notice”) specifying in reasonable detail the proposed Operational Change including details of the applicable requirements of the Regulator or Applicable Law giving rise thereto, and shall promptly provide NDA with such information as it may reasonably request;

(B) a Regulator-required Key Operational Change Notice shall be given:

(i) within 10 Business Days after the Licensee becomes aware of the requirement imposed by the Regulator or Applicable Law in respect of which the Operational Change is required; or

(ii) if later, immediately after the Licensee, using all reasonable endeavours to do so, determines in reasonable detail the Operational Change required to comply with the requirements of the Regulator or Applicable Law;

(C) within 20 Business Days of receipt of the Regulator-required Key Operational Change Notice, NDA shall give notice in writing to the Licensee confirming whether or not it approves the Operational Change. If NDA:

(i) either approves the Operational Change or fails to give such notice within the 20 Business Day period, the Licensee may implement the Key Operational Change;

(ii) gives notice to the Licensee within the 20 Business Day period that it objects to the proposed Operational Change (whether in whole or in part), NDA and the Licensee shall meet as soon as reasonably practicable, and in any event not later than 10 Business Days following receipt of the notice by the Licensee, to discuss the proposed Operational Change and the reasons for NDA’s objection to the proposed Operational Change; if, following such meeting, NDA agrees to the Operational Change, the Licensee may then implement the same, in accordance with the scope of NDA’s approval;

(D) the Licensee will, so far as is reasonably practicable, consult with NDA in relation to any response to a Regulator in respect of the Operational Change and will respond to and deal with any requirements or proposals of a Regulator in the same manner as it would have done had the Licensee not had the benefit of the Liabilities Documents and been liable to fund any increase in Costs of Discharging Liabilities arising as a result of the proposed Operational Change;

44

(E) notwithstanding the foregoing provisions of this clause 8.4, the Licensee shall be entitled to implement an Operational Change specified, directed or otherwise formally required by a Regulator without the approval of NDA;

(F) notwithstanding the foregoing provisions of this clause 8.4, the Licensee shall be entitled to implement a Regulator-required Change which has not been specified, directed or otherwise formally required by a Regulator without the approval of NDA if:

(i) the Licensee has complied with the foregoing provisions of clause 8.4; and

(ii) failure by the Licensee to implement the proposed Operational Change within 6 months of service of the Regulator-required Key Operational Change Notice would result in the Licensee being in breach of Applicable Law,

unless a reasonable and prudent operator of a nuclear power generating plant, who did not have the benefit of the Liabilities Documents and who bore responsibility for the Costs of Discharging Liabilities and the Discharge of Qualifying Liabilities in relation to the Power Station would reasonably be expected to Close the Power Station rather than implement the Operational Change; and

(G) any increase in Costs of Discharging Liabilities arising as a result of a Regulator-required Change being implemented in accordance with this clause 8.4 shall then constitute Costs of Discharging Liabilities and shall not constitute Disqualified Liabilities. However, if the Licensee fails to comply with the provisions of this clause 8.4 and makes the proposed Operational Change in any event, any increase in Costs of Discharging Liabilities arising as a result of the Operational Change being implemented shall be deemed to be Disqualified Liabilities.

Anticipatory Changes

8.5. In relation to a proposed Anticipatory Change which is a Key Operational Change:

(A) the Licensee shall give notice in writing to NDA (the “Anticipatory Key Operational Change Notice”) specifying in reasonable detail the proposed Operational Change and the reasons for the proposed change, which shall include details of (i) the requirements of the relevant Applicable Law or Accepted Standard or condition of Licence or other permission, authorisation or consent which gives rise to the proposed Operational Change, and (ii) an explanation setting out in reasonable detail the reasons why the proposed change will be needed and the consequences of the Licensee failing to implement the proposed Operational Change and shall promptly provide NDA with such information as it may reasonably request;

(B) within 40 Business Days of receipt of the Anticipatory Key Operational Change Notice, NDA shall give notice in writing to the Licensee confirming whether or not it approves the Operational Change. If NDA approves the Operational Change or if NDA fails to give such notice within the 40 Business Day period, the Licensee may implement the Key Operational Change;

45

(C) NDA shall approve the proposed Operational Change in accordance with clause 8.5(B) if it is reasonably satisfied that:

(i) the change proposed by the Licensee (in terms of the nature and timing of the proposed change) is, at the time the change is proposed to be implemented, a reasonable change to make in order for the Licensee to ensure future compliance with the specified Applicable Law or Accepted Standard or condition of Licence or other permission, authorisation or consent; and

(ii) a reasonable and prudent operator of a nuclear power generating plant, who did not have the benefit of the Liabilities Documents and who bore responsibility for, and Costs of, the Discharge of Qualifying Liabilities would reasonably be expected to make such Operational Change even if no economic benefit was to be achieved as a result of the Operational Change;

(D) if NDA gives notice to the Licensee in accordance with clause 8.5(B) that it objects to the proposed Operational Change (whether in whole or in part), NDA and the Licensee shall meet as soon as reasonably practicable, and in any event not later than 30 Business Days following receipt of the notice by the Licensee, to discuss the proposed Operational Change and the reasons for NDA’s objection to the proposed Operational Change;

(E) if, following compliance with clause 8.5(D), NDA does not approve the proposed change, the matter in dispute may be referred by the Licensee to the Expert for resolution pursuant to clauses 42.4 to 42.11 on the basis described in clause 8.5(F);

(F) if the Licensee has complied with the foregoing provisions of this clause 8.5, and either the NDA approves the proposed change or the Expert determines that the proposed change is, at the time the change is proposed to be implemented, (i) a reasonable change to make at that time in order for the Licensee to ensure future compliance with the specified Applicable Law or condition of Licence or other permission, authorisation or consent and (ii) a change that a reasonable and prudent operator of a nuclear power generating plant, who did not have the benefit of the Liabilities Documents and who bore responsibility for the Costs of Discharging Liabilities and the Discharge of Qualifying Liabilities would reasonably make at that time even if no economic benefit was to be achieved as a result of the Operational Change, the Licensee shall be entitled to implement the proposed Anticipatory Change; and

(G) any increase in Costs of Discharging Liabilities arising as a result of an Anticipatory Change being implemented in accordance with this clause 8.5 shall then constitute Costs of Discharging Liabilities and shall not constitute Disqualified Liabilities. However, if the Licensee fails to comply with the provisions of this clause 8.5 and makes the

46

proposed Operational Change in any event, any increase in Costs of Discharging Liabilities arising as a result of the Operational Change being implemented shall be deemed to be Disqualified Liabilities.

Licensee Changes

8.6. In relation to a Licensee Change that is a Key Operational Change:

(A) the Licensee shall give notice in writing to NDA (a “Licensee Key Operational Change Notice”), specifying in reasonable detail the proposed Operational Change and details of the increase in Costs of Discharging Liabilities which would arise, or could reasonably be expected to arise, as a result of the proposed Operational Change being implemented and the Licensee shall promptly provide NDA with such information as it may reasonably request;

(B) within 40 Business Days of receipt of the Licensee Key Operational Change Notice, the Licensee and NDA shall meet to discuss the proposed Operational Change and agree the compensation to be paid by the Licensee to NLF in accordance with clause 9 (Compensation for Key Operational Changes), and the Licensee may implement the Operational Change following such agreement and payment of the compensation (or, if payment is by instalments, of the first instalment); and

(C) if the Licensee fails to comply with the provisions of this clause 8.6 and implements the proposed Operational Change in any event, any increase in Costs of Discharging Liabilities arising as a result of the Operational Change being implemented shall be deemed to be Disqualified Liabilities.

Secretary of State Changes

8.7 (A) If (i) the Secretary of State (with the approval of Her Majesty’s Treasury) or NDA so requests, and (ii) the Secretary of State or, as the case may be, NDA has complied with this clause 8.7, a Licensee shall, subject to the provisions of this clause 8.7, make a Secretary of State Change. Subject to the provisions of clause 8.7(C) there shall be no limitations on the nature of a Secretary of State Change requested by the Secretary of State or NDA and a Secretary of State Change may include a request to continue Operating at a Power Station after the Scheduled Closure Date or actual Closure Date of such Power Station.

(B) In relation to a proposed Secretary of State Change, the Secretary of State or, as the case may be, NDA shall give notice in writing to the Licensee specifying in reasonable detail the proposed Operational Change and the reasons for the proposed change, including details of the reduction in Costs of Discharging Liabilities which would arise, or could reasonably be expected to arise, as a result of the proposed change being implemented.

(C) Except as set out below, the Licensee shall be required to implement the proposed Operational Change following the agreement or determination of the compensation to be paid by NLF to the Licensee in accordance with clause 9

47

(Compensation for Key Operational Changes). The Licensee shall not be required to implement a Secretary of State Change if:

(i) the proposed Operational Change will not result in, or could not reasonably be expected to result in, a reduction in the Net Present Value of Costs of Discharging Liabilities of £10,000,000 or more;

(ii) a reasonable and prudent operator who was responsible for implementing the proposed Operational Change and who stood to bear all Costs of Discharging Liabilities arising in connection with the Power Station would, acting reasonably and taking account of any compensation or other amounts receivable in connection with the proposed Operational Change, not make the requested Operational Change; or

(iii) a Regulator objects to the proposed Operational Change.

(D) If a Licensee refuses to implement an Operational Change on the basis of one of the reasons set out in clause 8.7(C), and the NDA does not agree with the reason for such refusal, and NDA and the Licensee are unable to resolve the dispute within 60 Business Days, the matter in dispute may be referred by the Licensee or NDA to the Expert for resolution pursuant to clauses 42.4 to 42.11 as to whether any of such reasons are met; provided that no determination by the Expert may require the Licensee to implement a Secretary of State Change to which a Regulator objects.

(E) Subject to clause 8.7(C), if, following compliance with clause 8.7(B) and agreement or resolution pursuant to clause 8.7(D), it is found that the Licensee has no grounds to refuse to implement the proposed Operational Change and the Licensee fails to implement the proposed Operational Change, any Costs of Discharging Liabilities which would not have arisen had the Licensee implemented the proposed Operational Change shall be deemed to be Disqualified Liabilities.

(F) If a Secretary of State Change requires a Licensee to postpone the Scheduled Closure Date of a Power Station, such postponement may be for a period of no longer than 12 months.

Net Cost Operational Changes

8.8 (A) A Licensee shall not be required to make a Net Cost Operational Change but may propose to NDA that a Net Cost Operational Change be implemented by giving notice in writing to NDA, specifying in reasonable detail the proposed change and the reasons for the proposed change, including details of the reduction in Costs of Discharging Liabilities and the Net Cost to the Licensee which would arise, or could reasonably be expected to arise, as a result of the proposed change being implemented.

(B) NDA may require the Licensee to implement the proposed Net Cost Operational Change following:

(i) agreement by the Licensee and NDA to the proposed Net Cost Operational Change;

48

(ii) the agreement of the Licensee and the Secretary of State (with the approval of Her Majesty’s Treasury) or, as the case may be, NDA of the compensation to be paid by NLF to the Licensee in accordance with clause 9 (Compensation for Key Operational Changes); and

(iii) where applicable, acceptance of the proposed Net Cost Operational Change by the Regulators.

(C) If the Licensee fails to implement the proposed Operational Change following satisfaction of clause 8.8(B), any Costs of Discharging Liabilities which would not have arisen had the Licensee implemented the proposed Operational Change shall be deemed to be Disqualified Liabilities.

Operational Liabilities Notices

8.9. If NDA believes that an Operational Change falling within clause 7.6(B) has or may have been implemented (whether or not such Operational Change constitutes a Key Operational Change) and that the Operational Change has resulted, or will or could reasonably be expected to result, in an increase in the Net Present Value of Costs of Discharging Liabilities of £1,000,000 or more, NDA shall be entitled to serve a notice on the Licensee (an “Operational Liabilities Notice”) within a reasonable period after NDA becomes aware that such Operational Change has or may have been implemented. Following receipt of an Operational Liabilities Notice from NDA, the Licensees and the Ultimate Parent Company shall, in relation to each matter specified in the notice, comply with clause 11.6, and the provisions of clause 11.7 shall apply in relation to each matter specified in such notice.

Disputes

8.10. In relation to any dispute arising under this clause 8 (Operational Changes) regarding whether a proposed Operational Change will result in an increase or decrease in Costs of Discharging Liabilities or in a Net Cost to a Licensee, or regarding the quantum of any such increase or decrease any party to the dispute may refer the dispute to the Expert for resolution.

Licensee Undertakings

8.11. Each Licensee, subject to the Secretary of State and NLF giving such confidentiality undertakings as is reasonable in the circumstances and to the Licensee’s obligations under the Licence, undertakes to the Secretary of State and NLF:

(A) to give access to records of its plant, inventories of materials and waste matter, operational processes and procedures at each Power Station and of all Operational Changes made on or after the Restructuring Principles Date. Each Licensee shall procure that sufficient details are included in its records to enable NDA and any Expert to whom a dispute is referred under the preceding provisions of this clause 8 (Operational Changes):

(i) to determine whether the Licensee has complied with the provisions of this clause 8 (Operational Changes); and

49

(ii) to assess the impact on the Costs of Discharging Liabilities and on the Net Cost to a Licensee of any Operational Change that has been or is proposed to be made;

(B) without charge to make such records (and copies or extracts thereof) available to NDA and any such Expert as they may reasonably require in such form and at such times as NDA and any such Expert may reasonably require; and

(C) to continue to carry out its existing activities, as required under the Licence, in respect of keeping under review methods of reducing Costs of Discharging Liabilities.

8.12. Without the written consent of NDA, a Licensee shall not change its operational review or modification procedures, including documentation requirements, in any way which will result in a material change to the manner in which a Licensee identifies or measures any Costs of Discharging Liabilities or increases in such Costs.

Review

8.13 (A) At the request of any party and in any event no later than the third anniversary of the Restructuring Date, NDA and the Licensees shall review how this clause 8 (Operational Changes) has operated in practice. Each of them shall use their reasonable endeavours to complete the review within three months of such request or the third anniversary of the Restructuring Date (as the case may be) and shall, in the conduct of the review:

(i) submit a paper to the other parties detailing the implementation of clause 8 (Operational Changes) in the period since the Restructuring Date and any proposals for improving the operation of clause 8 (Operational Changes); and

(ii) meet not less than twice to discuss in good faith the papers prepared under this clause 8.13 and any proposals for improving the operation of clause 8 (Operational Changes).

(B) The parties agree that the carrying out of a review pursuant to clause 8.13(A) does not prevent a party requesting a further review thereafter (in which case the provisions of clause 8.13(A) shall apply mutatis mutandis); provided that a review may not be requested within three years after completion of the previous review.

9. COMPENSATION FOR KEY OPERATIONAL CHANGES

Introduction

9.1. Where a Licensee Change which constitutes a Key Operational Change, a Secretary of State Change or a Net Cost Operational Change is proposed, the provisions of this clause 9 (Compensation for Key Operational Changes) shall apply in determining

50

the amount (if any) of compensation to be paid by the Licensee to NLF (in the case of a Licensee Change) or by NLF to the Licensee (in the case of a Secretary of State Change or a Net Cost Operational Change).

Compensation by Licensee

9.2. Where a Licensee Change is proposed and the Licensee is required to compensate NLF, the amount of compensation payable by the Licensee to NLF (the “NLF Compensation Amount”) shall be determined in accordance with the provisions of Schedule 5 (Determination of Liabilities and Compensation).

9.3. Following determination and payment of an NLF Compensation Amount, (or, if payment is by instalments, payment of the first instalment) the Licensee shall be entitled to implement the relevant Operational Change and the increase in Costs of Discharging Liabilities arising as a result of the implementation of the relevant Operational Change shall not be Disqualified Liabilities.

9.4. A Licensee shall make payment of an NLF Compensation Amount (or the first instalment thereof if the NLF Compensation Amount is to be paid in instalments pursuant to clause 9.5) within 20 Business Days of the agreement or determination of the NLF Compensation Amount and, in the case of payment in instalments, the matters set out in clauses 9.5(A) to (E).

9.5. If an NLF Compensation Amount is more than £1,000,000, the Licensee shall be entitled to pay the NLF Compensation Amount in instalments unless the Secretary of State objects, in her sole discretion, to the Licensee making payments in instalments. In determining whether to accept payment in instalments, the Secretary of State shall consult with the Licensee in good faith and shall take into account the amount of the NLF Compensation Amount, the creditworthiness of the Licensee and the Guarantors, and the security, if any, proposed to be granted to NLF to secure payment of the instalments. If the Secretary of State gives notice in writing to the Licensee that she does not agree to payment by instalments, within 40 Business Days of the agreement or determination of the NLF Compensation Amount, the Licensee must make payment of the NLF Compensation Amount in whole. If the Secretary of State gives notice in writing to the Licensee that payment in instalments is acceptable, or gives no notice, the Licensee shall be entitled to pay the NLF Compensation Amount in instalments as follows:

(A) the Licensee shall provide to the NLF such security for the instalment payments as the Secretary of State may reasonably require;

(B) the number of instalments shall be determined by the Secretary of State in consultation with the Licensee and, so far as practicable and consistent with the provisions of this clause 9.5, each instalment (other than the first and the last instalment) shall be of the same amount and the aggregate amount of instalments in each Financial Period shall not be less than £100,000;

(C) each instalment other than the first instalment shall be payable on 30 June in each year;

51

(D) the instalments shall be completed not later than the earlier of (i) the date on which the last Scheduled Closure Date for any of the Licensee’s Power Stations falls, and (ii) the date on which the net increase in Costs of Discharging Liabilities for which compensation is payable is reasonably expected to become due and payable or, if such increase is reasonably expected to become payable in part at different times, instalments with a Net Present Value equal to the part next due and payable shall be completed not later than the date on which that part is reasonably expected to become due and payable;

(E) outstanding instalments shall bear interest at the Licensee’s Cost of Borrowing (adjusted, as appropriate, to take account of any security provided under paragraph (A));

(F) if a Default Event occurs in relation to a Licensee or a Guarantor (other than a Default Event falling within clause 22.1(C)) at any time before all instalments are paid, all outstanding instalments (and interest, if any, thereon) shall become due and payable immediately upon the occurrence of the Default Event; and

(G) if a Default Event falling within clause 22.1(C) occurs in relation to a Licensee or a Guarantor at any time before all instalments are paid, all outstanding instalments (and interest, if any, thereon) shall become due and payable immediately upon NDA giving notice in writing to the Licensee.

9.6. Each Licensee acknowledges and agrees that its obligations to pay an NLF Compensation Amount pursuant to this clause 9 (Compensation for Key Operational Changes) are given for the benefit of NLF and the Secretary of State and that failure by the Licensee to pay an NLF Compensation Amount or any part thereof may result in the Secretary of State suffering a loss, cost, liability, expense or damage (including by way of having to make additional payments to NLF pursuant to this Agreement).

Compensation by NLF

9.7. Where a Secretary of State Change or a Net Cost Operational Change is proposed and NLF is required to compensate the Licensee, the amount of compensation payable by NLF to the Licensee (the “Licensee Compensation Amount”) and the timing of the payment of such Licensee Compensation Amount shall be determined in accordance with the provisions of Schedule 5 (Determination of Liabilities and Compensation) and shall be paid direct to an account of the Licensee notified to NLF and the Secretary of State (and not pursuant to clause 5 (Designated Accounts)). For the avoidance of doubt, the provisions of clauses 3.4 to 3.9 and clauses 4.4 to 4.8 shall not apply to payments made under this clause 9.7. Immediately following determination of a Licensee Compensation Amount, the Licensee shall implement the relevant Operational Change and each Licensee undertakes to implement such Secretary of State Change as soon as reasonably practicable and to consult with the Secretary of State as to the method of implementation of such Secretary of State Change, taking reasonable account of the Secretary of State’s representations.

52

10. STRATEGY APPROVAL PROCESS

Licensee Undertakings

10.1. Subject to clause 10.2, each Licensee undertakes to NLF and the Secretary of State, subject to the Licensee’s obligations under the Licence and to the confidentiality restrictions under the BNFL Historic Contracts:

(A) to give NLF and NDA notice in writing of any change to (i) the Scheduled Closure Date of a Power Station (as set out in Part 3 of Schedule 1 (Power Stations)) or (ii) the Scheduled Closure Date of a single reactor at a Power Station, as subsequently changed by notice in accordance with this clause, at least two years prior to the earlier of the existing or the new Scheduled Closure Date. However, the Licensee may, without prejudice to the terms of the Option Agreement, give less than two years’ notice if any unforeseen event (including any economic event) occurs which leads the Licensee to decide to cease permanently generating electricity at the Power Station (or at one of the reactors at a Power Station) within two years. In such event the Licensee shall give NLF and NDA notice as soon as is reasonably practicable in the circumstances;

(B) to obtain NDA’s approval in writing to any proposed change to a Scheduled Closure Date if (i) the proposed date falls after the Scheduled Closure Date of the Power Station set out in Part 3 of Schedule 1 (Power Stations), and (ii) the proposed change would result in, or could reasonably be expected to result in, an increase in Costs of Discharging Liabilities. Notwithstanding the foregoing:

(i) (a) NDA shall approve the proposed change if the Licensee demonstrates to the reasonable satisfaction of NDA that any economic benefits (including, without limitation, any economic benefit deriving from the deferral of the relevant Costs of Discharging Liabilities but excluding any future NLF Payments which may become payable) that are reasonably likely to accrue to NLF or the Secretary of State as a result of the proposed change to the Scheduled Closure Date (the “Benefit”) exceed the reasonably likely corresponding increase in Costs of Discharging Liabilities (the “Increased Liabilities”); and (b) in other circumstances, NDA shall take into account the Benefit in deciding whether to approve the proposed change; and

(ii) in respect of any Licensee proposal to stagger the Closure of individual reactors at a Power Station, the NDA shall approve the proposed change if the Licensee can demonstrate to the reasonable satisfaction of NDA that such a proposal is consistent with maximising the efficiency of the Closure of the relevant Power Station (in which case NDA shall also take into consideration the net impact of such proposed staggering of the Closure of individual reactors at that Power Station);

(C) (i)

(a) to produce or update and provide to NDA by 30 September 2005, for NDA’s approval, the initial submission of the Decommissioning Plan for each Power Station, and an Uncontracted Liabilities Discharge Plan; and

53

(b) to produce and provide to NDA, for NDA’s approval, an updated Decommissioning Plan for each Power Station (i) as and when required to do so under Applicable Law and (ii) three years before the Scheduled Closure Date for each Power Station, (but in no case earlier than 30 September 2005); and

(c) to produce and provide to NDA, for NDA’s approval, an updated Uncontracted Liabilities Discharge Plan as and when required to do so under Applicable Law but in any case no earlier than 30 September 2005; and

(d) three years before the Scheduled Closure date for each Power Station, to produce or update and provide to NDA (i) the draft defuelling safety case in respect of the Power Station, and (ii) the pro-forma environmental impact assessment of Decommissioning in respect of the Power Station,

provided further that the Licensees shall,

(e) in relation to each Power Station other than Dungeness B, ensure that the Decommissioning Plan, safety cases and environmental impact assessment referred to in paragraphs (a) to (d) above shall be sufficiently developed by the date three years prior to the Scheduled Closure Date for that Power Station so as to ensure that the relevant Power Station can be Decommissioned without undue delay upon the occurrence of an unforeseen Closure of that Power Station; and

(f) in relation to Dungeness B, ensure that the Decommissioning Plan, safety cases and environmental impact assessment referred to in paragraphs (a) to (d) above shall be sufficiently developed by the date three years prior to the Scheduled Closure Date of Dungeness B (or, where the Scheduled Closure Date of Dungeness B is prior to 30 September 2008, by 30 September 2005), so as to ensure that Dungeness B can be Decommissioned without undue delay upon the occurrence of its unforeseen Closure;

(D) to submit the following documents to NDA for approval:

(i) a document setting out a rolling three-year liabilities budget (which shall comprise Part Two of the Annual Liabilities Report) as shown in paragraph 2 of section 1 of Schedule 6 (Annual Liabilities Report)) describing the anticipated scope and expenditure to be applied towards the Discharge of Qualifying Liabilities, such Part Two to include the overall contracting strategy to be adopted; and

54

(ii) to the extent that any of the following contains a material deviation (whether economic, technical or otherwise) from the contracting strategy approved in clause 10.1(D)(i):

(a) the terms of the tendering process for any contract for the Discharge of Qualifying Liabilities which will incur, or could reasonably be expected to incur, Costs of Discharging Liabilities with a Net Present Value of £5,000,000 or more; and

(b) the terms of any agreement or arrangement with a contractor for Discharging Qualifying Liabilities which will incur, or could reasonably be expected to incur, Costs of Discharging Liabilities with a Net Present Value of £5,000,000 or more;

(iii) notwithstanding clause 10.1(D)(ii), a Licensee shall submit to NDA for approval:

(a) the terms of any agreement or arrangement with a member of the Group or an Associate of a member of the Group under which there will be incurred, or there could reasonably be expected to be incurred, Costs of Discharging Liabilities with a Net Present Value of £20,000,000 or more; or

(b) the terms of any agreement or arrangements with any other person under which there will be incurred, or there could reasonably be expected to be incurred, Costs of Discharging Liabilities with a Net Present Value of £25,000,000 or more; and

(iv) any change to an item approved under this clause 10.1(D)(ii) and (iii) if the change would result in, or could reasonably be expected to result in, an increase in Costs of Discharging Liabilities of ten per cent. of the contract value of such item or £5,000,000, whichever is the lower amount; and

(E) promptly to notify NDA of any change or proposed change to the Licence conditions in relation to a Power Station of which it becomes aware which will, or is reasonably expected to, give rise to an increase in Costs of Discharging Liabilities.

Role of Regulators

10.2. NDA agrees that, in reviewing any of those matters or documents submitted to it for approval pursuant to clause 10.1:

(A) it shall consult with the Regulators and the Licensees with the aim of adopting a common approach to such review;

(B) it shall not require a Licensee to do anything which would constitute a breach of Applicable Law; and

55

(C) in the event of:

(i) disagreement between a Regulator and NDA; or

(ii) receipt by a Licensee of inconsistent responses from NDA and any Regulator,

as to whether such approval shall be granted or whether such approval shall be conditional on any amendments, it shall, following reasonable efforts to resolve such disagreement or inconsistency, defer to the Regulator’s decision on such matter.

10.3. In submitting any plan or other item referred to in clause 10.1 to a Regulator and in dealing with any Regulator and responding to any proposals made by a Regulator in relation to any such plan or item, each Licensee shall act in the same manner as would reasonably be expected from a reasonable and prudent operator of a nuclear power generating plant who did not have the benefit of the Liabilities Documents and who bore responsibility for the Costs of Discharging Liabilities and the Discharge of Qualifying Liabilities dealt with in such plan or other item.

10.4. Where any matter under this Agreement requires a Licensee to obtain the consent or approval of a Regulator or participate in “Level 1, 2 or 3” (or equivalent) meetings with a Regulator in relation to (i) any Key Operational Change, (ii) any breach of the Minimum Performance Standard which is, will or is reasonably likely to result in an increase in the NPV of Costs of Discharging Liabilities of £1,000,000 or more, or (iii) the consideration or approval of any Decommissioning Plans or Uncontracted Liabilities Discharge Plans, the Licensee shall:

(A) copy to NDA any document to be submitted to the Regulator;

(B) give prompt notice to NDA of all such proposed “Level 1, 2 or 3” (or equivalent) meetings between the Licensee and the Regulator. Subject to the requirements of the Regulator, NDA may attend such meetings between the Licensee and the Regulator and the Licensee shall use its reasonable endeavours to ensure that NDA is able to attend such meetings; and

(C) whether or not NDA attends meetings between the Licensee and the Regulator, consult with NDA on the Licensee’s approach in discussions or negotiations with the Regulator. Where NDA does not attend any meeting referred to in clause 10.4(B), the Licensee shall keep NDA informed on a timely basis of the outcome of the meeting.

Licensee Plans

10.5 (A) Where a Licensee is required under this clause 10 (Strategy Approval Process) to prepare any Decommissioning Plan, Uncontracted Liabilities Discharge Plan, environmental impact assessment, defuelling safety case or any other paper, report or item for approval by NDA, the relevant plan or other item referred to above shall be prepared to the standard that would be applied by a reasonable and prudent operator of a nuclear power generating plant who did not have the

56

benefit of the Liabilities Documents and who bore responsibility for, and Costs of Discharging Liabilities and the Discharge of Qualifying Liabilities dealt with in the plan, assessment, safety case or other paper, report or item.

(B) NDA shall be entitled to serve notice in writing on a Licensee if it believes the Licensee has failed to comply with clause 10.5(A). If the Licensee disputes that a plan or other item notified by NDA failed to comply with clause 10.5(A), NDA and the Licensee shall meet within 30 Business Days of the notice served by NDA to resolve the dispute. If the dispute is not resolved within 30 Business Days of such meeting, the Licensee may refer the matter to the Expert for determination pursuant to clauses 42.4 to 42.11.

(C) If it is agreed by NDA and the Licensee, or the Expert determines, that the relevant plan or item has not been produced in compliance with clause 10.5(A), NDA shall be entitled, without prejudice to any other provision of this Agreement, to withhold its consent to the approval of any such plan or item and in such case the Licensee shall be obliged to revise the relevant plan or other item to comply with clause 10.5(A) as soon as reasonably practicable following such agreement or determination.

NDA Response

10.6. Save where a matter has previously been referred to NDA by a Licensee under clause 11 (Annual Liabilities Report) (in which case the provisions of clause 11.4 shall apply) NDA shall notify a Licensee of any approval or objection in relation to any matter referred to it under clause 10.1 in writing as soon as reasonably practicable and in any event within 90 Business Days of receipt of the matter submitted to it for approval (if it relates to approval of strategy) or 60 Business Days (if it relates to approval of budgets) or, if the matter also requires the approval of a Regulator, not later than the date on which the Regulator gives its approval. To the extent that the matter notified to NDA pursuant to this clause is subject to the approval of a Regulator, the Secretary of State shall procure that NDA consults with the Regulator and acts in a manner consistent with the Memorandum of Understanding.

Licensee response to NDA

10.7. Each Licensee shall, without cost to NDA, promptly provide NDA with such information as it reasonably requires:

(A) to make an informed assessment of the matters referred to it under clause 10.1; and

(B) so far as the Licensee has such information available to it, to conduct such other reviews and assessments of the appropriate strategy for the Decommissioning and Discharge of Uncontracted Liabilities and of the Costs of Discharging Liabilities,

and to the extent required by NDA shall, so far as permitted by Applicable Law and the requirements of any Regulator, amend any of the matters referred to in clause 10.1 to the extent required to ensure that they are consistent with the conclusions of any such review and assessment by the NDA.

57

Use of Compatible Systems, etc.

10.8. Each Licensee shall use its reasonable endeavours to ensure that the systems used by it to produce Decommissioning Plans, Uncontracted Liabilities Discharge Plans, environmental impact assessments and defuelling safety cases in relation to a Power Station are such that the format of such plans, assessments and safety cases produced by the Licensee are consistent and compatible with the formats used by NDA in relation to those sites NDA is responsible for decommissioning. NDA shall provide each Licensee with such assistance as the Licensee may reasonably request, including the provision of information and training, in connection with the Licensee meeting its obligations under this clause 10.8. Each party shall bear its own costs and expenses in performing its obligations under this clause.

Memorandum of Understanding

10.9. NDA shall, prior to entering into the Memorandum of Understanding, provide the Licensees with a draft of the Memorandum of Understanding. If, within 20 Business Days of receipt of such draft Memorandum of Understanding, the Licensees serve notice on NDA requesting a meeting in respect of the draft Memorandum of Understanding:

(A) NDA shall not enter into the Memorandum of Understanding prior to the meeting taking place; and

(B) NDA shall meet the Licensees within a reasonable period of time and permit the Licensees a reasonable opportunity to present their comments on the draft Memorandum of Understanding.

11. ANNUAL LIABILITIES REPORT

Frequency of Reports

11.1. The Licensees shall produce and submit to NLF, NDA and the Secretary of State:

(A) (i) Part One of a first Annual Liabilities Report for the period from 29 November 2002 until 31 March 2004 (inclusive) by not later than 30 September 2004 and (ii) Part Two of a first Annual Liabilities Report for the period from the Restructuring Date or 1 April 2005 (whichever is the earlier) until 31 March 2006 (inclusive) by not later than 1st February 2005;

(B) (i) Part One of a second Annual Liabilities Report for the Financial Period from 1 April 2004 until 31 March 2005 (inclusive) by not later than 30th September 2005 and (ii) Part Two of a second Annual Liabilities Report for the Financial Period from 1 April 2006 until 31 March 2007 (inclusive) by not later than 1st February 2006; and

58

(C) thereafter, (i) within three months of the end of each subsequent Financial Period, Part One of the Annual Liabilities Report for that Financial Period and (ii) no later than two months prior to the beginning of a Financial Period, Part Two of the Annual Liabilities Report for that Financial Period.

In respect of the first Annual Liabilities Report referred to in paragraph (A), the Licensees shall consult with NDA in advance of the submission of such report pursuant to paragraph (A) to discuss the proposed form, content and detail of such report.

Contents of Reports

11.2. The parties acknowledge that the first Annual Liabilities Report produced pursuant to clause 11.1(A) shall contain such limited information and detail as the Licensees are reasonably able to provide for this period. Subject thereto, each Annual Liabilities Report shall include the information specified in Part 1 of Schedule 6 (Annual Liabilities Report) in such detail as is sufficient to enable NDA to make an informed assessment of the impact of the Operations of the Licensees on Costs of Discharging Liabilities, and the information shall be presented in the format set out in Part 2 of Schedule 6 (Annual Liabilities Report).

Board Approvals

11.3. The Annual Liabilities Report shall be reviewed and approved by the board of directors of the Ultimate Parent Company and of each Licensee and shall contain a statement that, to the best of the knowledge and belief of those boards, having taken all reasonable care to ensure that such is the case, except as disclosed in the Annual Liabilities Report:

(A) there have been no other Costs of Discharging Liabilities or Incremental Historic Liabilities incurred during the Financial Period;

(B) there have been no failures to comply with the Minimum Performance Standard which have given rise to, will give rise to, or could reasonably be expected to give rise to, any Disqualified Liabilities;

(C) there have been no other Operational Changes during the Financial Period which have given rise to, will give rise to, or could reasonably be expected to give rise to, any Disqualified Liabilities;

(D) no other matter or event has arisen or occurred which has given rise to, will give rise to or could reasonably be expected to give rise to, any Disqualified Liabilities; and

(E) the books, records and other materials (including databases and other forms of electronically held information) on which the Annual Liabilities Report is based are complete and accurate in all material respects and have been maintained on a basis consistent with the basis on which they have been maintained in the previous three years.

59

In respect of the first Annual Liabilities Report produced pursuant to clause 11.1(A), the reference to “reasonable care” in such statement shall be replaced with a reference to “reasonable care having regard to the limited nature of the information and detail reasonably available to the Licensees in the period within which such report is to be produced”.

NDA Review

11.4. NDA shall review each Annual Liabilities Report and within 30 Business Days of receipt of Part Two of the Annual Liabilities Report (and 60 Business Days in the case of Part One of the Annual Liabilities Report) shall serve on the Ultimate Parent Company and the Licensees one or more of the following:

(A) a notice stating that the relevant part of the Annual Liabilities Report does not provide NDA with sufficient information and specifying the additional information required by NDA; or

(B) a notice stating that it does not wish to carry out a more detailed review of any matter set out in the relevant part of the Annual Liabilities Report and that no matter described in the relevant part of the Annual Liabilities Report constitutes a Relevant Event or gives rise to a Disqualified Liability, save to the extent that:

(i) any such matter has been agreed or determined to constitute a Relevant Event or to give rise to Disqualified Liabilities;

(ii) any such matter has been approved or is under consideration pursuant to any other term of this Agreement; or

(iii) it emerges that the information in the relevant part of the Annual Liabilities Report did not comply with the requirements of clause 11.2; or

(C) a notice (a “Review Notice”) that it wishes to carry out a more detailed review of such matters as are disclosed in the relevant part of the Annual Liabilities Report and specified in the Review Notice.

If NDA fails to serve any such notice within the period specified above, NDA shall be deemed to have served a notice under paragraph (B) above immediately prior to the expiry of the notice period. If NDA has approved a matter pursuant to clause 10.6, a notice shall be deemed to have been served by NDA under paragraph (B) above.

11.5. Without prejudice to the generality of clause 11.4(C), NDA shall be entitled to serve a Review Notice in relation to any matter set out in the Annual Liabilities Report which NDA has not otherwise approved or which is not under review in accordance with the terms of this Agreement and which it reasonably believes:

(A) has been categorised as a Regulator-required Change or an Anticipatory Change without meeting the criteria to qualify as such an Operational Change; or

(B) may give or may have given rise to a Disqualified Liability, provided that, in each case, the Review Notice sets out the basis on which NDA claims to be entitled to serve the Review Notice.

60

11.6. Following receipt from NDA of an MPS Failure Notice under clause 7.8, an Operational Liabilities Notice under clause 8.9, a Review Notice under this clause 11 (Annual Liabilities Report) or a notice under clause 11.4(A), the Licensees and the Ultimate Parent Company shall, and shall procure that the other members of the Group and their advisers shall, in relation to each matter specified in the notice (but subject to NDA giving such confidentiality undertaking as is reasonable in the circumstances and to each Licensee’s obligations under the Licences):

(A) provide such information to NDA as NDA may reasonably request (including copies or extracts in such form as NDA may require of any records, reports or other documents or databases, in whatever form held);

(B) allow access to such Power Stations and other sites and such personnel as NDA may reasonably require, having given the relevant Licensee or the Ultimate Parent Company, as the case may be, not less than 10 Business Days’ notice; and

(C) co-operate in good faith with NDA in order to enable NDA to make an informed assessment of each matter specified in the relevant notice.

11.7 (A) If, within six months of NDA serving a notice referred to in clause 11.6 and receiving all the information and access referred to in that clause in relation to a specified matter, NDA does not confirm in writing that the matter does give rise to a Disqualified Liability, that matter shall be deemed not to give rise to a Disqualified Liability.

(B) If the Licensee objects to NDA confirming that a matter gives rise to a Disqualified Liability, then it shall notify NDA of that fact within 30 Business Days of receipt of such confirmation. Not later than 30 Business Days after the Licensee gives such notice (or such later date as NDA and the Licensee may agree), the Licensee and NDA shall meet and seek to resolve the dispute in good faith.

(C) If the matter in dispute is not resolved in writing within 60 Business Days of that meeting (or such later date as NDA and the Licensee may agree), then either NDA or the Licensee may, by giving notice to the other, refer the dispute to an Expert for resolution pursuant to clauses 42.4 to 42.11.

(D) On the basis of the Expert’s determination of such question (and all relevant matters agreed between NDA and the Licensee), the Expert will determine whether the matter gives rise to any Disqualified Liabilities. The costs of the Expert shall be borne (i) by the relevant Licensee if it is determined that the matter gives rise to a Disqualified Liability, or that the Annual Liabilities Report was not in compliance with clause 11.2, as the case may be or (ii) by NDA if it is determined that the matter does not give rise to a Disqualified Liability or that the Annual Liabilities Report was in compliance with clause 11.2, as the case may be.

61

(E) If the Expert determines that the matter gives rise to a Disqualified Liability, the quantum of that Disqualified Liability shall be determined in accordance with Schedule 5 (Determination of Liabilities and Compensation) and payment for that Disqualified Liability shall be made in accordance with clause 11.8.

Disqualified Liabilities

11.8 (A) Except to the extent already discharged pursuant to clause 23.1(C), in relation to any Disqualified Liability arising under this clause 11 (Annual Liabilities Report) or any other provision of this Agreement, NLF, and not the Licensee responsible for the Disqualified Liability, shall be responsible for funding the discharge of that liability as and when it arises. However, the Licensee shall discharge the Disqualified Liability in whole or part if NDA gives notice in writing to NLF and the Licensee within 20 Business Days of the Disqualified Liability having been agreed or determined to have arisen directing that the Licensee shall so discharge the liability.

(B) If NDA does not require the Licensee to discharge a Disqualified Liability under clause 11.8(A):

(i) NLF shall discharge the Disqualified Liability on the same terms and in the same manner as Costs of Discharging Liabilities are funded under this Agreement (including clause 3 (NLF Payment Obligations) and clause 4 (Secretary of State Payment Obligation)) and the costs of discharging the Disqualified Liability shall be treated as a Cost of Discharging Liabilities for that purpose; and

(ii) the Licensee shall pay compensation to NLF in accordance with the following provisions of this clause 11.8.

(C) NDA and the Licensee shall determine the Net Present Value of the Disqualified Liability (or the relevant part thereof) in accordance with the provisions of Schedule 5 (Determination of Liabilities and Compensation). If the Net Present Value of the Disqualified Liability (or the relevant part thereof) is determined to be:

(i) equal to or less than £1,000,000, the Licensee shall pay the relevant amount in compensation to NLF in whole within 10 Business Days of determination of the Net Present Value of the Disqualified Liability (or the relevant part thereof); or

(ii) more than £1,000,000, the Licensee may pay the compensation amount in instalments unless the Secretary of State, in her sole discretion, objects to payment by way of instalments.

(D) In determining whether to accept payment in instalments, the Secretary of State shall consult with the Licensee in good faith and shall take into account the amount to be paid in respect of the Disqualified Liability, the creditworthiness of the Licensee and the Guarantors, and the security, if any, granted to NLF to secure payment of the instalments. If the Secretary of State gives notice in writing to the Licensee that she has not agreed to payment by instalments within 40

62

Business Days of the Agreement or determination of the Net Present Value of the Disqualified Liability, the Licensee must make payment of the amount in whole. If the Secretary of State gives notice in writing to the Licensee that payment in instalments is acceptable, or gives no notice, the Licensee shall be entitled to pay the amount in instalments as follows:

(i) in accordance with the provisions of clause 9.5(A), (B), (C), (E)(F) and (G); and

(ii) the instalments shall be completed not later than the earlier of (a) the date on which the last Scheduled Closure Date for any of the Licensee’s Power Stations falls, and (b) the date on which discharge of the Disqualified Liability is reasonably expected to become due and payable or, if the Disqualified Liability is payable in parts at different times, instalments with a Net Present Value equal to the part next due and payable shall be completed not later than the date on which that part is reasonably expected to become due and payable.

(E) NDA shall notify NLF of any amounts owed by a Licensee to NLF under this clause 11 (Annual Liabilities Report) within 10 Business Days of such amount being agreed or determined.

NLF Payment of Costs which are not Excluded Liabilities

11.9. Any increase in Costs of Discharging Liabilities arising as a result of any matter disclosed in an Annual Liabilities Report which is not an Excluded Liability and is not the subject of a Review Notice shall be paid by NLF and the Secretary of State, as the case may be, in accordance with the terms of this Agreement.

Adequacy of Compensation Amounts

11.10 (A) Each of NLF and the Secretary of State agrees that, if an NLF Compensation Amount or other amount is agreed or determined to become payable by a Licensee to NLF or the Secretary of State in respect of any Cost of Discharging Liabilities assumed or agreed to be met by NLF or the Secretary of State in accordance with the terms of this Agreement, the Licensee shall have no further liability to NLF or the Secretary of State in respect of the relevant Cost of Discharging Liabilities (other than in respect of its obligation to make payment of the NLF Compensation Amount or such other amount). The limitation set out in this clause 11.10(A) shall not apply if, in agreeing or determining the NLF Compensation Amount or other amount, the Licensee or any member of the Group wilfully, negligently or in bad faith withholds relevant information or provides false or misleading information to NLF or the Secretary of State, any of their advisers or any Expert.

(B) Each Licensee agrees that, if a Licensee Compensation Amount or other amount is agreed or determined to become payable by NLF or the Secretary of State in respect of any Cost of Discharging Liabilities assumed or agreed to be met by NLF or the Secretary of State in accordance with the terms of this Agreement, NLF and the Secretary of State shall

63

have no further liability to the Licensees in respect of the relevant Cost of Discharging Liabilities (other than in respect of its obligation to make payment of the Licensee Compensation Amount or such other amount). The limitation set out in this sub-clause shall not apply if, in agreeing or determining the Licensee Compensation Amount or other amount, NLF or the Secretary of State wilfully, negligently or in bad faith withholds relevant information or provides false or misleading information to the Licensees, any of their advisers or any Expert.

12. DISTRIBUTION OF NLF SURPLUS

12.1. A Fund Review shall be initiated by NLF in January 2015 and each ten year anniversary thereafter and at such other times after January 2015 as the Secretary of State may request in writing, provided that:

(A) a Fund Review shall not be initiated unless the Secretary of State notifies NLF that she believes, acting reasonably, that the Fund Review will show that, as at the date of the Fund Review, the Estimated Asset Value of the total assets of NLF less the Estimated Tax on NLF Assets will exceed 125 per cent. of the Estimated Liabilities (the “Funding Threshold”); and

(B) a Fund Review shall not be initiated within five years of completion of the previous Fund Review.

12.2. Each Fund Review shall be carried out in accordance with the provisions of Schedule 8 (Funds Review Procedure).

12.3. If, as part of a Fund Review, the Estimated Asset Value of the total assets of NLF less the Estimated Tax on NLF Assets exceeds the Funding Threshold, NLF will pay to the Secretary of State an amount equal to the amount of such excess (the amount of such excess being the “NLF Surplus”), but only to the extent that after such payment the Estimated Asset Value of the total assets of NLF less the Estimated Tax on NLF Assets as at the time of that Fund Review would equal or exceed the Funding Threshold.

12.4. In making any payment in accordance with clause 12.3, NLF shall pay such amount as, together with any Taxation payable by, chargeable on or otherwise recoverable from NLF by reason or in consequence of the amount in question becoming due and payable or being paid, is equal to the lower of (i) the full amount of the NLF Surplus, or (ii) such amount of the NLF Surplus as results in the Estimated Asset Value of the total assets of NLF less the Estimated Tax on NLF Assets as at the time of payment of the NLF Surplus being equal to or exceeding the Funding Threshold.

12.5. Payments due in accordance with this clause shall be paid by NLF within one month of the date of determination of the NLF Surplus unless the Secretary of State agrees otherwise in writing (which agreement may include a direction from the Secretary of State that the amount shall be paid in instalments over a period of time specified by the Secretary of State).

12.6. The Secretary of State may elect to waive in whole or in part her right to payment, if any, under this clause.

64

12.7. In determining the nature of the payments to be made to discharge its obligations under this clause and the means by which such payments are to be made, NLF will endeavour to minimise the amount of Taxation (if any) expected to be incurred by it in respect of such payments.

13. PAYMENTS BY NLF ON FINAL DISCHARGE OF QUALIFYING LIABILITIES

13.1. On the earlier of (i) all Power Stations having been fully Decommissioned and all Costs of Discharging Uncontracted Liabilities having been fully discharged and (ii) alternative arrangements for the Costs of Discharging Liabilities that are reasonably satisfactory to the Licensees, NLF and the Secretary of State having been made, NLF shall cease to have any further obligations to the Licensees under this Agreement, any assets of NLF then remaining will be converted into cash at the best rate then reasonably achievable and NLF will provide for all outstanding liabilities and the costs of its winding up. NLF shall do such things as are necessary to ensure that there are made payments of such amount as, together with any Taxation payable by or chargeable on or otherwise recoverable from NLF by reason or in consequence of the amount in question becoming due and payable or being paid, is equal to the balance outstanding in the following proportions:

(A) 99.9999 per cent. to the Secretary of State; and

(B) 0.0001 per cent. to the Trustees for the purposes of the Nuclear Trust.

13.2. In determining the nature of the payments to be made to discharge its obligations under clause 13.1 and the means by which such payments are to be made, NLF will endeavour to minimise the amount of Taxation (if any) expected to be incurred by it in respect of such payments.

13.3. For the purposes of this Agreement, “fully Decommissioned” means, in relation to a Power Station, the earliest of:

(A) the date on which the Licensee receives notification from the Licensing Authority under section 5(3)(a) of the Nuclear Installations Act 1965 that there has ceased to be any danger from ionising radiations from any thing at the Power Station; and

(B) the date on which a new Licence in relation to the Power Station is granted to another person who is not a party to this Agreement as a Licensee and who is not otherwise entitled to exercise any of the rights of a Licensee or an Approved Person under this Agreement by virtue of clause 33 (Assignment) or otherwise.

13.4. For the purposes of this Agreement, “fully discharged” means, in relation to a Licensee, the date on which NDA notifies the Licensee and NLF that, in its opinion, all Costs of Discharging Uncontracted Liabilities of that Licensee have been fully discharged, provided that, if the Licensee notifies NDA and NLF within three months of receipt of such notification by NDA that the Discharge of all Uncontracted Liabilities in relation to the Licensee is not complete and specifies further Costs of Discharging Uncontracted Liabilities, NLF, the Licensee and NDA shall meet to agree such additional Costs (or, if the parties cannot agree such additional Costs within one month of the notice from the Licensee, the matter shall be referred to an Expert

65

for determination). Following such agreement or determination, the Costs of Discharging Uncontracted Liabilities of the Licensee shall not be fully discharged until the work required to discharge such additional Costs has been completed.

14. ESCALATION

Unless expressly stated otherwise, all monetary amounts referred to in this Agreement are stated in March 2003 money values and shall be escalated in accordance with the following formula:

Am	=	Ao x Rm
		Ro

where:

“Am” is the relevant amount as escalated;

“Ao” is the relevant amount in March 2003 money values;

“Ro” is the Retail Price Index for the month of March 2003, and is 179.9;

“Rm” is the Retail Price Index for the month in which (i) payment is due, (ii) the event occurs which gives rise to the relevant amount, or (iii) calculation of the relevant amount is required (in each case the “relevant month”) and shall be estimated as follows if the Retail Price Index is not available:

where:

“m” is the month for which the index number is to be estimated;

“n” is the number of months between the relevant month and the month in which the index number has been most recently published;

“R_m-n” is the Retail Price Index for the month in which the index has been most recently published; and

“R_m-n-3” is the Retail Price Index for the month three months prior to Rm-n.

15. INTEREST

15.1. If a party fails to pay any sum payable by it under this Agreement on the due date for payment, it shall pay interest at LIBOR plus 2 per cent. per annum on that sum for the period from and including the due date up to the date of actual payment (after as well as before judgment).

66

15.2. The provisions of clause 15.1 shall not apply to late payments to which clause 3.7(B) applies but, for the avoidance of doubt, interest is payable to a relevant Approved Person under clause 15.1 in respect of the period from and including the date of notification by such Approved Person of such late payment penalty pursuant to clause 3.7(B) until payment of the same by NLF.

15.3. Interest on each sum shall accrue from day to day and shall be compounded on each anniversary of the due date for payment.

15.4. Without limiting clause 27 (Remedies and Waivers), the right to receive interest under this clause in respect of any unpaid sum is not exclusive of any rights, powers and remedies provided by law in respect of the failure to pay the relevant sum on the due date or at all.

16. ADMINISTRATION OF NLF

16.1. NLF shall keep complete accounts and records of all monies received or paid by it and of all other matters which should be recorded for the proper administration of the arrangements contemplated by this Agreement. The Secretary of State, NDA and the Licensees shall be entitled to inspect and take copies of any such accounts and records on giving reasonable notice to NLF and shall bear NLF’s out-of-pocket expenses in connection therewith.

16.2. NLF shall provide to the Licensing Authority, when so requested by any Licensee, such information as such Licensee shall reasonably request and such Licensee shall bear NLF’s out-of-pocket expenses in connection therewith.

16.3. At all times after the Restructuring Date until all Costs of Discharging Liabilities are discharged, NLF shall maintain:

(A) such insurances in such amounts as are in NLF’s reasonable opinion appropriate; and

(B) such further insurances in such amounts as NDA shall notify to NLF as being in NDA’s reasonable opinion appropriate.

NLF shall at any time on reasonable notice supply copies of all insurance policies, cover notes, premium details and other documents and evidence of compliance with this clause 16.3 to NDA.

16.4. At all times after the Restructuring Date NLF shall ensure that there are in place such arrangements for the safekeeping of NLF’s assets and investments, the settlement of transactions effected by the Investment Managers, the collection of income and the effecting of other administrative actions in relation to NLF’s assets and investments as NLF, after consulting with NDA and the Investment Managers, shall reasonably consider to be appropriate and in accordance with best practice for the time being.

67

16.5. NLF shall, upon the reasonable request of NDA, require the Actuary and/or the Investment Managers to prepare a valuation and/or report relating to the assets of NLF at such times as NDA may reasonably require and shall promptly forward a copy of each such valuation and report to NDA.

16.6. NLF shall prepare and deliver to NDA and each of the Licensees:

(A) audited annual accounts of NLF within three months of the end of the period to which they relate;

(B) not later than 30 days prior to the beginning of each Financial Period, an annual budget of NLF Administration Costs to be incurred in that Financial Period, a cash flow forecast of the timing of payment of such Administration Costs and such other information relating to NLF Administration Costs as the Licensees or NDA may from time to time reasonably require; and

(C) as soon as reasonably practicable after the same become available, details of any material difference (or expected material difference) between budgeted NLF Administration Costs and NLF Administration Costs actually incurred.

16.7. Where NLF exercises any discretion granted to it, or makes any decisions or judgment which it is entitled or obliged to make, or complies with its obligations, or otherwise takes any action, in each case, in accordance with, or as contemplated by, this Agreement, NLF may in respect of any such matter:

(A) seek the advice of one or more Advisers on any aspect of such performance; and

(B) rely on the advice received from any such Adviser unless NLF knows (without being obliged to make any further enquiries) such advice is wrong,

and the parties agree and acknowledge that NLF shall not be liable for any judgment, decision or discretion exercised or taken by it in good faith in reliance on such advice.

16.8. The parties acknowledge and agree that NLF shall be entitled to (i) appoint Advisers, (ii) employ staff, and (iii) enter into arrangements in relation to real property and other assets, in order to comply with its obligations under the Liabilities Documents and it shall be entitled to apply the assets of NLF to meet costs incurred in relation to such appointments and arrangements.

17. ADMINISTRATION COSTS

17.1. Subject to clause 17.2, the Licensees shall on demand by NLF, NDA or the Secretary of State (as the case may be) reimburse NLF, NDA or the Secretary of State (as the case may be) against an appropriate supporting invoice and receipt for any Administration Costs properly and reasonably incurred by them.

17.2. The aggregate liability of the Licensees under clause 17.1 for Administration Costs shall not exceed £1,000,000 in each Financial Period, provided that any Administration Costs properly and reasonably incurred by NLF, NDA or the Secretary of State as a result of the occurrence of a Default Event or a breach of any of the Liabilities Documents by a Licensee or a

68

Guarantor shall be reimbursed by the Licensees and shall be disregarded for the purposes of determining whether the £1,000,000 threshold referred to in this clause has been exceeded.

17.3. The Licensees shall be entitled, on giving reasonable notice in writing to NDA, to review the budget of NDA for the next following financial period of NDA but only insofar as the budget relates to costs and expenses of NDA arising in connection with the performance of its obligations and the exercise of its rights under this Agreement.

17.4. NLF shall be entitled to apply any assets it has in discharging Administration Costs if (i) the Licensees fail to meet or reimburse Administration Costs in accordance with this clause, (ii) NLF incurs Administration Costs in any Financial Period in excess of the amount for which the Licensees are liable under this clause, or (iii) at such other times as NLF, in its absolute discretion, deems fit.

17.5. If in the circumstances described in paragraphs (i) and (ii) of clause 17.4 above NLF does not have sufficient assets to apply in the discharge of any NLF Administration Costs, NLF shall notify NDA in writing of that fact and request payment of such NLF Administration Costs by the Secretary of State. The Secretary of State shall make payment to NLF in respect of such NLF Administration Costs within 30 Business Days following receipt of the notice from NLF.

17.6. NLF undertakes to the Secretary of State and each of the Licensees that it will not, without the prior written consent of the Secretary of State and the Licensees, enter into any contract, transaction, obligation, commitment, arrangement or liability (other than those contemplated by this Agreement) which is inconsistent with or prejudicial to the terms of this Agreement or the other Liabilities Documents, and that it will not amend, extend or terminate any such contract, transaction, obligation, commitment or liability once entered into or undertaken.

18. INVESTMENT POLICY

18.1. The assets of NLF shall be invested in accordance with the Investment Policy set out in Schedule 9 (Investment Policy).

18.2. The Investment Policy may be amended by the Secretary of State by giving notice in writing to NLF of any such amendments, provided that the Secretary of State shall consult with NLF in relation to any proposed amendments before giving notice pursuant to this clause. Notwithstanding any other provision of this Agreement, the Secretary of State shall not require the consent of any other party to this Agreement before making any amendment to the Investment Policy.

18.3. NLF may also amend the Investment Policy with the consent in writing of the Secretary of State, such consent to be given by the Secretary of State in her absolute discretion.

69

19. CAPACITY OF NDA

Where the Secretary of State nominates the Nuclear Decommissioning Authority or any other person as NDA for the purposes of this Agreement:

(A) NDA shall perform the obligations expressed to be imposed on NDA, and exercise the rights expressed to be granted to NDA, under this Agreement pursuant to the authority delegated to it by the Secretary of State and in performing such obligations and exercising such rights under this Agreement, NDA shall act as agent of the Secretary or State; and

(B) the Secretary of State shall procure the performance of the obligations expressed to be obligations of NDA under this Agreement and, where this Agreement is expressed to confer a right, benefit or power on or in favour of NDA, such right, power or benefit shall be exercisable or enforceable by NDA for and on behalf of the Secretary of State who shall also be entitled to exercise and enforce such right, benefit or power in her own name.

20. REPRESENTATIONS AND WARRANTIES

20.1. The BE Parties jointly and severally represent and warrant to NLF and the Secretary of State that as at the date of this Agreement each of the warranties set out in this clause 20.1 is accurate in all respects and not misleading:

Due incorporation, capacity and authority

(A) each BE Party is a company duly incorporated and validly existing under the laws of England and Wales or the laws of Scotland;

(B) each BE Party has the requisite capacity, power and authority to enter into and perform this Agreement and the other Liabilities Documents;

(C) this Agreement constitutes and the other Liabilities Documents executed by each BE Party will, when executed, constitute valid and binding obligations of that BE Party in accordance with their respective terms;

No breach of other instruments or orders

(D) the execution and delivery of this Agreement and those of the Liabilities Documents to which each BE Party is a party will not:

(i) result in a breach of, or constitute a default under, any instrument by which it is bound; or

(ii) result in a breach of any order, judgment or decree of any court, governmental agency or regulatory body by which it is bound; or

(iii) require the consent of any person; and

other than (in the case of paragraphs (i) and (ii)), a breach or default that will not result in a Material Adverse Change (as defined in the Creditor Restructuring Agreement) or (in the case of paragraph (iii)), a consent the failure to obtain which will not result in a Material Adverse Change;

70

No insolvency

(E) no resolution has been passed by any BE Party for its winding-up (other than in the context of a solvent amalgamation or reconstruction in either case on terms previously approved in writing by the Secretary of State) and no court of competent jurisdiction has made an order for the winding-up or dissolution of any BE Party;

(F) no administrative receiver, receiver and manager or receiver has been appointed over all or a material part of the assets of any BE Party;

(G) no provisional liquidator or administrator has been appointed in relation to any BE Party;

(H) no BE Party has convened a meeting for a creditors’ voluntary liquidation, or for a creditors’ meeting following a members’ voluntary liquidation or for the consideration by creditors of a voluntary arrangement or scheme of arrangement (other than in the context of a solvent amalgamation or reconstruction, in either case on terms previously approved in writing by the Secretary of State);

(I) no distress, distraint, charging order, garnishee order, execution or other process has been levied or applied for in respect of any BE Party; and

(J) no BE Party has been subject to any proceeding or in a position analogous to that in paragraphs (E) to (I) in its jurisdiction of incorporation.

20.2. Each of the BE Parties undertakes to disclose in writing to NLF and the Secretary of State anything which is or may constitute a breach of or be inconsistent with any of the representations and warranties set out in clause 20.1 immediately after it comes to the notice of either of them.

20.3. If any property, rights or liabilities of a Licensee are to be acquired by the Secretary of State, NDA, a publicly owned company or any other person pursuant to the terms of a Liabilities Document and such transfer is to be effected by way of a transfer scheme under the Energy Act 2004, the Licensee undertakes to give such consent as is required to permit such transfer to proceed pursuant to the provisions of such Act.

21. COVENANTS

21.1. BE plc covenants as follows:

Information

(A) it shall provide the Secretary of State with the following information:

(i) all formal notices, statements and circulars (together, “Documents”) despatched by any member of the Group to its shareholders or creditors generally (or any class thereof), such Documents to be provided at the same time as they are despatched;

71

(ii) audited consolidated financial statements for the Group in accordance with UK GAAP, consistently applied, as soon as such statements are publicly released and in any event within 90 days of the end of each Financial Period;

(iii) all other quarterly or semi-annual financial statements of each member of the Group prepared in accordance with UK GAAP, consistently applied, as soon as such statements are publicly released;

(iv) all reports required to be published by the UKLA by virtue of the admission of any of the equity of the Ultimate Parent Company to the Official List of the UKLA and, if none of its equity is so listed, all such reports as if such equity were so admitted;

(v) all regulatory news statements; and

(vi) financial information which the Secretary of State may reasonably require to monitor the financial health of the business, including monthly cash flow information covering the period 18 months ahead.

Accounting Reference Period

(B) it shall not, and it shall procure that the Ultimate Parent Company and each Licensee shall not, make any change to its accounting reference period without the consent in writing of the Secretary of State; and

(C) if there is a change in the Ultimate Parent Company of the Group, it shall procure that the new Ultimate Parent Company shall adopt the same accounting reference period as the Ultimate Parent Company it is replacing.

21.2. Each of the BE Parties covenants as follows:

Conduct of Business

(A) it shall not, and shall procure that no member of the Group shall, directly or indirectly, enter into any material transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with or for the benefit of any of its Affiliates (excluding BNFL) unless such transaction or series of related transactions is entered into on terms no less favourable to the member of the Group than those terms which would be available in a comparable transaction in arm’s length dealings with an unrelated party, save for:

(i) transactions which comply with Condition 8.4 (Eggborough Transactions) of the terms and conditions of the Bonds (as scheduled to the Trust Deed);

(ii) the provision of benefit arrangements for any employee, officer or director, including vacation plans, health and life insurance plans, deferred compensation plans, director’s and officer’s indemnification agreements and

72

retirement or savings plans and similar plans, and any stock option or stock incentive plans (together with the issuance of securities pursuant to, or for the purpose of the funding of, any such agreements or arrangements), entered into in the ordinary course of business and which are customary in the industry;

(iii) transactions entered into prior to the Issue Date (as defined in the terms and conditions of the Bonds) or as part of the Restructuring (without limitation, pursuant to the Nuclear Liabilities Documentation as in effect on the Restructuring Date);

(iv) payment of compensation to and reimbursement of expenses of its employees, officers and directors in the ordinary course of business;

(v) advances to employees which are Permitted Investments;

(vi) its Trading Arrangements;

(vii) transactions entered into on any arm’s length basis in the ordinary course of business between members of the Group;

(viii) advances to employees, officers and directors (or guarantees of third party loans to employees, officers and directors) in the ordinary course of business;

(ix) transactions with BNFL which comply with Condition 8.6 (Limitations on transactions with BNFL) of the terms and conditions of the Bonds (as scheduled to the Trust Deed);

(x) Permitted Payments; and

(xi) any sale of Capital Stock of BE plc, other than Disqualified Capital Stock.

Negative Pledge

(B) it shall not, and shall procure that no member of the Group shall, except with the prior written consent of NLF and the Secretary of State, directly or indirectly create or agree to create or permit to arise or subsist any mortgage, pledge, lien, charge, assignment, hypothecation or other security interest or any other agreement or arrangement having the effect of conferring security (including, without limitation, any sale and leaseback but excluding, without limitation, any rights of set-off or combination of accounts arising under common law, in equity or under statute or regulation) (each a “Security Interest”), other than:

(i) any Security Interest existing on the Issue Date (as defined in the terms and conditions of the Bonds);

(ii) any Security Interest required to be granted pursuant to, or as a condition precedent to, the Liabilities Documents, including to secure the payment of the Decommissioning Default Payment (as defined in the Contribution Agreement);

73

(iii) any guarantee, indemnity or credit support in favour of a third party providing agency, brokerage, clearing or settlement services in respect of Trading Arrangements provided such guarantee, indemnity or credit support is for such services to the relevant member of the Group;

(iv) any Security Interest under court judgements or court orders to the extent that the same are adequately bonded and appeals have not been exhausted;

(v) any Security Interest arising by reason of taxes, assessments or other governmental charges not yet delinquent or which are being contested in good faith;

(vi) deposits to secure public, regulatory or statutory obligations or in lieu of surety bonds incurred in the ordinary course of business;

(vii) any lien arising by operation of law;

(viii) any rights of set-off with respect to demand or time deposits with financial institutions and banker’s liens and any depositary institution’s security in bank accounts with it in the ordinary course of business, except where the relevant member of the Group indicates that such deposit is made by way of collateral;

(ix) any Security Interest created by a member of the Group to secure Financial Indebtedness owing to another member of the Group;

(x) any Security Interest the principal purpose and effect of which is to allow the setting-off or netting of obligations of a member of the Group with those of a financial institution in the ordinary course of the cash management arrangements of that Group member;

(xi) any Security Interest represented by good faith deposits in connection with tenders, leases and contracts (other than contracts for the payment of money) of the relevant member of the Group;

(xii) any Security Interest to secure performance bonds, leases (including statutory and common law landlord’s liens), statutory obligations, surety and appeal bonds, letters of credit and other obligations of a like nature and incurred in the ordinary course of business;

(xiii) any Security Interest provided in connection with environmental licences and any other permits, licences or authorisations, or in compliance with any other regulatory requirements, in any such case in relation to any Permitted Business of the relevant Group member;

74

(xiv) any Security Interest over cash paid into an escrow account by any third party pursuant to any deposit or retention of purchase price arrangements entered into pursuant to any disposal or acquisition (permitted by the terms of the Bonds) made by a member of the Group;

(xv) any Security Interest created under or in connection with or arising out of the Balancing and Settlement Code, the Connection and Use of System Code, the Grid Code, required under the terms of a Group member’s Electricity Generation Licence, Electricity Supply Licence or Gas Shipper’s Licence or otherwise reasonably required to obtain and maintain access to, or use of, transmission and distribution systems and participation in wholesale electricity markets in England, Wales or Scotland by any member of the Group provided that any collateral so provided by any Eggborough Subsidiary is provided on terms such that, upon release, such collateral shall not be paid to it but shall instead be returned to another Group member;

(xvi) any Security Interest given by way of cash collateral or cash deposits in relation to Trading Arrangements or procurement contracts with suppliers, in each case entered into in the ordinary course of any member of the Group’s business (or any such Security Interest given in respect of letters of credit relating to such obligations);

(xvii) any Security Interest securing for the benefit of the vendor of a Renewables Obligation Certificate, emissions permits (in relation to the Eggborough Plant) or other similar or related permits, obligations or entitlements, (each, a “Permit”), some or all of the purchase price being payable in respect of such Permit, provided that such Security Interest only extends to such Permit and secures Financial Indebtedness in an amount not in excess of the purchase price for such Permit;

(xviii) any Security Interest over goods or documents of title arising in the course of letter of credit transactions entered into by a Group member in the ordinary course of business;

(xix) any provision for the retention of title to any asset by the vendor or transferor of such asset which asset is acquired by a Group member in a transaction entered into in the ordinary course of business, if it is normal market practice for such retention of title provision to be included for such a transaction, or arising under conditional sale or hiring arrangements in respect of goods supplied in the ordinary course of trading;

(xx) any Security Interest on assets of a member of the Group which becomes a member of the Group after the Restructuring Date, to secure obligations of that member of the Group existing at the date on which it becomes a member of the Group (but not any increase in principal amount (other than by capitalisation of interest) or extension of maturity of such obligations) provided that such Security Interest was not created in contemplation of or in connection with such company becoming a member of the Group, that such Security Interest shall not

75

extend to any other assets owned by any member of the Group and that such obligations are repaid in full within 180 days of such company becoming a member of the Group;

(xxi) any Security Interest over receivables comprising part of the Secured Basket (including any Security Interest over related insurance policies taken out by the seller of the receivables in relation to the debtors under such receivables and any Security Interest over the records and systems necessary for producing invoices relating to such receivables);

(xxii) any other Security Interest not permitted under paragraphs (i) to (xxi) above securing obligations (contingent or otherwise) of up to £10,000,000 in aggregate at any one time; and

(xxiii) renewals and/or refinancings referred to under paragraphs (i) to (xxii) provided that such renewal or refinancing (as the case may be) of the Security Interest is limited to all or part of the same property or assets (including any improvements, accessions, proceeds or dividends or distributions in respect thereof) or is in respect of property that is subject to a permitted Security Interest under this clause 21.2.

unless at the same time it grants security equally and rateably to the NLF and the Secretary of State to secure amounts that are or may become payable under the Liabilities Documents, provided that this clause 21.2(B) shall cease to apply on the later of (a) the date on which the NLF Payment Percentage (as defined in the Contribution Agreement) falls below 10 per cent. and (b) 31 March 2014. Notwithstanding anything to the contrary in this clause 21.2(B), no member of the Group may create or agree to create or permit to arise or subsist any Security Interest in respect of any of its benefits and rights under this Agreement or under the Historic Liabilities Funding Agreement. For the avoidance of doubt, no purpose trust declared, arising or subsisting in respect of moneys received by any member of the Group from the Secretary of State pursuant to the Historic Liabilities Funding Agreement, or from the Secretary of State or NLF pursuant to this Agreement, and which moneys are, in either case, required to be held on trust for the benefit of the Secretary of State or NLF until they are applied to the purpose for which they were given, shall constitute a Security Interest for the purposes of the foregoing;

No Reconstruction that Increases Liabilities

(C) it shall not, without the prior consent in writing of the Secretary of State (given with the approval of Her Majesty’s Treasury), undertake any corporate reconstruction, amalgamation, merger or demerger if to do so would result in, or could reasonably be expected to result in, a material increase in Costs of Discharging Liabilities;

76

Authorisations, etc.

(D) it shall maintain in force all authorisations, consents, approvals and licences that are necessary to ensure the validity and enforceability of its obligations under the Liabilities Documents; and

Preservation of Security

(E) it shall take all steps reasonably required to be taken by it to ensure the validity and enforceability of any security required to be granted to NLF or the Secretary of State under any provision of the Liabilities Documents.

21.3. Each of the BE Parties undertakes to disclose in writing to NLF and the Secretary of State anything which is or may constitute a breach of or be inconsistent with any of the covenants in this clause 21 (Covenants) immediately it comes to the notice of either of them.

22. EVENTS OF DEFAULT

22.1. Each of the events described below in this clause constitutes a “Default Event” in relation to a Licensee or a Guarantor (the “Defaulting Party”):

(A) the Defaulting Party fails to pay an amount due under this Agreement or any other Liabilities Document within 10 Business Days of the due date therefor, and such Default Event shall continue until such payment (together with any interest thereon) is made; or

(B) it is proved that monies provided to the Defaulting Party (excluding a Guarantor for the purposes of this clause 22.1(B)) by NLF following an application pursuant to clause 3 (NLF Payment Obligations):

(i) have, prior to payment of Costs of Discharging Liabilities in relation to which the application was made, been the subject of an assignment or security interest effected by the Defaulting Party in favour of a third party not previously approved by NDA or NLF in writing; or

(ii) have not, where so required by this Agreement, been held in a Designated Account; or

(iii) have not been applied in payment of such Costs of Discharging Liabilities within 15 Business Days of receipt by the Defaulting Party or of the due date for payment thereof, whichever shall be the later or held by that person for payment of Tax or Value Added Tax to the extent such monies have been provided in respect of Tax, or as the case may be, Value Added Tax obligations of the Licensee; or

(C) the Defaulting Party is in material or persistent breach of any other provisions of this Agreement or any other Liabilities Document and such breach, if capable of remedy, has not been remedied (i) where the remedy incorporates an Operational Change, within 60 Business Days, or (ii) in the case of any other matter, within 20 Business Days, after receipt by the Defaulting Party of notice from NLF or the Secretary of State requiring such remedy; or

77

(D) if by reason of the Perpetuities and Accumulations Act 1964 any option granted to the Secretary of State under the Option Agreement (or any replacement option as referred to in this paragraph) would become void if not exercised within 21 years of its grant, a Licensee does not grant a replacement option to the Secretary of State on the same terms as those contained in the Option Agreement within 3 months of receiving a request in writing to do so from the Secretary of State made within the final year of such 21 year period; or

(E) the Defaulting Party fails,

(i) within 10 Business Days after being called upon to do so by the Secretary of State, to provide a certificate signed by two of its directors certifying (without personal liability except in the event of fraud or wilful default) that it is not then unable to pay its debts within the meaning of section 123(1) of the Insolvency Act 1986; or

(ii) within 40 Business Days, after being called upon to do so by the Secretary of State to provide a certificate signed by two of its directors certifying (without personal liability except in the event of fraud or wilful default) that it is not then unable to pay its debts within the meaning of section 123(2) of the Insolvency Act 1986, provided that:

(a) if the Restructuring Date is on or prior to 31 March 2005, the Secretary of State may not require such a certificate prior to the publication of the Accounts in relation to the Financial Period ending on 31 March 2005; and

(b) if the Restructuring Date is after 31 March 2005, the Secretary of State may not require such a certificate prior to the date which is the later of: (1) two months following the publication of the Accounts in relation to the Financial Period ending on 31 March 2005; and (2) two months after the Restructuring Date,

and such Default Event shall continue for so long as no such certificate is provided; or

(F) the Defaulting Party passes a resolution for its winding up (other than in the context of a solvent amalgamation or reconstruction in either case on terms previously approved in writing by NLF and the Secretary of State or notified in writing to NLF and the Secretary of State prior to the date of this Agreement) or a court of competent jurisdiction makes an order (which is not rescinded) for its winding up or dissolution, and such Default Event shall continue thereafter without limitation in time; or

(G) the appointment of an administrative receiver, receiver and manager or receiver over all or a material part of the Defaulting Party’s assets, and such a Default Event shall continue until there is no administrative receiver, receiver and manager or receiver in office in relation to those assets; or

78

(H) the appointment of a provisional liquidator or administrator in relation to the Defaulting Party, and such a Default Event shall continue until the provisional liquidator or administrator ceases to hold that office; or

(I) the making of an administration order in relation to the Defaulting Party and such a Default Event shall continue until the administration order is discharged; or

(J) other than in the context of a solvent amalgamation or reconstruction in either case on terms previously approved in writing by NLF and the Secretary of State or notified in writing to NLF and the Secretary of State prior to the date of this Agreement, the Defaulting Party convenes a meeting for a creditors’ voluntary liquidation, or for a creditors’ meeting following a members’ voluntary liquidation or for the consideration by creditors of a voluntary arrangement or scheme of arrangement and such a Default Event shall continue unless and until the relevant resolution or resolutions are voted on and not passed or are withdrawn; or

(K) the Defaulting Party is subject to any proceeding or in a position analogous to that in paragraphs (E), (F), (G), (H), (I) or (J) in its jurisdiction of incorporation.

23. EFFECT OF DEFAULT EVENT

23.1. Without prejudice to clause 23.3, if a Default Event is continuing (or, in the case of a Default Event within clause 22.1 (B) or (C) for a period of 30 Business Days following receipt by the Secretary of State of written notice of the breach from the Defaulting Party after which period such Default Event shall be deemed to have ceased) in relation to a Licensee or Guarantor which has not been waived in writing by the Secretary of State, NDA may give notice in writing to the Licensees that some or all of the following provisions apply:

(A) the Licensees’ rights to receive any payment under clause 9 (Compensation for Operational Changes) shall be suspended, provided that a Licensee shall be entitled to receive suspended payments (without any additional amount in respect of interest for deferred payment) on cessation or waiver of the Default Event;

(B) the Licensees shall not be entitled to take part in the exercise of rights given to the Licensees under the following clauses of this Agreement: clause 8.6; clause 8.8; clause 11.8(C)(ii); clause 11.8(D); clause 16.6; clause 17.3 and clause 33 (except for clauses 33.3 and 33.7); or

(C) the Secretary of State may, by notice in writing to the Licensees and NLF, elect that such Excluded Liabilities for which NLF or the Secretary of State has not otherwise assumed responsibility under the Liabilities Documents (including pursuant to the Option Agreement) as are designated in the notice shall be discharged by the Secretary of State or, if specified in the notice, the NLF. In such event, the Licensees shall indemnify and keep indemnified NLF and the

79

Secretary of State from and against any Loss which NLF or the Secretary of State properly and reasonably incurs or suffers, directly or indirectly, in discharging those Excluded Liabilities, including (i) any loss arising in respect of any amount paid by the Secretary of State to NLF under this Agreement which would not have been paid but for such discharge, (ii) any loss arising in respect of any amount not repaid by NLF to the Secretary of State under this Agreement which would have been repaid by NLF to the Secretary of State but for such discharge, (iii) any costs incurred or suffered by the Crown upon the acquisition by it or any other person of any Power Station or other property of a Licensee or (iv) any costs incurred or suffered by the Crown upon the acquisition by it by operation of law of any Power Station or any other property of a Licensee following a Default Event.

For the avoidance of doubt, the parties acknowledge and agree that, subject to clause 23.3 and except as expressly set out at paragraph (A) above, payments under this Agreement (including, without limitation, pursuant to clause 3 (NLF Payment Obligations) and clause 4 (Secretary of State Payment Obligation)) shall continue on the terms of this Agreement, notwithstanding the occurrence or continuation of a Default Event or a breach of any other Liabilities Document.

23.2. The parties acknowledge that, notwithstanding the occurrence of a Default Event under clause 22.1 (E) to (K) (inclusive) in respect of a Licensee or Guarantor:

(A) the Secretary of State and NLF shall each remain liable to perform their obligations under this Agreement and the other Liabilities Documents; and

(B) without prejudice to any obligations of the Licensees or Guarantors arising under the terms of the Liabilities Documents or the terms of any other agreement or instrument, the Secretary of State and NLF shall not be entitled to any claim or remedy by reason of the Default Event, nor shall the relevant Licensee or Guarantor have any liability to the Secretary of State solely by reason of the Default Event, whether for damages, set-off, counterclaim or otherwise.

23.3. Notwithstanding the foregoing, if a Default Event occurs under clause 22.1(D) and is continuing, NLF and the Secretary of State shall make no further payments to any Licensee or other Approved Person except to the extent that the Secretary of State otherwise agrees.

23.4. If a Default Event falling within clause 22.1(E) to (K) is continuing in relation to a Licensee or Guarantor which has not been waived:

(A) the Licensees and the Guarantors shall promptly produce such information in respect of Costs of Discharging Liabilities as NDA may reasonably require;

(B) provided that it does not in any way compromise a Licensee’s ability to comply with Applicable Law, NDA may at any time enter into agreements with other Approved Persons who intend to Operate, and/or to undertake Decommissioning in respect of, some or all of that Licensee’s Power Stations or who intend to undertake the Discharge of other Qualifying

80

Liabilities of the Licensee, in terms similar to those set out in this Agreement or on such other terms as NDA may, in its absolute discretion, consider appropriate. Any such agreement shall not affect the terms of this Agreement and shall not entitle such Approved Persons to the assets of NLF otherwise than in accordance with the terms of this Agreement; and

(C) each of the Secretary of State and, if instructed to do so by the Secretary of State, NLF may deliver a notice to the relevant Licensees and/or Guarantors requiring payment of any amount accrued and payable by the relevant Licensees and/or Guarantors to it under this Agreement (whether or not such amount has become due and owing), including any NLF Compensation Amount or amount accrued and payable by the Licensees and/or Guarantors to the Secretary of State or NLF in respect of Excluded Liabilities (together with any interest thereon). Within two Business Days of receipt of such notice, all such amounts (together with any interest thereon) shall become immediately due and payable and the relevant Licensees and/or Guarantors shall pay all amounts specified in the notice to the Secretary of State or NLF (together with any interest thereon).

23.5 (A) Notwithstanding clause 27 (Remedies and Waivers), this Agreement may not be terminated by any party to it and each party hereby waives any rights it may have at law to terminate this Agreement. Without prejudice to the generality of the foregoing, the Secretary of State and NLF shall not be entitled to rely on any breach or future breach (including any anticipated breach or future breach) by a Licensee or Guarantor of this Agreement or any other Liabilities Document or on any Default Event (including any anticipated Default Event) occurring in relation to a Licensee or Guarantor under any Liabilities Document in order to:

(i) terminate or rescind this Agreement; or

(ii) claim that this Agreement is repudiated or that the Secretary of State’s, or, as the case may be, NLF’s, obligations under this Agreement are discharged,

and in such circumstances the Secretary of State and NLF shall not be relieved of their obligations under this Agreement, except to the extent that this Agreement expressly so provides.

(B) Except as set out in the Liabilities Documents, no Licensee or Guarantor shall be liable to the Secretary of State or NLF by reason of the Secretary of State or NLF entering into or performing the Liabilities Documents, and all rights of indemnity or subrogation of the Secretary of State or NLF that might otherwise be implied by law as a result of their entering into or performing the Liabilities Documents are hereby excluded.

(C) Notwithstanding clause 27 (Remedies and Waivers), except as expressly stated in this Agreement, this Agreement and the respective obligations of NLF and the Secretary of State under this Agreement shall be continuing obligations and

81

shall not be impaired, discharged, void, subject to avoidance or set-off, suspended, terminated or otherwise affected by any circumstances or for any reason whatsoever (including any breach by a Licensee or Guarantor of the terms of any Liabilities Document or any principle of equity or law).

24. NLF DEFAULT EVENT

24.1. If NLF is in breach of this Agreement and, as a result of the breach, it fails to make a payment due by it under this Agreement within 10 Business Days of the due date therefor, such breach shall constitute an “NLF Default Event” and such default event shall continue until the breach is remedied and payment is made (together with interest, if any, thereon).

24.2. If an NLF Default Event has occurred and is continuing and has not been waived by the Licensees, a Licensee or other Approved Person may make application to the Secretary of State for payment of the amount or amounts unpaid by NLF which have given rise to the NLF Default Event. The application shall be accompanied by evidence reasonably satisfactory to the Secretary of State that an NLF Default Event has occurred and is continuing.

24.3. Upon receipt of an application complying with clause 24.2, the Secretary of State shall, on behalf of NLF, fulfil the payment obligations of NLF referred to in clause 24.1. In fulfilling any such payment obligation of NLF, the Secretary of State shall make payment of outstanding amounts on the same terms and in the same manner as the payments would have been made had NLF made them in accordance with the terms of this Agreement and shall be subrogated to the relevant Licensee’s right against NLF. Accordingly, amounts received by a Licensee from the Secretary of State in respect of Costs of Discharging Liabilities in accordance with this clause 24 (NLF Default Event) shall be applied by the Licensee or other Approved Person solely for the purpose of discharging such Costs and, pending or in default of such application, shall be held on trust in accordance with the provisions of this Agreement.

24.4. NLF shall keep indemnified the Licensees against all losses, costs and expenses properly and reasonably incurred or suffered by such Licensee or Guarantor (as the case may be) as a result of the occurrence of an NLF Default Event.

24.5. The provisions of this clause 24 (NLF Default Event) shall (without prejudice to any rights already accrued) cease to apply upon the assumption by the Secretary of State of the payment obligations of NLF under clause 3.11.

25. DEDUCTION OR WITHHOLDING

25.1. Subject to any contrary provisions in any of the other Liabilities Documents, all payments to be made to any party by another party under this Agreement or any other Liabilities Document shall be made in full except to the extent a deduction or withholding is permitted under clause 25.2. All such payments will be free and clear of any right of set-off and from any restriction, condition or deduction because of any counterclaim.

25.2. Where such a deduction or withholding is required in relation to a payment referred to in clause 25.1 in respect of Tax and is also required by law, the relevant party shall be permitted to make such deduction or withholding.

82

25.3. If a party becomes or will become required by law to make any deduction or withholding under clause 25.2 or there is or will be any change in the requirement to make any such deduction or withholding, that party will give notice to the other parties of any such requirement or change in requirement as soon as that party becomes aware of it.

25.4 (A) If, notwithstanding the provisions of clause 5.3 and the foregoing provisions of this clause, any mandatory set-off in administration, winding-up or other insolvency of a Licensee (including a set-off under Rule 2.85 or Rule 4.90 of the Insolvency Rules 1986)(a “Mandatory Set-off”) would arise in respect of any amount that would, but for this clause, be owed by the Secretary of State or NLF (the “Recipient”) to the Licensee under any of the Liabilities Documents (the “Recipient Payment”) against any amount that would, but for this clause, be owed by the Licensee to the Recipient on any account and that would, but for this clause, be subject to the Mandatory Set-off (the “Licensee Payment”), then the provisions of paragraph (B) shall apply.

(B) The Licensee Payment shall not be due, owing or payable (or capable of Mandatory Set-off or proof) in the insolvency until arrangements have been put in place (which NLF and the Secretary of State undertake that, so far as lies within their reasonable control, they will put in place) ensuring that the Recipient Payment will be applied without reduction on account of the Mandatory Set-off towards the Costs of Discharging Liabilities (where applicable) or otherwise in accordance with the provisions of the Liabilities Documents, and in particular in accordance with clause 3 (NLF Payment Obligations), clause 4 (Secretary of State payment obligation) and clause 5 (Designated Accounts) of this Agreement.

26. LIABILITY

26.1. The liabilities of the Licensees under this Agreement are assumed jointly and severally. If any liability of one or some but not all of the Licensees is, or becomes, illegal, invalid or unenforceable in any respect, that shall not affect or impair the liabilities of the other Licensees under this Agreement.

26.2. The Secretary of State may release or compromise the liability of one or more of the Licensees or grant time or other indulgence to one or more of the Licensees without releasing or reducing the liability of any other party.

27. REMEDIES AND WAIVERS

27.1. No delay or omission by any party to this Agreement in exercising any right, power or remedy provided by law or under this Agreement or any other document referred to in it shall affect that right, power or remedy or operate as a waiver of it.

27.2. The single or partial exercise of any right, power or remedy provided by law or under this Agreement shall not preclude any other or further exercise of it or the exercise of any other right, power or remedy.

27.3. Save as provided herein, the rights, powers and remedies provided in this Agreement are cumulative and not exclusive of any rights, powers and remedies provided by law.

83

27.4. The parties acknowledge and agree that in the event of non-performance by the Secretary of State or NLF of their obligations under this Agreement the loss or damage suffered by a Licensee by reason of such non-performance will be such that damages will not be an adequate remedy. Accordingly a Licensee, and, if the Licensee is subject to a Default Event under clause 22.1(E) to (K) (inclusive), the relevant insolvency officer, shall have the right to specific performance of the Secretary of State and NLF’s obligations. Such remedy shall be in addition to, and not in lieu of other remedies available to a Licensee or insolvency officer at law or in equity.

28. INVALIDITY

If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, that shall not affect or impair:

(A) the legality, validity or enforceability in that jurisdiction of any other provision of this Agreement; or

(B) the legality, validity or enforceability under the law of any other jurisdiction of that or any other provision of this Agreement.

29. NO PARTNERSHIP

Nothing in this Agreement and no action taken by the parties shall constitute a partnership, association, joint venture or other co-operative entity between any of the parties.

30. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

The parties to this Agreement do not intend that any term of this Agreement should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Agreement, except that the Trustees may enforce and rely on clause 33.7(E)(iii) to the same extent as if they were a party to this Agreement.

31. FURTHER ASSURANCE

Each party shall at its own cost, from time to time on request, do or procure the doing of all acts and/or execute or procure the execution of all documents in a form reasonably satisfactory to the other parties which any party may reasonably consider necessary for giving full effect to this Agreement and securing the full benefit of the rights, powers and remedies conferred upon it in this Agreement.

32. ENTIRE AGREEMENT

32.1. This Agreement and the other Liabilities Documents constitute the whole and only agreement between the parties relating to the subject matter of this Agreement and the other Liabilities Documents.

84

32.2. Each party acknowledges that in entering into this Agreement and the other Liabilities Documents it is not relying upon any pre-contractual statement which is not set out in one or more of the Liabilities Documents.

32.3. Except in the case of fraud, no party shall have any right of action against any other party to this Agreement arising out of or in connection with any pre-contractual statement except to the extent that it is repeated in one or more of the Liabilities Documents.

32.4. For the purposes of this clause 32 (Entire Agreement), “pre-contractual statement” means any draft, agreement, undertaking, representation, warranty, promise, assurance or arrangement of any nature whatsoever, whether or not in writing, relating to the subject matter of one or more of the Liabilities Documents made or given by any person at any time prior to the date of this Agreement.

33. ASSIGNMENT

Prohibition on Assignment

33.1. Subject to the provisions of this Agreement, no party may at any time:

(A) assign all or any part of the benefit of, or its rights or benefits under, this Agreement; or

(B) make a declaration of trust in respect of or enter into any arrangement whereby it agrees to hold in trust for any other person all or any part of the benefit of, or its rights or benefits under, this Agreement; or

(C) subject to clause 19 (Capacity of the NDA), sub-contract or enter into any arrangement whereby another person is to perform any or all of its obligations under this Agreement.

Intra-Group Assignment

33.2	(A)	A Licensee may assign and transfer all or any part of its rights, benefits and obligations under this Agreement to a wholly-owned Subsidiary of the Group or to the Ultimate Parent Company of the Group if:
		(i)        the assignee has a Power Station transferred to it by the Licensee; (ii)       the assignee holds all necessary Licences and other regulatory consents, authorisations and approvals for (a) undertaking the Operation of the Power Station, and (b) Decommissioning and Discharging Uncontracted Liabilities in relation to that Power Station (if the nuclear reactor or reactors at the Power Station have Closed); (iii)      the assignee delivers to NLF and the Secretary of State a duly completed and executed Deed of Adherence;

85

(iv) NLF and the Secretary of State have received all of the documents and other evidence listed in Part 2 of Schedule 10 (Deeds of Adherence and Release) in relation to that assignee;

(v) the assignee has entered into a deed of adherence in respect of, and in accordance with the terms of, the Contribution Agreement, the Option Agreement and the Historic Liabilities Funding Agreement; and

(vi) the assignee has become an Additional Guarantor in accordance with the Guarantee and has delivered all documents required in connection therewith.

(B) The transferring Licensee hereby undertakes to NLF and the Secretary of State to procure that any assignee referred to in clause 33.2(A) shall hold all the necessary regulatory consents and approvals referred to in clause 33.2(A)(ii).

(C) The Licensees at the date of any Deed of Adherence hereby accept and agree that any new Licensee executing a Deed of Adherence shall thereafter be treated for all purposes as if the new Licensee had executed this Agreement subject only to the provisions of the Deed of Adherence.

Assignment to Third Parties

33.3 (A) It is the intention of (i) the Secretary of State to continue to fund NLF, and (ii) NLF to fund, so far as practicable, Costs of Discharging Liabilities, in each case in circumstances where the assets of a Licensee to which the Costs relate are transferred or transmitted (whether by Agreement, operation of law or otherwise) to a third party otherwise than in accordance with clause 33.2. Where a Power Station or other relevant asset is transferred or transmitted in a manner contemplated by this clause 33.3 to another person (including NDA, the Secretary of State or any other Station Purchaser as defined in the Option Agreement), that person or any person licensed under the Nuclear Installations Act 1965 in relation to that Power Station may, at the discretion of the Secretary of State, and on and subject to such terms and conditions as the Secretary of State may in her discretion agree, be deemed to be a Licensee or other Approved Person for some or all the purposes of this Agreement and, in exercising such discretions, the Secretary of State shall have due regard to whether the proposed Licensee or Approved Person has the financial and technical competence to carry out its obligations under the Liabilities Documents and is a fit and proper transferee of the Power Station or other asset.

(B) The terms and conditions on which the Secretary of State may agree to deem a person to be a Licensee or other Approved Person may include (i) the terms of any deed of adherence by which such person agrees to be bound by the terms of this Agreement, (ii) the terms on which such person will make a contribution, if any, to NLF in relation to Costs of Discharging Liabilities, and (iii) the terms on which the obligations of such person are to be guaranteed and/or secured.

86

(C) Notwithstanding clauses 33.3(A) and (B), the Secretary of State shall not, without the consent in writing of the Licensees, agree to a person becoming a Licensee under this Agreement on such terms as would result in:

(i) any Licensee which is a member of the Group becoming jointly and severally liable for the obligations of that person; or

(ii) any Guarantor becoming liable to guarantee the obligations of that person under this Agreement or any other Liabilities Document; or

(iii) any Licensee or Guarantor incurring any additional obligations or liabilities under this Agreement or any other Liabilities Document as a result of that person being deemed to be a Licensee or other Approved Person under this Agreement or any other Liabilities Document or as a result of the acts or omissions of that person,

and the Secretary of State shall indemnify the Licensees and the Guarantors against any loss, cost, expense or liability properly and reasonably incurred by the Licensees and the Guarantors as a result of the Secretary of State being in breach of this clause 33.3(C).

33.4. Where a Licensee no longer holds a Licence in respect of any Power Station, the parties agree, if requested by the relevant Licensee, to execute a Deed of Release.

33.5. Where a party becomes a Licensee pursuant to clause 33.2 or 33.3, Schedule 1 (Power Stations) shall be amended to reflect the new ownership of the Power Stations.

33.6. A Licensee may disclose to a proposed assignee information in its possession relating to the provisions of this Agreement and the other Liabilities Documents and the other parties which it is necessary to disclose for the purposes of the proposed assignment, notwithstanding the provisions of clause 38 (Confidentiality).

Successor Government Entity

33.7   (A) If the Secretary of State considers that it is expedient in order to facilitate the public sector’s administration and performance of this Agreement, the Secretary of State may notify the other parties to this Agreement that such of the Secretary of State’s rights and obligations under this Agreement as are specified in the notice (the “Government Substituted Rights and Obligations”) are to be assumed by another Government Entity (the “Secretary of State Successor Entity”).

(B) If the Secretary of State issues a notice under paragraph (A):

(i) the Secretary of State shall, except where the Secretary of State Successor Entity is a Minister of the Crown or a government department, unconditionally and irrevocably guarantee the due and punctual performance by any Secretary of State Successor Entity of the Government Substituted Rights and Obligations;

87

(ii) the parties to this Agreement shall enter into such further agreements as the Secretary of State may reasonably consider necessary in order to substitute the Secretary of State Successor Entity for the Secretary of State in respect of the Government Substituted Rights and Obligations and to make any consequential modifications to the Liabilities Documents that are necessary to give effect to the substitution; and

(iii) the Secretary of State may not require:

(a) any assumption of Government Substituted Rights and Obligations to be effected if it will adversely affect any rights of any other party to this Agreement or impose any additional obligations on any other party to this Agreement; or

(b) any consequential modification to be made to the Liabilities Documents under paragraph (B)(ii) if it will adversely affect any rights of any other party to this Agreement or impose any additional obligations on any other party to this Agreement.

(C) The NLF may notify the other parties to this Agreement that it proposes that such of the NLF’s rights and obligations under this Agreement as are specified in the notice (the “NLF Substituted Rights and Obligations”) are to be assumed by a Government Entity (the “NLF Successor Entity”). Any such assumption shall be subject to receipt of the prior written consent of the Secretary of State who, in determining whether or not to grant such consent, shall consider whether or not the assumption by the NLF Successor Entity of the NLF Substituted Rights and Obligations will be expedient in order to facilitate the administration and performance of this Agreement.

(D) The NLF may not require any assumption of NLF Substituted Rights and Obligations to be effected if it will adversely affect any rights of any other party to this Agreement or impose any additional obligations on any other party to this Agreement.

(E) If the NLF issues a notice under paragraph (C) and the Secretary of State consents to the assumption by the NLF Successor Entity of the NLF Substituted Rights and Obligations:

(i) the parties to this Agreement shall enter into such further agreements as the Secretary of State may reasonably consider necessary in order to substitute the NLF Successor Entity for the NLF in respect of the NLF Substituted Rights and Obligations and to make any consequential modifications to the Liabilities Documents that are necessary to give effect to the substitution;

(ii) the Secretary of State may not require any consequential modification to be made to the Liabilities Documents under paragraph (E)(i) if it will adversely affect any rights of any other party to this Agreement or impose any additional obligations on any other party to this Agreement; and

88

(iii) the assumption shall not be effected until any consequential modifications to the constitutional documents of the Nuclear Trust and the NLF have been documented. Such consequential modifications shall not be effected until all necessary consents and approvals (including the consent of the Trustees and, where necessary, the Court of Session) have been obtained.

(F) In this sub-clause, “Government Entity” means:

(i) a Minister of the Crown;

(ii) a government department;

(iii) a non-departmental government body;

(iv) a body exercising functions on behalf of the Crown; or

(v) a body corporate established by statute, some or all of the members of which are appointed by a Minister of the Crown.

34. CONDUCT OF PROCEEDINGS

34.1. Within 10 Business Days of a Licensee becoming aware of (i) any material claim, action or demand (each, a “Claim”) made against it or any other member of the Group by a third party (other than NLF, the Secretary of State, NDA or any other nominee of the Secretary of State), or (ii) any right it or any other member of the Group may have to make a material claim or demand, or commence an action against a third party (other than NLF, the Secretary of State, NDA or any other nominee of the Secretary of State), in either case relating to the Discharge of Qualifying Liabilities, the Licensee shall notify NLF, NDA and the Secretary of State of the Claim.

34.2. Following notification of the Claim, the Licensee shall, or shall procure that the relevant member of the Group shall:

(A) take such action and give such information and access to personnel, premises, documents and records to the Secretary of State and its professional advisers as the Secretary of State may reasonably request and the Secretary of State shall be entitled to require the Licensee to take, or procure the relevant member of the Group to take, such action and give such information and assistance in relation to the Claim as the Secretary of State, acting reasonably and with a view to keeping Costs of Discharging Liabilities to a minimum, deems fit;

(B) at the request of the Secretary of State, allow the Secretary of State to take the sole conduct of such proceedings as the Secretary of State, acting reasonably, deems appropriate in connection with any such Claim in the name of the Licensee or the relevant member of the Group. In that connection the Licensee shall, or shall procure that the relevant member of the Group shall, give to the Secretary of State all such assistance as the Secretary of State may reasonably require in conducting the proceedings and shall, or shall procure that the relevant member of the Group shall, instruct such solicitors or other professional advisers as the Secretary of State may nominate to act on behalf of the Licensee or the

89

relevant member of the Group, but to act in accordance with the Secretary of State’s sole instructions provided that, where the Secretary of State has elected to take the sole conduct of the proceedings, the Secretary of State shall, in respect of the proceedings:

(i) provide regular written updates to the Licensee and/or relevant member of the Group; and

(ii) consult with the Licensee and/or relevant member of the Group on a monthly basis for the duration of the proceedings (or on such other basis as is agreed by the Secretary of State and the Licensee and/or relevant member of the Group (as the case may be)) in respect of future strategy for handling the proceedings and take reasonable account of any representations made by the Licensee and/or member of the Group in respect of such future strategy; and

(C) make no admission of liability, agreement, settlement or compromise with any third party in relation to any such Claim without the prior written consent of the Secretary of State.

34.3. In any event, the Secretary of State shall be entitled at any stage to settle any such Claim provided that she consults the Licensee and, if applicable, the relevant member of the Group prior to settling such Claim and such consultation shall include a reasonable opportunity for the Licensee and/or relevant member of the Group to make representations to the Secretary of State in respect of the settlement of such Claim. The Secretary of State shall take reasonable account of such representations in making her decision to settle any Claim.

34.4. If at any time NLF makes payment in respect of Costs of Discharging Liabilities of a Licensee and, following such payment, the Licensee or any other member of the Group recovers from another person any amount in respect of such Costs of Discharging Liabilities (whether or not pursuant to any material Claim referred to in this clause 34 (Conduct of Proceedings)), the Licensee shall, or shall procure that the relevant member of the Group shall, pay to NLF forthwith the amount recovered and, pending payment of that amount to NLF, hold the amount recovered on trust for NLF in the Designated Account of a Licensee.

34.5. In this clause “material Claim” means any Claim for an amount which represents or is reasonably likely to represent a Cost of Discharging Liabilities of more than £1,000,000.

35. ACCESS TO INFORMATION

35.1. Upon being given reasonable notice, BE plc, Holdings and the Licensees shall give, or procure that there is given, to each of NLF, the Secretary of State, NDA and any persons authorised by any of them (including any Adviser) (subject to any such person giving such confidentiality undertaking as is reasonable in the circumstances and to the Licensees’ obligations under the Licences) full access to:

(A) the Power Stations and the books, records and papers of the Licensees, the Guarantors and, if appropriate, any other member of the Group;

90

(B) the directors and employees of the Licensees, the Guarantors and, if appropriate, any other member of the Group, who shall be instructed to give promptly all information and explanations to NLF, the Secretary of State, NDA or any such persons as they may request; and

(C) the SERS database for audit purposes,

in each case in order to enable each of NLF and the Secretary of State to exercise its rights and powers, and to perform its obligations, under this Agreement and the other Liabilities Documents to which it is a party.

35.2. Each Licensee shall use its reasonable endeavours to make available to NLF, the Secretary of State, NDA or any persons authorised by any of them (including any Adviser) (subject to any such person giving such confidentiality undertaking as is reasonable in the circumstances and to the Licensees’ obligations under the Licences) the advice, records and papers of any of its advisers to enable each of NLF, the Secretary of State and NDA to verify that amounts paid by NLF and the Secretary of State under this Agreement are properly expended in meeting Costs of Discharging Liabilities or otherwise in accordance with the terms of this Agreement.

35.3. The parties acknowledge and agree that nothing in this clause 35 (Access to Information) permits NLF, the Secretary of State, NDA and/or any persons authorised by any of them (including any Adviser) to have:

(A) any access to information held on NUPER; or

(B) any on-line access to SERS.

36. NOTICES

36.1. A notice under this Agreement shall only be effective if it is in writing. Telexes and e-mail notices are not permitted but faxes are permitted.

36.2. Notices under this Agreement shall be sent to a party at its address or facsimile number and for the attention of the individual set out below:

Party	Address	Facsimile No.	Attention:
The Secretary of State	One Victoria Street London SW1H 0ET	020 7215 0138	Head of BE Team, Energy Group, Department of Trade and Industry
NLF	78 Hatton Garden London EC1N 8JA	020 7405 6736	Company Secretary

91

BEG	c/o the Company Secretary, British Energy Group plc, Systems House, Alba Campus, Livingston EH54 7EG	01355 594 022	c/o Company Secretary, British Energy Group plc
BEG(UK)	c/o the Company Secretary, British Energy Group plc, Systems House, Alba Campus, Livingston EH54 7EG	01355 594 022	c/o Company Secretary, British Energy Group plc
BE plc	c/o the Company Secretary, British Energy Group plc, Systems House, Alba Campus, Livingston EH54 7EG	01355 594 022	c/o Company Secretary, British Energy Group plc
Holdings	c/o the Company Secretary, British Energy Group plc, Systems House, Alba Campus, Livingston EH54 7EG	01355 594 022	c/o Company Secretary, British Energy Group plc

provided that a party may change its notice details on giving notice to the other parties of the change in accordance with this clause 36 (Notices). That notice shall only be effective on the date falling five clear Business Days after the notification has been received or such later date as may be specified in the notice.

36.3. If the Secretary of State designates the Nuclear Decommissioning Authority or any other governmental body or authority for the purposes of this Agreement, as referred to in the definition of NDA in clause 1.1, the Secretary of State shall notify the other parties to this Agreement of the notice details of the NDA for the purposes of clause 36.2.

36.4. Any notice given under this Agreement shall, in the absence of earlier receipt, be deemed to have been duly given as follows:

(A) if delivered personally, on delivery;

(B) if sent by first class post from the United Kingdom to a United Kingdom address, two clear Business Days after the date of posting;

92

(C) if sent by airmail to an address outside the United Kingdom, five clear Business Days after the date of posting; and

(D) if sent by facsimile, when clearly received in full.

36.5. Any notice given under this Agreement outside Working Hours in the place to which it is addressed shall be deemed not to have been given until the start of the next period of Working Hours in such place.

36.6. The provisions of this clause 36 (Notices) shall not apply in relation to the service of Service Documents.

37. ANNOUNCEMENTS

37.1. Subject to clauses 37.2 and 37.3, no announcement concerning the subject matter of this Agreement or any ancillary matter shall be made by any party without the prior written approval of the others, that approval not to be unreasonably withheld or delayed.

37.2. A party may, after consultation with the other parties, make an announcement concerning the subject matter of this Agreement or any ancillary matter if required by:

(A) law; or

(B) any securities exchange or regulatory or governmental body to which that party is subject or submits, wherever situated, including (amongst other bodies) the London Stock Exchange, the UK Listing Authority, the Financial Services Authority or the UK Panel on Take-overs and Mergers, whether or not the requirement has the force of law.

37.3. The Secretary of State may make an announcement to Parliament concerning the subject matter of this Agreement or any ancillary matter if she considers that it is appropriate to do so pursuant to her duty to Parliament but, when reasonably practicable, shall consult with BE plc prior to such announcement.

37.4. The restrictions contained in this clause 37 (Announcements) shall continue to apply without limit in time.

38. CONFIDENTIALITY

38.1. Each party shall treat as confidential all information obtained as a result of entering into or performing this Agreement which relates to:

(A) the provisions of this Agreement;

(B) the negotiations relating to this Agreement;

(C) the subject matter of this Agreement;

(D) the business and operations, assets, liabilities and financial position of the Group; or

93

(E) another party.

38.2. Each party shall:

(A) not disclose any such confidential information to any person other than any of its directors or employees or those of any of the Group who needs to know such information in order to discharge his duties; and

(B) procure that any person to whom any such confidential information is disclosed by it complies with the restrictions contained in this clause 38 (Confidentiality) as if such person were a party to this Agreement.

38.3. Notwithstanding the other provisions of this clause 38 (Confidentiality) a party may disclose any such confidential information:

(A) if and to the extent required by law (including for the purposes of this clause 38.3 applicable accounting standards) or for the purpose of any judicial proceedings;

(B) if and to the extent required by any securities exchange or regulatory or governmental body to which that party is subject or submits, wherever situated, including (amongst other bodies) the UK Listing Authority, the London Stock Exchange, the Financial Services Authority or the UK Panel on Take-overs or Mergers, whether or not the requirement for information has the force of law;

(C) if and to the extent required to vest the full benefit of this Agreement in that party;

(D) if and to the extent required for the purpose of any Expert determination or arbitration pursuant to clause 43 (Dispute Resolution);

(E) to its professional advisers, auditors and bankers (including, in the case of NLF, its Advisers);

(F) to, in the case of the Licensees, the Licensees’ Local Liaison Committees;

(G) if and to the extent the information has come into the public domain through no fault of that party;

(H) if and to the extent required to perform its obligations under this Agreement;

(I) if and to the extent the other parties have given prior written consent to the disclosure, such consent not to be unreasonably withheld or delayed;

(J) pursuant to clause 33.6;

(K) to any of the following:

(i) the Bondholders and the Consenting Bondholders (each as defined in the Creditor Restructuring Agreement);

94

(ii) Enron Capital and Trade Resources International Corporation, Total Gas & Power Limited and Teesside Power Limited; or

(iii) the EPL Lenders (as defined in the Creditor Restructuring Agreement);

and their respective actual or potential transferees, their respective professional advisers, auditors and bankers, and, if and to the extent required by any regulatory body or governmental body to which any of the entities referred to above respectively is subject or submits, whether or not the requirement for information has the force of law.

Any information to be disclosed pursuant to paragraphs (A), (B) or (C) shall be disclosed only after notice to the other parties.

38.4. Notwithstanding any other provisions of this clause 38 (Confidentiality), the Secretary of State may disclose information to Parliament to the extent that she considers that it is appropriate to do so pursuant to her duty to Parliament but, where reasonably practicable, shall consult with BE plc prior to such disclosure.

38.5. The restrictions contained in this clause 38 (Confidentiality) shall continue to apply without limit in time.

39. COSTS AND EXPENSES

Except as otherwise agreed in writing or as stated in this Agreement, each party shall pay its own costs and expenses in relation to the negotiation, preparation, execution and carrying into effect of this Agreement and all other documents referred to in it.

40. COUNTERPARTS

40.1. This Agreement may be executed in any number of counterparts, and by the parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart.

40.2. Each counterpart shall constitute an original of this Agreement, but all the counterparts shall together constitute but one and the same instrument.

41. CHOICE OF GOVERNING LAW

This Agreement is to be governed by and construed in accordance with English law.

42. DISPUTE RESOLUTION

Negotiation

42.1. Save in relation to other provisions of this Agreement containing express procedures for resolution of a disagreement or dispute between the parties, in relation to which clauses 42.1 to 42.3 shall not apply, if a party becomes aware of a disagreement, dispute or controversy (a “Dispute”) arising out of or in connection with this Agreement, including any Dispute regarding the existence, validity or termination of this Agreement, it shall provide the other parties to the Dispute with a notice (a “Notice of Dispute”) including full particulars of the Dispute and any proposal for resolution of the Dispute.

95

42.2. Upon delivery of a Notice of Dispute, the relevant parties (the “Disputing Parties”) shall promptly meet and in good faith use their reasonable endeavours to resolve that Dispute.

42.3. If the Disputing Parties are unable to reach agreement under clause 42.2 within 20 Business Days of delivery of a Notice of Dispute (the “Initial Resolution Period”), the Dispute shall be referred for resolution:

(A) by an Expert in circumstances in which this Agreement expressly provides for reference of the Dispute to an Expert; and

(B) by arbitration in all other circumstances.

Expert determination

42.4. If, pursuant to the terms of this Agreement, a Dispute requires resolution by an Expert, the Disputing Parties shall use their reasonable endeavours to agree the type and identity of the Expert to be appointed.

42.5. If the Disputing Parties do not agree, within 10 Business Days of the expiry of the Initial Resolution Period:

(A) as to the type of Expert to be appointed, the matter shall be referred to the Chairman of the City Disputes Panel (“CDP”) who shall be requested to determine, as soon as practicable after such referral, the appropriate type of Expert to resolve the Dispute; or

(B) as to the identity of the Expert to be appointed, the matter shall be referred to the President, Chairman or other senior representative of the appropriate professional body who shall be requested to determine, as soon as practicable after such referral, the identity of the Expert to resolve the Dispute.

If clause 42.5(A) applies, the Disputing Parties shall use their reasonable endeavours to agree the identity of the Expert within 10 Business Days of the CDP’s determination. If agreement on the identity of the Expert is not reached within such period, clause 42.5(B) shall apply. Any Expert identified pursuant to this clause 42.5 shall be an “Expert” for the purposes of the remaining provisions of this clause 42 (Dispute resolution).

42.6. The procedure to be followed in order to resolve the Dispute shall be decided by the Expert, save that such procedure shall include the taking of submissions from each of the Disputing Parties.

42.7. Each Disputing Party shall provide or procure the provision to the Expert of all such information as the Expert shall reasonably require, including provision of such information by its advisers, and shall give all such assistance to the Expert as the Expert shall reasonably require and as shall be required to allow the Expert to reach a decision as soon as reasonably practicable.

96

42.8. The Expert shall be instructed to make a determination in respect of the Dispute within the shortest practical time from her appointment and to deliver a report to the Disputing Parties stating his opinion as to the matters under dispute.

42.9. Any Expert shall act as an expert and not as an arbitrator.

42.10. The decision of the Expert shall, in the absence of fraud or manifest error, be final and binding on the parties in dispute.

42.11. The costs of the Expert shall be paid by the parties in dispute equally or as otherwise determined by the Expert.

Arbitration

42.12. If a Dispute arises which is not expressly required by this Agreement to be referred to Expert determination and it is not resolved by the Disputing Parties within the Initial Resolution Period (or such longer period as the parties may mutually agree), the Dispute shall be referred to arbitration in accordance with clause 42.13.

42.13. Any Dispute to be referred to arbitration under this Agreement shall be referred to and finally resolved by arbitration under the Rules of the London Court of International Arbitration, which rules are deemed to be incorporated into this clause 42.13. The tribunal shall consist of one arbitrator. The seat of arbitration shall be London. The language of arbitration shall be English.

Interlocutory relief

42.14. Nothing in this Agreement shall prevent a party from applying to the court for interlocutory relief to preserve the position of the parties pending the resolution of Dispute in accordance with the provisions of this Agreement unless the application for such relief is intended to impede the procedures detailed in this clause 42 (Dispute Resolution).

43. JURISDICTION

43.1. The courts of England are to have jurisdiction to settle any dispute arising out of or in connection with this Agreement. Any Proceedings may be brought in the English courts.

43.2. Any Proceedings may also be brought in the courts of Scotland.

43.3. Any party may bring Proceedings in any court which has jurisdiction other than by virtue of clause 44 (Agent for Service).

43.4. This clause 43 (Jurisdiction) shall not limit the right of any party to bring Proceedings, to the extent permitted by law, in the courts of more than one jurisdiction at the same time.

97

43.5. Each party waives (and agrees not to raise) any objection, on the ground of forum non conveniens or on any like ground, to the taking of Proceedings by another party in any court in accordance with this clause. Each party also agrees that a judgment against it in Proceedings brought in any jurisdiction in accordance with this clause 43 (Jurisdiction) shall be conclusive and binding upon it and may be enforced in any other jurisdiction.

43.6. Each party irrevocably submits and agrees to submit to the jurisdiction of the English courts and of any other court in which Proceedings may be brought in accordance with this clause 43 (Jurisdiction).

43.7. This clause 43 (Jurisdiction) is subject to the provisions of clause 42 (Dispute Resolution).

44. AGENT FOR SERVICE

44.1. Each of BEG(UK), BE plc and Holdings (the “Appointing Parties”) irrevocably appoints BEG to be its agent for the receipt of Service Documents and each agrees that any Service Document may be effectively served on it in connection with Proceedings in England and Wales by service on its agent effected in any manner permitted by the Civil Procedure Rules 1998 (as amended).

44.2. If the agent of the Appointing Parties at any time ceases for any reason to act as such for any of the Appointing Parties, that or those Appointing Parties shall appoint a replacement agent having an address for service in England and Wales and shall notify the other parties of the name and address of the replacement agent. Failing such appointment and notification, the Secretary of State shall be entitled by notice to appoint a replacement agent to act on behalf of the Appointing Parties. The provisions of this clause 44 (Agent for Service) applying to service on an agent apply equally to service on a replacement agent.

44.3. A copy of any Service Document served on an agent of one or both of the Appointing Parties shall be sent by post to the relevant Appointing Party or Parties. Failure or delay in so doing shall not prejudice the effectiveness of service of the Service Document.

44.4. NLF irrevocably appoints PKF of 78 Hatton Garden, London EC1N 8JA to be its agent for the receipt of Service Documents and agrees that any Service Document may be effectively served on it in connection with Proceedings in England and Wales by service on its agent effected in any manner permitted by the Civil Procedure Rules 1998 (as amended).

44.5. If the agent of NLF at any time ceases for any reason to act as such NLF shall appoint a replacement agent having an address for service in England and Wales and shall notify the other parties of the name and address of the replacement agent. Failing such appointment and notification, BE plc shall be entitled by notice to appoint a replacement agent to act on behalf of NLF. The provisions of this clause 44 (Agent for Service) applying to service on an agent apply equally to service on a replacement agent.

98

44.6. A copy of any Service Document served on an agent of NLF shall be sent by post to NLF. Failure or delay in so doing shall not prejudice the effectiveness of service of the Service Document.

45. VARIATION

Subject to any other provisions of this Agreement, this Agreement shall not be varied unless such variation shall have been expressly agreed in writing by each of the parties to this Agreement (or one of its duly authorised representatives).

99

Schedule 1

Power Stations

Part 1: BEG Power Stations

1. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 61 dated on or after 25th March 1996 and known as Dungeness “B” station.

2. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 59 dated on or after 25th March 1996 and known as Hartlepool nuclear power station.

3. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 60 dated on or after 25th March 1996 and known as Heysham 1 station.

4. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 60 dated on or after 25th March 1996 and known as Heysham 2 station.

5. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 62 dated on or after 25th March 1996 and known as Hinkley Point “B” station.

6. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 63 dated on or after 25th March 1996 and known as Sizewell “B” station.

Part 2: BEG (UK) Power Stations

7. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. Sc 11 dated on or after 25th March 1996 and known as Hunterston “B” station.

8. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. Sc 10 dated on or after 25th March 1996 and known as Torness nuclear power station.

Part 3: Scheduled Closure Dates

(1) Power Station	(2)   Scheduled Closure Date	(3) Pro-forma Environmental   impact assessment and draft   defuelling safety cases dates
Dungeness B	31st March, 2008	31st March, 2005
Hartlepool	31st March, 2014	31st March, 2011
Heysham 1	31st March, 2014	31st March, 2011
Heysham 2	31st March, 2023	31st March, 2020

100

(1) Power Station	(2)   Scheduled Closure Date	(3) Pro-forma Environmental   impact assessment and draft   defuelling safety cases dates
Hinkley Point B	31st March, 2011	31st March, 2008
Sizewell B	31st March, 2035	31st March, 2032
Hunterston B	31st March, 2011	31st March, 2008
Torness	31st March, 2023	31st March, 2020

Part 4: Sister Stations

The following pairs of Stations are Sister Stations:

1. Hartlepool and Heysham 1;

2. Heysham 2 and Torness; and

3. Hinkley Point B and Hunterston B.

101

Schedule 2

Decommissioning

1. Subject to paragraph 3 of this Schedule, for the purposes of this Agreement “Decommissioning” means, in relation to a Power Station, those activities which are necessary for, and are undertaken in connection with, making the Licensed Site available for re-use after the Power Station has permanently ceased generating electricity and in connection with de-licensing the Licensed Site.

2. Subject to paragraph 3 of this Schedule, the following activities will be deemed to be activities falling within the meaning of paragraph 1:

(A) activities relating to the drawing up, production or amendment of detailed Decommissioning Plans, environmental impact assessments and defuelling safety cases for the relevant Licensed Site which (i) form part of the pre-closure planning project for the relevant Licensed Site identified in the Approved Decommissioning Strategy and which occur after the date of commencement of that project as identified in the Approved Decommissioning Strategy or (ii) are undertaken after the Closure Date;

(B) the final defuelling of a reactor after the Closure Date of that reactor;

(C) the management of spent AGR fuel and potentially hazardous materials at, and their removal from, the Licensed Site after the Closure Date;

(D) the carrying out of engineering preparatory work and post-operational clean out, including taking mechanical plant and systems out of service and making them safe;

(E) the management of potentially mobile operational wastes, including the processing and storage of such wastes and their ultimate removal from the Licensed Site;

(F) the dismantling and removal of non-radioactive plant and buildings at the Licensed Site and the dismantling, storage and removal of any radioactive plant and buildings other than the reactors;

(G) the design, engineering and construction of a safestore structure for each reactor and any other related buildings and plant at the Licensed Site;

(H) the care and maintenance of the Licensed Site and the safestore structures after the Closure Date, including the surveillance and security of the Licensed Site and the safestore structures prior to the completion of Decommissioning;

(I) the retrieval, management and disposal of stored activated wastes from the Licensed Site after the Closure Date (including storage, retrieval and disposal of cropped fuel tie bars);

102

(J) the final dismantling and removal of each reactor and safestore structure and the removal and disposal of associated radioactive waste materials from the Licensed Site;

(K) the clearance of all other materials and Wastes at the Licensed Site after the Closure Date of the Power Station to the extent reasonably required as part of making the site available for re-use;

(L) the carrying out of any necessary ground, surface water, sub-surface water or groundwater remediation activities within the boundary of the Licensed Site after the Closure Date, and

(M) de-licensing of the Licensed Site,

provided that the list of activities in this paragraph 2 shall not prevent other activities constituting activities of Decommissioning if the Approved Decommissioning Strategy requires such other activities to be undertaken.

3. The following activities will be deemed to be activities falling outside the meaning of paragraph 1:

(A) any activity to the extent that the costs of such activity are an Excluded Liability;

(B) any activity undertaken on or before the Restructuring Date;

(C) any activity referred to in paragraph 2 above to the extent that it is an activity carried out as part of the day-to-day operations at a Licensed Site prior to the Closure of the Power Station, including the management and storage of spent fuel and potentially mobile operational wastes and the management, storage and disposal of Low Level Waste;

(D) any activity that results in or will result in an economic benefit to the extent that a reasonable and prudent operator of the Power Station who did not have the benefit of the Liabilities Documents and who bore responsibility for the Costs of Discharging Liabilities and the Discharge of Qualifying Liabilities would not have undertaken such activity if such economic benefit would not have been achieved; and

(E) any activity relating to the drawing up, production or amendment of any draft Decommissioning Plans, pro forma environmental impact assessments or draft defuelling safety cases that are undertaken prior to the date referred to in paragraph 2(A) above or do not specifically relate to the Licensed Site in question.

103

Schedule 3

Discharge of Uncontracted Liabilities

1. For the purposes of this Agreement “Discharge of Uncontracted Liabilities” means the carrying out of any of the following activities by a Licensee or Approved Person in connection with the past, present or future Operation of a Power Station:

(A) activities relating to the drawing up, production or amendment of detailed Uncontracted Liabilities Plans and environmental impact assessments which form part of the pre-project planning for the relevant Licensed Site identified in the Approved Uncontracted Liabilities Discharge Strategy and which occur after the date of commencement of that project as identified in the Approved Uncontracted Liabilities Discharge Strategy;

(B) the management (including conditioning and repackaging), storage, retrieval and disposal of Historic Fuel;

(C) the decommissioning and disposal of the flasks and flatrols used in connection with the transport of Historic Fuel;

(D) the management (including conditioning and repackaging), storage, retrieval and disposal of PWR Fuel and its derivatives and associated waste;

(E) the management (including conditioning and repackaging), storage, retrieval and disposal of uranium trioxide and plutonium dioxide, in each case derived from the reprocessing of Historic Fuel;

(F) the management (including conditioning and repackaging), storage, retrieval and disposal of High Level Waste derived from the reprocessing of Historic Fuel;

(G)  (i) the management (including conditioning and repackaging), storage, retrieval and disposal of Intermediate Level Waste derived from the reprocessing of Historic Fuel;

(ii) the retrieval and disposal of Intermediate Level Waste which is not derived from Historic Fuel;

(iii) the management of the storage and disposal of all Intermediate Level Waste at a Licensed Site following the Closure Date (including, but not limited to, the costs associated with the construction of an operational Intermediate Level Waste store at each site to hold all potentially mobile operational wastes (including desiccant) after the Closure Date, regardless of when the costs associated with this building are incurred, provided that such costs are incurred after 28 November 2002); and

(iv) the storage, retrieval and disposal of graphite arising from the dismantling of stored spent AGR Fuel.

104

(H) the management, including handling, storage and disposal, of unirradiated fuel elements which have been utilised for testing purposes;

(I) all other activities carried out in relation to the management, including handling, storage and disposal, of irradiated matter that arose prior to the Restructuring Principles Date out of activities at the Power Stations or their Licensed Sites, including without limitation:

(i) Berkeley operational waste;

(ii) Halden fuel;

(iii) experimental fuel;

(iv) fissile wastes; and

(v) Winfrith Graphite fines;

provided that the list of activities in this paragraph 1 shall not prevent other activities constituting activities for Discharging Uncontracted Liabilities if the Approved Uncontracted Liabilities Discharge Strategy requires such other activities to be undertaken.

2. The following activities will be deemed to be activities falling outside the meaning of paragraph 1:

(A) any activity falling with Schedule 2 (Decommissioning);

(B) any activity to the extent that the costs of such activity are an Excluded Liability;

(C) any activity undertaken on or before the Restructuring Date;

(D) any activity referred to in paragraph 1 above to the extent that it is an activity carried out as part of the day-to-day operations of a Power Station prior to its Closure;

(E) any activity that results in or will result in an economic benefit to the extent that a reasonable and prudent operator of the Power Station who did not have the benefit of the Liabilities Documents and who bore responsibility for the Costs of Discharging Liabilities and the Discharge of Qualifying Liabilities would not have undertaken such activity if such economic benefit would not have been achieved; and

(F) any activity relating to the drawing up, production or amendment of any draft Uncontracted Liabilities Discharge Plans or pro forma environmental impact assessments that are undertaken prior to the date referred to in paragraph 2(A) above or do not specifically relate to the Licensed Site in question.

105

Schedule 4

Excluded Liabilities

1. For the purposes of this Agreement, a “BE Liability” means:

(A) any liability, cost or expense arising under or pursuant to the BNFL Historic Contracts,

provided that, if (i) a BNFL Historic Fuel Contract terminates, or (ii) a BNFL Ancillary Agreement terminates (whether in its entirety or in relation to the provision of services in relation to Historic Fuel only), in either case in accordance with their terms, then:

(i) the reasonable costs as determined by NDA and BNFL of any activity in respect of Historic Fuel carried on by BNFL on or after such termination which was carried on by BNFL pursuant to such contract prior to its termination (to the extent such costs are agreed by NDA and BNFL under a new contract); and

(ii) the costs of any claim by BNFL against BEG or BEG(UK) (or any such assignee) in consequence of such termination (including any claim under the law of bailment)

shall be deemed to constitute a Cost of Discharging Liabilities;

(B) any liability, cost or expense arising in connection with New Fuel, save for any liability, cost or expense arising in connection with any activity carried out in relation to New Fuel described in paragraph 2(I) of Schedule 2 (Decommissioning) or paragraph 1(B), (G)(ii), (G)(iii) and (G)(iv) of Schedule 3 (Discharge of Uncontracted Liabilities) that is not the responsibility of BNFL under the BNFL New Fuel Contracts;

(C) any liability, cost or expense incurred in connection with the termination of employment (including redundancy) of any director, officer or employee of any member of the Group;

(D) any liability, cost or expense arising in connection with any Environmental Works which are required by a relevant regulatory authority or body or by virtue of any Applicable Law to be carried out in relation to an Environmental Matter at a Power Station except where such Environmental Works are Decommissioning Only Environmental Works (in which case, such Environmental Works shall be deemed to constitute a Cost of Discharging Liabilities);

(E) any liability, cost or expense arising in connection with any Environmental Works carried out in relation to any land or property outside the boundaries of a Power Station, except where such Environmental Works are Decommissioning Only Environmental Works (in which case, such Environmental Works shall be deemed to constitute a Cost of Discharging Liabilities);

106

(F) any liability arising in respect of any fine, penalty, compensation or similar payment imposed by a relevant regulatory authority or body or imposed under any Applicable Law and which is required to be paid by a Licensee in respect of any Environmental Matter arising at a Power Station or in relation to any land or property outside the boundaries of a Power Station, except where such fine, penalty, compensation or similar payment is in relation to Decommissioning Only Environmental Works (in which case, such Environmental Works shall be deemed to constitute a Cost of Discharging Liabilities);

(G) any liability, cost or expense arising in connection with a breach by a Licensee of its duty under the Nuclear Installations Act 1965 to secure that no occurrence involving nuclear material and that no ionising radiations causes personal injury or damage to property of a person other than the Licensee subject to the limit set out in section 16(1) of the Nuclear Installations Act 1965 or any other limit from time to time under Applicable Law;

(H) any liability, cost or expense arising under the existing contracts with United Kingdom Nirex Limited (“Nirex”) unless there is a material increase (having regard to the current amounts paid in respect of the same) in the level of costs arising under such contracts (in which case such costs shall not constitute Excluded Liabilities for the purposes of this Schedule 4 and shall constitute Costs of Discharging Liabilities);

(I) any internal cost of a Licensee other than an Attributable Overhead;

(J) any liability, cost or expense incurred by a Licensee arising in connection with any generic research relating to the Decommissioning of Power Stations or the Discharge of Uncontracted Liabilities, including any costs incurred under the HSE Co-ordinated Programme of Nuclear Safety Research or any levy imposed in respect thereof;

(K) any liability, cost or expense arising from any activity at a Licensed Site that is not connected with the existing Power Station, including the construction, operation and decommissioning of any new power station;

(L) any liability, cost or expense incurred by a Licensee (i) in the administration of this Agreement or the other Liabilities Documents, (ii) in connection with any breach by a Licensee of this Agreement or any other Liabilities Document or (iii) in connection with any dispute arising under this Agreement or any other Liabilities Document.

2. For the purposes of this Agreement, a “Disqualified Liability” means:

(A) any liability described in this Agreement as, or deemed in this Agreement to be, a Disqualified Liability arising as a result of the occurrence of a Relevant Event;

(B) any liability described as, or deemed to be, a Disqualified Liability in clause 8 (Operational Changes);

107

(C) any liability described as, or deemed to be, a Disqualified Liability in clause 11 (Annual Liabilities Report); or

(D) any liability described as, or deemed to be, a Disqualified Liability in any other provision of this Agreement.

3. For the purposes of this Schedule Environmental Works in relation to an Environmental Matter shall not to be deemed to be Decommissioning Only Environmental Works, if and to the extent it is reasonably likely that Environmental Works should be required by the relevant regulatory authorities in relation to such Environmental Matter, such likelihood to be assessed on the assumption that (1) the relevant regulatory authorities were aware of all relevant facts and circumstances in relation to such Environmental Matter and (2) there were no immediate or foreseeable prospect of Closure and Decommissioning.

108

Schedule 5

Determination of Liabilities and Compensation

1. Determination of Liability

1.1 This paragraph applies where this Agreement requires the amount of an increase in Costs of Discharging Liabilities or the amount of a Disqualified Liability to be determined.

1.2 The determination shall be made:

(A) by estimating the additional cash flows that will result from the event giving rise to the increase in the Costs of Discharging Liabilities or the creation of the Disqualified Liability (as the case may be), ignoring any existing provisions or estimates made by the Licensee or any member of the Group and (to the extent appropriate) including within the estimated cash flows provisions for risk, consistent with the level of prudence required to be used in accordance with Applicable Law and accounting standards in preparing the financial statements of the Group prepared in accordance with UK GAAP; and

(B) by assuming that those estimated cash flows arise in the middle of the Financial Periods in which they are estimated to arise, and discounting those cash flows at the rate that is used in discounting nuclear provisions in the financial statements of the Group prepared in accordance with UK GAAP.

1.3 If NDA, acting reasonably, believes that having regard to the then current applicable accounting standards, the discount rate used in discounting nuclear provisions in the financial statements of the Group, prepared in accordance with UK GAAP, should not properly have been used (or should not properly have been used had the Group not had the benefit of the Liabilities Documents), NDA may refer the matter to an Expert for determination.

2. Determination of NLF Compensation Amount

Where a Licensee proposes a Licensee Change which is a Key Operational Change, the Licensee shall at the time that the Licensee Change is proposed provide the NDA with its written estimate of the NLF Compensation Amount, which shall be the estimated increase in Costs of Discharging Liabilities determined in accordance with paragraph 1.

3. Determination of Licensee Compensation Amounts

3.1 Where a Secretary of State Change or a Net Cost Operational Change (referred to in this paragraph as a “Change”) is proposed, the Licensee shall, within 30 Business Days after the Change is proposed:

(A) provide the NDA with the written estimate of the expected costs (including attributable overheads) and revenues resulting from the Change referred to in paragraph 3.2; and

109

(B) elect whether it wishes to be compensated on the Actual Basis referred to in paragraph 3.3 or the Estimated Basis referred to in paragraph 3.4 and, if the Licensee elects to be compensated on the Actual Basis, specify the Licensee’s proposals for assessing costs and revenues and reflecting them in compensation payments by NLF.

3.2 The estimate of costs and revenues to be provided by the Licensee will either:

(A)  (i) be prepared using expected values (i.e. the amounts that take account of all possible outcomes using probabilities to weight the outcomes);

(ii) so far as practicable, take account of all effects, including effects on tax and interest costs; and

(iii) estimate the costs and revenues by Financial Period; or

(B) be prepared on such other basis as the Licensee and NDA may agree.

3.3 The “Actual Basis” of compensation requires NLF to pay to the Licensee compensation measured on the basis of the actual costs (including attributable overheads) or reductions in revenues, adjusted for actual reductions in such costs or increases in revenues as a result of the Change. Such compensation payments will be made as and when the costs or reductions in revenues are incurred.

3.4 In the case of a Secretary of State Change which requires the Licensee to postpone the Scheduled Closure Date of a Power Station, the compensation payment to the Licensee will include a commercially reasonable incentivisation margin to be agreed between NDA and the relevant Licensee, such margin to reflect the risk incurred by the Licensee in connection with such a Secretary of State Change.

3.5 The “Estimated Basis” of compensation requires NLF to pay to the Licensee compensation measured on the basis of the estimated costs (including attributable overheads) or reductions, adjusted for expected reductions in such costs or increases in revenues as a result of the Change. Such compensation payments will be made at the times when the increases in costs or reductions in revenues are expected to be incurred.

3.6 In the case of a Net Cost Operational Change, the compensation payment to the Licensee shall be increased by an incentivisation margin, proposed by the Licensee acting reasonably, and agreed with NDA, that reflects the risk incurred by the Licensee in connection with the Net Cost Operational Change.

4. Information

The Licensee shall provide and shall use reasonable endeavours to procure that the Group and the Licensee’s accountants and advisers provide without charge such reasonable access to their personnel, books and records, calculations and working papers as NDA or its advisers may request in connection with its consideration of any estimates or proposals under this Schedule.

110

5. Disputes

5.1 NDA may dispute any estimate or proposal provided by the Licensee in accordance with the foregoing provisions of this Schedule by notice in writing to the Licensee within 30 Business Days of receiving that estimate or proposal. The notice shall specify which items are disputed and the reasons therefor (the “Disputed Items”).

5.2 If NDA does not serve a notice under paragraph 5.1 within the 30 Business Day period, the estimate or proposal shall be deemed to have been accepted by NDA.

5.3 If NDA serves a notice under paragraph 5.1, then the Licensee and NDA shall use their reasonable endeavours to resolve the Disputed Items and either:

(A) if the Licensee and NDA reach agreement on the Disputed Items within 20 Business Days of the notice being served (or such longer period as the Licensee and NDA may agree in writing), the estimate or proposal shall be amended to reflect such agreement; or

(B) if the Licensee and NDA do not reach agreement in accordance with sub-paragraph (A), the Licensee or NDA may refer the Disputed Items to an Expert.

5.4 In any reference to the Expert in accordance with paragraph 5.3:

(A) the Expert shall be directed to determine any dispute by reference to the principles and methodologies set out in this Schedule;

(B) the estimate or proposal shall be adjusted as necessary to reflect the decision of the Expert and, as amended, shall be signed by the Expert; and

(C) NDA and the Licensee shall use their reasonable endeavours to procure that the Expert is able to make a final determination within 20 Business Days of the referral of the dispute to him.

111

Schedule 6

Annual Liabilities Report

Section 1: Information requirements

1. Part 1 of the Annual Liabilities Report for each Financial Period shall contain the following information and material:

(A) details of all Costs of Discharging Liabilities and Incremental Historic Liabilities incurred in that Financial Period in relation to each Power Station and each Licensee, together with a reconciliation to the budget for that Financial Period;

(B) details of all Incremental Historic Liabilities incurred in relation to the BNFL Historic Contracts in that Financial Period;

(C) details of each failure by a Licensee to comply with the Minimum Performance Standard or the Minimum Contracting Standard during that Financial Period which constitutes a Relevant Event;

(D) details of each Operational Change made by a Licensee during that Financial Period which constitutes a Relevant Event, in such format as NDA may reasonably require;

(E) an indication of which Operational Changes falling within paragraph 1(D) constitute Regulator-required Changes, Anticipatory Changes or Licensee Changes;

(F) details of all Operational Changes otherwise notified to NDA during that Financial Period;

(G) details of all Key Exercises of Rights made by the Licensee during that Financial Period;

(H) details of all events occurring in that Financial Period which are classified, or could reasonably be expected to be classified, as level 2 or higher events on INES;

(I) details of changes made during that Financial Period to the Scheduled Closure Date of a Power Station;

(J) details of any changes made to any Decommissioning Plan or Uncontracted Liabilities Discharge Plans;

(K) details of any changes made during that Financial Period to any defuelling safety case;

(L) details of any changes made during that Financial Period to any environmental impact assessments;

112

(M) details of changes made during that Financial Period to any overall contracting strategy described in clause 10.1(G)(i) (Strategy approval process), the terms of any tendering process for any contract or the terms of any contract, in each case as is required to be approved under clause 10.1 (Strategy Approved process);

(N) details of any breaches of the Liabilities Documents, other than breaches of a minor or inconsequential nature;

(O) a statement required pursuant to clause 11.3; and

(P) such other information as the Licensees wish to include in the Annual Liabilities Report.

and all costs to be reported under this paragraph 1 shall be reported on both an undiscounted and Net Present Value basis.

2. Part 2 of the Annual Liabilities Report shall comprise:

(A) Liabilities Budget for each licensed site including a three year work programme.

(B) Overall contracting strategy for the discharge of the liabilities budget.

113

Section 2: Form of Annual Liabilities Report

Annexe A	:	Illustrative Part One
Annexe B	:	Pro forma budget for Part Two
Annexe C	:	Descriptive content for Part Two

114

ANNEXE A

British Energy

Illustrative Annual Liabilities Report

Year ended 31 March 2004

Contents:
1.	EXECUTIVE SUMMARY	1
2.	REGULATOR-REQUIRED CHANGES	2
3.	ANTICIPATORY CHANGES	3
4.	LICENSEE CHANGES	4
5.	KEY EXERCISES OF RIGHTS	5
6.	RELEVANT EVENTS	6
7.	LIABILITIES DISCHARGED DURING THE YEAR	7
8.	CHANGES	7
9.	CHANGES IN UNCONTRACTED LIABILITIES STRATEGY	7
10.	CHANGES IN DE-FUELLING SAFETY CASES	7
11.	OTHER MOVEMENTS IN LIABILITIES ACCOUNTING ESTIMATES DURING THE YEAR	7
12.	UPDATE ON ENVIRONMENTAL IMPACT ASSESSMENTS	7
13.	DETAILS OF EVENTS CLASSIFIED AS LEVEL 2 OR HIGHER ON THE INES SCALE	8
14.	CHANGES IN OPERATING ENVIRONMENT	8
15.	REVIEW OF CONTRACTING STRATEGY	8
16.	BREACHES OF THE LIABILITIES DOCUMENTS	8
17.	OTHER INFORMATION	8
18.	BOARD STATEMENT	9

- 2 -

1. Executive Summary

Discount rate [ ] %	Ref	Contracted liabilities	Uncontracted liabilities	Decommissioning liabilities	Total
		£m	£m	£m	£m
Balance at  1/4[ ]
Incremental liabilities:
Regulatory changes	2
Anticipatory changes	3
Licensee changes	4
Key exercises of rights	5
MPS & MCS failures	6
Revalorisation
Discharge of liabilities during the year	7
Increase in liabilities due to change in liabilities plans
	11
Balance at 31/3/[ ]
Excluded liabilities
Qualifying liabilities

Narrative

-1-

2. Regulator-required changes

This table should include all regulatory-required changes (as contemplated by clause 8.4 of the Nuclear Liabilities Funding Agreement) that created an incremental liability with an NPV in excess of £100,000 (adjusted for inflation).

	Description	Incremental liability NPV	Undiscounted Incremental liability	Was NDA informed in advance?
		£m	£m
Change Ref 1
Change Ref 2
Change Ref 3
Etc
Total incremental liabilities

-2-

3. Anticipatory changes

This table should include all anticipatory changes (as contemplated by clause 8.5 of the Nuclear Liabilities Funding Agreement) that created an incremental liability with an NPV in excess of £100,000 (adjusted for inflation).

	Description	Incremental liability NPV	Undiscounted Incremental liability	Was NDA informed in advance?
		£m	£m
Change Ref 1
Change Ref 2
Change Ref 3
Etc
Total incremental liabilities

-3-

4. Licensee changes

This table should include all licensee changes (as contemplated by clause 8.6 of the Nuclear Liabilities Funding Agreement) that created an incremental liability with an NPV in excess of £100,000 (adjusted for inflation).

	Description	Incremental liability NPV	Undiscounted Incremental liability	Was NDA informed in advance?
		£m	£m
Change Ref 1
Change Ref 2
Change Ref 3
Etc
Total incremental liabilities

-4-

5. Key Exercises of Rights

This table should include all Key Exercises of Rights (as contemplated by clause 5 of the Historic Liabilities Funding Agreement).

	Description	Incremental liability NPV	Undiscounted Incremental liability	Was NDA informed in advance?
		£m	£m
Exercise Ref 1
Exercise Ref 2
Exercise Ref 3
Etc
Total incremental liabilities

-5-

6. Relevant events

This table should include all MPS and MCS failures that created an incremental liability with an NPV in excess of £100,000 (adjusted for inflation) and as contemplated by in clause 7 of the Nuclear Liabilities Funding Agreement and clause 4 of the Historic Liabilities Funding Agreement.

	Description	Incremental liability NPV	Undiscounted Incremental liability
		£m	£m
Relevant event Ref 1
Relevant event Ref 2
Relevant event Ref 3
Etc
Total incremental liabilities

-6-

7. Liabilities discharged during the year

	Contracted liabilities	Uncontracted liabilities	Decommissioning liabilities	Total
	£m	£m	£m	£m
Liabilities discharged during the year
Budgeted discharge of liabilities
Variance

Detailed narrative explanation

8. Changes

Detailed narrative explanation

9. Changes in uncontracted liabilities strategy

Detailed narrative explanation

10. Changes in de-fuelling safety cases

Detailed narrative explanation

11. Other movements in liabilities accounting estimates during the year

Detailed narrative explanation

12. Update on Environmental Impact Assessments

Detailed narrative explanation

-7-

Changes in schedule closure dates

	New Closure Date	Previous Closure Date
Dungeness B		31 March 2008
Hartlepool		31 March 2014
Heysham 1		31 March 2014
Heysham 2		31 March 2023
Hinkley Point B		31 March 2011
Sizewell B		31 March 2035
Hunterston B		31 March 2011
Torness		31 March 2023

Detailed narrative explanation

13. Details of events classified as level 2 or higher on the INES scale

Detailed narrative explanation

14. Changes in operating environment

Detailed narrative explanation

15. Review of Contracting Strategy

Detailed narrative explanation

16. Breaches of the Liabilities Documents

Detailed narrative explanation

17. Other Information

Detailed narrative explanation

-8-

18. Board Statement

In this paragraph 18, capitalized terms have the meaning given to them in the Nuclear Liabilities Funding Agreement.

The Annual Liabilities Report has been reviewed and approved by the board of directors Newco 1, BEG and BEG(UK) and, to the best of our knowledge and belief, having taken all reasonable care to ensure that such is the case, except as disclosed in this Annual Liabilities Report:

A. there have been no other Costs of Discharging Liabilities or Incremental Historic Liabilities incurred during the Financial Period;

B. there have been no failures to comply with the Minimum Performance Standard which have given rise to, will give rise to, or could reasonably be expected to give rise to, any Disqualified Liabilities;

C. there have been no other Operational Changes during the Financial Period which have given rise to, will give rise to, or could reasonably be expected to give rise to, or could reasonably be expected to give rise, any Disqualified Liabilities;

D. no other matter or event has arisen or occurred which has given rise to, will give rise to or could reasonably be expected to give rise to, any Disqualified Liabilities; and

E. the books, records and other materials (including databases and other forms of electronically held information) on which the Annual Liabilities Report is based are complete and accurate in all material respects and have been maintained on a basis consistent with the basis on which they have been maintained in the previous three years.

In respect of the first Annual Liabilities Report produced pursuant to clause 11.1(A) of the Nuclear Liabilities Funding Agreement, the reference to “reasonable care” in such a statement shall be replaced with a reference to “reasonable care having regard to the limited nature of the information and detail reasonably available to the Licensees in the period within which such report is to be produced”.

                                                                                                                      for and on behalf of Newco 1

Date:

                                                                                                                      for and on behalf of BEG

Date:

                                                                                                                      for and on behalf of BEG UK

Date:

-9-

ANNEXE B

Annual Liabilities Budget

April

May

June

July

August

September

October

November

December

January

February

March

Total Year 1

Year 2

Year 3

Decommissioning

Payments under agreed contracting strategy

Hunterston

Hinkley Point B

Dungeness B

Heysham 1

Heysham 2

Hartlepool

Sizewell

Payments under approved material contracts

Contract 1

Contract 2

Other Decommissioning Costs

Hunterston:

Internal employee costs

Station overheads

Other directly attributable overheads

Immaterial contractual payments not covered by contracting strategy

Purchase of materials

Torness:

Internal employee costs

Station overheads

Other directly attributable overheads

Immaterial contractual payments not covered by contracting strategy

Purchase of materials

Hinkley Point B:

Internal employee costs

Station overheads

Other directly attributable overheads

Immaterial contractual payments not covered by contracting strategy

Purchase of materials

Dungeness B:

Internal employee costs

Station overheads

Other directly attributable overheads

Immaterial contractual payments not covered by
contracting strategy

Purchase of materials

Heysham 1:

Internal employee costs

Station overheads

Other directly attributable overheads

Immaterial contractual payments not covered by
contracting strategy

Purchase of materials

Internal employee costs

Station overheads

Other directly attributable overheads

Immaterial contractual payments not covered by
contracting strategy

Purchase of materials

Heyham 2:

Internal employee costs

Station overheads

Other directly attributable overheads

Immaterial contractual payments not covered by
contracting strategy

Purchase of materials

Hartlepool:

Internal employee costs

Station overheads

Other directly attributable overheads

Immaterial contractual payments not covered by
contracting strategy

Purchase of materials

Sizewell B:

Internal employee costs

Station overheads

Other directly attributable overheads

Immaterial contractual payments not covered by
contracting strategy

Purchase of materials

Total Decommissioning Expenditure

- 2 -

Uncontracted Liabilities

Berkley Operational Waste

Winfrith Fines

Etc.

Payments under agreed contracting strategy

Hunterston

Torness

Hinkley Point B

Dungeness B

Heysham 1

Heysham 2

Hartlepool

Sizewell B

Payments under approved material contracts

Contract 1

Contract 2

Other Decommissioning Costs

Hunterston:

Internal employee costs

Station overheads

Other directly attributable overheads

Immaterial contractual payments not covered by
contracting strategy

Purchase of materials

Torness:

Internal employee costs

Station overheads

Other directly attributable overheads

Immaterial contractual payments not covered by
contracting strategy

Purchase of materials

Hinkley Point B:

Internal employee costs

Station overheads

Other directly attributable overheads

Immaterial contractual payments not covered by
contracting strategy

Purchase of materials

Dungeness B:

Internal employee costs

Station overheads

Other directly attributable overheads

- 3 -

Immaterial contractual payments not covered by
contracting strategy

Purchase of materials

Heysham 1:

Internal employee costs

Station overheads

Other directly attributable overheads

Immaterial contractual payments not covered by
contracting strategy

Purchase of materials

Heysham 2:

Internal employee costs

Station overheads

Other directly attributable overheads

Immaterial contractual payments not covered by
contracting strategy

Purchase of materials

Hartlepool:

Internal employee costs

Station overheads

Other directly attributable overheads

Immaterial contractual payments not covered by
contracting strategy

Purchase of materials

Sizewell B:

Internal employee costs

Station overheads

Other directly attributable overheads

Immaterial contractual payments not covered by
contracting strategy

Purchase of materials

Total Uncontracted Liabilities Expenditure

Total Expenditure

- 4 -

ANNEXE C

Preamble

This annexe outlines the proposed content for the Part Two of the Annual Liabilities Report.

In accordance with section 11.1 of the NLFA, the Liabilities Management Unit and British Energy will meet to establish the expected format and content which is to be utilised to produce Part Two of the initial Annual Liabilities Report, as required under the NLFA. These discussions will establish clear expectations by both parties as to the required level of detail and will facilitate the development, review and approval of the initial Annual Liabilities Reports

Part Two of the Annual Liabilities Report

Part Two of the Annual Liabilities Report documents the scope of work, the planned schedule for completing the work and the costs associated with completing the work for a rolling three year period together with a numerical analysis in the form annexed at Annex B. It is a subset of the approved Decommissioning Plans or Uncontracted Liability Discharge Plans. The plan ties to funding and estimating guidance information provided by the NODE. The Annual Liabilities Report is used by BE to monitor the work effort when the scope, schedule and costs have been agreed with the NDA. its primary use therefore is by BE. However, the basic requirements of this document will be used by BE to update Decommissioning Plans and Uncontracted Liability Discharge Plans, and to request prior authorisation from the NDA for planned expenditures reimbursable from the NLF. It will also .allow for timely review and approval of invoices against the NLF during the upcoming fiscal year.

All work to be performed by BE which is to be reimbursed from the NLF should be contained within Part Two of the Annual Liabilities Report. Part Two of the Annual Liabilities Report serves as the annual mechanism to authorise work planned for the coming fiscal year and to provide a forecast of amounts to be incurred in the subsequent two years. Therefore if work is performed that is not included in the Annual Liabilities Report within the specific fiscal year, or has not been otherwise agreed with the NDA, the NDA may require additional justification if the work is to be considered as a Cost of Discharging Liabilities.

Schedule 7

NLF Approved Payment Criteria

To: [Nuclear Decommissioning Authority]/[The Secretary of State for Trade and Industry]/[or such other person nominated by the Secretary of State] [Delete as applicable]

We refer to the nuclear liabilities funding agreement dated [                    ] January, 2005 between, inter alia, Nuclear Liabilities Fund Limited, British Energy Generation (UK) Limited, British Energy Generation Limited, [British Energy Plc] Group Plc, British Energy Group Holdings plc and the Secretary of State for Trade and Industry (the “Agreement”). Terms defined in the Agreement shall have the same meaning in this certificate, unless the context otherwise requires.

We, [name of applicant, registered number [                    ]] whose registered office is at [                    ] (the “Applicant”), certify, for the purposes of an application for payment for, or towards, the Costs of Discharging Liabilities in respect of [specify Licensee] and [specify Power Station] pursuant to clause [    ] of the Agreement, that:

(A) the Applicant [is]/[was] at the time the works were undertaken] the holder of all necessary regulatory approvals or consents to carry out the works [proposed]/[undertaken] (including, where applicable and without limitation, a Licence relating to the relevant Power Station (if a Licence is or was required for such works to be undertaken)) (Note 1);

(B) the Applicant has, or has retained, the necessary technological and civil engineering expertise to enable it to carry out the works (Note 2); and

(C) [the consent or agreement of [name of Licensee] has been obtained]/[no consent or agreement is required] pursuant to the Agreement (Note 3) to our representing ourselves as an Approved Person.

We also hereby agree and acknowledge that any amount paid to us pursuant to this application shall be applied by us solely for the purpose of funding the Costs of Discharging Liabilities which are the subject of this application and, pending or in default of such application, shall be held on trust for NLF.

Signed by:  ________________________  

 [Name of Signatory]

 [Name of Applicant]

Dated:        ________________________

Note 1:	delete whichever alternative is not applicable.
Note 2:	delete if the application is being made in respect of completed works.
Note 3:	delete whichever alternative is not applicable.

1

Schedule 8

Funds Review Procedure

1. For the purposes of this Agreement, a “Fund Review” shall mean a review carried out in accordance with the terms of this schedule.

2. To initiate a Fund Review (following notice from the Secretary of State or otherwise), NLF shall request the Investment Manager to produce a written valuation of the total assets of NLF and attributing to each asset its Estimated Asset Value, which valuation shall be at a date not later than three months prior to the due date for completion of the Fund Review. The valuation shall be produced as soon as practicable after the request is made by NLF to the [Actuary/Investment Actuary or, as the case may be, the Investment Manager].

3. The valuation produced by the Investment Manager in accordance with paragraph 2 shall be provided by NLF to the Secretary of State and the Licensees within 30 days of its receipt by NLF and shall be final except in the case of a manifest error. If the Secretary of State believes, acting reasonably, that a manifest error has been made which if corrected would give rise either to an NLF Surplus arising or a greater NLF Surplus arising than would otherwise be the case, the matter in question may be referred by either NLF or the Secretary of State for determination by the Expert. The costs of the Expert shall be borne by NLF.

4. At a date not later than 30 days after the receipt of the valuation by NLF from the Investment Manager, NLF shall provide to the Secretary of State a calculation of the aggregate of any Tax liabilities that NLF would incur if all assets owned by it were disposed of at the date used for the valuation referred to in paragraph 1.

5. At a date not later than three months after the commencement of the review, the Licensees shall provide to NLF:

(A) a financial appraisal by each Licensee (on a Financial Period by Financial Period basis) of Costs of Discharging Liabilities;

(B) a calculation (developed from the financial appraisal produced pursuant to paragraph 5(A)) of Costs of Discharging Liabilities in respect of each Licensee, including the expected timing of their being incurred (on a Financial Period by Financial Period basis).

6. The appraisal referred to in paragraph 5(A) shall be reviewed as soon as reasonably practicable by NDA and NDA shall confirm to NLF whether the financial appraisal has been properly compiled and whether it is reasonable. NDA shall procure that the matters referred to in paragraphs 5(B) are reviewed as soon as reasonably practicable by the Actuary and that the Actuary is requested to confirm whether such calculations have been properly compiled and are reasonable.

7. For the purposes of paragraph 6, NDA and the Actuary shall be entitled to full information as to the matters underlying such appraisal, including background information and working papers. NDA and the Actuary may also make their own enquiries and shall have access on reasonable notice to relevant sites, personnel, accounts and files, computer programmes and written, electronic or other information stores.

2

8. The findings of NDA and the Actuary under this schedule in relation to each Licensee will be reported as soon as reasonably practicable to NLF and the Secretary of State. The Secretary of State and NLF shall be entitled to full information as to the matters underlying such findings, including background information and working papers and access on reasonable notice to relevant personnel.

9. If the Secretary of State or NLF does not agree as to the findings of NDA and/or the Actuary, or as to the calculation referred to in paragraph 4, then the matter in question may be referred by either NLF or the Secretary of State for determination by the Expert. The costs of the Expert shall be borne by NLF.

10. NLF, taking full account of the findings of NDA and the Actuary, and on the basis of any determinations of the Expert, will, as soon as reasonably practicable, determine the amount, if any, to be paid by NLF to the Secretary of State pursuant to clause 12.3.

3

Schedule 9

Investment Policy

INTRODUCTION

This investment policy has been determined by the Secretary of State in consultation with NLF and applies with effect from the Restructuring Date.

INVESTMENT POLICY - PART A

NLF will invest in and manage all of its assets (other than those specific assets which are referred to in Part B below) within the framework and parameters as set by the Secretary of State in her discretion from time to time, following consultation with NLF and the trustees of the Nuclear Trust.

INVESTMENT POLICY - PART B

Part B of the investment policy details the framework for the management of specific assets which NLF will receive pursuant to the agreements entered into on the Restructuring Date with, amongst others, certain members of the Group. This Part B may be altered by the Secretary of State in her discretion from time to time, following consultation with NLF and the trustees of the Nuclear Trust.

1. NLF Conversion Rights; Waiver of NLF Payments

1.1 Exercise of NLF Conversion Rights; Conversion of Conversion Shares

(A) NLF will, subject to the restrictions on the exercise of the NLF Conversion Right set out in the Contribution Agreement, comply with any directions given by the Secretary of State in regard to the exercise of the NLF Conversion Right. NLF will not take any action to exercise the NLF Conversion Right (whether in whole or in part), before receiving such directions from the Secretary of State.

(B) Notwithstanding the foregoing, during the 6 month period immediately following the Restructuring Date (the “Lock-up Period”), the Secretary of State will not direct NLF to exercise the NLF Conversion Right, unless: (i) a person (or persons acting jointly by agreement, understanding or arrangement, whether or not legally binding) has acquired or proposed the acquisition of 14.9 per cent. or more of the voting rights or equity share capital of BE plc; (ii) BE plc or any other member of the Group commits a material breach or persistent breaches of any of the covenants or any other material provision set out in the Nuclear Liabilities Agreements or any of the covenants set out in the Trust Deed; (iii) a Default Event under the Nuclear Liabilities Funding Agreement has occurred; (iv) an Event of Default occurs under the terms of the New Bonds; (v) actions taken or proposed by any person in respect of a member of the Group (and not expressly contemplated by any of the Nuclear Liabilities Agreements) will or may, in the opinion of the Secretary of State, have an adverse effect on the interests of the Secretary of State or NLF; or (vi) the exercise or disposal is required by law or by the rules of any regulatory body (together, “exceptional circumstances”).

4

1.2 Waiver of NLF Payments

(A) If, pursuant to the Contribution Agreement, NLF is entitled to waive any NLF Payment, NLF will request the Secretary of State for directions on whether or not to grant such waiver to BE plc and NLF shall comply with any directions given by the Secretary of State on whether or not to grant such waiver.

(B) If, following a request by NLF, no direction is given by the Secretary of State within the time period required by the Contribution Agreement, NLF will determine whether or not to waive the relevant NLF Payment by reference to the overall objectives of the Nuclear Trust and the other objectives of this investment policy.

2. RETENTION AND DISPOSAL OF BRITISH ENERGY GROUP PLC SHARES

(A) NLF will, subject to the restrictions on the disposal of Conversion Shares issued pursuant to the exercise of NLF Conversion Right (“Shares”) set out in the Contribution Agreement, comply with any directions given by the Secretary of State in regard to the retention, disposal or proposed disposal of Shares. NLF will not take any action to dispose of any Shares, before receiving such directions from the Secretary of State.

(B) Notwithstanding the foregoing, during the Lock-up Period the Secretary of State will not direct NLF to dispose of any or all of its Shares, unless an exceptional circumstance (as defined at paragraph 1.1 above) arises.

3. EXERCISE OF SHAREHOLDER RIGHTS

(A) If NLF has exercised all or any of its NLF Conversion Right and, pursuant to such exercise, holds any Shares, NLF will consult with the Secretary of State to obtain her guidance on the exercise of its rights as a shareholder (including in respect of voting on shareholder resolutions).

(B) NLF will, in exercising its rights as a shareholder, give due consideration to any such guidance.

4. RETENTION AND DISPOSAL OF NEW BONDS

(A) If NLF, in furtherance of the objectives of the Nuclear Trust and in compliance with the other policies set out in this investment policy, wishes to dispose of all or any of the New Bonds:

(i) NLF will consult with the Secretary of State to obtain her directions on such proposed disposal if effecting the disposal will result in NLF holding twenty-five per cent. (25%) or less of the total principal amount of New Bonds outstanding at that time; and

(ii) otherwise may implement such disposal without consulting with the Secretary of State.

5

(B) NLF will comply with any directions given by the Secretary of State in regard to the retention, disposal or proposed disposal of New Bonds, whether following a request from directions from NLF pursuant to paragraph 4(A)(i) or otherwise.

5. EXERCISE OF BONDHOLDER RIGHTS

At all times during which NLF holds any New Bonds, NLF will consult with the Secretary of State to obtain her guidance on the exercise of its rights as a bondholder (including in respect of voting on bondholder resolutions).

NLF will, in exercising its rights as a bondholder, give due consideration to any such guidance and, in circumstances in which NLF wishes or is entitled either (i) to waive any default by a member of the Group in respect of the New Bonds, or (ii) take any enforcement action following any such default, NLF shall comply with any directions given by the Secretary of State in regards to the grant or refusal of any such proposed waiver or the taking of such enforcement action. NLF will not take any action (whether in whole or in part) in regards to the grant or refusal of any such proposed waiver or the taking of any such enforcement action before receiving directions to that effect from the Secretary of State.

6. DEFINITIONS

For the purpose of this investment policy:

“dispose”	includes offer, sell, contract to sell, issue options in respect of or otherwise dispose of (whether directly or indirectly) and cognate expressions shall be construed accordingly;
“Hunterston Standard Security”	means the standard security over Hunterston Power Station entered into on or about the Restructuring Date between BEG(UK) and NLF;
“Lock-up Period”	has the meaning given in paragraph 1.1(B);
“NDA Termination Deed”	means the deed terminating the agreement entitled the “Nuclear Decommissioning Agreement” between, inter alia, BEG, BEG(UK), British Energy and Nuclear Generation Decommissioning Fund Limited;
“NDF Articles”	means the amended memorandum and articles of association of the Nuclear Generation Decommissioning Fund Limited and the written resolution effecting the relevant amendments;
“NLF Conversion Right”	has the meaning given to it in the Contribution Agreement;
“Nuclear Liabilities Agreements”	means the each of the Liabilities Documents, the DDP Debenture, the Torness Standard Security, the Hunterston Standard Security, the Nuclear Trust Amendment, the NDF Articles and the NDA Termination Deed;

6

“Nuclear Trust Amendment”	means the deed of amendment to the trust deed of the Nuclear Trust dated 27 March 1996 and entered into by the trustees of the Nuclear Trust, the Secretary of State and British Energy;
“Shares”	has the meaning given in paragraph 2(A); and
“Torness Standard Security”	means the standard security over Torness Power Station entered into on or about the Restructuring Date between BEG(UK) and NLF.

7

Schedule 10

Deeds of Adherence and Release

Part 1: Form of Deed of Adherence

THIS DEED POLL is made on [                    ] by [                    ], a company incorporated [in/under the laws of] [            ] under registered number [    ], whose registered office is at [                    ] (the “New Licensee”).

WHEREAS:

(A) By an agreement dated [                    ], [                    ] transferred to the New Licensee the nuclear power generating station[s] at [                    ] (the “Power Station[s]”).

(B) This Deed Poll is entered into in compliance with the terms of clause 35 (Assignment) of the Nuclear Liabilities Funding Agreement dated [                    ], 2004 January, 2005 between (1) the Secretary of State for Trade and Industry, (2) Nuclear Liabilities Fund Limited, (3) British Energy Generation (UK) Limited, (4) British Energy Generation Limited, (5) British Energy Group plc and (6) British Energy Holdings plc (as such agreement shall have been or may be amended, supplemented or novated from time to time) (the “NLF Agreement”).

THIS DEED POLL WITNESSES as follows:

1. Words and expressions defined in the NLF Agreement shall have the same meanings in this Deed Poll unless given a different meaning in this Deed Poll.

2. The New Licensee undertakes to adhere to and be bound by the provisions of the NLF Agreement, and to perform the obligations imposed by the NLF Agreement which are to be performed on or after the date of this Deed Poll, in all respects as if the New Licensee were a party to the NLF Agreement and named therein as a Licensee except to the extent that the NLF Agreement requires any New Licensee which is not a member of the Group to warrant in respect of, or procure the performance of the obligations of, any member of the Group.

3. The New Licensee represents and warrants to the persons referred to in paragraph 4 of this Deed Poll that as at the date hereof:

(A) it has all necessary regulatory consents and approvals for undertaking (i) the Operation of [the]/[each] Power Station (but only to the extent that the nuclear reactor or reactors at each such Power Station have not Closed, and (ii) the Decommissioning of [the]/[each] Power Station and the Discharge of Uncontracted Liabilities in relation to [the][each] Power Station if the nuclear reactor or reactors at the Power Station(s) have Closed;

(B) it is the [owner/operator] of the Power Station; and

8

The New Licensee also represents, warrants and covenants on the terms set out in clauses 20 (Representations and Warranties) and 21 (Covenants) of the NLF Agreement.

4. This Deed Poll is made for the benefit of (a) the original parties to the NLF Agreement and (b) any other person or persons who after the date of the NLF Agreement (and whether or not prior to or after the date of this Deed Poll) adheres to the NLF Agreement..

5. References in Schedule 1 (Power Stations) of the NLF Agreement to a Power Station being licensed to the Licensee shall be construed as a reference to the Power Station being licensed to the New Licensee and Schedule 1 shall be amended to show the New Licensee as Licensee of the Power Station.

6. The address and facsimile number of the New Licensee for the purposes of clause 38 (Notices) of the NLF Agreement are as follows:

Party	Address	Facsimile no.	Attention
·	[Its registered office from time to time]	·	·

7. This Deed Poll shall be governed by and construed in accordance with English law.

8. The provisions of clause 43 (Jurisdiction) of the NLF Agreement shall apply equally to this Deed Poll.

9. [The agent for receipt of Service Documents on behalf of the New Licensees for the purposes of clause 44 (Agent for Service) of the NLF Agreement is · of ·.

IN WITNESS of which this Deed Poll has been executed and delivered by the New Licensee on the date which first appears above.

[Appropriate execution clause]

9

Part 2: Additional information to be delivered by an assignee

1. A certified copy of the constitutional documents of the assignee.

2. A certified copy of a resolution of the board of directors of the assignee:

(a) approving the terms of, and the transactions contemplated by, the Deed of Adherence and the Liabilities Documents and resolving that it execute the Deed of Adherence; and

(b) authorising a specified person or persons to execute the Deed of Adherence on its behalf.

3. A copy of any other authorisation or other document, opinion or assurance which the Secretary of State considers to be necessary or desirable in connection with the entry into and performance of the transactions contemplated by the Deed of Adherence or for the validity or enforceability of any Liabilities Document.

10

Part 3: Form of Deed of Release

THIS DEED is made on [                    ] by:

1. THE SECRETARY OF STATE FOR TRADE AND INDUSTRY of One Victoria Street, London SW1V 0HT (the “Secretary of State”);

2. NUCLEAR LIABILITIES FUND LIMITED of [16 Rothesay Place, Edinburgh EH3 7SQ] (registered in Scotland No. SC164685) (“NLF”);

3. [THE TRANSFERRING LICENSEE] of [                    ] (registered in [            ] No. [    ]) (“New Licensee”)

4. [THE NEW LICENSEE] of [                    ] (registered in [            ] No. [    ]) (“New Licensee”)

[5. [THE OTHER LICENSEES], being at the date of this Deed the persons listed in Schedule 1 to this Deed;]

6. BRITISH ENERGY GROUP PLC of Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC270134) (“BE plc”); AND

7. BRITISH ENERGY HOLDINGS PLC of Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC270186) (“Holdings”).

WHEREAS:

(A) By an agreement dated [                    ], the Transferring Licensee transferred to the New Licensee the nuclear power generating station[s] at [            ] (the “Power Station[s]”).

(B) The Transferring Licensee wishes to be released and discharged from the NLF Agreement (as defined below) and the Secretary of State and NLF have agreed to release and discharge the Transferring Licensee from the NLF Agreement upon the terms of this Deed.

(C) This Deed is entered into in compliance with the terms of clause 33 (Assignment) of the nuclear liabilities funding agreement dated      January, 2005 between (1) the Secretary of State for Trade and Industry, (2) Nuclear Liabilities Fund Limited, (3) British Energy Generation (UK) Limited, (4) British Energy Generation Limited, (5) British Energy Group plc and (6) British Energy Holdings plc (as such agreement shall have been or may be amended, supplemented or novated from time to time) (the “NLF Agreement”).

11

THIS DEED WITNESSES as follows:-

1. Words and expressions defined in the NLF Agreement shall have the same meaning in this Deed unless given a different meaning in this Deed.

2. With effect from the date hereof and in consideration of the New Licensee entering into a deed of adherence [on or about the date hereof] by which it agrees to be bound by the terms of the NLF Agreement as a Licensee, the parties to this Deed (other than the Transferring Licensee) hereby release and discharge the Transferring Licensee from its obligations under the NLF Agreement, except for:

(A) the Transferring Licensee’s obligations in respect of, and liability for, any Excluded Liabilities, including any Costs which are the subject of an MPS Failure Notice, an Operational Liabilities Notice, a Review Notice or a notice under clause 11.4(A) of the NLF Agreement at the date of this Deed;

(B) the Transferring Licensee’s obligations in respect of, and liability for, any NLF Compensation Amount or any other amount payable by the Licensee to NLF or the Secretary of State in connection with any Excluded Liabilities; and

(C) without prejudice to paragraphs 2(A) and 2(B), the Transferring Licensee’s obligations under the clauses of the NLF Agreement specified in Schedule 2 to this Deed.

3. Notwithstanding the provisions of paragraph 2, nothing in this Deed shall affect or prejudice any claim or demand whatsoever which the Secretary of State or NLF may have against the Transferring Licensee in relation to the NLF Agreement and arising out of matters prior to the date hereof.

4. With effect from the date hereof and in consideration of the undertakings given by the Secretary of State and NLF in paragraph 2, the Transferring Licensee hereby releases and discharges the Secretary of State and NLF from all obligations to observe, perform, discharge and be bound by the NLF Agreement except to the extent that any Uncontracted Liabilities remain to be discharged. Notwithstanding this undertaking and release, nothing in this Deed shall affect or prejudice any claim or demand whatsoever which the Transferring Licensee may have against the Secretary of State or NLF in relation to the NLF Agreement and arising out of matters prior to the date hereof, including in respect of any Licensee Compensation Amount.

5. This Deed may be executed in any number of counterparts, and by the parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart. Each counterpart shall constitute an original of this agreement, but all the counterparts shall together constitute but one and the same instrument.

7. This Deed shall be governed by and construed in accordance with English law.

8. The provisions of clause 43 (Jurisdiction) of the NLF Agreement shall apply equally to this Deed.

12

9. The agent for receipt of Service Documents on behalf of the New Licensee for the purposes of clause 44 (Agent for Service) of the NLF Agreement is · of ·.

IN WITNESS of which this Deed has been executed and delivered by the parties on the date which first appears above.

[Execution clause]

13

Schedule 1

(Other Licensees)

Name Registered Address Registered Number]

[Details to be inserted.]

14

Schedule 2

(Excluded Clauses)

The clauses referred to in paragraph 2 of this Deed are:

1. Clauses 3.3 and 3.10.

2. Clauses 4.3 and 4.10.

3. Clause 6

4. Clauses 7.8 and 7.9.

5. Clauses 8.9, 8.10, 8.11(A) and (C).

6. Clause 9 (insofar as it relates to compensation payable or receivable by the Transferring Licensee or the determination of such compensation).

7. Clause 10 (insofar as it relates to Uncontracted Liabilities)

8. Clause 11.1 to 11.3 ((i) insofar as they relate to Uncontracted Liabilities and (ii) insofar as they relate to Decommissioning during the Financial Period covered by an Annual Liabilities Report the Transferring Licensee was the Licensee of the Power Station transferred), 11.4 to 11.10.

9. Clause 23.3(C).

10. Clause 26 (insofar as the other Licensees shall remain jointly and severally liable for the obligations of the Transferring Licensee which are expressed to survive under this Deed).

11. Clauses 27 to 30.

12. Clause 31 (insofar as it relates to the obligations of the Transferring Licensee which are expressed to survive under this Deed).

13. Clause 33.1.

14. Clause 34.

15. Clause 35.

16. Clause 36.

17. Clause 37.

18. Clause 38.

19. Clauses 41 to 44.

15

Schedule 11

Designated Accounts

[Date]

[                    ] Bank plc

Dear Sir,

Trust Account

We refer to [Name of Licensee/Approved Person] Nuclear Liabilities NLF Trust Account, account number [                    ] (the “Trust Account”). Standard account documentation for the Trust Account has already been provided.

We would be grateful if you would sign and return the attached copy letter to us. Your signature will confirm that:

1. The Trust Account has been established by you and is currently being operated by you.

2. You hereby acknowledge that the Trust Account is a trust account, and that funds standing to the credit of the Trust Account are held by [Licensee/Approved Person] on trust for the purposes set out in a Nuclear Liabilities Funding Agreement dated      January, 2005 between, inter alia, British Energy Generation Limited, British Energy Generation (UK) Limited, British Energy Group Plc, British Energy Group Holdings plc the Secretary of State for Trade and Industry, Nuclear Liabilities Fund Limited and other members of the British Energy Plc group, and pending or in default of such application, on trust for Nuclear Liabilities Fund Limited and the Secretary of State as set out therein.

3. You will not exercise and hereby waive any right to combination, consolidation, merger, set off or lien whatsoever which you may have in respect of any monies standing or accruing to the credit of the Trust Account.

4. You will operate each Trust Account in accordance with the Mandate then currently in force for the Trust Account, provided that the terms of this letter shall prevail in the event they conflict with your Mandate or any of your standard terms and conditions applicable to the opening, operating and holding of the Trust Account with you.

5. This letter shall be governed by and construed in accordance with English law.

Yours faithfully,

___________________

Director

[Licensee/Approved Person]

16

SECRETARY OF STATE SIGNED by a senior official of the Department of Trade and Industry duly authorised to sign on behalf of
the Secretary of State:	______________________________
SIGNED for and on behalf of NUCLEAR GENERATION
DECOMMISSIONING FUND LIMITED acting by:	______________________________
SIGNED by	______________________________
as attorney for BRITISH ENERGY GENERATION (UK) LIMITED
SIGNED by as attorney for BRITISH ENERGY GENERATION LIMITED	______________________________
SIGNED by as attorney for BRITISH ENERGY GROUP PLC	______________________________
SIGNED by as attorney for BRITISH ENERGY HOLDINGS PLC	______________________________

17

British Energy

Illustrative Annual Liabilities Report

Year ended 31 March [    ]

1. EXECUTIVE SUMMARY

	Ref
		£m	£m	£m	£m
Balance at 1/4/[    ]
Incremental liabilities:
Regulatory changes	2
Anticipatory changes	3
Licensee changes	4
Key exercises of rights	5
MPS & MCS failures	6
Revalorisation Discharge of liabilities during the year	7
Increase in liabilities due to change in liabilities plans	8,9
	11
Balance at 31/3/[    ]
Excluded liabilities
Qualifying liabilities

Narrative

- 1 -

2. REGULATOR-REQUIRED CHANGES

This table should include all regulatory-required changes (as contemplated. by clause 8.4 of the Nuclear Liabilities Funding Agreement) that created an incremental liability with an NPV in excess of £100,000 (adjusted for inflation).

	£m	£m
Change Ref1
Change Ref2
Change Ref3
Etc.
Total incremental liabilities

3. ANTICIPATORY CHANGES

This table should include all anticipatory changes (as contemplated by clause 8.5 of the Nuclear Liabilities Funding Agreement that created an incremental liability with an NPV in excess of £100,000 (adjusted for inflation).

	£m	£m
Change Ref1
Change Ref2
Change Ref3
Etc.
Total incremental liabilities

4. LICENSEE CHANGES

This table should include all licensee changes (as contemplated by clause 8.6 of the Nuclear Liabilities Funding Agreement) that created an incremental liability with an NPV in excess of £100,000 (adjusted for inflation).

	£m	£m
Change Ref1
Change Ref2
Change Ref3
Etc.
Total incremental liabilities

5. KEY EXERCISES OF RIGHTS

This table should include all Key Exercises of Rights (as contemplated by clause 5 of the Historic Liabilities Funding Agreement).

	£m	£m
Change Ref1
Change Ref2
Change Ref3
Etc.
Total incremental liabilities

6. RELEVANT EVENTS

This table should include all MPS and MCS failures that created an incremental liability with an NPV in excess of £100,000 (adjusted for inflation) and as contemplated by in clause 7 of the Nuclear Liabilities Funding Agreement and clause 4 of the Historic Liabilities Funding Agreement.

	£m	£m
Relevant event Ref 1
Relevant event Ref2
Relevant event Ref3
Etc.
Total incremental liabilities

7. LIABILITIES DISCHARGED DURING THE YEAR

	£m	£m	£m	£m
Liabilities discharged during the year
Budgeted discharge of liabilities
Variance
Detailed narrative explanation

8. CHANGES IN DECOMMISSIONING STRATEGY

Detailed narrative explanation.

9. CHANGES IN UNCONTRACTED LIABILITIES STRATEGY

Detailed narrative explanation.

10. CHANGES IN DE-FUELLING SAFETY CASES

Detailed narrative explanation.

11. OTHER MOVEMENTS IN LIABILITIES ACCOUNTING ESTIMATES DURING THE YEAR

Detailed narrative explanation.

12. UPDATE ON ENVIRONMENTAL IMPACT ASSESSMENTS

Detailed narrative explanation.

Changes in schedule closure dates

	Closing Date	Previous Closing Date
Dungeness B		31 March 2008
Hartlepool		31 March 2014
Heysham 1		31 March 2014
Heysham 2		31 March 2023
Hinkley Point B		31 March 2011
Sizewell B		31 March 2035
Hunterston B		31 March 2011
Torness		31 March 2023

Detailed narrative explanation.

13. DETAILS OF EVENTS CLASSIFIED AS LEVEL 2 OR HIGHER ON THE INES SCALE

Detailed narrative explanation.

14. CHANGES IN OPERATING ENVIRONMENT

Detailed narrative explanation.

15. REVIEW OF CONTRACTING STRATEGY

Detailed narrative explanation.

16. BREACHES OF THE LIABILITIES DOCUMENTS

Detailed narrative explanation.

17. OTHER INFORMATION

18. BOARD STATEMENT

In this paragraph 18, capitalized terms have the meaning given to them in the Nuclear Liabilities Funding Agreement.

This Annual Liabilities Repo:7i has been reviewed and approved by the board of directors of Newco I, BEG and BEG(UK) and, to the best of our knowledge and belief, having taken all reasonable care to ensure that such is the case, except as disclosed in this Annual Liabilities Report:

(A) there have been no other Costs of Discharging Liabilities or Incremental Historic Liabilities incurred during the Financial Period;

(B) there have been no failures to comply with the Minimum Performance Standard which have given rise to, will give rise to, or could reasonably be expected to give rise to, any Disqualified Liabilities;

(C) there have been no other Operational Changes during the Financial Period which have given rise to, will give rise to, or could reasonably be expected to give rise to, any Disqualified Liabilities;

(D) no other matter or event has arisen or occurred which has given rise to, will give rise to or could reasonably be expected to give rise to, any Disqualified Liabilities; and

(E) the books, records and other materials (including databases and other forms of electronically held information) on which the Annual Liabilities Report is based are complete and accurate in all material respects and. have been maintained on a basis consistent with the basis on which they have been maintained in the previous three years.

In respect of the first Annual Liabilities Report produced pursuant to clause 11.1(A) of the Nuclear Liabilities Funding Agreement, the reference to “reasonable care” in such statement shall be replaced with a reference to “reasonable care having

regard to the limited nature of the information and detail reasonably available to the Licensees in the period within which such report is to be produced.

______________________	for and on behalf of Newco 1
Date
______________________	for and on behalf of BEG
Date
______________________	for and on behalf of BEG UK
Date

EX-4.23

Exhibit 4.23

DATED 14 January, 2005

THE SECRETARY OF STATE FOR TRADE AND INDUSTRY

BRITISH ENERGY GENERATION (UK) LIMITED

BRITISH ENERGY GENERATION LIMITED

BRITISH ENERGY GROUP PLC

AND

BRITISH ENERGY HOLDINGS PLC

HISTORIC LIABILITIES FUNDING AGREEMENT

Slaughter and May

One Bunhill Row

London EC1Y 8YY

(CDR/JEZS)

PI040680093

CONTENTS

Clause		Page
1.	INTERPRETATION	2
2.	SECRETARY OF STATE PAYMENTS	9
3.	EXCLUDED HISTORIC LIABILITIES	14
4.	MINIMUM CONTRACTING STANDARD AND MINIMUM PERFORMANCE STANDARD	16
5.	EXERCISE OF RIGHTS BY LICENSEE	18
6.	COMPENSATION FOR SECRETARY OF STATE EXERCISE OF RIGHTS AND NET COST OF EXERCISE OF RIGHTS	23
7.	ESCALATION	24
8.	INTEREST	24
9.	AMENDMENTS TO THE BNFL HISTORIC CONTRACTS	25
10.	TITLE TO FUEL AT SELLAFIELD	26
11.	EVENTS OF DEFAULT	28
12.	EFFECT OF DEFAULT EVENT	30
13.	DEDUCTION OR WITHHOLDING	33
14.	LIABILITY	34
15.	REMEDIES AND WAIVERS	34
16.	INVALIDITY	35
17.	NO PARTNERSHIP	35
18.	CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999	35
19.	FURTHER ASSURANCE	35
20.	ENTIRE AGREEMENT	35
21.	ASSIGNMENT	36
22.	CONDUCT OF PROCEEDINGS	39

23.	ACCESS TO INFORMATION	40
24.	NOTICES	41
25.	ANNOUNCEMENTS	42
26.	CONFIDENTIALITY	43
27.	COSTS AND EXPENSES	45
28.	COUNTERPARTS	45
29.	CHOICE OF GOVERNING LAW	45
30.	DISPUTE RESOLUTION	45
31.	JURISDICTION	47
32.	AGENT FOR SERVICE	48
33.	VARIATION	48
Schedule 1 BNFL Historic Contracts		49
Schedule 2 Power Stations		50
Schedule 3 Strategic Exercises of Rights		51
Schedule 4 Determination of Licensee Historic Compensation Amount		55
Schedule 5 Deeds of Adherence and Release		57

HISTORIC LIABILITIES FUNDING AGREEMENT

DATE: 14 January, 2005

PARTIES:

(1) THE SECRETARY OF STATE FOR TRADE AND INDUSTRY of One Victoria Street, London SW1V 0ET (the “Secretary of State”);

(2) BRITISH ENERGY GENERATION (UK) LIMITED of Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC117121) (“BEG(UK)”);

(3) BRITISH ENERGY GENERATION LIMITED of Barnett Way, Barnwood, Gloucester, England GL4 7RS (registered in England No. 03076445) (“BEG”);

(4) BRITISH ENERGY GROUP PLC Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC270184) (“BE plc”); AND

(5) BRITISH ENERGY HOLDINGS PLC, of Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC270186) (“Holdings”).

BACKGROUND

(A) In 1996, the Secretary of State privatised certain parts of the nuclear generation industry through a sale of shares in British Energy Plc (“British Energy”).

(B) In September 2002, British Energy initiated discussions with the Secretary of State with a view to seeking immediate financial support and to enable a longer term restructuring of British Energy to take place.

(C) In November 2002, British Energy announced the principles of a restructuring of the British Energy group with its significant financial creditors which, together with other proposals agreed between British Energy and the Secretary of State, were intended to lead to a solvent restructuring of British Energy.

(D) The proposals agreed between the Secretary of State and British Energy in connection with the restructuring of British Energy included a proposal for the funding of the liabilities of certain members of the British Energy group to BNFL under the BNFL Historic Contracts (as defined below).

(E) British Energy, certain other members of the British Energy group and its significant financial creditors entered into a creditors’ restructuring agreement dated as of 30 September 2003 (the “Creditor Restructuring Agreement”), under the terms of which a solvent restructuring of the British Energy group would be effected. The solvent restructuring of the British Energy group to be thereby effected involved, inter alia, the creation of a new ultimate parent company, BE plc and a new wholly-owned subsidiary of BE plc, Holdings. BE plc and Holdings are the holding companies of British Energy, BEG and BEG (UK).

(F) On 1 October 2003, British Energy, BEG, BEG (UK), certain other members of the British Energy group, NLF and the Secretary of State entered into an agreement (the “Government Restructuring Agreement”) under the terms of which they agreed to enter into the agreements that constitute the Liabilities Documents (as defined herein) including, amongst other agreements, this Agreement.

(G) Subject to the conditions set out in the Government Restructuring Agreement (which have been satisfied in full or waived in accordance with the terms thereof), the parties to this agreement have agreed, inter alia, to enter into this Agreement in order to give effect to the proposal for the funding of the liabilities of certain members of the British Energy group to BNFL under the BNFL Historic Contracts.

(H) The undertaking to make payments given by the Secretary of State in this Agreement is given to the extent permitted by (a) paragraph 1 of Schedule 12 to the Electricity Act 1989, and (b) section 1 of the Electricity (Miscellaneous Provisions) Act 2003.

THE PARTIES AGREE as follows:

1. INTERPRETATION

1.1 In this Agreement (including the recitals):

“1995 Agreement”	means the agreement dated 31st March 1995 (as amended from time to time, including by way of a deed of amendment dated 16th May 2003) and entered into by BNFL and Nuclear Electric plc (as novated to Nuclear Electric Limited, now BEG) for the storage and reprocessing of irradiated oxide fuel and related services;
“BE Parties”	means each of the Licensees, BE plc and Holdings and any other company that is, from time to time, party to this Agreement and that in any case is also a member of the Group;
“BNFL”	means British Nuclear Fuels plc (company number 1002607) whose registered office is at Risley, Warrington, Cheshire WA3 6AS or its successors or permitted assignees, including any person to whom British Nuclear Fuels plc (or its successors or permitted assignees) may assign or transfer any of its rights or obligations under the BNFL Historic Contracts in accordance with the terms thereof;
“BNFL Ancillary Agreements”	has the meaning given in paragraph 3 of Schedule 1 (BNFL Historic Contracts);

2

“BNFL Historic Contracts”	has the meaning given in paragraph 1 of Schedule 1 (BNFL Historic Contracts). For the purposes of this Agreement, “BNFL Historic Contracts” includes only those terms set out on the face of the BNFL Historic Contracts and any terms implied therein by law, and excludes any pre-contractual statements not set out therein and any collateral warranties or contracts;
“BNFL Historic Fuel Contracts”	has the meaning given in paragraph 2 of Schedule 1 (BNFL Historic Contracts);
“British Energy”	has the meaning given in Recital (A);
“Contribution Agreement”	means the contribution agreement entered into on the same date as this Agreement between the Secretary of State, NLF, BEG(UK), BEG, BE plc and Holdings pursuant to which BEG and BEG(UK) agree to make the British Energy Contributions;
“Creditor Restructuring Agreement”	has the meaning given in Recital (E);
“Deed of Adherence”	means a deed of adherence in the form or substantially in the form set out in Part 1 of Schedule 5 (Deeds of Adherence and Release);
“Deed of Release”	means a deed of release in the form or substantially in the form set out in Part 3 of Schedule 5 (Deeds of Adherence and Release);
“Default Event”	has the meaning given in clause 11 (Events of Default);
“Defaulting Party”	has the meaning given in clause 11 (Events of Default);
“Delivered”	has the meaning given in the BNFL Historic Contracts;
“Dispute”	has the meaning given in clause 30.1;
“Excluded Historic Liabilities”	has the meaning given in clause 3.1;
“Exercise of Rights”	means the exercise of (or refraining from exercise of) any right or discretion by a Licensee under a BNFL Historic Contract or the agreement in writing by a Licensee of any future course of conduct, action, cost, rebate, or other matter with BNFL in accordance with the terms of a BNFL

3

	His toric Contract which will or is reasonably expected to give rise to an Incremental Historic Liability;
“Expert”	means an expert appointed in accordance with clause 30 (Dispute Resolution);
“Fixed Historic Liabilities”	means the amounts payable under clause 12.3 (as adjusted for inflation pursuant to clause 12.7) of the 1995 Agreement and clause 12.3 (as adjusted for inflation pursuant to clause 12.7) of the SNL Agreement;
“Fixed Payment Criteria”	has the meaning given in clause 2.3;
“Government Restructuring Agreement”	has the meaning given in Recital (F);
“Historic Fuel”	has the meaning ascribed to “Fuel” in the 1995 Agreement and the SNL Agreement;
“Historic Liabilities”	means the Fixed Historic Liabilities and the Incremental Historic Liabilities;
“Incremental Historic Liabilities”	means all amounts due and owing under and in accordance with the terms of the BNFL Historic Contracts but excluding Fixed Historic Liabilities;
“Incremental Payment Criteria”	has the meaning given in clause 2.4;
“Key Exercise of Rights”	means: (a)    a Strategic Exercise of Rights; or (b)    a Non-Strategic Exercise of Rights which: (i)     results in an increase in Historic Liabilities of £15,000 (on an undiscounted basis) or more; or (ii)    when the increase in Historic Liabilities arising as a result of that Exercise of Rights is aggregated with all other increases in Historic Liabilities arising as a result of other Exercises of Rights in that Financial Period, results in an increase in the Net Present Value of Historic Liabilities of £50,000 or more;

4

“Licensee”	means from time to time each of: (A)   BEG and BEG(UK); and (B)   any person who satisfies the criteria set out in clause 21.2 and who has executed a Deed of Adherence; and (C)   any person deemed to be a Licensee for the purposes of this Agreement in accordance with clause 21.3;
“Licensee Historic Compensation Amount”	has the meaning given in clause 6 (Compensation for Secretary of State Exercise of Rights and Net Cost Exercise of Rights);
“Minimum Contracting Standard”	means, in relation to an Exercise of Rights: (a)    the exercise of such discretion in such manner; and (b)    the agreement of such matters, in each case with reasonable care, in compliance with Applicable Law and Accepted Standards, and in a similar manner as if the Licensee was bearing the Historic Liabilities and all other decommissioning liabilities, uncontracted and contracted liabilities and other nuclear-related liabilities arising in connection with the Operation of each Power Station;
“Net Cost”	means the sum of:
	(A)   costs and expenses, including attributable overheads;
	(B)   reductions in income; and
	(C)   any Value Added Tax referable to (A) and (B) to the extent that such Value Added Tax is reasonably expected to be not recoverable (whether by a Licensee or the representative member of its Value Added Tax group registration);

5

“Net Cost Exercise of Rights”	means an Exercise of Rights (other than a Secretary of State Exercise of Rights) which will result in, or could reasonably be expected to result in, a decrease in Historic Liabilities but which will also result in, or could reasonably be expected to result in, a Licensee incurring a net cost;
“Net Present Value” or “NPV”	has the meaning given in clause 1.2(O);
“New Fuel”	has the meaning given in the BNFL Historic Contracts;
“NLF”	means Nuclear Generation Decommissioning Fund Limited (to be renamed Nuclear Liabilities Fund Limited) of 16 Rothesay Place, Edinburgh EH3 7SQ (registered in Scotland No. SC164685);
“NLFA”	means the nuclear liabilities funding agreement of even date between the Secretary of State, NLF, BEG(UK), BEG, BE plc and Holdings;
“NLF Bonds”	means £275,000,000 bonds to be issued by BE plc to NLF under the Contribution Agreement;
“Non-Standard Fuel”	has the meaning given in the BNFL Historic Fuel Contracts;
“Non-Strategic Exercise of Rights”	means an Exercise of Rights other than a Strategic Exercise of Rights;
“Notice of Dispute”	has the meaning given in clause 30.1;
“Option Agreement”	means the option agreement dated the same date as this Agreement, between the Secretary of State, BEG, BEG(UK), BE plc and Holdings pursuant to which BEG and BEG(UK) each grant an option to the Secretary of State to acquire the Power Stations;
“Power Stations”	means each nuclear power station described in Parts 1 and 2 of Schedule 2 (Power Stations) and references to a Power Station or Power Stations of a Licensee are to the Power Station or Power Stations listed under the Licensee’s name in Schedule 2 (Power Stations) and references to a Licensee of a Power Station are to the relevant Licensee listed in Schedule 2 (Power Stations) (including Schedule 2 (Power Stations) as it may be amended from time to time pursuant to paragraph 6 of Part 1 of Schedule 5 (Deeds of Adherence and Release);

6

“Proceedings”	means any proceeding, suit or action arising out of or in connection with this Agreement;
“Reconciliation Statement”	has the meaning given in clause 3.2(C);
“Secretary of State Exercise of Rights”	means an Exercise of Rights (other than a Net Cost Exercise of Rights) which the Secretary of State requires a Licensee to make in accordance with clause 5.4;
“Service Document”	has the meaning given to it in clause 32.4;
“SNL Agreement”	means the agreement dated 30th March 1995 (as amended from time to time, including by way of a deed of amendment dated 16th May 2003) entered into by BNFL and Scottish Nuclear Limited (now BEG(UK)) for the storage and reprocessing of irradiated oxide fuel and related services; and
“Strategic Exercise of Rights”	means an Exercise of Rights under any of the provisions listed in Schedule 3 (Strategic Exercises of Rights).

1.2 Unless otherwise stated:

(A) words importing the singular only shall include the plural and vice versa;

(B) references to any “party” shall be construed so as to include its successors in title, permitted assigns and permitted transferees;

(C) references to a “company” shall be construed so as to include any company, corporation or other body corporate, wherever and however incorporated or established;

(D) references to a “person” shall be construed so as to include any individual, firm, company, government, state or agency of a state, local or municipal authority or government body or any joint venture, association or partnership (whether or not having separate legal personality);

(E) any reference to a “day” (including within the phrase “Business Day”) shall mean a period of 24 hours running from midnight to midnight;

7

(F) references to times are to London time;

(G) a reference to any statute or statutory provision shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted;

(H) a reference to any other document referred to in this Agreement is a reference to that other document as amended, varied, novated or supplemented at any time;

(I) the schedules form part of this Agreement and shall have the same force and effect as if expressly set out in the body of this Agreement, and reference to this Agreement shall include the schedules;

(J) a reference to a clause, paragraph or a schedule is a reference to a clause, sub-clause or paragraph of, or a schedule to, this Agreement;

(K)	(i)	the rule known as the ejusdem generis rule shall not apply and accordingly general words introduced by the word “other” shall not be given a restrictive meaning by reason of the fact that they are preceded by words indicating a particular class of acts, matters or things;
	(ii)	general words shall not be given a restrictive meaning by reason of the fact that they are followed by particular examples intended to be embraced by the general words;

(L) references to any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official, or any legal concept or thing shall in respect of any jurisdiction other than England and Wales be deemed to include what most nearly approximates in that jurisdiction to the English legal term;

(M) a reference to “cost” or “expense” of any person shall not include any amount paid or payable in respect of Value Added Tax that is recoverable by that person or the representative member of its Value Added Tax group registration;

(N) references to Value Added Tax being “recoverable” shall mean credit (as input tax) being allowable in respect of the relevant amount of Value Added Tax, in accordance with the Value Added Tax Act 1994 and any regulations made thereunder, or (in the case of any other tax on value or turnover which is enacted in addition to or in substitution of value added tax charged in accordance with that Act) relief having corresponding economic effect being allowable;

(O) where any provision of this Agreement requires the calculation of a “Net Present Value” or “NPV”, the amount shall be calculated in accordance with this Agreement using generally accepted methodologies for the calculation of net present values. Where this Agreement does not specify who is to perform the calculation and the parties are unable to agree the calculation, the calculation shall be referred to an Expert for determination;

8

(P) words importing any gender shall include all other genders;

(Q) words importing natural persons shall include corporations; and

(R) with effect from the date (if any) that the United Kingdom adopts the Euro as its lawful currency in substitution for sterling:

(i) payments falling due under this Agreement shall be made by the payer to the recipient in Euros;

(ii) no payments which would have been payable in sterling under this Agreement but for the adoption of the Euro by the United Kingdom as its lawful currency shall be made in sterling or national currency units;

(iii) all amounts stated in sterling shall be converted into Euros at the fixed conversion rate provided for by the laws of England; and

(iv) all amounts required to be calculated in sterling shall be calculated in Euros.

1.3 All headings and titles are inserted for convenience only. They are to be ignored in the interpretation of this Agreement.

1.4 Capitalised terms not otherwise defined in this Agreement shall have the meanings ascribed to them in the NLFA.

2. SECRETARY OF STATE PAYMENTS

Undertaking

2.1 The Secretary of State undertakes to each Licensee to make payments in respect of Historic Liabilities of the Licensee (other than Excluded Historic Liabilities) and Licensee Historic Compensation Amounts on the terms of this Agreement and otherwise to comply with the terms of this Agreement.

2.2 The undertaking given by the Secretary of State to make payments under this Agreement is given, as the case may be:

(A) to the extent permitted by paragraph 1 of Schedule 12 to the Electricity Act 1989, under that paragraph; and

(B) to the extent permitted by section 1 of the Electricity (Miscellaneous Provisions) Act 2003, under that section.

9

Application Procedure

2.3 Any application by a Licensee for payment in respect of Fixed Historic Liabilities must satisfy the following criteria (the “Fixed Payment Criteria”) as at the date of the application and at the date of payment, namely that the application is accompanied by an invoice addressed to the Licensee from BNFL for the amount in respect of which the application is made, and such amount (excluding any Value Added Tax thereon or other Tax required by legislation thereon) (save for payments made under clause 6.1 below):

(A) is equal to the sum of (a) the relevant amount listed in the relevant payment schedule in which the Fixed Historic Liabilities are set out and (b) any adjustment for inflation in accordance with the terms of the relevant BNFL Historic Contract; and

(B) has not already been paid by the Secretary of State.

2.4 Any application by a Licensee for payment in respect of Incremental Historic Liabilities must satisfy the following criteria (the “Incremental Payment Criteria”) as at the date of the application and at the date of payment, namely:

(A) the application is made to the Secretary of State in writing and for a specified sum, excluding any Value Added Tax and/or any other Tax required by legislation thereon and referable to such Incremental Historic Liabilities (unless the application is accompanied by written confirmation from the applicant satisfactory to the Secretary of State that such Value Added Tax and/or other Tax is not recoverable by the applicant (or the representative of its Value Added Tax group registration) in which case it shall be included); and

(B) the application is accompanied by written or permanent materials reasonably satisfactory to the Secretary of State (including, where applicable, copies of any invoices in respect of the sums which are the subject of the application) substantiating:

(i) the calculation of the sum in respect of which the application is made;

(ii) (a) the date on which the sum in respect of which the application is made is due and payable, or (b) that the sum represents an amount which has been paid or incurred by the applicant;

(iii) confirmation that none of the amounts that are the subject of the application are in dispute or, to the extent that there is a dispute between the applicant Licensee and BNFL regarding any Incremental Historic Liability invoiced by BNFL under the BNFL Historic Contracts in an invoice or invoices the subject of this application, details of the dispute and a breakdown, in form and substance reasonably satisfactory to the Secretary of State, of the relevant invoices into disputed and undisputed amounts. Any undisputed amounts shall be treated as due and payable for the purposes of this Agreement and any disputed amounts shall not be treated as due and payable for the

10

purposes of this Agreement unless and until the applicant Licensee provides the Secretary of State with evidence, in form and substance reasonably satisfactory to the Secretary of State, that the dispute has been resolved and the relevant amounts are due and payable;

(iv) the basis on which the Incremental Historic Liability for which payment is required has arisen, including a description of any works (from which such Incremental Historic Liability derives) carried out or to be carried out;

(v) confirmation by an appropriate and authorised employee or officer of the applicant Licensee that, in his or her reasonable opinion, the Incremental Historic Liability in respect of which the application is made does not constitute an Excluded Historic Liability; and

(vi) confirmation by an appropriate and authorised employee or officer of the applicant Licensee that, in his or her reasonable opinion, no part of the Incremental Historic Liability is recoverable from BNFL (and the parties agree that any amounts so recoverable by the Licensee from BNFL shall be Excluded Historic Liabilities).

Disputes

2.5 (A) Subject to clause 2.5(B):

(i) if the Secretary of State disputes a confirmation made under clause 2.4(B)(v) or (vi) and such confirmation was given in respect of Incremental Historic Liabilities already approved by her as at the date of such confirmation, she shall give notice of such dispute to the relevant Licensee within 20 Business Days after such confirmation is given; or

(ii) if the Secretary of State disputes a confirmation made under clause 2.4(B)(v) or (vi) and such confirmation was given in respect of Incremental Historic Liabilities not previously approved by her as at the date of such confirmation, she shall give notice of such dispute to the relevant Licensee within 40 Business Days after such confirmation is given,

and, if the disputed matter cannot be resolved by discussion between the Secretary of State and the applicant Licensee, the Secretary of State may refer the disputed matter to the Expert, and, on the basis of the Expert’s determination of such question, the Expert shall determine, pursuant to clauses 30.4 to 30.11, whether or not the confirmation so disputed was correctly given. If the Expert determines that the confirmation so disputed was incorrectly given, the liabilities in respect of which such confirmation was made shall be Excluded Historic Liabilities. If the Expert determines that such confirmation was correctly given, then, provided that the other Incremental Payment Criteria have been met, the Secretary of State shall make payment of such Incremental Historic Liabilities in accordance with this clause 2 (Secretary of State Payments).

11

(B) The Secretary of State shall make payment to BNFL or the Licensee (as the case may be) in respect of Incremental Historic Liabilities which arise or result from a Non-Strategic Exercise of Rights which is not a Key Exercise of Rights if the Incremental Payment Criteria are met, notwithstanding that the Secretary of State may, pursuant to clause 2.5(A), be disputing a confirmation made under clause 2.4(B)(v) or (vi). If it is determined pursuant to clause 2.5(A) that the liabilities the subject of such application were Excluded Historic Liabilities or were recoverable from BNFL, the Licensee, within 10 Business Days, shall reimburse the Secretary of State for such sum wrongly paid, together with interest calculated from day to day at LIBOR plus 2 per cent. per annum on that sum from (and including) the date of payment by the Secretary of State to (but excluding) the date of reimbursement.

Payment

2.6 (A) Subject to clause 2.5(B), an application made under clause 2.3 or 2.4 shall lead to a payment by the Secretary of State on a non-discretionary basis only if:

(i) in the case of a Fixed Historic Liability, the application meets the Fixed Payment Criteria; or

(ii) in the case of an Incremental Historic Liability, the application meets the Incremental Payment Criteria,

and, where the Fixed Payment Criteria or Incremental Payment Criteria (as the case may be) are met, the Secretary of State shall make such payment no later than the date on which the sum which is the subject of the application is due and payable under the BNFL Historic Contracts or, if later, 10 Business Days after the Fixed Payment Criteria or Incremental Payment Criteria (as the case may be) are met.

(B) Any payment made by the Secretary of State pursuant to clause 2.6(A) shall be made exclusive of any Value Added Tax and/or any other Tax required by legislation and referable to such Historic Liabilities (unless the application made pursuant to clause 2.3 or 2.4 is accompanied by written confirmation from the applicant satisfactory to the Secretary of State that such Value Added Tax and/or any other Tax required by legislation and referable to such Historic Liabilities is not recoverable (or is not recoverable in part) by the applicant (or the representative of its Value Added Tax group registration) in which case such payment shall be increased by an amount equal to the Value Added Tax and/or any other Tax) (or part thereof, as the case may be) which has been confirmed as not recoverable in accordance with this clause 2.6(B). To the extent that such confirmation is not satisfactory to the Secretary of State then the provisions of clause 30 (Dispute Resolution) shall apply.

12

Payment Procedures

2.7 Where a payment is to be made by the Secretary of State in respect of an Historic Liability:

(A) that has already been incurred and paid by a Licensee, the Secretary of State will make payment of the relevant sum by transfer of cleared funds to the nominated account of the Licensee; or

(B) that has been incurred but not yet paid by a Licensee, the Secretary of State will make payment of the relevant sum direct to BNFL and inform the Licensee that she has done so.

2.8 Notwithstanding any other terms of this Agreement, each Licensee acknowledges and agrees that it will not in any circumstances or at any time:

(A) have any right in, or right to receive, any sum payable or paid by the Secretary of State to BNFL under clause 2.7(B); or

(B) demand that any sum payable or paid by the Secretary of State to BNFL under clause 2.7(B) be paid directly to it; or

(C) make any claim or take or initiate any action to require or compel the Secretary of State to pay to it any sum due to BNFL under clause 2.7(B); or

(D) apply any amounts paid to it by the Secretary of State, in accordance with the terms of this Agreement in respect of Historic Liabilities which it has not already paid, for any purpose other than for the purpose of discharging such Historic Liabilities and, pending or in default of their application for such purpose, each Licensee undertakes to hold such amounts, together with any amounts recovered by it from BNFL which are payable to the Secretary of State, on trust for the Secretary of State in a separate account in which such amounts shall not be commingled with the Licensee’s property.

Excluded Historic Liabilities

2.9 Each Licensee acknowledges that the payment of any amount by the Secretary of State under the foregoing provisions of this clause 2 (Secretary of State Payments) which is subsequently agreed or determined to have been paid in respect of an Excluded Historic Liability shall not be treated as an acceptance or admission by the Secretary of State that such amount was not an Excluded Historic Liability, and shall not affect a Licensee’s obligation under this Agreement to indemnify the Secretary of State in respect of any such Excluded Historic Liability.

13

3. EXCLUDED HISTORIC LIABILITIES

3.1 “Excluded Historic Liabilities” comprise:

(A) liabilities arising under the BNFL Ancillary Agreements in relation to New Fuel as determined in accordance with clause 3.2 below;

(B) Incremental Historic Liabilities arising as a result of a breach by a Licensee of the terms of a BNFL Historic Contract after the Restructuring Principles Date including any and all liabilities representing liquidated damages under the terms of a BNFL Historic Contract (except to the extent that such liabilities result or arise from an act or omission of the Secretary of State (acting solely in her capacity as a party to the Liabilities Documents) after the Restructuring Date);

(C) except as provided in clause 3.3 below:

(i) Incremental Historic Liabilities deriving from Non-Standard Fuel where the event that caused the fuel to become Non-Standard Fuel was a failure by a Licensee to comply with the Minimum Performance Standard; or

(ii) Incremental Historic Liabilities deriving from a Licensee opting to package Non-Standard Fuel in 5” cans;

(D) Incremental Historic Liabilities arising out of a Non-Strategic Exercise of Rights (whether or not such Exercise of Rights is a Key Exercise of Rights) which does not comply with the Minimum Contracting Standard;

(E) Incremental Historic Liabilities arising as a result of the occurrence of:

(i) a Licensee failing (or being deemed to fail by this Agreement or the NLFA) to comply with the Minimum Performance Standard; or

(ii) a Licensee implementing a Licensee Change; and

(F) any other liability described as, or deemed to be, an Excluded Historic Liability in or by any provision of this Agreement.

3.2 To the extent that liabilities arising under the BNFL Ancillary Agreements are in relation to both New Fuel and Historic Fuel, such liabilities shall be pro-rated between New Fuel and Historic Fuel on the following basis:

(A) no longer than 20 Business Days prior to the start of a Financial Period, each Licensee shall provide the Secretary of State with its good faith estimate of the ratio of New Fuel to Historic Fuel to be Delivered from its Power Stations in the forthcoming Financial Period, based on its reasonable estimates of the quantity of New Fuel and the quantity of Historic Fuel to be so Delivered;

14

(B) during a Financial Period, liabilities arising under the BNFL Ancillary Agreements that relate to both New Fuel and Historic Fuel shall be pro-rated between New Fuel and Historic Fuel, and paid by the relevant Licensee and Secretary of State respectively, according to the estimated ratio provided to the Secretary of State pursuant to clause 3.2(A);

(C) no later than 30 Business Days following the end of each Financial Period, each Licensee shall provide the Secretary of State with a reconciliation statement (“Reconciliation Statement”) showing:

(i) the actual quantity of New Fuel and Historic Fuel Delivered in the previous Financial Period;

(ii) the ratio of New Fuel to Historic Fuel Delivered in the previous Financial Period, based on the actual quantities referred to in clause 3.2(C)(i);

(iii) the amount of liabilities arising under the BNFL Ancillary Agreements that, based on the ratio referred to in clause 3.2(C)(ii) above, should have been attributed to each of (a) New Fuel and (b) Historic Fuel, and payable by each of the relevant Licensee and Secretary of State respectively, had the actual quantities of New Fuel and Historic Fuel Delivered in the previous Financial Period been known at the time of payment to BNFL;

(iv) the difference between those amounts calculated pursuant to clause 3.2(C)(iii) and the sums actually paid by each of the relevant Licensee and Secretary of State to BNFL in relation to those liabilities in the previous Financial Period; and

(v) whether the difference referred to in clause 3.2(C)(iv) represents an amount payable by the relevant Licensee to the Secretary of State or by the Secretary of State to the relevant Licensee,

provided that where the Excluded Historic Liabilities arising in a Financial Period under the BNFL Ancillary Agreements are in excess of £15,000, such amount (which shall include such excess amount) shall be included in the Reconciliation Statement as being to the relevant Licensee’s account;

(D) payment by the relevant Licensee or the Secretary of State of the amount referred to in clause 3.2(C)(v) shall be due 20 Business Days after the receipt by the Secretary of State of the Reconciliation Statement;

(E) if the Secretary of State gives notice to the relevant Licensee that she disputes any of the estimates, calculations or information provided by a Licensee pursuant to this clause 3.2, the relevant Licensee and the Secretary of State shall meet within 10 Business Days to discuss the Secretary of State’s objection. If the relevant Licensee and Secretary of State are unable to resolve the dispute within 10 Business Days, either party may refer the dispute for Expert resolution pursuant to clauses 30.4 to 30.11; and

15

(F) either party acting reasonably and having regard to the viability of the administration of the pro-rating provisions set out in this clause 3.2 may, from time to time, request modifications to such provisions.

3.3 Notwithstanding clause 3.1(C) above, liabilities deriving from Non-Standard Fuel shall not be Excluded Historic Liabilities if the event which caused the fuel to become Non-Standard Fuel occurred prior to the Restructuring Principles Date.

3.4 Except to the extent that the Secretary of State (with the approval of Her Majesty’s Treasury) (i) assumes responsibility for any Excluded Historic Liabilities in accordance with the terms of this Agreement, or (ii) otherwise agrees with a Licensee that it will assume responsibility for any Excluded Historic Liabilities, including pursuant to the Option Agreement:

(A) any and all Excluded Historic Liabilities shall be for the account of the Licensees;

(B) the Secretary of State shall not have any liability in respect of any Excluded Historic Liabilities; and

(C) the Licensees shall keep the Secretary of State indemnified from and against any loss, cost, expense, liability, claim or damage which the Secretary of State properly and reasonably incurs or suffers, directly or indirectly, as a result of the Licensees not meeting or discharging an Excluded Historic Liability, including any costs incurred or suffered by the Crown in relation to an Excluded Historic Liability upon the acquisition by it or any other person of any Power Station or other property of a Licensee or any costs incurred or suffered by the Crown in relation to an Excluded Historic Liability upon the acquisition by it by operation of law of any Power Station or any other property of a Licensee following a Default Event.

4. MINIMUM CONTRACTING STANDARD AND MINIMUM PERFORMANCE STANDARD

Compliance with Standard

4.1 Unless specifically permitted by the terms of this Agreement not so to comply, each Licensee undertakes to the Secretary of State that, for so long as any Historic Liabilities or any other payments under this Agreement remain to be paid, settled or discharged, it shall comply with the Minimum Contracting Standard with respect to any Non-Strategic Exercise of Rights.

4.2 Notwithstanding clause 15 (Remedy and Waivers), except in the case of fraud, where a Licensee fails to comply with the Minimum Contracting Standard or Minimum Performance Standard, its liability under this Agreement for such failure shall be limited solely to the liabilities expressed in this Agreement to arise upon the occurrence of such a failure.

16

Deemed Compliance and Non-Compliance

4.3 Subject to clause 4.4, for the purposes of this Agreement, each Licensee shall be deemed to have complied, or be in compliance, with the Minimum Contracting Standard in respect of each of the BNFL Historic Contracts:

(A) at any time up to but excluding the Restructuring Principles Date; and

(B) to the extent that it makes an Exercise of Rights on or after the Restructuring Principles Date which is consistent with or equivalent to an Exercise of Rights it made prior to the Restructuring Principles Date.

4.4 Notwithstanding clause 4.3, a Licensee shall not be deemed to have complied with the Minimum Contracting Standard by virtue of the fact that it makes an Exercise of Rights which is consistent with an Exercise of Rights it made prior to the Restructuring Principles Date if:

(A) there is or was a change in circumstance or there occurs or occurred any event after the Restructuring Principles Date as a result of which, in order to maintain its compliance with the Minimum Contracting Standard, the Licensee should not make or should not have made such an Exercise of Rights; or

(B) the making of the Exercise of Rights prior to the Restructuring Principles Date, was in breach of any Applicable Law, any Accepted Standard, or the terms of a BNFL Historic Contract,

and a Licensee shall be deemed to be failing to comply with the Minimum Contracting Standard if and to the extent it implements an Exercise of Rights, on or after the Restructuring Principles Date, in breach of any Applicable Law or Accepted Standard or in breach of this Agreement or of the terms of a BNFL Historic Contract.

4.5 When a Licensee is deemed pursuant to the NLFA to have complied, or to have failed to comply, with the Minimum Performance Standard, the Licensee shall be so deemed for the purposes of this Agreement.

4.6 The parties agree that failure to comply with the Minimum Contracting Standard by reason of the Secretary of State not approving a Key Exercise of Rights shall not constitute a failure to comply with the Minimum Contracting Standard for the purposes of this Agreement.

Emergencies, Applicable Law and Regulatory Requirements

4.7 Notwithstanding any other provision of this Agreement, the parties acknowledge and agree that:

(A) nothing in this Agreement shall prevent a Licensee from taking such action as it considers necessary:

(i) in an emergency to prevent, mitigate or remedy any event that may prejudice the safety of employees or the public or may harm the environment; or

17

(ii) to comply with any Applicable Law including (without limitation) to prevent, mitigate or remedy any breach of a limitation or condition of a Licence or of an authorisation issued under the Radioactive Substances Act 1993,

provided that, if the occurrence of the emergency or the taking of any action under paragraph (i) or (ii) above gives rise to an increase in Historic Liabilities, the terms of this Agreement shall apply in determining whether the increase constitutes an Excluded Historic Liability or not; and

(B) the Licensees are not required, pursuant to this Agreement, to do any act or omit to do any act if:

(i) any Regulator would consider such act or omission unacceptable; or

(ii) the act or omission would cause the Licensee to be in breach of any Licence condition or Applicable Law; and

(C) nothing in this Agreement shall oblige the Secretary of State to monitor a Licensee’s compliance with the Minimum Contracting Standard or the Minimum Performance Standard.

5. EXERCISE OF RIGHTS BY LICENSEE

Restriction on Implementing Exercise of Rights

5.1 Except as otherwise permitted by the following provisions of this clause 5 (Exercise of Rights by Licensee), each Licensee undertakes to the Secretary of State not to make or implement any Key Exercise of Rights unless:

(A) if the Key Exercise of Rights is a Non-Strategic Exercise of Rights, the Licensee has complied with the provisions of clause 5.2; or

(B) if the Key Exercise of Rights is a Strategic Exercise of Rights, the Licensee has complied with the provisions of clause 5.3; or

(C) the Key Exercise of Rights is otherwise agreed by the Licensee and the Secretary of State on such terms as the Licensee and Secretary of State may agree, provided that the Secretary of State shall not be obliged to agree any proposed Exercise of Rights under this clause 5.1(C), including (in particular) if the proposed Exercise of Rights falls within the scope of clauses 5.1(A) or 5.1(B).

18

Non-Strategic Exercises of Rights

5.2 In relation to a proposed Key Exercise of Rights which is a Non-Strategic Exercise of Rights, a Licensee is entitled either to:

(A) give notice in writing to the Secretary of State specifying in reasonable detail the proposed Non-Strategic Exercise of Rights and the reasons therefor, in which case:

(i) within 20 Business Days of receipt of such notice, the Secretary of State shall give notice in writing to the Licensee confirming whether or not she approves the proposed Non-Strategic Exercise of Rights. If the Secretary of State gives notice that she approves such Exercise of Rights, or gives no notice, any increase in Historic Liabilities arising as a result of the Non-Strategic Exercise of Rights shall then constitute Incremental Historic Liabilities and shall not constitute Excluded Historic Liabilities; and

(ii) if the Secretary of State gives notice to the Licensee in accordance with clause 5.2(A)(i) that she objects to the proposed Non-Strategic Exercise of Rights (either in whole or part) on the grounds that it is not in compliance with the Minimum Contracting Standard, the Secretary of State and the Licensee shall meet as soon as reasonably practicable, and in any event no later than 20 Business Days following receipt of the notice of the Licensee, to discuss the proposed Non-Strategic Exercise of Rights and the reasons for the Secretary of State’s objection thereto; and

(iii) if, following compliance with clause 5.2(A)(ii), the Secretary of State still objects to the proposed Non-Strategic Exercise of Rights, the matter in dispute may be referred by either party to the Expert for resolution as to whether the Non-Strategic Exercise of Rights is in compliance with the Minimum Contracting Standard; or

(B) implement the Non-Strategic Exercise of Rights and pay BNFL in respect thereof without notice to the Secretary of State and without prejudice to the Secretary of State’s right pursuant to clause 2.5(A), on application by the Licensee under clause 2 (Secretary of State Payments) for reimbursement of such payment, to dispute a confirmation given pursuant to clause 2.4(B)(v) or (vi).

The Licensee may withdraw any notice given under clause 5.2(A) at any time prior to implementing the Non-Strategic Exercise of Rights in question and elect to proceed under clause 5.2(B).

19

Strategic Exercises of Rights

5.3 In relation to a Key Exercise of Rights which is a Strategic Exercise of Rights, the Licensee shall:

(A) give notice in writing to the Secretary of State specifying in reasonable detail the proposed Strategic Exercise of Rights and the reasons therefor, in which case:

(i) within 20 Business Days of receipt of such notice, the Secretary of State shall give notice in writing to the Licensee confirming whether or not she approves the proposed Strategic Exercise of Rights. If the Secretary of State gives notice that she approves such Strategic Exercise of Rights, any increase in Historic Liabilities arising as a result thereof shall then constitute Incremental Historic Liabilities and shall not constitute Excluded Historic Liabilities; and

(ii) if the Secretary of State gives notice to the Licensee in accordance with clause 5.3(A)(i) that she does not approve the proposed Strategic Exercise of Rights (either in whole or part), the Secretary of State and the Licensee shall meet as soon as reasonably practicable, and in any event no later than 20 Business Days following receipt of the notice of the Licensee, to discuss the proposed Strategic Exercise of Rights and the reasons for the Secretary of State’s objection thereto; and

(iii) if, following compliance with clause 5.3(A)(ii), the Secretary of State still objects to the proposed Strategic Exercise of Rights the Licensee shall not implement it; and

(iv) notwithstanding clause 5.3(A)(ii) or (iii), where clause 4.7 applies in relation to a proposed Strategic Exercise of Rights, the Secretary of State shall approve such Strategic Exercise of Rights and the terms of this Agreement shall apply in determining whether any resulting increase in Historic Liabilities shall constitute Excluded Historic Liabilities or not.

Secretary of State Exercise of Rights

5.4 (A) If (i) the Secretary of State so requests (with the approval of Her Majesty’s Treasury), and (ii) the Secretary of State has complied with this clause 5.4, a Licensee shall, subject to the provisions of this clause 5.4, implement a Secretary of State Exercise of Rights. Subject to the provisions of this clause 5.4, there shall be no limitations on the nature of a Secretary of State Exercise of Rights requested by the Secretary of State.

(B) In relation to a proposed Secretary of State Exercise of Rights, the Secretary of State shall give notice in writing to the Licensee specifying in reasonable detail the proposed Secretary of State Exercise of Rights and the reasons therefor, including details of the reduction in Historic Liabilities which would arise, or could reasonably be expected to arise, as a result of the proposed Exercise of Rights being implemented.

20

(C) Except as set out below, the Licensee shall be required to implement the proposed Secretary of State Exercise of Rights following the agreement or determination of the compensation to be paid by the Secretary of State to the Licensee in accordance with clause 6 (Compensation for Secretary of State Exercise of Rights and Net Cost Exercise of Rights). The Licensee shall not be required to implement a Secretary of State Exercise of Rights if:

(i) the proposed Secretary of State Exercise of Rights is a Non-Strategic Exercise of Rights and will not result in, or could not reasonably be expected to result in, a reduction of £10,000,000 or more, expressed in Net Present Value terms, in respect of the Costs of Discharging Liabilities; or

(ii) the proposed Secretary of State Exercise of Rights is a Non-Strategic Exercise of Rights and a reasonable and prudent operator who was responsible for implementing the proposed Secretary of State Exercise of Rights and who stood to bear all Historic Liabilities arising in connection with BNFL Historic Contracts would, acting reasonably and taking account of any compensation or other amounts receivable in connection therewith, not implement the proposed Secretary of State Exercise of Rights; or

(iii) a Regulator objects to the proposed Secretary of State Exercise of Rights; or

(iv) BNFL’s agreement is necessary to implement the proposed Secretary of State Exercise of Rights and such agreement is not reached with BNFL, provided that the Licensee has used its reasonable endeavours to obtain such BNFL agreement.

(D) If a Licensee refuses to implement a Secretary of State Exercise of Rights on the basis of one of the reasons set out in clause 5.4(C), the Secretary of State does not agree with the reason for such refusal, and the Secretary of State and the Licensee are unable to resolve the dispute within 40 Business Days, the matter in dispute may be referred by the Licensee or the Secretary of State to the Expert for resolution pursuant to clauses 30.4 to 30.11, provided that no determination by the Expert may require the Licensee to carry out a Secretary of State Exercise of Rights to which a Regulator objects.

(E) Subject to clause 5.4(C), if, following compliance with clause 5.4(B) and agreement or resolution pursuant to 5.4(D), it is found that the Licensee has no grounds to refuse to implement the Secretary of State Exercise of Rights and the Licensee fails to implement the same, any Historic Liabilities which would not have arisen had the Licensee implemented the proposed Secretary of State Exercise of Rights shall be deemed to be Excluded Historic Liabilities.

21

Net Cost of Exercise of Rights

5.5 (A) A Licensee shall not be required to implement a Net Cost Exercise of Rights but may propose to the Secretary of State that a Net Cost Exercise of Rights be implemented by giving notice in writing to the Secretary of State, specifying in reasonable detail the proposed Net Cost Exercise of Rights and the reasons therefor, including details of the reduction in Historic Liabilities and the Net Cost to the Licensee which would arise, or could reasonably be expected to arise, as a result of the proposed Net Cost Exercise of Rights being implemented.

(B) The Secretary of State (with the approval of Her Majesty’s Treasury) may require the Licensee to implement the proposed Net Cost Exercise of Rights following:

(i) agreement by the Licensee and the Secretary of State to the proposed Net Cost Exercise of Rights; and

(ii) the agreement of the Licensee and the Secretary of State of the compensation to be paid by the Secretary of State to the Licensee in accordance with clause 6 (Compensation for Secretary of State Exercise of Rights and Net Cost Exercise of Rights); and

(iii) where applicable, acceptance of the proposed Net Cost Exercise of Rights by the Regulators; and

(iv) where applicable, BNFL’s agreement being obtained in respect of such proposed Net Cost Exercise of Rights, and the Licensee shall use its reasonable endeavours to obtain such BNFL agreement.

(C) If the Licensee fails to implement the proposed Net Cost Exercise of Rights following satisfaction of clause 5.5(B), any Historic Liabilities which would not have arisen had the Licensee implemented the same shall be Excluded Historic Liabilities.

Disputes

5.6 In relation to any dispute arising under this clause 5 (Exercise of Rights by Licensee) regarding whether or not a proposed Exercise of Rights will result in an increase or decrease in Historic Liabilities or in a Net Cost to a Licensee, or regarding the quantum of any such increase or decrease in Historic Liabilities or of any such Net Cost, any party to the dispute may refer the dispute to the Expert for resolution pursuant to clauses 30.4 to 30.11.

22

Licensee Undertakings

5.7 Each Licensee undertakes to the Secretary of State, subject to the Licensee’s obligations under the Licence and to the confidentiality restrictions under the BNFL Historic Contracts:

(A) to give access to records of all Exercises of Rights made on or after the Restructuring Principles Date. Each Licensee shall procure that sufficient details are included in its records to enable the Secretary of State and any Expert to whom a dispute is referred under the preceding provisions of this clause 5 (Exercise of Rights by Licensee):

(i) to determine whether or not the Licensee has complied with the provisions of this clause 5 (Exercise of Rights by Licensee); and

(ii) to assess the impact on the Historic Liabilities and on the Net Cost to a Licensee of any Exercise of Rights that has been or is proposed to be made; and

(B) without charge to make such records (and copies or extracts thereof) available to the Secretary of State and any such Expert as they may reasonably require in such form and at such times as the Secretary of State and any such Expert may reasonably require.

Review

5.8 At the request of any party and in any event no later than the third anniversary of the Restructuring Date, the Secretary of State and the Licensees shall review how this clause 5 (Exercise of Rights by Licensee) has operated in practice. Each of them shall use their reasonable endeavours to complete the review within three months of such request or the third anniversary of the Restructuring Date (as the case may be) and shall, in the conduct of the review:

(A) submit a paper to the other parties detailing the implementation of clause 5 (Exercise of Rights by Licensee) in the period since the Restructuring Date and any proposals for improving the operation of clause 5 (Exercise of Rights by Licensee); and

(B) shall meet not less than twice to discuss in good faith the papers prepared under this clause 5.8 and any proposals for improving the operation of clause 5 (Exercise of Rights by Licensee).

5.9 The parties agree that the carrying out of a review pursuant to clause 5.8 does not prevent a party requesting a further review thereafter (in which case the provisions of clause 5.8 shall apply mutatis mutandis), provided that a review may not be requested within three years after completion of the previous review.

6. COMPENSATION FOR SECRETARY OF STATE EXERCISE OF RIGHTS AND NET COST OF EXERCISE OF RIGHTS

6.1 Where a Secretary of State Exercise of Rights or a Net Cost Exercise of Rights is proposed and the Secretary of State is required to compensate the Licensee, the amount of compensation (if any) payable by the Secretary of State to the Licensee (the “Licensee Historic Compensation Amount”) and the timing of the payment of such Licensee Historic Compensation Amount

23

shall be determined in accordance with the provisions of Schedule 4 (Determination of Licensee Historic Compensation Amount) and shall be paid direct to an account notified to the Secretary of State. For the avoidance of doubt, the provisions of clauses 2.3 to 2.8 shall not apply to payments made under this clause 6.1).

7. ESCALATION

Unless expressly stated otherwise, all monetary amounts referred to in this Agreement are stated in March 2003 money values and shall be escalated in accordance with the following formula:

Am	=	Ao x Rm
		Ro

where:

“Am” is the relevant amount as escalated;

“Ao” is the relevant amount in March 2003 money values;

“Ro” is the Retail Price Index for the month of March 2003, and is 179.9 ;

“Rm” is the Retail Price Index for the month in which (i) payment is due, (ii) the event occurs which gives rise to the relevant amount, or (iii) calculation of the relevant amount is required (in each case the “relevant month”) and shall be estimated as follows if the Retail Price Index is not available:

where:

“m” is the month for which the index number is to be estimated;

“N” is the number of months between the relevant month and the month in which the index number has been most recently published;

“R_m-n ” is the Retail Price Index for the month in which the index has been most recently published; and

“R_m-n-3” is the Retail Price Index for the month three months prior to Rm-n.

8. INTEREST

8.1 If a party fails to pay any sum payable by it under this Agreement on the due date for payment, it shall pay interest at LIBOR plus 2 per cent. per annum on that sum for the period from and including the due date up to the date of actual payment (after as well as before judgment).

24

8.2 Interest on each sum shall accrue from day to day and shall be compounded on each anniversary of the due date for payment.

8.3 Without limiting clause 15 (Remedies and Waivers), the right to receive interest under this clause in respect of any unpaid sum is not exclusive of any rights, powers and remedies provided by law in respect of the failure to pay the relevant sum on the due date or at all.

8.4 For the avoidance of doubt, Historic Liabilities shall include any interest on late payment where such late payment occurs other than through an act or omission of a Licensee.

9. AMENDMENTS TO THE BNFL HISTORIC CONTRACTS

9.1 Subject to clause 9.5, no Licensee shall amend, vary, modify or alter any term of a BNFL Historic Contract or otherwise agree with BNFL to do the same except:

(A) with the written consent of the Secretary of State, which consent shall not be unreasonably withheld if the amendment, variation, modification or alteration will result in either:

(i) no increase in Historic Liabilities or the Costs of Discharging Liabilities; or

(ii) an increase in the amount of Historic Liabilities or the Costs of Discharging Liabilities which, when taken together with all previous amendments, variations, modifications or alterations does not exceed £50,000; or

(iii) an increase in the amount of Historic Liabilities or Costs of Discharging Liabilities which, when taken together with all previous amendments, variations, modifications or alterations does exceed £50,000 and the Secretary of State is satisfied that the Minimum Contracting Standard has been properly complied with in respect of the amendment, variation, modification or alteration; or

(B) where the amendment, variation, modification or alteration is minor or required to correct a typographical error.

Notwithstanding the foregoing, a Licensee may amend, vary, modify or alter any term of a BNFL Ancillary Agreement in a manner that does not affect the terms on which any service is provided under the BNFL Ancillary Agreement in respect of Historic Fuel and does not affect any Historic Liabilities.

9.2 Except with the prior written consent of the Secretary of State, no Licensee shall amend, vary, modify or alter any term of any other contract with BNFL if to do so would increase or would reasonably be expected to result in an increase in the amount of

25

Historic Liabilities. For this purpose, the agreement of any project pursuant to the terms of the 1996 agreements for oxide miscellaneous services between BNFL and BEG and BEG(UK) shall be treated as an amendment to a BNFL Historic Fuel Contract, but only to the extent that such project relates to services carried out in respect of Historic Fuel.

9.3 The Secretary of State will use her reasonable endeavours to respond to any proposed amendment, variation, modification or alteration notified to her by a Licensee within a period of 30 Business Days after such notification is received. If the Secretary of State has not (a) given her consent to the proposed amendment, variation, modification or alteration, or (b) notified the Licensee of her objection thereto (giving reasons), in either case within the period specified above, the Licensee shall be free to make the proposed amendment, variation, modification or alteration without such consent. Notwithstanding the notice period referred to above, the Licensee shall give the Secretary of State as much notice of a proposed amendment as is reasonably practicable where the amendment can reasonably be expected to have an impact on the amount of Cost of Discharging Liabilities of £50,000 or more.

9.4 The parties agree that failure to amend, vary, modify or alter a BNFL Historic Contract by reason of the Secretary of State not agreeing to such amendment, variation, modification or alteration shall not constitute failure to comply with the Minimum Contracting Standard or the Minimum Performance Standard.

9.5 Where an amendment, variation, modification or alteration is required by a Regulator or to take account of a change in regulation the Licensee will consult with the Secretary of State and respond to proposals by the Secretary of State in good faith in the same manner as if any consequential Incremental Historic Liabilities were to be funded by the Licensee and not the Secretary of State. Notwithstanding the foregoing, unless:

(A) the amendment, variation, modification or alteration is necessary to comply with a specification, direction or other formal requirement made by a Regulator to a Licensee or BNFL; or

(B) failure by a Licensee to make the amendment, variation, modification or alteration within 6 months would result in the Licensee being in breach of Applicable Law or the BNFL Historic Contract,

the Licensee will not make such amendment, variation, modification or alteration without obtaining the prior written consent of the Secretary of State. If the Licensee fails to give reasonable notice to the Secretary of State to enable reasonable consultation to take place, any Incremental Historic Liabilities resulting from the amendment, variation, modification or alteration will be Excluded Historic Liabilities.

10. TITLE TO FUEL AT SELLAFIELD

10.1 Each of BEG(UK) and BEG (each a “Transferor”) hereby grants to the Secretary of State an option to require that:

(A) on the Effective Date the Transferor transfers to the Secretary of State or a person nominated by the Secretary of State (the “Transferee”) the Title Rights to all of its Sellafield Fuel and Fuel Products that are held by the Sellafield Operator on the Effective Date; and

26

(B) the Transferor enters into such amendments to the BNFL Historic Fuel Contracts, and such other documents, as are necessary to provide that on Delivery of Sellafield Fuel to BNFL after the Effective Date, the Transferee acquires the Title Rights to that Sellafield Fuel and to all Fuel Products relating to such Sellafield Fuel.

10.2 The consideration payable for the transfer of the Title Rights to the Sellafield Fuel and Fuel Products referred to in clause 10.1 shall be £1.

10.3 The option shall not be exercisable unless each of the following conditions is satisfied:

(A) the Transferee has agreed the terms on which the Sellafield Fuel and Fuel Products will be held by the Sellafield Operator;

(B) all necessary regulatory consents, authorisations and approvals to the transfer to the Transferee of the Title Rights to the Sellafield Fuel and Fuel Products have been duly obtained and remain in force; and

(C) BNFL, the Secretary of State and the Transferor have agreed the necessary documents:

(i) to give effect to the transfer of Title Rights referred to in clause 10.1; and

(ii) to ensure that the Transferor is relieved from all liability to BNFL in respect of the Sellafield Fuel and Fuel Products to be transferred to the Transferee (other than liability to make payments under the BNFL Historic Fuel Contracts), and the Transferee assumes all such liability, as from the transfer of the Title Rights in respect of those Sellafield Fuel and Fuel Products in accordance with this clause 10 (Title to Fuel at Sellafield).

If the Secretary of State so requires, the Transferor shall use all reasonable endeavours to agree such amendments.

10.4 Provided that the conditions set out in clause 10.3 have been fulfilled, the Secretary of State may exercise the option granted by a Transferor by giving notice in writing to the Transferor, specifying the Effective Date. On the Effective Date:

(A) the Transferor and the Transferee will execute the documents referred to in clause 10.3(C); and

27

(B) the Secretary of State shall pay, or procure the payment of, the consideration referred to in clause 10.2 to the Transferor.

10.5 In this clause:

(A) “Effective Date” means a Business Day specified in the notice given by the Secretary of State under clause 10.4, which shall not be less than one month nor more than 3 months after the date on which the notice is given;

(B) “Fuel Products” means uranium trioxide, plutonium dioxide and Wastes and Residues relating to Fuel and Non-Standard Fuel delivered to BNFL under the BNFL Historic Fuel Contracts;

(C) “Sellafield Fuel” means Fuel and Non-Standard Fuel delivered to BNFL under the BNFL Historic Fuel Contracts;

(D) “Sellafield Operator” means BNFL or such other person as may for the time being be the operator of the Reprocessing Site;

(E) “Title Rights” means all title of the relevant Transferor to Sellafield Fuel and Fuel Products and all rights of the relevant Transferor under the BNFL Historic Fuel Contracts to acquire title to Sellafield Fuel and Fuel Products, including rights of the relevant Transferor to require that the Sellafield Fuel and Fuel Products are Made Available to the Transferor; and

(F) capitalised terms not otherwise defined in this Agreement have the meanings given to them in the BNFL Historic Fuel Contracts.

10.6 For the avoidance of doubt, this Agreement shall continue unaffected notwithstanding the exercise of an option pursuant to this clause 10 (Title to Fuel at Sellafield).

11. EVENTS OF DEFAULT

11.1 Each of the events described below in this clause constitutes a “Default Event” in relation to a Licensee or a Guarantor (the “Defaulting Party”):

(A) the Defaulting Party fails to pay an amount due under this Agreement or any other Liabilities Document within 10 Business Days of the due date therefor, and such Default Event shall continue until such payment (together with interest thereon) is made; or

(B) it is proved that monies provided to the Defaulting Party (excluding a Guarantor for the purposes of this clause 11.1(B)) by the Secretary of State following an application pursuant to clause 2 (Secretary of State Payments):

(i) have, prior to payment of Historic Liabilities in relation to which the application was made, been the subject of an assignment or security interest effected by the Defaulting Party in favour of a third party not previously approved by the Secretary of State in writing; or

28

(ii) have not been applied in payment of such Historic Liabilities within 15 Business Days of receipt by the Defaulting Party or of the due date for payment thereof, whichever shall be the later or held by that person for payment of Tax or Value Added Tax to the extent such monies have been provided in respect of Tax, or as the case may be, Value Added Tax obligations of the Licensee; or

(C) the Defaulting Party is in material or persistent breach of any other provisions of this Agreement or any other Liabilities Document and such breach, if capable of remedy, has not been remedied:

(i) where the remedy incorporates an Operational Change, within 60 Business Days; or

(ii) in the case of any other matter, within 20 Business Days, after receipt by the Defaulting Party of notice from the Secretary of State requiring such remedy; or

(D) if by reason of the Perpetuities and Accumulations Act 1964 any option granted to the Secretary of State under the Option Agreement (or any replacement option as referred to in this paragraph) would become void if not exercised within 21 years of its grant, a Licensee does not grant a replacement option to the Secretary of State on the same terms as those contained in the Option Agreement within 3 months of receiving a request in writing to do so from the Secretary of State made within the final year of such 21 year period; or

(E) the Defaulting Party fails:

(i) within 10 Business Days after being called upon to do so by the Secretary of State, to provide a certificate signed by two of its directors certifying (without personal liability except in the event of fraud or wilful default) that it is not then unable to pay its debts within the meaning of section 123(1)(e) of the Insolvency Act 1986; or

(ii) within 40 Business Days, after being called upon to do so by the Secretary of State to provide a certificate signed by two of its directors certifying (without personal liability except in the event of fraud or wilful default) that it is not then unable to pay its debts within the meaning of section 123(2) of the Insolvency Act 1986, provided that:

(a) if the Restructuring Date is on or prior to 31 March 2005, the Secretary of State may not require such a certificate prior to the publication of the Accounts in relation to the Financial Period ending on 31 March 2005; and

29

(b) if the Restructuring Date is after 31 March 2005, the Secretary of State may not require such a certificate prior to the date which is the later of: (1) two months following the publication of the Accounts in relation to the Financial Period ending on 31 March 2005; and (2) two months after the Restructuring Date,

and such Default Event shall continue for so long as no such certificate is provided; or

(F) the Defaulting Party passes a resolution for its winding up (other than in the context of a solvent amalgamation or reconstruction in either case on terms previously approved in writing by the Secretary of State or notified in writing to NLF and the Secretary of State prior to the date of this Agreement) or a court of competent jurisdiction makes an order for its winding up or dissolution, and such Default Event shall continue thereafter without limitation in time; or

(G) the appointment of an administrative receiver, receiver and manager or receiver over all or a material part of the Defaulting Party’s assets and such a Default Event shall continue until there is no administrative receiver, receiver and manager or receiver in office in relation to those assets; or

(H) the appointment of a provisional liquidator or administrator in relation to the Defaulting Party, and such a Default Event shall continue until the provisional liquidator or administrator ceases to hold that office; or

(I) the making of an administration order in relation to the Defaulting Party, and such a Default Event shall continue until the administration order is discharged; or

(J) other than in the context of a solvent amalgamation or reconstruction in either case on terms previously approved in writing by the Secretary of State or notified in writing to the Secretary of State prior to the date of this Agreement, the Defaulting Party convenes a meeting for a creditors’ voluntary liquidation, or for a creditors’ meeting following a members’ voluntary liquidation or for the consideration by creditors of a voluntary arrangement or scheme of arrangement, and such a Default Event shall continue unless and until the relevant resolution or resolutions are voted on and not passed or are withdrawn; or

(K) the Defaulting Party is subject to any proceeding or in a position analogous to that in clauses 11.1(E), (F), (G), (H), (I) or (J) in its jurisdiction of incorporation.

12. EFFECT OF DEFAULT EVENT

12.1 Without prejudice to clause 12.3, if a Default Event is continuing (or, in the case of a Default Event within clause 11.1(B) or (C), for the period of 30 Business Days following receipt by the Secretary of State of written notice of the breach from the Defaulting Party after which such Default Event shall be deemed to have ceased) in relation to a Licensee or Guarantor which

30

has not been waived in writing by the Secretary of State, the Secretary of State may give notice in writing to the Licensees that some or all of the following provisions apply:

(A) the Licensees’ rights to receive any payment under clause 6 (Compensation for Secretary of State Exercise of Rights and Net Cost Exercise of Rights) shall be suspended, provided that a Licensee shall be entitled to receive suspended payments (without any additional amount in respect of interest for deferred payment) on cessation or waiver of the Default Event;

(B) the Licensees shall not be entitled to take part in the exercise of rights given to the Licensees under the following clauses of this Agreement: any rights of the Licensee to apply for payment in the circumstances referred to in clause 5.2(B); clause 5.5; clause 6 and clause 21 (except for clauses 21.3 and 21.4 (Assignment)); or

(C) the Secretary of State may, by notice in writing to the Licensees, elect that such Excluded Historic Liabilities for which the Secretary of State has not otherwise assumed responsibility under the Liabilities Documents (including pursuant to the Option Agreement) as are designated in the notice shall be discharged by the Secretary of State. In such event, the Licensees shall indemnify and keep indemnified the Secretary of State from and against any loss, cost, expense, liability, claim or damage which the Secretary of State properly and reasonably incurs or suffers, directly or indirectly, in discharging those Excluded Historic Liabilities, including:

(i) any costs incurred or suffered by the Crown upon the acquisition by it or any other person of any Power Station or other property of a Licensee; and

(ii) any costs incurred or suffered by the Crown upon the acquisition by it by operation of law of any Power Station or any other property of a Licensee following a Default Event.

For the avoidance of doubt, the parties acknowledge and agree that, subject to clause 12.3 and except as expressly set out at paragraph (A) above, payments under this Agreement (including, without limitation, pursuant to clause 2) shall continue on the terms of this Agreement, notwithstanding the occurrence or continuation of a Default Event or a breach of any other Liabilities Document.

12.2 The parties acknowledge that, notwithstanding the occurrence of an Default Event under clause 11.1 (E) to (K) (inclusive) in respect of a Licensee or Guarantor:

(A) the Secretary of State shall remain liable to perform her obligations under this Agreement and the other Liabilities Documents; and

(B) without prejudice to any obligations of the Licensees or Guarantors arising under the terms of the Liabilities Documents or the terms of any other agreement or instrument, the Secretary of State shall not be entitled to any claim or remedy by

31

reason of the Default Event, nor shall the relevant Licensee or Guarantor have any liability to the Secretary of State solely by reason of the Default Event, whether for damages, set-off, counterclaim or otherwise.

12.3 Notwithstanding the foregoing, if a Default Event occurs under clause 11.1(D) and is continuing, the Secretary of State shall make no further payments to any Licensee except to the extent that the Secretary of State otherwise agrees.

12.4 If a Default Event falling within clause 11.1(E) to 11.1(K) is continuing in relation to a Licensee or Guarantor which has not been waived:

(A) the Licensee and the Guarantors shall promptly produce such information in respect of Historic Liabilities as the Secretary of State may reasonably require; and

(B) the Secretary of State may deliver a notice to the relevant Licensees and/or Guarantors requiring payment of any amount accrued and payable by the Licensees and/or Guarantors to it under this Agreement (whether or not such amount has become due and owing), including any amount accrued and payable by the Licensee to the Secretary of State in respect of Excluded Historic Liabilities (together with any interest thereon). Within two Business Days of receipt of such notice, all such amounts (together with any interest thereon) shall become immediately due and payable and the relevant Licensees and/or Guarantors shall pay all amounts specified in the notice to the Secretary of State (together with any interest thereon).

12.5 If a BNFL Historic Contract terminates (whether in whole or in part) as a result of the passing of a resolution for the winding up of, or the making of a court order for the winding up of, or the appointment of a liquidator in respect of BEG, BEG (UK), British Energy or the Ultimate Parent Company, the Secretary of State shall be obliged to make payments to BNFL in respect of Historic Liabilities accrued up to and including the date of such termination of the BNFL Historic Contract. Such accrued Historic Liabilities shall include amounts invoiced but as yet unpaid or amounts accrued but not yet invoiced at the date of such termination and the Secretary of State shall make such payment within 30 calendar days of such termination or, if later, 30 calendar days of BNFL’s invoice or, where any accrued amounts are the subject of a dispute between BNFL and a Licensee, as soon as practicable following determination of the disputed amount as an Historic Liability. The Secretary of State shall have no obligation to make payments in respect of Historic Liabilities to the extent that such Historic Liabilities arise after the date of such termination of the BNFL Historic Contract or would have arisen after such date but for the termination of such BNFL Historic Contract.

12.6 (A) Notwithstanding clause 15 (Remedies and Waivers) this Agreement may not be terminated by any party to it and each party hereby waives any rights it may have at law to terminate this Agreement. Without prejudice to the generality of the foregoing, the Secretary of State shall not be entitled to rely on any breach or future breach (including any anticipated breach or future breach) by a

32

Licensee or Guarantor of this Agreement or any other Liabilities Document or on any Default Event (including any anticipated Default Event) occurring in relation to a Licensee or Guarantor under any Liabilities Document in order to:

(i) terminate or rescind this Agreement; or

(ii) claim that this Agreement is repudiated or that the Secretary of State’s obligations under this Agreement are discharged,

and in such circumstances the Secretary of State shall not be relieved of her obligations under this Agreement, except to the extent that this Agreement expressly so provides; and

(B) Except as set out in the Liabilities Documents, no Licensee or Guarantor shall be liable to the Secretary of State by reason of the Secretary of State entering into or performing the Liabilities Documents, and all rights of indemnity or subrogation of the Secretary of State that might otherwise be implied by law as a result of her entering into or performing the Liabilities Documents are hereby excluded.

(C) Notwithstanding clause 15 (Remedies and Waivers), except as expressly stated in this Agreement, this Agreement and the obligations of the Secretary of State shall be continuing obligations and shall not be impaired, discharged, void, subject to avoidance or set-off, suspended, terminated or otherwise affected by any circumstances or for any reason whatsoever (including any breach by a Licensee or Guarantor of the terms of any Liabilities Document or any principle of equity or law).

13. DEDUCTION OR WITHHOLDING

13.1 Subject to any contrary provisions in any of the other Liabilities Documents, all payments to be made to a party by another party under this Agreement or any other Liabilities Document shall be made in full except to the extent a deduction or withholding is permitted under clause 13.2. All such payments will be free and clear of any right of set-off and from any restriction, condition or deduction because of any counterclaim.

13.2 Where such a deduction or withholding is required in relation to a payment referred to in clause 13.1 in respect of Tax and is also required by law, the Licensee shall be permitted to make such deduction or withholding.

13.3 If a Licensee becomes or will become required by law to make any deduction or withholding under clause 13.2 or there is or will be any change in the requirement to make any such deduction or withholding, the Licensee will give notice to the Secretary of State of any such requirement or change in requirement as soon as the Licensee becomes aware of it.

33

13.4 (A) If, notwithstanding clause 2.8 and the foregoing provisions of this clause 13 (Deduction or Withholding), any mandatory set-off in administration, winding-up or other insolvency of a Licensee (including a set-off under Rule 2.85 or Rule 4.90 of the Insolvency Rules 1986) (a “Mandatory Set-off”) would arise in respect of any amount that would, but for this clause 13 (Deduction or Withholding), be owed by the Secretary of State (the “Recipient”) to the Licensee under any of the Liabilities Documents (the “Recipient Payment”) against any amount that would, but for this clause 13 (Deduction or Withholding), be owed by the Licensee to the Recipient on any account and that would, but for this clause 13 (Deduction or Withholding), be subject to the Mandatory Set-off (the “Licensee Payment”), then the provisions of paragraph (B) shall apply.

(B) The Licensee Payment shall not be due, owing or payable (or capable of Mandatory Set-off or proof) in the insolvency until arrangements have been put in place (which the Secretary of State undertakes that, so far as lies within her reasonable control, she will put in place) ensuring that the Recipient Payment will be applied without reduction on account of the Mandatory Set-off towards discharging Historic Liabilities (where applicable) or otherwise in accordance with the provisions of the Liabilities Documents, and in particular in accordance with clause 2 (Secretary of State Payments).

14. LIABILITY

14.1 The liabilities of the Licensees under this Agreement are assumed jointly and severally. If any liability of one or some but not all of the Licensees is, or becomes, illegal, invalid or unenforceable in any respect, that shall not affect or impair the liabilities of the other Licensees under this Agreement.

14.2 The Secretary of State may release or compromise the liability of one or more of the Licensees or grant time or other indulgence to one or more of the Licensees without releasing or reducing the liability of any other party.

15. REMEDIES AND WAIVERS

15.1 No delay or omission by any party to this Agreement in exercising any right, power or remedy provided by law or under this Agreement or any other document referred to in it shall affect that right, power or remedy or operate as a waiver of it.

15.2 The single or partial exercise of any right, power or remedy provided by law or under this Agreement shall not preclude any other or further exercise of it or the exercise of any other right, power or remedy.

15.3 The rights, powers and remedies provided in this Agreement are cumulative and not exclusive of any rights, powers and remedies provided by law.

34

15.4 The parties acknowledge and agree that in the event of non-performance by the Secretary of State of her obligations under this Agreement the loss or damage suffered by a Licensee by reason of such non-performance will be such that damages will not be an adequate remedy. Accordingly a Licensee, and, if the Licensee is subject to a Default Event under clause 11.1(E) to (K) (inclusive), the relevant insolvency officer shall have the right to specific performance of the Secretary of State’s obligations. Such remedy shall be in addition to, and not in lieu of other remedies available to a Licensee or insolvency officer at law or in equity.

16. INVALIDITY

If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, that shall not affect or impair:

(A) the legality, validity or enforceability in that jurisdiction of any other provision of this Agreement; or

(B) the legality, validity or enforceability under the law of any other jurisdiction of that or any other provision of this Agreement.

17. NO PARTNERSHIP

Nothing in this Agreement and no action taken by the parties shall constitute a partnership, association, joint venture or other co-operative entity between any of the parties.

18. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

The parties to this Agreement do not intend that any term of this Agreement should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Agreement.

19. FURTHER ASSURANCE

Each party shall at its own cost, from time to time on request, do or procure the doing of all acts and/or execute or procure the execution of all documents in a form reasonably satisfactory to the other parties which any party may reasonably consider necessary for giving full effect to this Agreement and securing the full benefit of the rights, powers and remedies conferred upon it in this Agreement.

20. ENTIRE AGREEMENT

20.1 This Agreement and the other Liabilities Documents constitute the whole and only agreement between the parties relating to the subject matter of this Agreement and the other Liabilities Documents.

20.2 Each party acknowledges that in entering into this Agreement and the other Liabilities Documents it is not relying upon any pre-contractual statement which is not set out in one or more of the Liabilities Documents.

35

20.3 Except in the case of fraud, no party shall have any right of action against any other party to this Agreement arising out of or in connection with any pre-contractual statement except to the extent that it is repeated in one or more of the Liabilities Documents.

20.4 For the purposes of this clause 20 (Entire Agreement), “pre-contractual statement” means any draft, agreement, undertaking, representation, warranty, promise, assurance or arrangement of any nature whatsoever, whether or not in writing, relating to the subject matter of one or more of the Liabilities Documents made or given by any person at any time prior to the date of this Agreement.

21. ASSIGNMENT

Prohibition on Assignment

21.1 Subject to the provisions of this Agreement, no party may, at any time:

(A) assign all or any part of the benefit of, or its rights or benefits under, this Agreement or a BNFL Historic Contract; or

(B) make a declaration of trust in respect of or enter into any arrangement whereby it agrees to hold in trust for any other person all or any part of the benefit of, or its rights or benefits under, this Agreement or a BNFL Historic Contract; or

(C) sub-contract or enter into any arrangement whereby another person is to perform any or all of its obligations under this Agreement or a BNFL Historic Contract.

Intra-Group Assignment

21.2 (A) A Licensee may assign and transfer all or any part of its rights, benefits and obligations under this Agreement or under a BNFL Historic Contract to a wholly-owned Subsidiary of the Group or to the Ultimate Parent Company of the Group if:

(i) the assignee has a Power Station transferred to it by the Licensee;

(ii) the assignee holds all necessary licences and other regulatory consents, authorisations and approvals for (a) undertaking the Operation of the Power Station and (b) Decommissioning and the Discharge of Uncontracted Liabilities in relation to that Power Station (if the nuclear reactors at the Power Station have Closed);

(iii) the assignee delivers to the Secretary of State a duly completed and executed Deed of Adherence;

36

(iv) the Secretary of State has received all of the documents and other evidence listed in Part 2 of Schedule 5 (Deeds of Adherence and Release) in relation to that assignee;

(v) the assignee has entered into a deed of adherence in respect of, and in accordance with the terms of, the Contribution Agreement, the Option Agreement and the NLFA; and

(vi) the assignee has become an Additional Guarantor in accordance with the Guarantee and has delivered all documents required in connection therewith.

(B) The transferring Licensee hereby undertakes to the Secretary of State to procure that any assignee referred to in clause 21.2(A) holds the necessary Licenses and other consents, authorisations and approvals referred to in clause 21.2(A)(ii).

(C) Where a Licensee assigns or transfers all or any part of its rights, benefits and obligations under this Agreement in accordance with clause 21.2(A) above but that Licensee retains any rights or obligations under a BNFL Historic Contract, then, notwithstanding such assignment or transfer, the Licensee shall remain a party to this Agreement and shall not be permitted to execute a Deed of Release unless otherwise agreed by the Secretary of State.

(D) The Licensees at the date of any Deed of Adherence hereby accept and agree that any new Licensee executing a Deed of Adherence shall thereafter be treated for all purposes as if the new Licensee had executed this Agreement subject only to the provisions of the Deed of Adherence.

(E) Where a Licensee no longer has any rights or obligations under any of the BNFL Historic Contracts (or where the Secretary of State otherwise agrees), the parties agree, if requested by the relevant Licensee, to execute a Deed of Release.

Assignment to Third Parties

21.3 A Licensee may assign and transfer rights, benefits and obligations under this Agreement or under a BNFL Historic Contract to a third party to whom a Power Station is transferred in accordance with clause 33.3 of the NLFA to the extent reasonably necessary to facilitate the transfer of that Power Station and to enable the third party to operate the Power Station and clause 33.3(C) of the NLFA shall apply mutatis mutandis in respect of such assignment or transfer under this Agreement.

Successor Government Entity

21.4 (A) If the Secretary of State considers that it is expedient in order to facilitate the public sector’s administration and performance of this Agreement, the Secretary of State may notify the other parties to this Agreement that such of the

37

Secretary of State’s rights and obligations under this Agreement as are specified in the notice (the “Substituted Rights and Obligations”) are to be assumed by another Government Entity (the “Successor Government Entity”).

(B) If the Secretary of State issues a notice under paragraph (A), the Secretary of State shall, except where the Successor Government Entity is a Minister of the Crown or a government department, unconditionally and irrevocably guarantee the due and punctual performance by any Successor Government Entity of such obligations as are assumed by it.

(C) If a notification complying with the foregoing requirements is given by the Secretary of State, the parties to this Agreement shall enter into such further agreements as the Secretary of State may reasonably consider necessary in order to substitute the Successor Government Entity for the Secretary of State in respect of the Substituted Rights and Obligations and to make any consequential modifications to the Liabilities Documents that are necessary to give effect to the substitution.

(D) The Secretary of State may not require any assumption of Substituted Rights and Obligations or the making of any consequential modifications to the Liabilities Documents under this sub-clause that will adversely affect any rights of any other party to this Agreement or that will impose any additional obligations on any other party to this Agreement.

(E) In this sub-clause, “Government Entity” means:

(i) a Minister of the Crown;

(ii) a government department;

(iii) a non-departmental government body;

(iv) a body exercising functions on behalf of the Crown; or

(v) a body corporate established by statute, some or all of the members of which are appointed by a Minister of the Crown.

21.5 A Licensee may disclose to a proposed assignee information in its possession relating to the provisions of this Agreement and the other Liabilities Documents and the other parties which it is necessary to disclose for the purposes of the proposed assignment, notwithstanding the provisions of clause 26 (Confidentiality).

21.6 Where a party becomes a Licensee pursuant to clause 21.2, Schedule 2 (Power Stations) shall be amended to reflect the new ownership of the Power Stations.

38

22. CONDUCT OF PROCEEDINGS

22.1 Within 10 Business Days of a Licensee becoming aware of (i) any material claim, action or demand, (each, a “Claim”) made against it or any other member of the Group by BNFL, or (ii) any right it or any other member of the Group may have to make a material claim or demand, or commence an action against BNFL, in either case relating to Historic Liabilities or in respect of a BNFL Historic Contract, the Licensee shall notify the Secretary of State of the Claim.

22.2 Following notification of the Claim, the Licensee shall, or shall procure that the relevant member of the Group shall:

(A) take such action and give such information and access to personnel, premises, documents and records to the Secretary of State and its professional advisers as the Secretary of State may reasonably request and the Secretary of State shall be entitled to require the Licensee to take, or procure the relevant member of the Group to take, such action and give such information and assistance in relation to the Claim as the Secretary of State, acting reasonably and with a view to keeping Historic Liabilities to a minimum, deems fit;

(B) at the request of the Secretary of State, allow the Secretary of State to take the sole conduct of proceedings relating to the Claim as the Secretary of State, acting reasonably, deems appropriate in connection with any such claim, action or demand in the name of the Licensee or the relevant member of the Group. In that connection the Licensee shall, or shall procure that the relevant member of the Group shall, give to the Secretary of State all such assistance as the Secretary of State may reasonably require in conducting the proceedings and shall, or shall procure that the relevant member of the Group shall, instruct such solicitors or other professional advisers as the Secretary of State may nominate to act on behalf of the Licensee or the relevant member of the Group, but to act in accordance with the Secretary of State’s sole instructions provided that, where the Secretary of State has elected to take the sole conduct of the proceedings, the Secretary of State shall, in respect of the proceedings:

(i) provide regular written updates to the Licensee and/or relevant member of the Group; and

(ii) consult with the Licensee and/or relevant member of the Group on a monthly basis for the duration of the proceedings (or on such other basis as is agreed by the Secretary of State and the Licensee and/or relevant member of the Group (as the case may be)) in respect of future strategy for handling the proceedings and take reasonable account of any representations made by the Licensee and/or member of the Group in respect of such future strategy; and

(C) make no admission of liability, agreement, settlement or compromise with any third party in relation to any such Claim without the prior written consent of the Secretary of State.

39

22.3 In any event, the Secretary of State shall be entitled at any stage and in her absolute discretion to settle any such Claim provided that she consults the Licensee and, if applicable, the relevant member of the Group prior to settling such Claim and such consultation shall include a reasonable opportunity for the Licensee and/or relevant member of the Group to make representations to the Secretary of State in respect of the settlement of such Claim. The Secretary of State shall take reasonable account of such representations in making her decision to settle any Claim.

22.4 If at any time the Secretary of State makes payment in respect of Historic Liabilities of a Licensee and, following such payment, the Licensee or any other member of the Group recovers from BNFL any amount in respect of such of Historic Liabilities (whether or not pursuant to any Material Claim), the Licensee shall, or shall procure that the relevant member of the Group shall, pay to the Secretary of State forthwith the amount recovered and pending payment of that amount to the Secretary of State hold the amount recovered on trust for the Secretary of State in a segregated account.

22.5 In this clause 22 (Conduct of Proceedings) “Material Claim” means any claim, action of demand for an amount which represents or is reasonably likely to represent Historic Liabilities of more than £1,000,000.

23. ACCESS TO INFORMATION

23.1 Upon being given reasonable notice, BE plc, Holdings and the Licensees shall give, or procure that there is given, to the Secretary of State, and any persons authorised by her (subject to any such person giving such confidentiality undertaking as is reasonable in the circumstances, and to the Licensees’ obligations under the Licences) full access to:

(A) the Power Stations and the books, records and papers of the Licensees, the Guarantors and, if appropriate, any other member of the Group;

(B) the directors and employees of the Licensees, the Guarantors and, if appropriate, any other member of the Group, who shall be instructed to give promptly all information and explanations to the Secretary of State, or any such persons as they may request; and

(C) the SERS database for audit purposes,

in each case in order to enable the Secretary of State to exercise her rights and powers, and to perform her obligations, under this Agreement and the other Liabilities Documents to which she is a party.

23.2 Each Licensee shall use its reasonable endeavours to make available to the Secretary of State or any persons authorised by her (subject to any such person giving such confidentiality undertaking as is reasonable in the circumstances, and to the Licensees’ obligations under the Licences) the advice, records and papers of any of its advisers to enable the Secretary of State to verify that amounts paid by the Secretary of State under this Agreement are properly expended in meeting Historic Liabilities or otherwise in accordance with the terms of this Agreement.

40

23.3 The parties acknowledge and agree that nothing in this clause 23 (Access to Information) permits the Secretary of State and/or any persons authorised by her to have:

(A) any access to information held on NUPER; or

(B) any on-line access to SERS.

24. NOTICES

24.1 A notice under this Agreement shall only be effective if it is in writing. Telexes and e-mail notices are not permitted but faxes are permitted.

24.2 Notices under this Agreement shall be sent to a party at its address or number and for the attention of the individual set out below:

Party	Address	Facsimile No.	Attention:
The Secretary of State	One Victoria Street London SW1V 0ET	020 7215 0138	Head of BE Team, Energy Group, Department of Trade and Industry
BEG	c/o the Company Secretary, British Energy Group plc, Systems House, Alba Campus, Livingston EH54 7EG	*****	c/o Company Secretary, British Energy Group plc
BEG(UK)	c/o the Company Secretary, British Energy Group plc, Systems House, Alba Campus, Livingston EH54 7EG	*****	c/o Company Secretary, British Energy Group plc
BE plc	c/o the Company Secretary, British Energy Group plc, Systems House, Alba Campus, Livingston EH54 7EG	*****	c/o Company Secretary, British Energy Group plc

*** Indicates materials omitted and filed separately with the Commission.

41

Party	Address	Facsimile No.	Attention:
Holdings	c/o the Company Secretary, British Energy Group plc, Systems House, Alba Campus, Livingston EH54 7EG	*****	c/o Company Secretary, British Energy Group plc

provided that a party may change its notice details on giving notice to the other parties of the change in accordance with this clause 24 (Notices). That notice shall only be effective on the date falling five clear Business Days after the notification has been received or such later date as may be specified in the notice.

24.3 Any notice given under this Agreement shall, in the absence of earlier receipt, be deemed to have been duly given as follows:

(A) if delivered personally, on delivery;

(B) if sent by first class post from the United Kingdom to a United Kingdom address, two clear Business Days after the date of posting;

(C) if sent by first class airmail to an address outside the United Kingdom, five clear Business Days after the date of posting; and

(D) if sent by facsimile, when clearly received in full.

24.4 Any notice given under this Agreement outside Working Hours in the place to which it is addressed shall be deemed not to have been given until the start of the next period of Working Hours in such place.

24.5 The provisions of this clause shall not apply in relation to the service of Service Documents.

25. ANNOUNCEMENTS

25.1 Subject to clauses 25.2 and 25.3, no announcement concerning the transaction contemplated by this Agreement or any ancillary matter shall be made by either party without the prior written approval of the other, that approval not to be unreasonably withheld or delayed.

25.2 A party may, after consultation with the other parties, make an announcement concerning the transaction contemplated by this Agreement or any ancillary matter if required by:

(A) law; or

*** Indicates materials omitted and filed separately with the Commission.

42

(B) any securities exchange or regulatory or governmental body to which that party is subject or submits, wherever situated, including (amongst other bodies) the UK Listing Authority, the London Stock Exchange, the Financial Services Authority or the Panel on Takeovers and Mergers, whether or not the requirement has the force of law.

25.3 The Secretary of State may make an announcement to Parliament concerning the subject matter of this Agreement or any ancillary matter if she considers that it is appropriate to do so pursuant to her duty to Parliament but, when reasonably practicable, shall consult with BE plc prior to such announcement.

25.4 The restrictions contained in this clause 25 shall continue to apply without limit in time.

26. CONFIDENTIALITY

26.1 Each party shall treat as confidential all information obtained as a result of entering into or performing this Agreement which relates to:

(A) the provisions of this Agreement;

(B) the negotiations relating to this Agreement;

(C) the subject matter of this Agreement;

(D) the business and operations, assets, liabilities and financial position of the Group; or

(E) another party.

26.2 Each party shall:

(A) not disclose any such confidential information to any person other than any of its directors or employees or those of any of the Group who needs to know such information in order to discharge his or her duties; and

(B) procure that any person to whom any such confidential information is disclosed by it complies with the restrictions contained in this clause 26 (Confidentiality) as if such person were a party to this Agreement.

26.3 Notwithstanding the other provisions of this clause 26 (Confidentiality), a party may disclose any such confidential information:

(A) if and to the extent required by law or for the purpose of any judicial proceedings;

(B) if and to the extent required by any securities exchange or regulatory or governmental body to which that party is subject or submits, wherever situated, including (amongst other bodies) the UK Listing Authority, the London Stock Exchange, the Financial Services Authority or the UK Panel on Take-overs or Mergers, whether or not the requirement for information has the force of law;

43

(C) if and to the extent required to vest the full benefit of this Agreement in that party;

(D) if and to the extent required for the purpose of any Expert Determination or arbitration pursuant to clause 30 (Dispute Resolution);

(E) to its professional advisers, auditors and bankers;

(F) if and to the extent the information has come into the public domain through no fault of that party;

(G) if and to the extent required to perform its obligations under this Agreement and under the BNFL Historic Contracts;

(H) if and to the extent the other parties have given prior written consent to the disclosure, such consent not to be unreasonably withheld or delayed;

(I) pursuant to clause 21.5; or

(J) to any of the following:

(i) the Bondholders and the Consenting Bondholders (each as defined in the Creditor Restructuring Agreement);

(ii) Enron Capital and Trade Resources International Corporation, Total Gas & Power Limited and Teesside Power Limited; or

(iii) the EPL Lenders (as defined in the Creditor Restructuring Agreement);

and their respective actual or potential transferees, their respective professional advisers, auditors and bankers, and, if and to the extent required by any regulatory body or governmental body to which any of the entities referred to above respectively is subject or submits, whether or not the requirement for information has the force of law.

Any information to be disclosed pursuant to paragraphs (A), (B) and (C) shall be disclosed only after notice to the other parties.

26.4 Notwithstanding any other provisions of this clause 26 (Confidentiality), the Secretary of State may disclose information to Parliament to the extent that she considers that it is appropriate to do so pursuant to her duty to Parliament but, where reasonably practicable, shall consult with BE plc prior to such disclosure.

26.5 The restrictions contained in this clause 26 (Confidentiality) shall continue to apply without limit in time.

44

27. COSTS AND EXPENSES

Except as otherwise agreed in writing or as stated in this Agreement, each party shall pay its own costs and expenses in relation to the negotiation, preparation, execution and carrying into effect of this Agreement and all other documents referred to in it.

28. COUNTERPARTS

28.1 This Agreement may be executed in any number of counterparts, and by the parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart.

28.2 Each counterpart shall constitute an original of this Agreement, but all the counterparts shall together constitute but one and the same instrument.

29. CHOICE OF GOVERNING LAW

This Agreement is to be governed by and construed in accordance with English law.

30. DISPUTE RESOLUTION

Negotiation

30.1 Save in relation to provisions of this Agreement containing express procedures for resolution of a disagreement or dispute between the parties, in relation to which clauses 30.2 and 30.3 shall not apply, if a party becomes aware of a disagreement, dispute or controversy (a “Dispute”) arising out of or in connection with this Agreement, including any Dispute regarding the existence, validity or termination of this Agreement, it shall provide the other parties to the Dispute with a notice (a “Notice of Dispute”) including full particulars of the Dispute and any proposal for resolution of the Dispute.

30.2 Upon delivery of a Notice of Dispute, the relevant parties (the “Disputing Parties”) shall promptly meet and in good faith use their reasonable endeavours to resolve that Dispute.

30.3 If the Disputing Parties are unable to reach agreement under clause 30.2 within 20 Business Days of delivery of a Notice of Dispute (the “Initial Resolution Period”), the Dispute shall be referred for resolution:

(A) by an Expert in circumstances in which this Agreement expressly provides for reference of the Dispute to an Expert; and

(B) by arbitration in all other circumstances.

45

Expert determination

30.4 If, pursuant to the terms of this Agreement, a Dispute requires resolution by an Expert, the Disputing Parties shall use their reasonable endeavours to agree the type and identity of the Expert to be appointed.

30.5 If the Disputing Parties do not agree, within 10 Business Days of the expiry of the Initial Resolution Period:

(A) as to the type of Expert to be appointed, the matter shall be referred to the Chairman of the City Disputes Panel (“CDP”) who shall be requested to determine, as soon as practicable after such referral, the appropriate type of Expert to resolve the Dispute; or

(B) as to the identity of the Expert to be appointed, the matter shall be referred to the President, Chairman or other senior representative of the appropriate professional body who shall be requested to determine, as soon as practicable after such referral, the identity of the Expert to resolve the Dispute.

If clause 30.5(A) applies, the Disputing Parties shall use their reasonable endeavours to agree the identity of the Expert within 10 Business Days of the CDP’s determination. If agreement on the identity of the Expert is not reached within such period, clause 30.5(B) shall apply. Any Expert identified pursuant to this clause 30.5 shall be an “Expert” for the purposes of the remaining provisions of this clause 30 (Dispute resolution).

30.6 The procedure to be followed in order to resolve the Dispute shall be decided by the Expert, save that such procedure shall include the taking of submissions from each of the Disputing Parties.

30.7 Each Disputing Party shall provide or procure the provision to the Expert of all such information as the Expert shall reasonably require, including provision of such information by its advisers, and shall give all such assistance to the Expert as the Expert shall reasonably require and as shall be required to allow the Expert to reach a decision as soon as reasonably practicable.

30.8 The Expert shall be instructed to make a determination in respect of the Dispute within the shortest practical time from his appointment and to deliver a report to the Disputing Parties stating his or her opinion as to the matters under dispute.

30.9 Any Expert shall act as an expert and not as an arbitrator.

30.10 The decision of the Expert shall, in the absence of fraud or manifest error, be final and binding on the parties in dispute.

30.11 The costs of the Expert shall be paid by the parties in dispute equally or as otherwise determined by the Expert.

46

Arbitration

30.12 If a Dispute arises which is not expressly required by this Agreement to be referred to Expert determination and it is not resolved by the Disputing Parties within the Initial Resolution Period (or such longer period as the parties may mutually agree), the Dispute shall be referred to arbitration in accordance with clause 30.13.

30.13 Any Dispute to be referred to arbitration under this Agreement shall be referred to and finally resolved by arbitration under the Rules of the London Court of International Arbitration, which rules are deemed to be incorporated into this clause 30.13. The tribunal shall consist of one arbitrator. The seat of arbitration shall be London. The language of arbitration shall be English.

Interlocutory relief

30.14 Nothing in this Agreement shall prevent a party from applying to the court for interlocutory relief to preserve the position of the parties pending the resolution of a Dispute in accordance with the provisions of this Agreement unless the application for such relief is intended to impede the procedures detailed in this clause 30 (Dispute Resolution).

31. JURISDICTION

31.1 The courts of England are to have jurisdiction to settle any dispute arising out of or in connection with this Agreement: Any Proceedings may be brought in the English courts.

31.2 Any Proceedings may also be brought in the courts of Scotland.

31.3 Any party may bring Proceedings in any court which has jurisdiction other than by virtue of clause 32 (Agent for Service).

31.4 This clause 31 (Jurisdiction) shall not limit the right or any party to bring Proceedings, to the extent permitted by law, in the courts of more than one jurisdiction at the same time.

31.5 Each party waives (and agrees not to raise) any objection, on the ground of forum non conveniens or on any like ground, to the taking of Proceedings by anther party in any court in accordance with this clause. Each party also agrees that a judgment against it in Proceedings brought in any jurisdiction in accordance with this clause 31 (Jurisdiction) shall be conclusive and binding upon it and may be enforced in any other jurisdiction.

31.6 Each party irrevocably submits and agrees to submit to the jurisdiction of the English courts and of any other court in which Proceedings may be brought in accordance with this clause.

31.7 This clause 31 (Jurisdiction) is subject to the provisions of clause 30 (Dispute Resolution).

47

32. AGENT FOR SERVICE

32.1 BEG(UK), and BE plc and Holdings (the “Appointing Parties”) irrevocably appoint BEG to be their agent for the receipt of Service Documents and each of them agrees that any Service Document may be effectively served on it in connection with Proceedings in England and Wales by service on its agent effected in any manner permitted by the Civil Procedure Rules 1998 (as amended).

32.2 If an agent at any time ceases for any reason to act as such for one, some or all of the Appointing Parties, such Appointing Parties shall appoint a replacement agent having an address for service in England and Wales and shall notify the other parties of the name and address of the replacement agent. Failing such appointment and notification, the Secretary of State shall be entitled by notice to appoint a replacement agent to act on behalf of the Appointing Parties. The provisions of this clause 32 (Agent for Service) applying to service or an agent apply equally to service on a replacement agent.

32.3 A copy of any Service Document served on an agent shall be sent by post to the relevant Appointing Party or Parties. Failure or delay in so doing shall not prejudice the effectiveness of service of the Service Document.

32.4 “Service Document” means a claim form, application notice, order, judgment or other document relating to any Proceedings.

33. VARIATION

Subject to any other provision of this Agreement, this Agreement shall not be varied unless such variation shall have been expressly agreed in writing by each of the parties to this Agreement (or one of its duly authorised representatives).

48

Schedule 1

BNFL Historic Contracts

1. The “BNFL Historic Contracts” are comprised of the BNFL Historic Fuel Contracts and the BNFL Ancillary Agreements, in each case as amended and restated by the parties pursuant to a deed of amendment entered into between BNFL and BEG or BEG(UK) (as the case may be) on 16th May 2003 and as amended and/or supplemented from time to time.

2. The following contracts comprise the “BNFL Historic Fuel Contracts”:

(a) the 1995 agreement between BEG and BNFL for the storage and reprocessing of Historic Fuel;

(b) the 1997 agreement between BEG and BNFL for spent fuel management services in relation to Historic Fuel;

(c) the 1995 agreement between BEG(UK) and BNFL for the reprocessing and storage of Historic Fuel; and

(d) the 1995 agreement between BEG(UK) and BNFL for the long-term storage of Historic Fuel and related services.

3. The following contracts comprise the “BNFL Ancillary Agreements”:

(a) the 1996 agreement between BEG and BNFL for flask maintenance services;

(b) the 1996 agreement between BEG(UK) and BNFL for flask maintenance services;

(c) the 1997 new agreement between BEG and BNFL for flask maintenance services;

(d) the 1997 new agreement between BEG(UK) and BNFL for flask maintenance services;

(e) the 1996 agreement between BEG and BNFL for oxide miscellaneous services;

(f) the 1996 agreement between BEG(UK) and BNFL for oxide miscellaneous services;

(g) the 1997 agreement between BEG and BNFL for rail transport services for irradiated nuclear fuel in the UK; and

(h) the 1997 agreement between BEG(UK) and BNFL for rail transport services for irradiated nuclear fuel in the UK.

49

Schedule 2

Power Stations

Part 1: BEG Power Stations

1. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 61 dated on or after 25th March 1996 and known as Dungeness “B” station.

2. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 59 dated on or after 25th March 1996 and known as Hartlepool nuclear power station.

3. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 60 dated on or after 25th March 1996 and known as Heysham 1 station.

4. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 60 dated on or after 25th March 1996 and known as Heysham 2 station.

5. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 62 dated on or after 25th March 1996 and known as Hinkley Point “B” station.

6. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 63 dated on or after 25th March 1996 and known as Sizewell “B” station.

Part 2: BEG (UK) Power Stations

1. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. Sc 11 dated on or after 25th March 1996 and known as Hunterston “B” station.

2. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. Sc 10 dated on or after 25th March 1996 and known as Torness nuclear power station.

50

Schedule 3

Strategic Exercises of Rights

1. Agreement for the storage and reprocessing or irradiated oxide fuel and related services dated 31 March 1995 between BNFL and Nuclear Electric plc dated 31 March 1995, as novated and as amended and restated by a deed of amendment dated 16 May 2003

1.1 Clause 8.25

1.2 Clause 8.27

1.3 Clause 8.38

1.4 Clause 8.39

1.5 Clause 9.3.2

1.6 Clause 10.20

1.7 Clause 10.21

1.8 Clause 10.23

1.9 Clause 10.35

1.10 Clause 10.36

1.11 Clause 10.38

1.12 Clause 10.39

1.13 Clause 10.40A

1.14 Clause 10.40B

1.15 Clause 10.41

1.16 Appendix 7, Clause 5

1.17 Appendix 9, Clause 5

2. Agreement for Spent Fuel Management Services between BNFL and Nuclear Electric Limited dated 3 June 1997, as amended and restated by a deed of amendment dated 16 May 2003

2.1 Clause 9.24

51

2.2 Clause 9.26

2.3 Clause 9.40

2.4 Clause 9.41

2.5 Clause 11.9

2.6 Clause 11.16

2.7 Clause 11.17

2.8 Clause 13.6

2.9 Clause 13.9

2.10 Clause 13.10

2.11 Clause 14.17

2.12 Clause 14.23

2.13 Clause 14.25

2.14 Clause 14.26

2.15 Clause 16.3.4

2.16 Clause 25.3

2.17 Appendix 10, clause 5

2.18 Appendix 12, clause 5

3. Agreement for the Storage and Reprocessing of Irradiated Oxide Fuel and Related Services between BNFL and Scottish Nuclear Limited dated 30 March 1995 as amended and restated by a deed of amendment dated 16 May 2003

3.1 Clause 8.25

3.2 Clause 8.27

3.3 Clause 8.38

3.4 Clause 8.39

3.5 Clause 9.3

3.6 Clause 10.20

52

3.7 Clause 10.21

3.8 Clause 10.22

3.9 Clause 10.23

3.10 Clause 10.24

3.11 Clause 10.35

3.12 Clause 10.35A

3.13 Clause 10.35B

3.14 Clause 10.36

3.15 Clause 10.38

3.16 Clause 10.39

3.17 Clause 10.41

3.18 Appendix 7, clause 5

3.19 Appendix 9, clause 5

4. Agreement for the Long Term Storage of Irradiated Oxide Fuel and Related Services dated 30 March 1995 between BNFL and Scottish Nuclear Limited as amended and restated by a deed of amendment dated 16 May 2003

4.1 Clause 5.4.2

4.2 Clause 5.5

4.3 Clause 6.8

4.4 Clause 7.3.6

4.5 Clause 7.3.7

4.6 Clause 16.3

5. Agreement for Oxide Flask Maintenance Services between BNFL and Nuclear Electric plc dated 31 March 1996, as novated and as amended and restated by a deed of amendment dated 16 May 2003

5.1 Clause 19.6

53

6. New agreement for Oxide Flask Maintenance between BNFL and Nuclear Electric Limited dated 3 June 1997, as amended and restated by a deed of amendment dated 16 May 2003

6.1 Clause 18.6

7. Agreement for Rail Transport Services of Irradiated Nuclear Fuel in the United Kingdom between BNFL and Nuclear Electric dated 3 June 1997, as amended and restated by a deed of amendment dated 16 May 2003

Not applicable

8. Agreement for Oxide Flask Maintenance Services between BNFL and Scottish Nuclear Limited dated 29 March 1996, as novated and as amended and restated by a deed of amendment dated 16 May 2003

8.1 Clause 19.6

9. New agreement for Oxide Flask Maintenance between BNFL and Scottish Nuclear Limited dated 3 June 1997, as amended and restated by a deed of amendment dated 16 May 2003

9.1 Clause 19.6

10. Agreement for Rail Transport Services of Irradiated Nuclear Fuel in the United Kingdom between BNFL and Scottish Nuclear Limited dated 3 June 1997, as amended and restated by a deed of amendment dated 16 May 2003

Not applicable.

54

Schedule 4

Determination of Licensee Historic Compensation Amount

1. DETERMINATION OF LICENSEE HISTORIC COMPENSATION AMOUNT

1.1 Where a Secretary of State Exercise of Rights or a Net Cost Exercise of Rights (referred to in this paragraph as an “Exercise”) is proposed, the Licensee shall, within 30 Business Days after the Exercise is proposed:

(A) provide the Secretary of State with the written estimate of the expected costs (including attributable overheads) and revenues resulting from the Exercise referred to in paragraph 1.2; and

(B) elect whether it wishes to be compensated on the Actual Basis referred to in paragraph 1.3 or the Estimated Basis referred to in paragraph 1.4 and, if the Licensee elects to be compensated on the Actual Basis, specify the Licensee’s proposals for assessing costs and revenues and reflecting them in compensation payments by the Secretary of State.

1.2 The estimate of costs and revenues to be provided by the Licensee will either:

(A) (i) be prepared using expected values (i.e. the amounts that take account of all possible outcomes using probabilities to weight the outcomes);

(ii) so far as practicable, take account of all effects, including effects on Tax and interest costs; and

(iii) estimate the costs and revenues by Financial Period; or

(B) be prepared on such other basis as the Licensee and the Secretary of State may agree.

1.3 The “Actual Basis” of compensation requires the Secretary of State to pay to the Licensee compensation measured on the basis of the actual costs (including attributable overheads) or reductions in revenues, adjusted for actual reductions in such costs or increases in revenues as a result of the Exercise. Such compensation payments will be made as and when the costs or reductions in revenues are incurred.

1.4 The “Estimated Basis” of compensation requires the Secretary of State to pay to the Licensee compensation measured on the basis of the estimated costs (including attributable overheads) or reductions, adjusted for expected reductions in such costs or increases in revenues as a result of the Exercise. Such compensation payments will be made at the times when the increases in costs or reductions in revenues are expected to be incurred.

1.5 In the case of a Net Cost Exercise of Rights, the compensation payment to the Licensee shall be increased by an incentivisation margin, to be proposed by the Licensee acting reasonably, that reflects the risk incurred by the Licensee in connection with the Net Cost Exercise of Rights.

55

2. Information

The Licensee shall provide and shall use reasonable endeavours to procure that the Group and the Licensee’s accountants and advisers provide without charge such reasonable access to their personnel, books and records, calculations and working papers as the Secretary of State or her advisers may request in connection with their consideration of any estimates or proposals under this Schedule 4.

3. Disputes

3.1 The Secretary of State may dispute any estimate or proposal provided by the Licensee in accordance with the foregoing provisions of this Schedule 4 by notice in writing to the Licensee within 30 Business Days of receiving that estimate or proposal. The notice shall specify which items are disputed and the reasons therefor (the “Disputed Items”).

3.2 If the Secretary of State does not serve a notice under paragraph 3.1 within the 30 Business Day period, the estimate or proposal shall be deemed to have been accepted by the Secretary of State.

3.3 If the Secretary of State serves a notice under paragraph 3.1, then the Licensee and the Secretary of State shall use their reasonable endeavours to resolve the Disputed Items and either:

(A) if the Licensee and the Secretary of State reach agreement on the Disputed Items within 20 Business Days of the notice being served (or such longer period as the Licensee and the Secretary of State may agree in writing), the estimate or proposal shall be amended to reflect such agreement; or

(B) if the Licensee and the Secretary of State do not reach agreement in accordance with paragraph (A), the Licensee or the Secretary of State may refer the Disputed Items to an Expert.

3.4 In any reference to the Expert in accordance with paragraph 3.3:

(A) the Expert shall be directed to determine any dispute by reference to the principles and methodologies set out in this Schedule;

(B) the estimate or proposal shall be adjusted as necessary to reflect the decision of the Expert and, as amended, shall be signed by the Expert; and

(C) the Secretary of State and the Licensee shall use their reasonable endeavours to procure that the Expert is able to make a final determination within 20 Business Days of the referral of the dispute to him or her.

56

Schedule 5

Deeds of Adherence and Release

Part 1: Form of Deed of Adherence

THIS DEED POLL is made on [                    ] by [                    ], a company incorporated [in/under the laws of] [            ] under registered number [            ], whose registered office is at [            ] (the “New Licensee”).

WHEREAS:

(A) By an agreement dated [                    ], [                    ] [transferred/novated] to the New Licensee its rights [and obligations] under the [describe relevant BNFL Historic Contracts] (the “Contracts”).

(B) This Deed Poll is entered into in compliance with the terms of clause 21 (Assignment) of the Historic Liabilities Funding Agreement dated January, 2005 between (1) the Secretary of State for Trade and Industry, (2) British Energy Generation (UK) Limited, (3) British Energy Generation Limited, (4) BE plc and (5) Holdings (as such agreement shall have been or may be amended, supplemented or novated from time to time) (the “Agreement”).

THIS DEED POLL WITNESSES as follows:-

1. Words and expressions defined in the Agreement shall have the same meaning in this Deed Poll unless given a different meaning in this Deed Poll.

2. The New Licensee undertakes to adhere to and be bound by the provisions of the Agreement, and to perform the obligations imposed by the Agreement which are to be performed on or after the date of this Deed Poll, in all respects as if the New Licensee were a party to the Agreement and named therein as a Licensee.

3. The New Licensee represents and warrants to the persons referred to in paragraph 4 of this Deed Poll that as at the date hereof:

(a) it has all the necessary regulatory consents and approvals for undertaking:

(i) the Operation of [the]/[each] Power Station (but only to the extent that the nuclear reactors at such Power Stations have not permanently ceased generating electricity), and

(ii) the Decommissioning of [the]/[each] Power Station and the Discharge of Uncontracted Liabilities in relation to [the]/[each] Power Station (if the nuclear reactors at such Power Station[s] have permanently ceased generating electricity); and

(b) it is the [owner/operator] of the Power Station.

57

4. The New Licensee also represents warrants and covenants on the terms of clause 20 (Representations and Warranties) and clause 21 (Covenants) of the NLFA.

5. This Deed Poll is made for the benefit of (a) the original parties to the Agreement and (b) any other person or persons who after the date of the Agreement (and whether or not prior to or after the date of this Deed Poll) adheres to the Agreement.

6. References in Schedule 2 (Power Stations) of the Agreement to a Power Station being licensed to the Licensee shall be construed as a reference to the Power Station being licensed to the New Licensee and Schedule 2 shall be amended to show the New Licensee as Licensee of the Power Station.

7. The address and facsimile number of the New Licensee for the purposes of clause 26 (Notices) of the Agreement are as follows:

Party and title of individual	Address	Facsimile no.	Attention
·	[Its registered office from time to time]	·	·

8. This Deed Poll shall be governed by and construed in accordance with English law.

9. The provisions of clause 31 (Jurisdiction) of the HLF Agreement shall apply equally to this Deed Poll.

10. The agent for receipt of Service Documents on behalf of the New Licensee for the purposes of clause 32 (Agent for Service) of the HLF Agreement is · of ·.

IN WITNESS of which this Deed Poll has been executed and delivered by the New Licensee on the date which first appears above.

[Appropriate execution clause]

58

Part 2: Additional information to be delivered by an assignee

1. A certified copy of the constitutional documents of the assignee.

2. A certified copy of a resolution of the board of directors of the assignee:

(a) approving the terms of, and the transactions contemplated by, the Deeds of Adherence and Release and the Liabilities Documents and resolving that it execute the Deeds of Adherence and Release; and

(b) authorising a specified person or persons to execute the Deeds of Adherence and Release on its behalf.

3. A copy of any other authorisation or other document, opinion or assurance which the Secretary of State considers to be necessary or desirable in connection with the entry into and performance of the transactions contemplated by the Deeds of Adherence and Release or for the validity and enforceability of any Liabilities Document.

59

Part 3: Form of Deed of Release

THIS DEED is made on [                    ] by:

(1) THE SECRETARY OF STATE FOR TRADE AND INDUSTRY of One Victoria Street, London SW1V 0HT (the “Secretary of State”);

(2) [THE TRANSFERRING LICENSEE] of [            ] (registered in [            ] No. [            ]) (“New Licensee”);

(3) [THE NEW LICENSEE] of [            ] (registered in [            ] No. [            ]) (“New Licensee”);

(4) [[THE OTHER LICENSEES], being at the date of this Deed the persons listed in Schedule 1 to this Deed;]

(5) BRITISH ENERGY GROUP PLC, of Systems House, Alba Campus, Livingston, EH54 7EG (registered in Scotland No. SC270184) (“BE plc”);

AND

(6) BRITISH ENERGY HOLDINGS PLC, of Systems House, Alba Campus, Livingston, EH54 7EG (registered in Scotland No. SC270186) (“Holdings”)

WHEREAS:

(A) By an agreement dated [                    ], the Transferring Licensee transferred to the New Licensee the nuclear power generating station[s] at [                    ] (the “Power Station[s]”).

(B) The Transferring Licensee wishes to be released and discharged from the HLF Agreement (as defined below) and the Secretary of State has agreed to release and discharge the Transferring Licensee from the HLF Agreement upon the terms of this Deed.

(C) This Deed is entered into in compliance with the terms of clause 21 (Assignment) of the historic liabilities funding agreement dated        January, 2005 between (1) the Secretary of State for Trade and Industry, (2) British Energy Generation (UK) Limited, (3) British Energy Generation Limited, (4) BE plc and (5) Holdings (as such agreement shall have been or may be amended, supplemented or novated from time to time) (the “HLF Agreement”).

THIS DEED WITNESSES as follows:-

1. Words and expressions defined in the HLF Agreement shall have the same meaning in this Deed unless given a different meaning in this Deed.

2. With effect from the date hereof and in consideration of the New Licensee entering into a deed of adherence [on or about the date hereof] by which it agrees to be bound by the terms of the HLF Agreement as a Licensee, the parties to this Deed (other

60

than the Transferring Licensee) hereby release and discharge the Transferring Licensee from its obligations under the HLF Agreement, except for the Transferring Licensee’s obligations in respect of, and liability for, any amount payable by the Licensee to the Secretary of State in connection with any Excluded Historic Liabilities.

3. Notwithstanding the provisions of paragraph 2, nothing in this Deed shall affect or prejudice any claim or demand whatsoever which the Secretary of State may have against the Transferring Licensee in relation to the HLF Agreement and arising out of matters prior to the date hereof.

4. With effect from the date hereof and in consideration of the undertakings given by the Secretary of State in paragraph 2, the Transferring Licensee hereby releases and discharges the Secretary of State from all obligations to observe, perform, discharge and be bound by the HLF Agreement. Notwithstanding this undertaking and release, nothing in this agreement shall affect or prejudice any claim or demand whatsoever which the Transferring Licensee may have against the Secretary of State in relation to the HLF Agreement and arising out of matters prior to the date hereof.

5 This agreement may be executed in any number of counterparts, and by the parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart. Each counterpart shall constitute an original of this agreement, but all the counterparts shall together constitute but one and the same instrument.

6. This Deed shall be governed by and construed in accordance with English law.

7. The provisions of clause 31 (Jurisdiction) of the HLF Agreement shall apply equally to this Deed.

8. The agent for receipt of Service Documents on behalf of the New Licensee for the purposes of clause 32 (Agent for Service) of the HLF Agreement is · of ·.

IN WITNESS of which this Deed has been executed and delivered by the parties on the date which first appears above.

[Execution clause]

61

Schedule 1

(Other Licensees)

Name	Registered Address	Registered Number
[Details to be inserted.]

62

SECRETARY OF STATE

SIGNED by a senior official of the Department of Trade and Industry duly authorised to sign on behalf of the Secretary of State:

SIGNED by

as attorney for

BRITISH ENERGY GENERATION

(UK) LIMITED

SIGNED by

as attorney for

BRITISH ENERGY GENERATION LIMITED

SIGNED by

as attorney for

BRITISH ENERGY GROUP PLC

SIGNED by

as attorney for

BRITISH ENERGY HOLDINGS PLC

63

EX-4.24

Exhibit 4.24

DATED: 14 January, 2005

THE SECRETARY OF STATE FOR TRADE AND INDUSTRY

NUCLEAR GENERATION DECOMMISSIONING FUND LIMITED

(to be renamed Nuclear Liabilities Fund Limited)

BRITISH ENERGY GENERATION (UK) LIMITED

BRITISH ENERGY GENERATION LIMITED

BRITISH ENERGY GROUP PLC

- AND -

BRITISH ENERGY HOLDINGS PLC

CONTRIBUTION AGREEMENT

Slaughter and May

One Bunhill Row

London EC1Y 8YY

(CDR/JPW/TP)

CONTENTS

1.	INTERPRETATION	2
2.	PAYMENT OBLIGATIONS AND ISSUE OF BONDS	12
3.	DECOMMISSIONING PAYMENTS	12
4.	PWR FUEL PAYMENTS	15
5.	ISSUE OF BONDS	16
6.	NLF PAYMENTS	16
7.	NLF CASH FLOW STATEMENTS	18
8.	CASH RESERVES	20
9.	TARGET AMOUNT	21
10.	FORECAST EXPENDITURE RESERVE	22
11.	NLF CONVERSION RIGHTS	24
12.	COVENANTS	28
13.	CONTRACT REVIEW	28
14.	ACKNOWLEDGEMENTS	29
15.	SET-OFF AND WITHHOLDING; TAX ADJUSTMENT	29
16.	INTEREST AND ADJUSTMENT FOR INFLATION	30
17.	DEFAULT EVENTS	32
18.	DISPUTE RESOLUTION	35
19.	LIABILITY	37
20.	RELEASE OF BE PARTIES	37
21.	REMEDIES AND WAIVERS	37
22.	ASSIGNMENT	37
23.	ENTIRE AGREEMENT	39
24.	NOTICES	40

25.	ANNOUNCEMENTS	41
26.	CONFIDENTIALITY	42
27.	COSTS AND EXPENSES	43
28.	COUNTERPARTS	44
29.	INVALIDITY	44
30.	CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999	44
31.	CHOICE OF GOVERNING LAW	44
32.	JURISDICTION	44
33.	AGENT FOR SERVICE	45

SCHEDULES

Schedule 1 Power Stations	47
Schedule 2 Calculation of NLF Payment Percentage	49
Schedule 3 Covenants	60
Schedule 4 Form of NLF Cash Flow Statement	67
Schedule 5 Decommissioning Payments	68
Schedule 6 Form of Deed of Adherence	74

CONTRIBUTION AGREEMENT

DATE:        January, 2005

PARTIES:

(1) THE SECRETARY OF STATE FOR TRADE AND INDUSTRY, of One Victoria Street, London SW1H 0ET (the “Secretary of State”);

(2) NUCLEAR GENERATION DECOMMISSIONING FUND LIMITED, of 16 Rothesay Place, Edinburgh EH3 7SQ (registered in Scotland No. SC164685) (to be renamed Nuclear Liabilities Fund Limited) (“NLF”);

(3) BRITISH ENERGY GENERATION (UK) LIMITED, of Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC117121) (“BEG(UK)”);

(4) BRITISH ENERGY GENERATION LIMITED, of Barnett Way, Barnwood, Gloucester GL4 3RS (registered in England No. 03076445) (“BEG”);

(5) BRITISH ENERGY GROUP PLC, of Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC270184) (“BE plc”); and

(6) BRITISH ENERGY HOLDINGS PLC, of Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC270186) (“Holdings”).

BACKGROUND

(A) In 1996 the Secretary of State privatised certain parts of the nuclear generation industry in the United Kingdom through a sale of shares in British Energy Plc (“British Energy”).

(B) To facilitate the privatisation, a segregated fund was established for the purpose of providing arrangements for funding certain nuclear decommissioning liabilities of BEG and BEG(UK), and for this purpose the Nuclear Trust and NLF were established.

(C) In September 2002, British Energy initiated discussions with the Secretary of State with a view to seeking immediate financial support and to enable a longer term restructuring of the Group to take place.

(D) In November 2002, British Energy announced the principles of a restructuring of the Group with its significant financial creditors which, together with other proposals agreed between British Energy and the Secretary of State, were intended to lead to a solvent restructuring of British Energy.

(E) British Energy, certain other members of the British Energy group and its significant financial creditors entered into a creditors’ restructuring agreement (the “Creditor Restructuring Agreement”) dated as of 30 September 2003 under the terms of which a solvent restructuring of the British Energy group would be effected. The solvent restructuring of the British Energy group thereby effected involved, inter alia, the creation of a new ultimate parent company, BE plc and a new wholly-owned subsidiary of BE plc, Holdings. BE plc and Holdings will become the holding companies of BEG and BEG(UK).

(F) The proposals agreed between the Secretary of State and British Energy in connection with the restructuring of British Energy included a change to the manner in which the decommissioning liabilities of the Group are to be funded and a proposal for the funding of the contracted nuclear liabilities of the Group and certain of the uncontracted nuclear liabilities of the Group, with British Energy agreeing to make additional contributions to NLF to meet such liabilities.

(G) On 1 October 2003, British Energy, BEG, BEG(UK), certain other members of the British Energy group, NLF and the Secretary of State entered into an agreement (the “Government Restructuring Agreement”) under the terms of which they agreed to enter into the agreements that constitute the Liabilities Documents (as defined below), including, amongst other agreements, this Agreement.

(H) Subject to the conditions set out in the Government Restructuring Agreement (which have been satisfied in full or waived in accordance with the terms thereof), the parties have agreed, inter alia, to enter into this Agreement, in order to record the provisions to effect the transactions described in Recital (F).

THE PARTIES AGREE as follows:

1. INTERPRETATION

1.1 In this Agreement (including the Recitals):

“Accelerated Decommissioning Payment”	has the meaning set out in clause 3.3;
“Accounts”	means, in respect of a Financial Period, the annual consolidated audited accounts of the Group;
“Additional Payment”	has the meaning set out in paragraph 2(B) of Schedule 2 (Calculation of NLF Payment Percentage);
“Adjusted Net Cash Flow”	means, in respect of any Financial Period, the cash flow of the Group for that Financial Period as calculated in accordance with clause 7.3;
“Adjustment Amount”	has the meaning set out in clause 6.5(B)(iii);
“Agreed Collateral Purposes”	means providing collateral for, and for operations ancillary to, the generation, sale and purchase by the Group of electricity;
“Auditors”	means the auditors for the time being of BE plc or, in the event of their being unable or unwilling to carry out any action requested of them pursuant to this Agreement, such other firm of auditors or financial

2

	advisers as BE plc may select for that purpose and NLF may in writing approve (such approval not to be unreasonably withheld or delayed) or, failing selection by BE plc within 15 Business Days of BE plc becoming aware that its auditors are so unable or unwilling, as NLF, in consultation with the Secretary of State, may select;
“BEG Entity”	means each of BEG and BEG(UK);
“BE Party”	means each of BEG, BEG(UK), BE plc and Holdings;
“Board”	means the board of directors from time to time of the BE Party in the relevant provision;
“Bonds”	means the £550,000,000 of 7 per cent. guaranteed bonds due 2005-2022 to be issued by Holdings pursuant to the terms of the Trust Deed;
“Capital Distribution”	means any non-cash dividend or distribution by a member of the Group (other than to another member of the Group), whether of assets or other property, and whenever paid or made and however described, provided that where a Cash Distribution is announced which is to be, or may at the election of a holder or holders of Ordinary Shares be, satisfied by the issue or delivery of Ordinary Shares or other non-cash property or assets, then the Cash Distribution in question shall be treated as a Capital Distribution of the Fair Market Value of such Ordinary Shares or other property or assets issued or delivered in satisfaction of such Cash Distribution;
“Cash”	means:
	(A)	cash in hand and deposits repayable on demand with any qualifying financial institution;
	(B)	any other cash deposits, regardless of their repayment maturity;
	(C)	current asset investments held as readily disposable stores of value, being investments which are disposable by the holder without curtailing or disrupting its or any member of the Group’s business and which are either readily convertible into known amounts of cash at or close to their carrying amount or traded in an active market; and

3

	(D)	any investment permitted under clause 8.2;
	but:
	(E)	excluding cash or deposits subject to escrow or similar restrictions; and
	(F)	deducting overdrafts from any qualifying financial institution repayable on demand;
“Cash Distribution”	means any Cash payment made by any member of the Group to its ordinary shareholders or any other shareholders of that Group member in their capacity as shareholders of that Group member (other than Cash payments made to a shareholder which is itself a Group member), whether by means of dividend, purchase or redemption of share capital by or on behalf of BE plc or any other member of the Group, or otherwise;
“Cash Reserves”	means:
	(A)	Cash within the Group; and
	(B)	cash applied to the Agreed Collateral Purposes,
	in an amount up to the Target Amount, but excludes the Forecast Expenditure Reserve;
“Collateral Amount”	means the amount of cash which is applied to the Agreed Collateral Purposes;
“Committed Facilities”	means facilities for borrowing (excluding facilities repayable on demand) made available to any member of the Group by third party financial institutions:
	(A)	which have a remaining term of at least 18 months; and
	(B)	which are available unconditionally to the entity in question subject only to customary conditions precedent relating to exercise of drawdown, which conditions immediately prior to such exercise, in the opinion of the Board acting reasonably, will be met and will continue to be met for at least 18 months thereafter;
“Conversion”	has the meaning set out in clause 11.1;

4

“Conversion Date”	means, in respect of any Conversion, the date on which NLF’s right to receive NLF Payments is converted into Conversion Shares following the exercise of the NLF Conversion Rights pursuant to, and in accordance with, clause 11.1;
“Conversion Shares”	has the meaning set out in clause 11.1;
“CTA Global Bond”	means the £150,000,000 7 per cent. guaranteed bonds to be represented by a global bond certificate and issued by Holdings;
“Current Market Price”	has the meaning set out in paragraph 6 of Schedule 2 (Calculation of NLF Payment Percentage);
“Dealing Day”	means a day on which the London Stock Exchange is open for business and Ordinary Shares may be dealt in;
“Decommissioning Default Payment”	has the meaning set out in clause 17.2;
“Decommissioning Payment Date”	means each of the dates set out in Schedule 5 (Decommissioning Payments);
“Decommissioning Payments”	means the payments to be made to NLF by the BEG Entities in connection with the costs of decommissioning the Power Stations pursuant to, and in accordance with, clause 3 (Decommissioning Payments), as set out in Schedule 5 (Decommissioning Payments);
“Deed of Adherence”	means a deed of adherence in the form or substantially the form set out in Part 1 of Schedule 6 (Form of Deed of Adherence);
“Default Event”	has the meaning set out in clause 17.6;
“Dispute”	has the meaning set out in clause 18.1;
“Eggborough”	means the 2000MW coal-fired power station located at Eggborough, Yorkshire;
“Expert”	has the meaning given in clause 18.6;
“Expert Resolution”	means resolution of a Dispute by an Expert pursuant to, and in accordance with the terms of, clause 18 (Dispute Resolution);

5

“Fair Market Value”	means, with respect to any property on any date, the fair market value of that property as determined by the Investment Bank, provided that:
	(A)	the fair market value of an Ordinary Share on any date shall be the Current Market Price of an Ordinary Share on that date;
	(B)	the fair market value of a cash dividend paid or to be paid per Ordinary Share shall be the amount of such cash dividend per Ordinary Share determined as at the date of announcement of such dividend; and
	(C)	where options, warrants or other rights are publicly traded in a market of adequate liquidity (as determined by such investment bank) the fair market value of such options, warrants or other rights shall equal the arithmetic mean of the daily closing prices of such options, warrants or other rights during the period of five trading days on the relevant market commencing on the first such trading day such options, warrants or other rights are publicly traded,
	in each case converted into pounds sterling (if expressed in a currency other than pounds sterling) at such rate of exchange as may be determined in good faith by the Investment Bank to be the spot rate ruling at the close of business on that date (or if no such rate is available on that date, the equivalent rate on the immediately preceding day on which such a rate is available);
“Financial Period”	means an accounting period for the Accounts, as adopted by BE plc from time to time in accordance with the Companies Act 1985;
“Forecast Expenditure Reserve”	has the meaning set out in clause 10.1;
“Group Borrowings”	means the aggregate indebtedness of the Group for or in respect of:
	(A)	moneys borrowed;
	(B)	any amount raised by acceptance under any acceptance credit facility;

6

	(C)	any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;
	(D)	the amount of any liability in respect of any lease or hire purchase contract;
	(E)	any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of borrowing;
	(F)	any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and
	(G)	the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (A) to (F) above;
“Incremental Collateral Amount”	means the amount from time to time by which the Collateral Amount exceeds £200 million;
“Initial Resolution Period”	has the meaning given in clause 18.3;
“Investment Bank”	has the meaning given in clause 18.18;
“Investment Grade Rating”	means a credit rating for the long-term, unsecured, unguaranteed and unsubordinated debt of the Group of:
	(C)	Baa3 or higher from Moody’s; or
	(D)	BBB- or higher from Standard & Poor’s; or
	(E)	BBB- or higher from Fitch; or
	(F)	if all of those rating agencies have ceased business, the minimum rating recognised generally in international capital markets as being an investment grade rating from another rating agency of international repute;
“Issue”	means the issue to NLF of certain of the Bonds pursuant to clause 2(B);

7

“Issue Date”	has the meaning given in the terms and conditions of the Bonds;
“New Bonds”	means the £700,000,000 7 per cent. guaranteed bonds due 2005-2022 to be issued by Holdings pursuant to the Trust Deed, comprising the Bonds and the CTA Global Bond;
“NLFA”	means the Nuclear Liabilities Funding Agreement of even date between the Secretary of State, NLF and each of the BE Parties;
“NLF Cash Flow Statement”	means the cash flow statement for each Financial Period to be prepared by BE plc pursuant to, and in accordance with, clause 7 (NLF Cash Flow Statements) and Schedule 4 (Form of NLF Cash Flow Statement);
“NLF Conversion Right”	means the right of NLF to convert its right to receive the NLF Payments into convertible ordinary shares issued by BE plc in accordance with, and subject to, clause 11 (NLF Conversion Rights);
“NLF Payment Date”	has the meaning set out in clause 6.1;
“NLF Payment Percentage”	means the percentage from time to time calculated in accordance with clause 11 (NLF Conversion Rights) and Schedule 2 (Calculation of NLF Payment Percentage);
“NLF Payments”	means the payments to be made to NLF by BE plc or the Nominee pursuant to, and in accordance with clause 6 (NLF Payments);
“Nominee”	has the meaning given in clause 6.1;
“Notice of Dispute”	has the meaning given in clause 18.1;
“Ordinary Shareholders”	means the holders from time to time of the Ordinary Shares;
“Ordinary Shares”	means ordinary shares in BE plc;
“Proceedings”	means any proceeding, suit or action arising out of or in connection with this Agreement;
“PWR Fuel”	means the fuel from time to time loaded into the Sizewell B Power Station reactor and such fuel shall be treated as being loaded when it has been placed within the reactor’s pressure vessel and detached from the fuelling mast;

8

“PWR Fuel Payments”	means the payments to be made to NLF by the BEG Entities pursuant to, and in accordance with, clause 4 (PWR Fuel Payments) in connection with the costs of managing PWR Fuel;
“PWR Fuel Payment Date”	means, in relation to each loading of PWR Fuel, the date falling four Business Days after such loading has been completed, as certified by an executive director of BEG;
“Record Date”	means, in respect of any Cash Distribution, the date by reference to which the entitlement of the relevant shareholders to such Cash Distribution is determined;
“Relevant Period”	has the meaning set out in clause 7.3;
“Securities”	includes, without limitation, shares in the capital of BE plc, Treasury Shares and options, warrants or other rights to subscribe or purchase shares in the capital of BE plc;
“Service Document”	means a claim form, application notice, order, judgment or other document relating to any Proceedings;
“Share Offering”	has the meaning set out in clause 11.9;
“Target Amount”	means the aggregate of £490 million, as altered from time to time by BE plc pursuant to clause 9.1, and the Incremental Collateral Amount;
“Trading Policies”	means those trading policies (including, without limitation, in respect of the level of speculative trading conducted by the relevant member of the Group) from time to time agreed by the Board in accordance with the requirements of paragraph 2(D) of Schedule 3 (Covenants);
“Treasury Shares”	means shares in the capital of BE plc held by BE plc as treasury shares pursuant to The Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003;
“Trust Deed”	means the trust deed constituting the New Bonds between Holdings (as Issuer), the Trustee (as Trustee) and certain members of the Group (as Guarantors);

9

“Trustee”	means the Law Debenture Trust Corporation p.l.c.;
“UKLA”	means the UK Listing Authority; and
“Weighted Average Payment Percentage”	means, in respect of any Financial Period, the aggregate of the NLF Payment Percentage for each day in that Financial Period (calculated to four decimal places) divided by the number of days in that Financial Period (rounded to four decimal places).

1.2 In this Agreement, unless otherwise stated or the context requires otherwise:

(A) words importing the singular only shall include the plural and vice versa;

(B) words importing any gender shall include all other genders;

(C) words importing natural persons shall include corporations;

(D) references to any “party” shall be construed so as to include its successors in title, permitted assigns and permitted transferees;

(E) references to a “company” shall be construed so as to include any company, corporation or other body corporate, wherever and however incorporated or established;

(F) references to a “person” shall be construed so as to include any individual, firm, company, government, state or agency of a state, local or municipal authority or government body or any joint venture, association or partnership (whether or not having separate legal personality);

(G) a reference to any statute or statutory provision shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted;

(H) any reference to a “day” (including within the phrase “Business Day”) shall mean a period of 24 hours running from midnight to midnight;

(I) a reference to any other document referred to in this Agreement is a reference to that other document as amended, varied, novated or supplemented at any time;

(J) any reference to a “qualifying financial institution” shall have the meaning given to that expression in Financial Reporting Standard 1 (Revised 1996) issued by the Accounting Standards Board;

(K)     (i) the rule known as the ejusdem generis rule shall not apply and accordingly general words introduced by the word “other” shall not be given a restrictive meaning by reason of the fact that they are preceded by words indicating a particular class of acts, matters or things;

10

(ii) general words shall not be given a restrictive meaning by reason of the fact that they are followed by particular examples intended to be embraced by the general words;

(L) the Schedules form part of this Agreement and shall have the same force and effect as if expressly set out in the body of this Agreement, and reference to this Agreement shall include the Schedules;

(M) references to any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official, or any legal concept or thing shall in respect of any jurisdiction other than England be deemed to include what most nearly approximates in that jurisdiction to the English legal term;

(N) a reference to a “clause” or a “Schedule” is a reference to a clause of, or a schedule to, this Agreement; and

(O) a reference to a “paragraph” is a reference to a paragraph within a clause or a Schedule.

1.3 All headings and titles are inserted for convenience only. They are to be ignored in the interpretation of this Agreement.

1.4 Capitalised terms not otherwise defined in this Agreement have the meanings ascribed to them in the NLFA.

1.5 Any payment to be made pursuant to this Agreement (including, without limitation, the Accelerated Decommissioning Payments, NLF Payments and PWR Fuel Payments) shall be made in cleared funds to such account or accounts as the recipient specifies or as the recipient shall otherwise direct, in each case by giving reasonable prior notice to the payer.

1.6 If any payment to be made pursuant to this Agreement becomes due and payable on a day which is not a Business Day (including, without limitation, in respect of a Decommissioning Payment Date, PWR Fuel Payment Date or NLF Payment Date), the due date for such payment shall be deemed to fall on the immediately preceding Business Day.

1.7 With effect from the date (if any) that the United Kingdom adopts the Euro as its lawful currency in substitution for sterling:

(A) payments falling due under this Agreement shall be made by the payer to the recipient in Euros;

(B) no payments which would have been payable in sterling under this Agreement but for the adoption of the Euro by the United Kingdom as its lawful currency shall be made in sterling or national currency units;

(C) all amounts stated in sterling shall be converted into Euros at the fixed conversion rate provided for by the laws of England and Wales; and

11

(D) all amounts required to be calculated in sterling shall be calculated in Euros.

1.8 Unless otherwise stated, any certificate to be provided by a BE Party pursuant to this Agreement may be certified by an executive director or the company secretary of the relevant BE Party, without personal liability for the individual other than for fraud or wilful default.

2. PAYMENT OBLIGATIONS AND ISSUE OF BONDS

In consideration of the Secretary of State and NLF entering into the Liabilities Documents:

(A) with effect from the Restructuring Date:

(i) BEG and BEG(UK) shall make the Decommissioning Payments;

(ii) BEG shall make the PWR Fuel Payments; and

(iii) BE plc shall (or shall procure that its Nominee shall) make the NLF Payments; and

(B) on the Issue Date Holdings shall issue to NLF £275,000,000 in principal amount of Bonds, credited as fully paid,

each in accordance with the provisions of this Agreement.

3. DECOMMISSIONING PAYMENTS

Decommissioning Payments

3.1 BEG and BEG(UK) shall make the Decommissioning Payments (adjusted for inflation in accordance with clause 16 (Interest and Adjustment for Inflation)) to NLF on the Decommissioning Payment Dates.

Accelerated Decommissioning Payments

3.2 Prior to any early redemption (whether in whole or in part) of the New Bonds or any market purchase (whether in whole or in part) of the New Bonds prior to their due date for repayment, in each case by or on behalf of any member of the Group, BEG and BEG(UK) shall pay to NLF an Accelerated Decommissioning Payment. The obligations under this clause 3.2 shall not apply in relation to:

(A) any buyback of the CTA Global Bond pursuant to the Share Subscription Agreement (as defined in the terms and conditions of the Bonds) and the subsequent cancellation of such CTA Global Bond by Holdings; or

(B) an early redemption or market purchase as permitted under the Trust Deed and resulting from or financed by a contemporaneous refinancing of the whole or part of the New Bonds in issue from time to time. In the event of any such refinancing or any subsequent refinancing (each, a “Refinancing”), the

12

obligations under this clause 3.2 shall apply to any prepayment or repayment (whether in whole or in part) of that Refinancing if the date of such prepayment or repayment is prior to the due date for redemption of the New Bonds as if the references:

(i) above in this clause 3.2 to the New Bonds were to the Refinancing; and

(ii) to the New Bonds in clause 3.3(B) were to the aggregate of any New Bonds and any Refinancing to be redeemed, purchased or repaid (as the case may be) as a proportion of the total amount of the New Bonds.

3.3 For the purposes of clause 3.2, an “Accelerated Decommissioning Payment” is an amount equal to the product of:

(A) the net present value of the Decommissioning Payments due in the five year period following the date or intended date of such early redemption or market purchase (as the case may be) indexed up to that date but not thereafter; and

(B) an amount (rounded to four decimal places) calculated by application of the following formula:

A

B

where:

A is the amount proposed to be paid in redeeming or purchasing (as the case may be) the New Bonds (whether in whole or in part); and

B the total principal amount of the New Bonds in issue immediately following the Issue Date.

The “net present value” of the Decommissioning Payments shall be calculated by BE plc using a discount rate equal to:

(i) 6.8 per cent.;

less

(ii) the average Retail Price Index for the three years prior to the date on which the Accelerated Decommissioning Payment becomes due

and the resulting Accelerated Decommissioning Payment shall be notified by BE plc to NLF.

3.4 The proportion of any Accelerated Decommissioning Payment referable to any future Decommissioning Payment and paid to NLF pursuant to this clause 3 (Decommissioning Payments) shall be deducted, after reversing the effect of the net present value calculation, from that Decommissioning Payment when that Decommissioning Payment becomes due and payable under clause 3.1.

13

Review and adjustment of Accelerated Decommissioning Payments

3.5 BE plc shall, as soon as reasonably practicable and in any event within 10 Business Days of making a decision to redeem or purchase all or any of the New Bonds prior to their due date for redemption, provide NLF with evidence (certified in writing by one of its executive directors as being true and complete) necessary to calculate the corresponding Accelerated Decommissioning Payment. NLF and its professional advisers shall be entitled to review such evidence and BE plc and its advisers shall, within 10 Business Days of a request (or, if not possible within this period, as soon as reasonably practicable thereafter), give all such information and explanations as NLF may reasonably request in connection therewith.

3.6 If NLF disagrees with any matter set out in the evidence referred to in clause 3.5, it must notify BE plc in writing of such disagreement within two months of the receipt of such evidence (the “Accelerated Decommissioning Payment Notification Period”). If NLF:

(A) does not notify BE plc in writing within the Accelerated Decommissioning Payment Notification Period, NLF shall be deemed to have accepted the stated amount of the Accelerated Decommissioning Payment which shall, for the purposes of this Agreement, be conclusive, final and binding on NLF and the BE Parties save in the event of manifest or proven error; or

(B) does notify BE plc in writing within the Accelerated Decommissioning Payment Notification Period, such notification will constitute a Notice of Dispute and the matter shall be referred for Expert Resolution (save where such Dispute is resolved by agreement within the Initial Resolution Period).

3.7 Any additional payment required to be made by BEG and BEG(UK) following Expert Resolution shall be made to NLF within five Business Days of such Dispute being resolved. Interest at the rate of LIBOR plus 1 (one) per cent. shall be payable on such additional amount for the period from and including the relevant date on which the Accelerated Decommissioning Payment became due and payable up to (but excluding) the date of actual payment of such additional amount.

Defeasance Decommissioning Deposit

3.8 Prior to any Legal Defeasance or Covenant Defeasance (each as defined in the Trust Deed) of the New Bonds (other than as permitted under the Trust Deed and resulting from or financed by a contemporaneous refinancing of the whole or part of the New Bonds in issue from time to time), Holdings shall irrevocably deposit with the Trustee, in trust, for the benefit of the NLF a Defeasance Decommissioning Deposit (as defined in and calculated in accordance with the terms of the Trust Deed).

14

4. PWR FUEL PAYMENTS

PWR Fuel Payments

4.1 BEG shall make the PWR Fuel Payments to NLF on the PWR Fuel Payment Dates being a payment in consideration for the NLF bearing any liability relating to the spent PWR Fuel.

4.2 A PWR Fuel Payment shall be made in respect of each loading of PWR Fuel into the Sizewell B power station reactor and shall be a sterling amount equal to the product of:

(A) £150,000 (adjusted for inflation in accordance with clause 16 (Interest and Adjustment for Inflation)); and

(B) the number of tonnes of uranium (or part thereof expressed as a decimal to two decimal places) comprised in PWR Fuel.

Review and adjustment of PWR Fuel Payments

4.3 BE plc shall, as soon as reasonably practicable and in any event within 10 Business Days of each loading of PWR Fuel, provide NLF with evidence (certified in writing by one of its executive directors as being true and complete) necessary to calculate the tonnage of PWR Fuel used in each loading of the Sizewell B Power Station reactor. NLF and its professional advisers shall be entitled to review such evidence and BE plc and its advisers shall, within 10 Business Days of a request (or, if not possible within this period, as soon as reasonably practicable thereafter), give all such information and explanations as NLF may reasonably request in connection therewith.

4.4 If NLF disagrees with any matter set out in the evidence referred to in clause 4.3 it must notify BE plc in writing of such disagreement within two months of the receipt of such evidence (the “PWR Notification Period”). If NLF:

(A) does not notify BE plc in writing within the PWR Notification Period, NLF shall be deemed to have accepted the stated tonnage of PWR Fuel which shall, for the purposes of this Agreement, be conclusive, final and binding on NLF and BE plc save in the event of manifest or proven error; or

(B) notifies BE plc in writing within the PWR Notification Period, such notification will constitute a Notice of Dispute and the matter shall be referred for Expert Resolution (save where such Dispute is resolved by agreement within the Initial Resolution Period).

4.5 Any additional payment required to be made by BEG following Expert Resolution shall be made to NLF within five Business Days of such Dispute being resolved. Interest at the rate of LIBOR plus 1 (one) per cent. shall be payable on such additional amount for the period from and including the relevant PWR Fuel Payment Date up to (but excluding) the date of actual payment of such additional amount.

4.6 NLF and the Secretary of State acknowledge and agree that the obligations of BEG to make the PWR Fuel Payments, save for any PWR Fuel Payments due and payable immediately prior to such transfer, shall cease with effect from the transfer of the Sizewell B Power Station to a third party in accordance with the Liabilities Documents.

15

5. ISSUE OF BONDS

On the Issue Date, Holdings shall issue to NLF £275,000,000 in principal amount of Bonds, credited as fully paid.

6. NLF PAYMENTS

NLF Payments

6.1 BE plc shall make an NLF Payment to NLF in respect of each Financial Period. The NLF Payments shall be made, subject to clause 6.3, 15 Business Days after the delivery of each NLF Cash Flow Statement by BE plc pursuant to clause 7.4 (each, an “NLF Payment Date”). Notwithstanding the foregoing, BE plc may, by prior notice in writing to NLF, from time to time nominate any member of the Group (the “Nominee”) to make all or part of any NLF Payment in its place, provided that payment by such Nominee does not in any way adversely affect or impact upon the position of NLF, including in respect of the exercise of the NLF Conversion Rights. NLF may, at its discretion (acting reasonably), accept or reject such nomination by notice in writing to BE plc. Any reference in this Agreement to the making of any NLF Payment by BE plc shall be deemed to include payment by the Nominee if the nomination of that Nominee is accepted by NLF in accordance with the provisions of this clause 6.1.

6.2 The NLF Payment for each Financial Period shall be an amount equal to the product (expressed in pounds sterling) of:

(A) the greater of zero and the Adjusted Net Cash Flow for that Financial Period; and

(B) the Weighted Average Payment Percentage for that Financial Period.

Waiver of NLF Payments

6.3 If the receipt by NLF of an NLF Payment would result in the reduction of the NLF Payment Percentage, NLF may waive its right to such NLF Payment in whole or in part but NLF may not waive an NLF Payment if and to the extent that such waiver would result in an increase in the NLF Payment Percentage above the lower of:

(A) 65 per cent.; and

(B) P (expressed as a percentage), where:

P = 65 × (1 – B); and

B is the proportion (expressed as a decimal) of the NLF Conversion Rights exercised by NLF since the Restructuring Date.

16

NLF shall notify BE plc (or, if a Nominee has been appointed, the Nominee) in writing of any such waiver at least two Business Days prior to the relevant NLF Payment Date.

Review and adjustment of NLF Payments

6.4 If an NLF Cash Flow Statement is adjusted pursuant to clause 7.6 after the relevant NLF Payment Date an appropriate adjustment amount shall be paid to NLF by BE plc (or its Nominee) within five Business Days of such adjustment being resolved. Interest at the rate of LIBOR plus 1 (one) per cent. shall be payable on such amount for the period from and including the relevant NLF Payment Date up to (but excluding) the date of actual payment.

6.5 If from time to time during the term of this Agreement any of the BE Parties or the Auditors discover any error in an NLF Cash Flow Statement for a prior Financial Period that is sufficiently material to require a prior period adjustment to the cash flow statement of any Accounts:

(A) BE plc shall notify the Secretary of State and NLF of such error within two Business Days of becoming aware of the same and shall provide promptly, or procure the prompt provision, to the Secretary of State and NLF of such information and details about the error as NLF may reasonably require;

(B) BE plc shall:

(i) complete, within 20 Business Days following the preliminary announcement of its results for the period to which such Accounts relate or (if earlier) within three months following the end of the Financial Period to which such Accounts relate (or such longer period as the parties shall agree) (the “Preparation Period”) a revised NLF Cash Flow Statement for the Financial Period to which such error relates together with an appropriate reconciliation calculation (a “Revised NLF Cash Flow Statement”);

(ii) procure that, not later than 10 Business Days after expiry of the Preparation Period, the Revised NLF Cash Flow Statement and the Adjustment Amount shall be reported on by the Auditors (at BE plc’s cost) and delivered to each of the Secretary of State and NLF by BE plc; and

(iii) calculate and notify to NLF and the Secretary of State, at the same time as delivery of the Revised NLF Cash Flow Statement, an amount (the “Adjustment Amount”) equal to the product of:

(a) the amount by which the Adjusted Net Cash Flow for that prior Financial Period was understated or overstated as a consequence of such error; and

(b) the Weighted Average Payment Percentage for such prior Financial Period;

17

(C) if the error resulted in an understatement of the Adjusted Net Cash Flow for that prior Financial Period BE plc (or, if a Nominee has been appointed, the Nominee) shall pay an amount in aggregate equal to the resulting Adjustment Amount to NLF on the immediately following NLF Payment Date in addition to the NLF Payment payable on that date; and

(D) if the error resulted in an overstatement of the Adjusted Net Cash Flow for that prior Financial Period an amount equal to the resulting Adjustment Amount shall be deducted, subject to clause 6.6, from the NLF Payment payable on the immediately following NLF Payment Date and, to the extent such Adjustment Amount exceeds that NLF Payment, such excess shall be deducted to the greatest extent possible from subsequent NLF Payments until deducted in full.

6.6 Subject to clause 11.10, NLF shall not be required under this Agreement to make any payment to any member of the Group, whether as a result of any deduction to an NLF Payment pursuant to clause 6.5(D) or otherwise.

6.7 NLF and its professional advisers shall be entitled to review the Revised NLF Cash Flow Statement and the calculation of the Adjustment Amount, and BE plc shall, and shall use its reasonable endeavours to procure that the Auditors shall, in each case within 10 Business Days of a request (or, if not possible within this period, as soon as reasonably practicable thereafter), give all such information and explanations as NLF may reasonably request in connection with the same, including the provision if required of the working papers relating to the basis of preparation of either or both of the Revised NLF Cash Flow Statement and the calculation of the Adjustment Amount.

6.8 If NLF disagrees with the Adjustment Amount or any matters set out in the Revised NLF Cash Flow Statement it must notify BE plc in writing of such disagreement within two months of receipt of the Revised NLF Cash Flow Statement or, if later, of the receipt of the information and explanations referred to in clause 6.7 (the “Revised Cash Flow Notification Period”). If NLF:

(A) does not notify BE plc in writing within the Revised Cash Flow Notification Period, then NLF shall be deemed to have accepted the Revised NLF Cash Flow Statement and the Adjustment Amount which shall, for the purposes of this Agreement, be conclusive, final and binding save in the event of manifest or proven error; or

(B) notifies BE plc within the Revised Cash Flow Notification Period, such notification will constitute a Notice of Dispute and the matter shall be referred for Expert Resolution (save where such Dispute is resolved by agreement within the Initial Resolution Period).

7. NLF CASH FLOW STATEMENTS

Preparation and form of NLF Cash Flow Statements

7.1 Subject to clause 7.4, the NLF Cash Flow Statement for each Financial Period shall be prepared by BE plc in conjunction with the preparation of the cash flow statement for the Accounts for that Financial Period.

18

7.2 Each NLF Cash Flow Statement shall be in the same or in substantially similar form to that set out in Schedule 4 (Form of NLF Cash Flow Statement) and BE plc shall ensure that:

(A) the NLF Cash Flow Statement presents, as a separate note, an analysis of the movements on available Cash within the Group which is invested in accordance with clause 8.2 and cash applied to the Agreed Collateral Purposes (both above and below the Target Amount), the Collateral Amount and the Forecast Expenditure Reserve for the Financial Period to which it relates; and

(B) the Accounts present, as a separate note, an analysis of the movements on available Cash within the Group which is invested in accordance with clause 8.2 and cash applied to the Agreed Collateral Purposes both above and below the Target Amount and the Collateral Amount for the Financial Period to which it relates.

7.3 The Adjusted Net Cash Flow of the Group for any Financial Period (the “Relevant Period”) shall be the amount reported by the Auditors to BE plc, the Secretary of State and NLF, on the basis of the NLF Cash Flow Statement for the Relevant Period, to be the aggregate of the items set out in Schedule 4 (Form of NLF Cash Flow Statement).

7.4 BE plc shall complete the NLF Cash Flow Statement (comprising the Adjusted Net Cash Flow) for each Financial Period not later than 5 Business Days after the date of publication of the Accounts for that Financial Period and shall procure that not later than 5 Business Days thereafter the NLF Cash Flow Statement shall be reported on by the Auditors and delivered by BE plc to each of the Secretary of State and NLF.

Review and adjustment of NLF Cash Flow Statement

7.5 NLF and its professional advisers shall be entitled to review the NLF Cash Flow Statement (including, without limitation, movements on Cash Reserves, the Collateral Amount and the allocation of amounts to the Forecast Expenditure Reserve) and BE plc shall, and shall use its reasonable endeavours to procure that the Auditors shall, within 10 Business Days of a request (or, if not possible within this period, as soon as reasonably practicable thereafter), provide all such information and explanations as NLF may reasonably request to satisfy NLF (acting reasonably) that the NLF Cash Flow Statement (including, without limitation, movements on Cash Reserves, the Collateral Amount and the allocation of amounts to the Forecast Expenditure Reserve) is correct in accordance with the terms of this Agreement. Such information may include the working papers relating to the basis of preparation of the relevant NLF Cash Flow Statement.

7.6 If NLF disagrees with any matters set out in the NLF Cash Flow Statement (including, without limitation, the allocation of amounts to the Forecast Expenditure Reserve) then NLF must notify BE plc in writing of such disagreement within two months of receipt of the NLF Cash Flow Statement or, if later, of the receipt of the information and explanations referred to in clause 7.5 (the “Cash Flow Notification Period”), provided that NLF shall not be entitled to disagree with any amount allocated to the Forecast Expenditure Reserve on the basis of a disagreement as to a decision or judgement of the Board made in good faith pursuant to clause 10.1(B). If NLF:

(A) does not notify BE plc in writing within the Cash Flow Notification Period, then NLF shall be deemed to have accepted the NLF Cash Flow Statement which shall, for the purposes of this Agreement, be conclusive, final and binding save in the event of manifest or proven error; or

19

(B) notifies BE plc in writing within the Cash Flow Notification Period, such notification will constitute a Notice of Dispute and the matter shall be referred for Expert Resolution (save where such Dispute is resolved by agreement within the Initial Resolution Period).

7.7 If an NLF Cash Flow Statement is adjusted pursuant to clause 7.6 (whether as a result of rectification of a misallocation of amounts to the Forecast Expenditure Reserve in breach of clause 10 (Forecast Expenditure Reserve) or otherwise) an additional payment shall be made by BE plc (or its Nominee) in accordance with clause 6.4.

8. CASH RESERVES

8.1 The Cash Reserves may only be:

(A) applied to the Agreed Collateral Purposes in accordance with the Trading Policies;

(B) applied in the manner specified in any of paragraphs 2(B)(ii) to (iv) inclusive of Schedule 3 (Covenants); or

(C) invested in accordance with clause 8.2.

Investment Policy

8.2 Cash comprised in the Cash Reserves may only be invested by the Group:

(A) in accordance with the Group’s treasury policy on investments in effect at the Restructuring Date with such modifications as the Board, acting reasonably and prudently and with the purpose of optimising returns consistent with maintenance of the principal amount of the Group’s Cash Reserves, may subsequently adopt from time to time (the “Investment Policy”); and

(B) subject to the prior written consent of the Secretary of State, in investments falling outside the Investment Policy,

Reporting

8.3 BE plc shall provide NLF and the Secretary of State, within 10 Business Days following the end of each quarter of each Financial Period, with a written summary (in such form as NLF may reasonably request) of the Cash Reserves investments as at the end of the last Business Day of that quarter, and such other information as either or both of NLF and the Secretary of State may reasonably request relating thereto.

20

9. TARGET AMOUNT

Target amount and right of reduction

9.1 The Target Amount at the Restructuring Date shall be £490 million plus the Incremental Collateral Amount at that date. BE plc may at any time after the Restructuring Date by notice to the Secretary of State and NLF:

(A) subject to clause 9.2, reduce the Target Amount to less than £490 million plus the Incremental Collateral Amount or to zero; or

(B) increase the Target Amount to an amount not more than £490 million plus the Incremental Collateral Amount.

The right to reduce or increase the Target Amount pursuant to this clause 9.1 shall be available to BE plc from time to time and is not restricted to a single exercise of such right. Any increase or decrease in the Incremental Collateral Amount shall automatically increase or decrease the Target Amount by the same amount.

9.2 BE plc shall only be permitted to reduce the Target Amount:

(A) if the Group achieves an Investment Grade Rating; or

(B) to the extent Committed Facilities raised by BE plc are available for, and are intended and expected by the Board to be used or maintained for, the same purposes for which the Cash Reserves may be applied.

The Target Amount may also be changed pursuant to a review under clause 13 (Contract Review).

9.3 If the Group achieves an Investment Grade Rating and BE plc reduces the Target Amount pursuant to clause 9.2(A), the Target Amount shall be automatically and immediately increased by the amount of such reduction if the Group ceases to have an Investment Grade Rating.

9.4 If BE plc wishes to reduce the Target Amount pursuant to clause 9.2(B), such reduction shall not be effective at any time during which any of the New Bonds are in issue and have not been redeemed or repaid if and to the extent that the availability of, or drawdown under, those Committed Facilities, breaches condition 8.1 (Limitation on Financial Indebtedness) of the terms and conditions of the New Bonds.

Restrictions relating to Target Amount reduction

9.5 If at any time the Target Amount is reduced in reliance on the Group having achieved an Investment Grade Rating, BE plc shall not (nor shall it allow any member of the Group to):

(A) announce or pay any Cash Distribution;

(B) make any Capital Distribution; or

21

(C) make or make any legally binding commitment to make any acquisition of any undertaking or participating interest in an undertaking,

if it (or any member of the Group) knows or has reasonable grounds to believe (whether as a result of the relevant rating agency’s guidance and conditions to grant of the Investment Grade Rating or otherwise) that (i) the announcement or payment of the Cash Distribution, (ii) the making of the Capital Distribution or (iii) making or making a legally binding commitment to make such an acquisition would or would be likely to result in the loss of such Investment Grade Rating, save to the extent such Cash Distribution or Capital Distribution or acquisition would not reduce the aggregate (as at the end of the then current Financial Period) of:

(i) the Cash Reserves; and

(ii) any Committed Facilities which are available for, and intended and expected by the Board to be used or maintained for, the same purposes for which the Cash Reserves may be applied,

below the Target Amount as at the end of the then current Financial Period. If required to do so by NLF, BE plc shall seek from the relevant rating agency or agencies appropriate guidance as to whether or not the announcement or payment of any such Cash Distribution or the making of any Capital Distribution or acquisition would or would be likely to result in the loss of the Investment Grade Rating.

Increase of Target Amount

9.6 If any member of the Group raises Committed Facilities and reduces the Target Amount pursuant to clause 9.2(B), the Target Amount shall be automatically and immediately increased if and to the extent that:

(A) such Committed Facilities cease to be available for, or the Board no longer intends or expects such Committed Facilities to be available for, the purposes for which the Cash Reserves may be applied;

(B) a member of the Group repays (whether upon maturity or by way of early repayment) or cancels some or all of such Committed Facilities; or

(C) a member of the Group for whatever reason is unable to draw down, or is required to repay by reason of a default, some or all of such Committed Facilities.

10. FORECAST EXPENDITURE RESERVE

Permitted allocations

10.1 If and to the extent that available Cash within the Group exceeds the Target Amount as at the end of a Financial Period, within 10 Business Days after the end of that Financial Period, BE plc may by notice to the Secretary of State and NLF allocate some or all of such excess Cash to an additional notional reserve (the “Forecast Expenditure Reserve”) for the following purposes:

(A) to meet capital expenditure commitments and any non-recurring maintenance and repair of a capital nature incurred by any member of the Group in that Financial Period which is due and payable in the following Financial Period;

22

(B) to fund capital expenditure (as determined in accordance with the accounting standards and policies used in the preparation of the Accounts) on an acquisition or financing of a specifically identified fixed asset, undertaking or shares in a company by any member of the Group, where:

(i) the amount to be reserved will be the amount BE plc reasonably expects the Group to fund from Cash and not from borrowings or other third party funds;

(ii) the Board of BE plc (as certified in writing by its secretary or an executive director) has:

(a) approved the acquisition or financing in principle, including the approval of an appropriately detailed financing plan for funding the acquisition or financing, and

(b) has reasonable grounds for believing that the acquisition or financing has a reasonable prospect of completing in a specified Financial Period; and

(C) to reserve funds to the extent they are raised for the general purpose of carrying on the business of the Group through the issue by BE plc or any other member of the Group of securities (of any kind) listed on a Recognised Investment Exchange (within the meaning of section 285 of the Financial Services and Markets Act 2000),

provided that BE plc shall only be entitled to allocate Cash to the Forecast Expenditure Reserve for transactions falling under paragraphs (A) and (B) above if and to the extent that the aggregate of BE plc’s potential commitments and costs in relation to such transactions exceeds the aggregate amount of Cash which under paragraph (C) above has been allocated to, and remains standing to the credit of, the Forecast Expenditure Reserve.

Other allocations

10.2 BE plc may not allocate Cash to the Forecast Expenditure Reserve for a purpose other than those specified in clause 10.1 without obtaining the prior written consent of NLF. NLF shall be under no obligation to give such consent but may, in its sole discretion and on such terms as it sees fit, agree that Cash may be allocated for the purpose or purposes specified by BE plc.

Accounting treatment

10.3 Save for any amounts re-allocated to the Forecast Expenditure Reserve pursuant to clause 10.4, the expenditure in any Financial Period of Cash allocated to the Forecast Expenditure Reserve together with the amount standing to the credit of the Forecast Expenditure Reserve at the end of such Financial Period shall be deemed to be a Cash receipt for the purposes of calculating the Adjusted Net Cash Flow for that Financial Period.

23

Re-allocations

10.4 BE plc may, within 10 Business Days after the end of a Financial Period, by notice in writing to the Secretary of State and NLF, re-allocate to the Forecast Expenditure Reserve amounts standing to the credit of the Forecast Expenditure Reserve at the end of that Financial Period for the following Financial Period, provided that:

(A) such amounts are re-allocated for the purpose of any acquisition or financing of the type referred to in clause 10.1(B) or are funds of the type referred to in clause 10.1(C); and

(B) in the case of amounts re-allocated for an acquisition or financing of the type referred to in clause 10.1(B), the Secretary of State and NLF have received, prior to such re-allocation, confirmation (as certified in writing by the secretary or an executive director of BE plc) that BE plc continues to approve such purpose and has reasonable grounds for believing that the acquisition or financing has a reasonable prospect of completing in the specified Financial Period.

11. NLF CONVERSION RIGHTS

NLF Conversion Rights

11.1 Subject to the following provisions of this clause 11 (NLF Conversion Rights), NLF may, from time to time, by notice in writing to BE plc, notify BE plc that it intends to convert all or part of the right to receive the NLF Payments from BE plc into a number of shares (“Conversion Shares”) to be calculated in accordance with clause 11.6 (a “Conversion”).

Restrictions on exercise

11.2 NLF may not exercise its NLF Conversion Rights or dispose of any Conversion Shares resulting from such exercise if such exercise or disposal will require BE plc to have produced listing particulars or a prospectus more than five times in any consecutive period of 7.5 years. If NLF gives a notice to BE plc under clause 11.1 or notifies BE plc of its intention to dispose of any or all of its Conversion Shares in either case within the three month period immediately following NLF becoming aware of a breach by a member of the Group of any of the covenants contained in Schedule 3 (Covenants), the exercise of the NLF Conversion Rights or the disposal of the corresponding Conversion Shares pursuant to such notice shall not be taken into consideration for the purposes of the limitation contained in this clause 11.2, provided that NLF has promptly given notice to BE plc upon becoming aware of such a breach.

24

Conversion Shares; Voting limitations

11.3 Subject to the remaining provisions of this clause 11 (NLF Conversion Rights), any Conversion Shares required to be issued pursuant to a Conversion, will be issued by BE plc to NLF (or its nominee) as a class of convertible ordinary shares which will be credited as fully paid and will rank pari passu in all respects with Ordinary Shares in issue on the date of the Conversion, except that any such Conversion Shares may only be voted as to the lesser of:

(A) the maximum percentage of voting rights attributable to the share capital of BE plc which are exercisable at a general meeting of BE plc which may, from time to time, be held without triggering a mandatory offer for BE plc under the City Code on Takeovers and Mergers (being, as at the Restructuring Date, 29.9 per cent. and, for this purpose, taking into account the voting rights attributable to any other Ordinary Shares held or acquired by any person acting in concert with the NLF); and

(B) the number of Conversion Shares which NLF would otherwise be entitled to vote if the Conversion Shares were Ordinary Shares.

Notwithstanding the foregoing, the restrictions on voting the Conversion Shares detailed in this clause 11.3 shall not apply to any resolution:

(i) for the winding up of BE plc; or

(ii) to modify, vary or abrogate the rights attaching to the Ordinary Shares or any class of shares held by NLF.

11.4 Conversion Shares shall automatically be converted into Ordinary Shares on a transfer of those Conversion Shares by NLF (or its nominee) to a third party (except transfer to NLF’s permitted assignees and successors in title under clause 22.8). Neither the NLF nor, if applicable, its nominee may otherwise convert any Conversion Shares into Ordinary Shares.

Issue of Conversion Shares

11.5 Subject to clause 11.7, BE plc will, at NLF’s election, issue the Conversion Shares to NLF or its nominee:

(A) within five Business Days of the notice of the Conversion being given pursuant to clause 11.1; or

(B) on the Business Day immediately preceding the date on which the Conversion Shares are to be disposed of pursuant to clause 11.8.

25

11.6 Subject to clause 11.7, the number of Conversion Shares to be issued on a Conversion shall be:

N = (P × E)	(	A	)
		1 – A

where:

N is the number of shares to be issued (rounded up to the nearest integer);

P is the proportion of the NLF Conversion Right being exercised (expressed as a decimal);

A is the NLF Payment Percentage as at the Conversion Date (expressed as a decimal); and

E is the number of Ordinary Shares in issue as at the Conversion Date (excluding any Ordinary Shares held by BE plc as Treasury Shares).

Exercise Mechanism

11.7 If a Conversion cannot be lawfully effected as a conversion into shares (whether because any necessary report cannot be obtained under section 103 of the Companies Act 1985 or otherwise), BE plc shall use all reasonable endeavours to procure that the Conversion is effected by other means agreed with NLF, whether by the issuance of different classes of shares, shares of different nominal value or otherwise.

Disposals

11.8 Except pursuant to a general offer or partial offer, open to all shareholders, for the acquisition of all or not less than 14.9 per cent. of the ordinary share capital of BE plc, if NLF intends to dispose of any interest in any Conversion Shares which will, when converted into Ordinary Shares, constitute more than 10 per cent. of BE plc’s issued share capital, NLF may not do so until the earlier of:

(A) three months (or such shorter period as BE plc may from time to time permit) after notice of such intended disposal has been given to BE plc by NLF; and

(B) the admission to the Official List of the UKLA and to trading on the London Stock Exchange of the Ordinary Shares which will result from the disposal by the NLF of its interest in the relevant Conversion Shares.

If NLF intends to dispose of any interest in any Conversion Shares which will, when converted into Ordinary Shares, constitute more than 3 per cent. but less than 10 per cent. of BE plc’s issued share capital, NLF shall only do so following prior reasonable consultation with BE plc as to the timing and manner of such proposed disposal. If, following a Conversion, an intended disposal under this clause 11.8 is not effected within the earlier of the dates notified by NLF to BE plc under paragraphs (A) and (B) and no Conversion Shares have been issued to NLF or its nominee pursuant to clause 11.5, NLF may elect to revoke its notice of Conversion and NLF shall remain entitled to the NLF Payments which would otherwise have become due and payable but for the exercise of the NLF Conversion Rights.

26

11.9 BE plc undertakes that, if NLF from time to time wishes to offer (whether by way of a public offer, private placing or otherwise, and whether to persons located in the United Kingdom and/or in any other jurisdiction) some or all of the Conversion Shares (a “Share Offering”), upon receipt of a notice from NLF that it wishes to make such an offer BE plc shall and, if applicable, shall procure that each member of the Group shall:

(A) make available to NLF, with respect to any investor presentations or similar exercises conducted by or on behalf of NLF in connection with a Share Offering, such directors and senior management of the Group as NLF may reasonably request, provided that BE plc shall be under no obligation to comply with this paragraph (A) in respect of any offer of shares constituting less that 10 per cent. of BE plc’s issued share capital;

(B) give prior written notification to NLF and the Secretary of State of any proposed offer by or on behalf of any member of the Group within the following 6 months (whether by way of a public offer, private placing or otherwise, and whether to persons located in the United Kingdom and/or in any other jurisdiction) of securities issued or to be issued by BE plc or any other member of the Group and, in connection with such proposed offer, consult with NLF with a view to ensuring that:

(i) any prospectus, listing particulars or other marketing document required by, or to be produced in connection with, such offer are consistent with any prospectus, listing particulars or other marketing document produced, or to be produced in connection with, a Share Offering; and

(ii) duplication of process and costs and expenses are, as far as practicable, eliminated or reduced; and

(C) take all such steps and do all such other things as NLF may reasonably request in connection with the registration with the US Securities and Exchange Commission of some or all of any shares to be offered pursuant to any Share Offering, provided that BE plc shall be under no obligation to comply with this paragraph (C) if, at the scheduled date of such Share Offering, the registration of Ordinary Shares and any other equity Securities with the US Securities and Exchange Commission will have ceased wholly or in all material respects.

Reimbursement of expenses

11.10 NLF shall pay BE plc any reasonable out of pocket costs and expenses incurred by any member of the Group in complying with that member’s obligations under clause 11.9 and in preparing any listing particulars required to be prepared pursuant to the exercise of the NLF Conversion Rights or the conversion of Conversion Shares into Ordinary Shares. To the extent that any such costs and expenses would have been incurred by the Group in the absence of any such Share Offering the amount of such costs and expenses shall be agreed by NLF and BE plc acting in good faith and shall be borne by BE plc.

11.11 If during the term of this Agreement any member of the Group in connection with an offer referred to in clause 11.9(B) incurs lower costs and expenses than it would otherwise have done as a result of a Share Offering being proposed or made (whether as a result of the production by or on behalf of NLF of a prospectus, other marketing document or otherwise), the amount of such reduction shall be agreed by NLF and BE plc acting in good faith as soon as practicable and BE plc shall pay NLF (within three Business Days of such agreement) an amount equal to half such reduction.

27

11.12 If NLF and BE plc are unable to reach agreement as to the amount of any reduction pursuant to clause 11.11 or costs and expenses pursuant to clause 11.10 within 30 Business Days of the disagreement being notified by the party or parties in disagreement to the other party, any matter in dispute shall be referred for Expert Resolution.

12. COVENANTS

12.1 At all times prior to NLF’s right to receive NLF Payments being satisfied in full by exercise of the NLF Conversion Rights, BE plc shall comply with the covenants set out in paragraph 1 of Schedule 3 (Covenants).

12.2 Each BE Party shall comply with the covenants set out in paragraph 2 of Schedule 3 (Covenants) at all times during which a BE Party owns any Power Station which has not Closed.

13. CONTRACT REVIEW

Following the second anniversary of the Restructuring Date, each of the parties shall review how this Agreement has operated in practice. Each of them shall use its reasonable endeavours to complete its review within three months of the second anniversary of the Restructuring Date and shall, in the conduct of the review:

(A) submit a paper to the other parties detailing the implementation of this Agreement in the period since the Restructuring Date and any proposals for improving the operation of this Agreement; and

(B) shall meet not less than twice to discuss in good faith the papers prepared under this clause 13 (Contract Review) and any proposals for improving the operation of this Agreement.

In addition, and without prejudice to the preceding provisions of this clause 13 (Contract Review), at any time after four Power Stations have ceased operating or have been disposed of by the Group and for each Power Station which ceases to operate or is disposed of by the Group thereafter, each party may require a review of the operation of this Agreement for the purposes of determining whether or not a change to the Target Amount is appropriate and, if agreed, the mechanism by which such change should be implemented and the consequential amendments required to this Agreement and any of the other Liabilities Documents.

28

14. ACKNOWLEDGEMENTS

14.1 Notwithstanding any other provision of this Agreement, the parties acknowledge and agree that no BE Party is required, pursuant to this Agreement, to do any act or omit to do any act if:

(A) any Regulator would consider such act or omission unacceptable; or

(B) the act or omission would cause any such BE Party to be in breach of any Applicable Law.

14.2 Except as set out in the Liabilities Documents, no Licensee shall be liable to the Secretary of State or NLF by reason of the Secretary of State or NLF entering into or performing the Liabilities Documents, and all rights of indemnity or subrogation of the Secretary of State or NLF that might otherwise be implied by law as a result of their entering into and/or performing the Liabilities Documents are hereby excluded.

15. SET-OFF AND WITHHOLDING; TAX ADJUSTMENT

15.1 All payments to be made to the Secretary of State or NLF by a BE Party or by the Secretary of State or NLF to a BE Party under this Agreement shall be made in full except to the extent a deduction or withholding is permitted under clause 15.2. All such payments will be free and clear of any right of set-off and from any restriction, condition or deduction because of any counterclaim other than as provided in clause 3.4 and 6.5(D).

15.2 All payments to be made to the Secretary of State or NLF by a BE Party under this Agreement shall be made in full without deduction or withholding of or in respect of any Tax, unless this is required by law. Where such a deduction or withholding is so required, the relevant BE Party shall be permitted to make such deduction or withholding.

15.3 If a BE Party becomes or will become required by law to make any deduction or withholding under clause 15.2 or there is or will be any change in the requirement to make any such deduction or withholding, such BE Party will give notice to NLF of any such requirement or change in requirement as soon as that BE Party becomes aware of it.

15.4 Each BE Party undertakes to NLF and the Secretary of State that neither it nor any other member of the same group of companies as any BE Party for tax purposes will claim any Relief in respect of a Payment or the Issue.

15.5 Each BE Party also undertakes to NLF and the Secretary of State that it will notify NLF and the Secretary of State as soon as possible after it becomes aware that either (i) the Assumption is or is likely to become incorrect or (ii) the undertaking contained in clause 15.4 has been breached.

15.6 If (i) the Assumption is or becomes incorrect and (ii) any BE Party and/or any other company which is a member of the same group of companies for tax purposes as any BE Party obtains any economic benefit as a consequence of any Relief in respect of a Payment or the Issue (including, without limitation, a reduction of any tax liability), BE plc shall make a payment (an “Equalisation Payment”) to NLF. The Equalisation Payment shall be such amount as will ensure that after the payment of such amount to NLF, the Group will be in the same economic position as it would have been in had it not benefited from the Relief in respect of the Payment or Issue, as the case may be, and paid the Equalisation Payment pursuant to this clause 15 (Set-off and Withholding; Tax Adjustment).

29

15.7 Any Equalisation Payment shall be due and payable ten Business Days following the receipt of the economic benefit by the recipient. Without prejudice to the generality of the foregoing, where the benefit is a reduction in a tax liability, such benefit shall be taken for the purposes of this clause 15 (Set-off and Withholding; Tax Adjustment) to have been received by the recipient on the date or dates upon which the recipient’s liability to pay tax or an installment of tax is reduced as a result of such Relief.

15.8 Any dispute arising between the parties regarding the correctness of the Assumption and/or the amount of the Equalisation Payment shall be referred for Expert Resolution.

15.9 For the purposes of this clause 15 (Set-off and Withholding; Tax Adjustment), the “Assumption” means the assumption that the following will not give rise to an allowance, relief or credit in respect of Tax or a deduction in computing income, profits or gains for the purposes of any Tax (a “Relief”):

(A) save for the PWR Fuel Payments, any additional payments made pursuant to clause 4.5 and payments of interest, payments made by a BE Party to NLF pursuant to this Agreement (each a “Payment”) including, without limitation:

(i) the Decommissioning Payments;

(ii) the Accelerated Decommissioning Payment (if any);

(iii) the NLF Payments; and

(iv) the Additional Payment (if any); and

(B) the Issue.

16. INTEREST AND ADJUSTMENT FOR INFLATION

16.1 If a BE Party fails to pay any sum payable by it under this Agreement on the due date for payment, it shall pay interest at the rate of LIBOR plus 2 (two) per cent. on that sum for the period from and including the due date up to (but excluding) the date of actual payment (after as well as before judgment).

16.2 Interest on each sum shall accrue from day to day and shall be compounded on each anniversary of the due date for payment.

16.3 Without limiting clause 21 (Remedies and Waivers), the right to receive interest under this clause 16 (Interest and Adjustment for Inflation) in respect of any unpaid sum is not exclusive of any rights, powers and remedies provided by law in respect of the failure to pay the relevant sum on the due date for payment or at all.

30

16.4 For the purposes of any calculation of interest payable under this Agreement, “LIBOR” shall be deemed to refer to LIBOR prevailing on the due date for payment (the “Due Date”). If the relevant amount remains unpaid on the twentieth Business Day after the Due Date, subsequent interest shall be calculated by reference to the LIBOR prevailing on such date and thereafter LIBOR shall be recalculated on the last Business Day of each subsequent 20 Business Day period until the date of actual payment of the amount due.

16.5 Any amount specified in this Agreement which is expressed to be adjusted for inflation is stated in March 2003 money values (unless expressly stated to the contrary) and shall be adjusted in accordance with the following formula:

Am =	Ao × Rm
	Ro

where:

Am is the relevant amount as adjusted;

Ao is the relevant amount in March 2003 money values;

Ro is the Retail Price Index for the month of March 2003, and is 179.9;

Rm is the Retail Price Index for the month in which (i) payment is due, (ii) the event occurs which gives rise to the relevant amount, or (iii) calculation of the relevant amount is required (in each case the “relevant month”) and shall be estimated as follows if the Retail Price Index is not available:

Rm = Rm-n + n	(	Rm-n –Rm-n-3	)
		3

where:

m is the month for which the index number is to be estimated;

n is the number of months between the relevant month and the month in which the index number has been most recently published;

R_m-n is the Retail Price Index for the month in which the index has been most recently published; and

R_m-n-3 is the Retail Price Index for the month three months prior to Rm-n.

31

17. DEFAULT EVENTS

Capital Contributions and Cash Contributions

17.1 If a BE Party has made any Cash Distribution or Capital Distribution since the immediately preceding NLF Payment Date (other than a final dividend declared in a general meeting) following a Default Event, NLF may, if instructed to do so by the Secretary of State, declare (by written notice to that BE Party) that an amount equal to a proportion (the “Distribution Proportion”) of such Cash Distribution or Capital Distribution (as the case may be) has become owing to NLF with immediate effect. The Distribution Proportion shall be equal to the product of:

(A) the Cash Distribution or Fair Market Value of the Capital Distribution (as the case may be); and

(B) P/(1-P)

where P is the NLF Payment Percentage prevailing at the date of such Cash Distribution or Capital Distribution (as the case may be). The Distribution Proportion shall be payable within 2 Business Days of such notification to, or to the order of, NLF. Any such amount paid to NLF shall be deducted from the next due NLF Payment and, to the extent such amount exceeds that NLF Payment, such excess shall be deducted to the greatest extent possible from subsequent NLF Payments until deducted in full.

Default

17.2 If in any Financial Period (i) a BE Party, (ii) any other member of the Group which is a restricted subsidiary and/or a guarantor in respect of all or any of the New Bonds (where all of any of the New Bonds have not been redeemed or repaid), or (iii) any Guarantor (where all of the New Bonds have been redeemed or repaid), is subject to one of the Default Events NLF may, if instructed to do so by the Secretary of State, declare (by written notice to BE plc) that the Decommissioning Default Payment shall become immediately due and payable. The “Decommissioning Default Payment” for the purposes of this clause 17.2 is an amount equal to the net present value at the time of the Default Event of the aggregate Decommissioning Payments remaining to be paid by BEG and BEG(UK) pursuant to clause 3 (Decommissioning Payments). The “net present value” of those aggregate Decommissioning Payments shall be calculated by BE plc using a discount rate equal to:

(i) 6.8 per cent.;

less

(ii) the average Retail Price Index for the three years prior to the date on which the Default Event occurred

and the resulting Decommissioning Default Payment shall be notified by BE plc to NLF. Any such notification shall be conclusive, final and binding save in the case of manifest or proven error.

32

Review and adjustment of Decommissioning Default Payments

17.3 BE plc shall, as soon as reasonably practicable and in any event within 10 Business Days of the occurrence of a Default Event, provide NLF with evidence (certified in writing by one of its executive directors as being true and complete) necessary to calculate any Decommissioning Default Payment. NLF and its professional advisers shall be entitled to review such evidence and BE plc and its advisers shall, within 10 Business Days of a request (or, if not possible within this period, as soon as reasonably practicable thereafter), give all such information and explanations as NLF may reasonably request in connection therewith.

17.4 If NLF disagrees with any matter set out in the evidence referred to in clause 17.3, it must notify BE plc in writing of such disagreement within two months of the receipt of such evidence (the “Decommissioning Default Payment Notification Period”). If NLF:

(A) does not notify BE plc in writing within the Decommissioning Default Payment Notification Period, NLF shall be deemed to have accepted the stated amount of the Decommissioning Default Payment which shall, for the purposes of this Agreement, be conclusive, final and binding on NLF and the BE Parties save in the event of manifest or proven error; or

(B) does notify BE plc in writing within the Decommissioning Default Payment Notification Period, such notification will constitute a Notice of Dispute and the matter shall be referred for Expert Resolution (save where such Dispute is resolved by agreement within the Initial Resolution Period).

17.5 Any additional payment required to be made by either of the BEG Entities following Expert Resolution shall be made to NLF within five Business Days of such Dispute being resolved. Interest at the rate of LIBOR plus 1 (one) per cent. shall be payable on such additional amount for the period from and including the relevant date on which the Decommissioning Default Payment became due and payable up to (but excluding) the date of actual payment of such additional amount.

17.6 For the purposes of this clause 17 (Default Events) “Default Event” means, in relation to a person:

(A) that person passing a resolution for its winding up (other than in the context of a solvent amalgamation or reconstruction in either case on terms previously approved in writing by NLF or notified in writing to NLF by BE plc prior to the Restructuring Date) or a court of competent jurisdiction making an order for its winding up or dissolution; or

(B) the appointment of an administrative receiver, receiver and manager, receiver or similar official over all or a material part of that person’s assets; or

(C) the appointment of a provisional liquidator or administrator in relation to the person; or

(D) the making of an administration order in relation to that person; or

33

(E) that person convening a meeting for a creditors’ voluntary liquidation, or for a creditors’ meeting following a members’ voluntary liquidation or for the consideration by creditors of a voluntary arrangement or scheme of arrangement (other than in the context of a solvent amalgamation or reconstruction in either case on terms previously approved in writing by NLF or notified in writing to NLF by BE plc prior to the Restructuring Date); or

(F) that person (i) being declared insolvent, being unable (or admitting inability) to pay its debts as they fall due (within the meaning of section 123(1) of the Insolvency Act 1986), (ii) fails within 40 Business Days after being called upon to do so by the NLF, to provide a certificate signed by two of its directors certifying (without personal liability except in the event of fraud or wilful default) that it is not then unable to pay its debts within the meaning of section 123(2) of the Insolvency Act 1986, provided that if the Restructuring Date is on or prior to 31 March 2005, the NLF may not require such a certificate prior to the publication of the Accounts in relation to the Financial Period ending on 31 March 2005 and if the Restructuring Date is after 31 March 2005, the NLF may not require such a certificate prior to the date which is the later of two months following the publication of the Accounts in relation to the Financial Period ending on 31 March 2005 and two months after the Restructuring Date, or (iii) stops, suspends or threatens to stop payment of its debts generally; or

(G) a distress, execution or other process is enforced in respect of that person, or an encumbrancer takes possession of the whole or a substantial part of the undertaking or assets of that person, and, in any such case, the same is not paid out or discharged within 90 days (or such longer period as the NLF permits); or

(H) that person being subject to any proceeding or in a position analogous to that in paragraphs (A) to (G) in its jurisdiction of incorporation.

Winding up

17.7 Subject to clause 17.8, on a winding up of BE plc, BE plc shall, in addition to any amounts due to NLF in respect of New Bonds, Decommissioning Payments, NLF Payments and PWR Fuel Payments, pay an additional amount to NLF equal to the amount NLF would have received on a winding up of BE plc in its capacity as a holder of Conversion Shares if NLF had exercised in full the NLF Conversion Rights and Conversion Shares had been issued to NLF pursuant to such exercise immediately prior to the commencement of the winding up.

17.8 If, on a winding up of BE plc, BE plc has paid the NLF Payments referred to in clause 17.7, following such payment the NLF Payment Percentage shall be subject to adjustment required pursuant to paragraph 2 of Schedule 2 (Calculation of NLF Payment Percentage). Any additional amount which NLF is entitled to receive pursuant to clause 17.7 in its capacity as a holder of Conversion Shares shall then be made by reference to the NLF Payment Percentage after such adjustment is made.

34

18. DISPUTE RESOLUTION

Negotiation

18.1 If a party becomes aware of a disagreement, dispute or controversy (a “Dispute”) arising out of or in connection with this Agreement, including any Dispute regarding the existence, validity or termination of this Agreement, it shall provide the other parties to the Dispute with a notice (a “Notice of Dispute”) including full particulars of the Dispute and any proposal for resolution of the Dispute.

18.2 Upon delivery of a Notice of Dispute, the relevant parties (the “Disputing Parties”) shall promptly meet and in good faith use their reasonable endeavours to resolve that Dispute.

18.3 If the Disputing Parties are unable to reach agreement under clause 18.2 within 20 Business Days of delivery of a Notice of Dispute (the “Initial Resolution Period”), the Dispute shall be referred for resolution:

(A) by an Expert in circumstances in which this Agreement expressly provides for resolution by an Expert or the Dispute relates to clause 11.12, an NLF Cash Flow Statement or the calculation of an NLF Payment, Decommissioning Payment, PWR Fuel Payment, NLF Payment Percentage or Adjustment Amount; and

(B) by arbitration in all other circumstances.

Expert Resolution

18.4 If, pursuant to the terms of this Agreement, a Dispute requires resolution by an Expert, the Disputing Parties shall use their reasonable endeavours to agree upon a firm of accountants to be appointed as Expert to resolve the Dispute.

18.5 If the Disputing Parties do not agree, within 10 Business Days of the expiry of the Initial Resolution Period, upon the Expert to be appointed, the matter shall be referred to the President of the Institute of Chartered Accountants in England and Wales who shall be requested to determine, as soon as practicable after such referral, the identity of the Expert to resolve the Dispute.

18.6 The person appointed pursuant to clause 18.4 or, as the case may be, clause 18.5, shall be an “Expert” for the purposes of this Agreement.

18.7 The procedure to be followed in order to resolve the Dispute shall be decided by the Expert, save that such procedure shall include the taking of submissions from each of the Disputing Parties.

18.8 Each Disputing Party shall provide or procure the provision to the Expert of all such information as the Expert shall reasonably require, including provision of such information by its advisers, and shall give all such assistance to the Expert as the Expert shall reasonably require and as shall be required to allow the Expert to reach a decision as soon as reasonably practicable.

35

18.9 The Expert shall be instructed to make a determination in respect of the Dispute within the shortest practical time from his appointment and to deliver a report to the Disputing Parties stating his opinion as to the matters under dispute.

18.10 Any Expert shall act as an expert and not as an arbitrator.

18.11 The decision of the Expert shall, in the absence of fraud or manifest error, be final and binding on the Disputing Parties.

18.12 The costs of the Expert shall be paid by the parties in dispute equally or as otherwise determined by the Expert.

Arbitration

18.13 If a Dispute arises which is not expressly required by this Agreement to be referred to Expert determination and it is not resolved by the Disputing Parties within the Initial Resolution Period (or such longer period as the parties may mutually agree), the Dispute shall be referred to arbitration in accordance with clause 18.14.

18.14 Any Dispute to be referred to arbitration under this Agreement shall be referred to and finally resolved by arbitration under the Rules of the London Court of International Arbitration, which rules are deemed to be incorporated into this clause 18.14. The tribunal shall consist of one arbitrator. The seat of arbitration shall be London. The language of arbitration shall be English.

Interlocutory relief

8.15 Nothing in this Agreement shall prevent a party from applying to the court for interlocutory relief pending the resolution of a matter in dispute in accordance with the provisions of this Agreement.

Investment Bank

18.16 If, pursuant to this Agreement, a matter requires resolution by an Investment Bank, BE plc and NLF shall use their reasonable endeavours to agree upon the appointment of an investment bank of international repute.

18.17 If BE plc and NLF do not agree on such appointment within 10 Business Days of the matter which requires resolution arising, the matter shall be referred to the City Disputes Panel who shall be requested to determine, as soon as practicable after such referral, the identity of the Investment Bank.

18.18 The person appointed pursuant to clause 18.16 or, as the case may be, clause 18.17, shall be an “Investment Bank” for the purposes of this Agreement.

18.19 Any Investment Bank shall act as an expert and not as an arbitrator.

36

19. LIABILITY

19.1 The obligations of each BE Party under this Agreement are joint and several. If any liability of any of those BE Parties is, or becomes illegal, invalid or unenforceable in any respect, that shall not affect or impair the liabilities of the other under this Agreement.

19.2 Where NLF exercises any discretion granted to it, or makes any decisions or judgment which it is entitled or obliged to make, or complies with its obligations, or otherwise takes any action, in each case, in accordance with, or as contemplated by, this Agreement, NLF may in respect of any such matter:

(A) seek the advice of one or more Advisers on any aspect of such performance; and

(B) rely on the advice received from any such Adviser unless NLF knows (without being obliged to make any further enquiries) such advice is wrong,

and the parties agree and acknowledge that NLF shall not be liable under clauses 3.6, 4.4, 6.8, 7.6, 10.2, 11.1 and 17.4 for any judgment, decision or discretion exercised or taken by it in good faith in reliance on such advice.

20. RELEASE OF BE PARTIES

20.1 NLF or the Secretary of State may release or compromise the liability of any of the BE Parties or grant time or other indulgence to the same under or in connection with this Agreement without releasing or reducing the liability of any other party.

20.2 Where a liability of either of the BE Parties is released or compromised, the others shall continue to be liable in respect of that obligation.

21. REMEDIES AND WAIVERS

21.1 No delay or omission by any party to this Agreement in exercising any right, power or remedy provided by law or under this Agreement or any other documents referred to in it shall affect that right, power or remedy or operate as a waiver thereof.

21.2 The single or partial exercise of any right, power or remedy provided by law or under this Agreement shall not preclude any other or further exercise of such right, power or remedy or the exercise of any other right, power or remedy.

21.3 The rights, powers and remedies provided in this Agreement are cumulative and not exclusive of any rights, powers and remedies provided by law.

22. ASSIGNMENT

Prohibition on Assignment

22.1 Subject to the remaining provisions of this clause 22 (Assignment), no BE Party may at any time:

(A) assign all or any part of the benefit of, or its rights or benefits under, this Agreement; or

37

(B) make a declaration of trust in respect of or enter into any arrangement whereby it agrees to hold in trust for any other person all or any part of the benefit of, or its rights and benefits under, this Agreement; or

(C) sub-contract or enter into any arrangement whereby another person is to perform any or all of its obligations under this Agreement.

Intra-Group Assignment

22.2 Each BE Party may assign and transfer all or any part of its rights, benefits and obligations under this Agreement to a wholly-owned Subsidiary of the Group or to the Ultimate Parent Company if:

(A) the assignee has a Power Station transferred to it by a BEG Entity;

(B) the assignee holds all necessary regulatory consents and approvals for (a) undertaking the Operation of that Power Station and (b) Decommissioning and Discharging Uncontracted Liabilities in relation to that Power Station if the nuclear reactors at the Power Station have permanently ceased generating electricity;

(C) the assignee delivers to NLF and the Secretary of State a duly completed and executed Deed of Adherence;

(D) NLF and the Secretary of State have received all of the documents and other evidence listed in Part 2 of Schedule 6 (Form of Deed of Adherence) in relation to that assignee;

(E) the assignee has entered into a deed of adherence in respect of, and in accordance with the terms of, the NLFA, the Option Agreement and the Historic Liabilities Funding Agreement; and

(F) the assignee has become an Additional Guarantor in accordance with the Guarantee and has delivered all documents in connection therewith.

22.3 The transferring party hereby undertakes to NLF and the Secretary of State to procure that any assignee referred to in clause 22.2 shall hold all the necessary regulatory consents and approvals referred to in clause 22.2(B).

22.4 Each BE Party hereby accepts and agrees that any new party executing a Deed of Adherence shall upon execution of that deed be treated for all purposes as if the new party had executed this Agreement subject only to the provisions of the Deed of Adherence.

38

Assignment to Third Parties

22.5 Each BE Party may assign and transfer all or any part of its rights, benefits and obligations under this Agreement to any person which is not a wholly-owned Subsidiary of the Group or the Ultimate Parent Company. Any such assignment or transfer must be effected pursuant to, and in accordance with, the provisions of clause 33.3 of the NLFA, such provisions to apply mutatis mutandis to an assignment or transfer under this Agreement.

Disclosure of Information

22.6 Each BE Party may disclose to a proposed assignee information in its possession relating to the provisions of this Agreement and the other parties which it is necessary to disclose for the purposes of the proposed assignment, notwithstanding the provisions of clause 26 (Confidentiality). That disclosure shall be made with the prior approval in writing of the other parties where the information is not publicly available.

Successor Government Entity

22.7 The Secretary of State may at any time assign all or any part of the benefit of her rights or benefits under this Agreement and/or any causes of action arising in connection with this Agreement to their successors in title, a Minister of the Crown, the Treasury, a department, non-departmental body or other agency of the Crown, any body corporate established by statute some or all of the members of which are appointed by a Minister of the Crown or other government entity or any person directly or indirectly wholly owned by, or held on trust for, the Secretary of State or other Minister of the Crown.

22.8 The NLF may (subject to receipt of the prior written consent of the Secretary of State) at any time assign all or any part of the benefit of its rights or benefits under this Agreement and/or any causes of action arising in connection with this Agreement to their successors in title, a Minister of the Crown, the Treasury, a department, non-departmental body or other agency of the Crown, any body corporate established by statute some or all of the members of which are appointed by a Minister of the Crown or other government entity or any person directly or indirectly wholly owned by, or held on trust for, the Secretary of State or other Minister of the Crown.

23. ENTIRE AGREEMENT

23.1 This Agreement and the other Liabilities Documents constitute the whole and only agreement between the parties relating to the subject matter of this Agreement and the other Liabilities Documents.

23.2 Each party acknowledges that in entering into this Agreement and the other Liabilities Documents it is not relying upon any pre-contractual statement which is not set out in this Agreement and the other Liabilities Documents.

23.3 Except in the case of fraud, no party shall have any right of action against any other party to this Agreement arising out of or in connection with any pre-contractual statement except to the extent that it is repeated in one or more of the other Liabilities Documents.

39

23.4 For the purposes of this clause 23 (Entire Agreement), “pre-contractual statement” means any draft agreement, undertaking, representation, warranty, promise, assurance or arrangement of any nature whatsoever, whether or not in writing, relating to the subject matter of one or more of the other Liabilities Documents made or given by any person at any time prior to the execution of this Agreement by all parties to it.

24. NOTICES

24.1 A notice under this Agreement shall only be effective if it is in writing. Telexes and e-mail notices are not permitted but faxes are permitted.

24.2 Notices under this Agreement shall be sent to a party at its address or facsimile number and for the attention of the individual set out below:

Party	Address	Facsimile No.	Attention
The Secretary of State	One Victoria Street, London SW1H 0ET	*****	Head of British Energy Team, Energy Group
NLF	78 Hatton Garden London EC1N 8JA	*****	Company Secretary
BEG	c/o The Company Secretary, British Energy Group plc, Systems House, Alba Campus, Livingston EH54 7EG	*****	Company Secretary, British Energy Group plc
BEG(UK)	c/o The Company Secretary, British Energy Group plc, Systems House, Alba Campus, Livingston EH54 7EG	*****	Company Secretary, British Energy Group plc
BE plc	c/o The Company Secretary, British Energy Group plc, Systems House, Alba Campus, Livingston EH54 7EG	*****	Company Secretary, British Energy Group plc
Holdings	c/o The Company Secretary, British Energy Group plc, Systems House, Alba Campus, Livingston EH54 7EG	*****	Company Secretary, British Energy Group plc

40

provided that a party may change its notice details on giving notice to the other parties of the change in accordance with this clause 24 (Notices). That notice shall only be effective on the day falling five clear Business Days after the notification has been received or such later date as may be specified in the notice.

24.3 Any notice given under this Agreement shall, in the absence of earlier receipt, be deemed to have been duly given as follows:

(A) if delivered personally, on delivery;

(B) if sent by first class post from the UK to a UK address, two clear Business Days after the date of posting;

(C) if sent by first class post to an address abroad, five clear Business Days after the date of posting; and

(D) if sent by facsimile, when clearly received in full.

24.4 Any notice given under this Agreement outside Working Hours in the place to which it is addressed shall be deemed not to have been given until the start of the next period of Working Hours in such place.

24.5 The provisions of this clause 24 (Notices) shall not apply in relation to the service of Service Documents.

25. ANNOUNCEMENTS

25.1 Subject to clause 25.2 and 25.3, no announcement concerning the subject matter of this Agreement or any ancillary matter shall be made by any party without the prior written approval of the others, that approval not to be unreasonably withheld or delayed.

25.2 A party may, after consultation with the other parties, make an announcement concerning the subject matter of this Agreement or any ancillary matter if required by:

(A) law; or

(B) any securities exchange or regulatory or governmental body to which that party is subject or submits, wherever situated, including (amongst other bodies) the London Stock Exchange, the UK Listing Authority, the Financial Services Authority or the UK Panel on Takeovers and Mergers, whether or not the requirement has the force of law.

25.3 The Secretary of State may make an announcement to Parliament concerning the subject matter of this Agreement or any ancillary matter if she considers that it is appropriate to do so pursuant to her duty to Parliament, but where reasonably practicable shall consult with BE plc prior to such announcement.

41

25.4 The restrictions contained in this clause 25 (Announcements) shall continue to apply without limit in time.

26. CONFIDENTIALITY

26.1 Each party shall treat as confidential all information obtained as a result of entering into or performing this Agreement which relates to:

(A) the provisions of this Agreement;

(B) the negotiations relating to this Agreement;

(C) the subject matter of this Agreement;

(D) the business and operations, assets, liabilities and financial position of the Group; or

(E) another party.

26.2 Each party shall:

(A) not disclose any such confidential information to any person other than any of its directors or employees or those of any of the Group who needs to know such information in order to discharge his duties; and

(B) procure that any person to whom any such confidential information is disclosed by it complies with the restrictions contained in this clause 26 (Confidentiality) as if such person were a party to this Agreement.

26.3 Notwithstanding the other provisions of this clause 26 (Confidentiality), any party may disclose confidential information:

(A) if and to the extent required by law (including, for the purposes of this clause 26.3(A), applicable accounting standards) or for the purpose of any judicial proceedings;

(B) if and to the extent required by any securities exchange or regulatory or governmental body to which that party is subject or submits, wherever situated, including (amongst other bodies) the UK Listing Authority, the London Stock Exchange, the Financial Services Authority or the UK Panel on Takeovers and Mergers, whether or not the requirement for information has the force of law;

(C) if and to the extent required to vest the full benefit of this Agreement in that party;

(D) if and to the extent required for the purpose of any dispute resolution pursuant to clause 18 (Dispute Resolution);

(E) to its professional advisers, auditors and bankers;

42

(F) if and to the extent the information has come into the public domain through no fault of that party;

(G) to the extent necessary to enable the party to perform its obligations under this Agreement;

(H) if and to the extent the other parties have given prior written consent to the disclosure, such consent not to be unreasonably withheld or delayed;

(I) pursuant to clause 22.6; or

(J) to any of the following:

(i) the Bondholders and the Consenting Bondholders (each as defined in the Creditor Restructuring Agreement);

(ii) Enron Capital and Trade Resources International Corporation, Total Gas & Power Limited and Teesside Power Limited;

(iii) the EPL Lenders (as defined in the Creditor Restructuring Agreement);

and their respective actual or potential transferees, their respective professional advisers, auditors and bankers, and, if and to the extent required by any regulatory body or governmental body to which any of the entities referred to above respectively is subject or submits, whether or not the requirement for information has the force of law.

Any information to be disclosed pursuant to paragraph (A), (B) or (C) shall be disclosed only after notice to the other parties.

26.4 NLF acknowledges that it may receive price-sensitive information pursuant to this Agreement and that the use of such information may be regulated or prohibited by law. NLF shall not unlawfully disclose any such information to another person or otherwise unlawfully make use or take advantage of such information.

26.5 Notwithstanding any other provision of this clause 26 (Confidentiality), the Secretary of State may disclose information to Parliament to the extent that she considers that it is appropriate to do so pursuant to her duty to Parliament but where reasonably practicable shall consult with BE plc prior to such disclosure.

26.6 The restrictions contained in this clause 26 (Confidentiality) shall apply without limit in time.

27. COSTS AND EXPENSES

Except as otherwise agreed in writing or as stated in this Agreement, each party shall pay its own costs and expenses in relation to the negotiation, preparation, execution and carrying into effect of this Agreement and all other documents referred to in it.

43

28. COUNTERPARTS

28.1 This Agreement may be executed in any number of counterparts, and by the parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart.

28.2 Each counterpart shall constitute an original of this Agreement, but all the counterparts shall together constitute one and the same instrument.

29. INVALIDITY

If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, that shall not affect or impair:

(A) the legality, validity or enforceability in that jurisdiction of any other provision of this Agreement; or

(B) the legality, validity or enforceability under the law of any other jurisdiction of that or any other provision of this Agreement.

30. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

The parties to this Agreement do not intend that any term of this Agreement should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Agreement.

31. CHOICE OF GOVERNING LAW

This Agreement is to be governed by and construed in accordance with English law.

32. JURISDICTION

32.1 The courts of England are to have jurisdiction to settle any dispute arising out of or in connection with this Agreement. Any Proceedings may be brought in the English courts.

32.2 Any Proceedings may also be brought in the courts of Scotland.

32.3 Any party may bring Proceedings in any court which has jurisdiction other than by virtue of clause 33 (Agent for Service).

32.4 This clause 32 (Jurisdiction) shall not limit the right of any party to bring Proceedings, to the extent permitted by law, in the courts of more than one jurisdiction at the same time.

32.5 Each party waives (and agrees not to raise) any objection, on the ground of forum non conveniens or on any like ground, to the taking of Proceedings by another party in any court in accordance with this clause 32 (Jurisdiction). Each party also agrees that a judgment against it in Proceedings brought in any jurisdiction in accordance with this clause 32 (Jurisdiction) shall be conclusive and binding upon it and may be enforced in any other jurisdiction.

44

32.6 Each party irrevocably submits and agrees to submit to the jurisdiction of the English courts and of any other court in which Proceedings may be brought in accordance with this clause 32 (Jurisdiction).

32.7 This clause 32 (Jurisdiction) is subject to the provisions of clause 18 (Dispute Resolution).

33. AGENT FOR SERVICE

33.1 Each of BEG(UK), BE plc and Holdings (the “Appointing Parties”) irrevocably appoints BEG to be its agent for the receipt of Service Documents and each agrees that any Service Document may be effectively served on it in connection with Proceedings in England and Wales by service on its agent effected in any manner permitted by the Civil Procedure Rules 1998 (as amended).

33.2 If the agent of the Appointing Parties at any time ceases for any reason to act as such for any of the Appointing Parties, that or those Appointing Parties shall appoint a replacement agent having an address for service in England and Wales and shall notify the other parties of the name and address of the replacement agent. Failing such appointment and notification, the Secretary of State shall be entitled by notice to appoint a replacement agent to act on behalf of the Appointing Parties. The provisions of this clause 33 (Agent for Service) applying to service on an agent apply equally to service on a replacement agent.

33.3 A copy of any Service Document served on an agent of one or both of the Appointing Parties shall be sent by post to the relevant Appointing Party or Parties. Failure or delay in so doing shall not prejudice the effectiveness of service of the Service Document.

33.4 NLF irrevocably appoints PKF of 78 Hatton Garden, London EC1N 8JA (Attn: David Venus) to be its agent for the receipt of Service Documents and agrees that any Service Document may be effectively served on it in connection with Proceedings in England and Wales by service on its agent effected in any manner permitted by the Civil Procedure Rules 1998 (as amended).

33.5 If the agent of NLF at any time ceases for any reason to act as such NLF shall appoint a replacement agent having an address for service in England and Wales and shall notify the other parties of the name and address of the replacement agent. Failing such appointment and notification, BE plc shall be entitled by notice to appoint a replacement agent to act on behalf of NLF. The provisions of this clause 33 (Agent for Service) applying to service on an agent apply equally to service on a replacement agent.

33.6 A copy of any Service Document served on an agent of NLF shall be sent by post to NLF. Failure or delay in so doing shall not prejudice the effectiveness of service of the Service Document.

45

Schedule 1

Power Stations

Part 1: Power Stations

1. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 61 dated on or after 25 March 1996 and known as Dungeness “B” station.

2. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 59 dated on or after 25 March 1996 and known as Hartlepool nuclear power station.

3. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 60 dated on or after 25 March 1996 and known as Heysham 1 station.

4. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 60 dated on or after 25 March 1996 and known as Heysham 2 station.

5. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 62 dated on or after 25 March 1996 and known as Hinkley Point “B” station.

6. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 63 dated on or after 25 March 1996 and known as Sizewell “B” station.

7. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. Sc 11 dated on or after 25 March 1996 and known as Hunterston “B” station.

8. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. Sc 10 dated on or after 25 March 1996 and known as Torness nuclear power station.

Part 2: Scheduled Closure Dates

Station	Scheduled Closure Date
Dungeness B	31 March, 2008
Hartlepool	31 March, 2014
Heysham 1	31 March, 2014
Heysham 2	31 March, 2023
Hinkley Point B	31 March, 2011
Sizewell B	31 March, 2035
Hunterston B	31 March, 2011
Torness	31 March, 2023

47

Schedule 2

Calculation of NLF Payment Percentage

The NLF Payment Percentage will be 65 per cent. as at the Restructuring Date and will be subject to the adjustments detailed in this Schedule 2 (Calculation of NLF Payment Percentage) thereafter.

1. ISSUE OF ORDINARY SHARES

If and wherever BE plc: (i) issues Ordinary Shares or sells Ordinary Shares held as Treasury Shares after the Restructuring Date other than an issue or sale (as the case may be) at less than 95 per cent. of the Current Market Price as at the date of such issue or sale; or (ii) issues Ordinary Shares after the Restructuring Date as a result of the exercise of rights, granted on or after the Restructuring Date, of conversion into, exchange or subscription for, or purchase of, such Ordinary Shares (including Ordinary Shares issued for cash pursuant to rights to subscribe for or purchase such Ordinary Shares under the Warrants (as defined in the Creditors Restructuring Agreement)) (each, a “Share Issue”), the NLF Payment Percentage shall be reduced as follows from the date of the Share Issue:

P	=	x × y
		y + z(1 – x)

where:

P is the new NLF Payment Percentage expressed as a decimal;

x is the NLF Payment Percentage previously in effect expressed as a decimal;

y is the number of Ordinary Shares and Conversion Shares in issue prior to the Share Issue (excluding any Ordinary Shares held by BE plc as Treasury Shares); and

z is the number of Ordinary Shares issued or sold out of treasury by BE plc pursuant to the Share Issue.

2. PAYMENT OF CASH DISTRIBUTIONS AND NLF PAYMENTS

(A) If and whenever BE plc makes any Cash Distribution or an NLF Payment is made the NLF Payment Percentage shall be adjusted on the relevant Record Date for that Cash Distribution or the relevant NLF Payment Date (as the case may be) as follows:

                                  (A × B)/(1 – A)                                    

B /(1 – A) + (((1 – G)/G × C) + ((1 – A)/A × F) – D)/ E

where:

A is the current NLF Payment Percentage expressed as a decimal;

B is the number of Ordinary Shares and Conversion Shares in issue at the relevant Record Date or NLF Payment Date (as the case may be);

C is the NLF Payment, if any;

D is an amount equal to such Cash Distribution, if any;

E is the average of the middle market quotation for an Ordinary Share derived from the Daily Official List of the London Stock Exchange for the 60 days immediately preceding the date of the Cash Distribution or NLF Payment Date;

F is any Additional Payment made pursuant to paragraph 2(B) below; and

G is the Weighted Average Payment Percentage as at the relevant Record Date or NLF Payment Date (as the case may be).

(B) If BE plc makes any Cash Distribution which is more than:

(1 – G)	× C
G

BE plc may elect to make a further payment to the NLF (an “Additional Payment”), at the same time as such Cash Distribution, equal or up to:

(A × D)	– C ×	(	1 – G	×	A	)
(1 – A)			G		1 – A

where A, D and G have the same meanings as in paragraph 2(A) above and C is the NLF Payment (if any) made at the same time as such Cash Distribution, provided that BE plc shall not make any Additional Payment to the extent it reduces the NLF Payment Percentage to less than the NLF Payment Percentage prevailing immediately prior to the Cash Distribution being made.

3. PARTIAL EXERCISE OF NLF CONVERSION RIGHTS

Any partial exercise by NLF of the NLF Conversion Rights shall reduce the NLF Payment Percentage as follows from the date of exercise:

P = B – (A × B)

where:

P is the new NLF Payment Percentage expressed as a percentage;

A is the percentage of the NLF Conversion Rights available to NLF immediately prior to such exercise exercised by NLF expressed as a decimal; and

B is the NLF Payment Percentage in effect immediately prior to such partial exercise expressed as a percentage.

4. FURTHER ADJUSTMENTS TO THE NLF PAYMENT PERCENTAGE

If any of the events described in paragraphs (A) to (G) below (each an “Adjustment Event”) occur the NLF Payment Percentage shall be adjusted. Adjustments will be by reference to C, where C is a nominal “Conversion Factor” per Ordinary Share, being 100 as at the Restructuring Date, as adjusted from time to time pursuant to paragraphs (A) to (G) below.

49

The NLF Payment Percentage immediately following an Adjustment Event shall be equal to:

    N     (expressed as a percentage)

E + N

where:

E is the number of Ordinary Shares and Conversion Shares in issue immediately following the Adjustment Event; and

N is the number of Conversion Shares to be issued to NLF upon exercise in full of the NLF Conversion Rights immediately following the Adjustment Event and is equal to:

Nt × Ct

    C

where:

Nt is the number of Conversion Shares to be issued to NLF upon exercise in full of the NLF Conversion Rights immediately prior to the Adjustment Event;

Ct is the Conversion Factor immediately prior to the Adjustment Event; and

C is the Conversion Factor immediately following the Adjustment Event.

The adjustments to the Conversion Factor described in paragraphs (A) to (G) below will result in adjustments to C (and consequently the NLF Payment Percentage) in accordance with the above.

(A) Capital Distributions

Subject to paragraph (H) below, if and whenever BE plc pays or makes any Capital Distribution to the Ordinary Shareholders, the Conversion Factor shall be adjusted by multiplying the Conversion Factor in force immediately prior to such Capital Distribution by the following fraction:

A –	(	B –	D	)
			Nt
A

50

where:

A is the Current Market Price of one Ordinary Share on the Dealing Day last preceding the date on which the Capital Distribution is publicly announced;

B is the Fair Market Value on the date of such announcement of the portion of the Capital Distribution attributable to one Ordinary Share; and

D is the amount of any payment notified and paid to NLF by BE plc prior to or at the same time as such Capital Distribution (where does not exceed B).

Any payments referred to in D above shall be at the discretion of BE plc, shall be made in addition to any other payment obligations of any member of the Group under this Agreement and must not result in a reduction to the NLF Payment Percentage below the NLF Payment Percentage prevailing immediately prior to such Capital Distribution. Any adjustment to the NLF Payment Percentage as a result of such payment shall become effective on the Record Date of the Capital Distribution to which it relates is made.

(B) Issue by Way of Rights

If and whenever BE plc issues Ordinary Shares to Ordinary Shareholders as a class by way of rights, or grants to Ordinary Shareholders as a class by way of rights, options, warrants or other rights to subscribe for or purchase any Ordinary Shares, in each case at a price per Ordinary Share which is less than 95 per cent. of the Current Market Price per Ordinary Share on the Dealing Day last preceding the date of the announcement of the terms of the issue or grant of such Ordinary Shares, options, warrants or other rights, the Conversion Factor shall be adjusted by multiplying the Conversion Factor in force immediately prior to such issue or grant by the following fraction:

A + B

A + C

where:

A is the number of Ordinary Shares and Conversion Shares in issue immediately before such announcement;

B is the number of Ordinary Shares which the aggregate consideration (if any) payable for the Ordinary Shares issued by way of rights, or for the options or warrants or other rights issued by way of rights and for the total number of Ordinary Shares comprised therein would purchase at such Current Market Price per Ordinary Share; and

C is the number of Ordinary Shares issued or, as the case may be, comprised in the issue or grant.

51

Such adjustment shall become effective on the first date on which the Ordinary Shares are traded ex-rights, ex-options or ex-warrants on the London Stock Exchange.

(C) Issue of Securities

Subject to paragraph (H) below, if and whenever BE plc issues any Securities (other than Ordinary Shares or options, warrants or other rights to subscribe for or purchase any Ordinary Shares) to Ordinary Shareholders as a class by way of rights or grants to Ordinary Shareholders as a class by way of rights any options, warrants or other rights to subscribe for or purchase any Securities (other than Ordinary Shares or options, warrants or other rights to subscribe for or purchase any Ordinary Shares), the Conversion Factor shall be adjusted by multiplying the Conversion Factor in force immediately prior to such issue or grant by the following fraction:

A –	(	B –	D	)
			Nt
A

where:

A is the Current Market Price of one Ordinary Share on the Dealing Day immediately preceding the date on which the terms of such issue or grant are publicly announced;

B is the Fair Market Value on the date of such announcement of the portion of the rights attributable to one Ordinary Share; and

D is the amount of any payment notified and paid to NLF by BE plc prior to or at the same time as such issue of Securities (where does not exceed B).

Any payments referred to in D above shall be at the discretion of BE plc, shall be made in addition to any other payment obligations of any member of the Group under this Agreement and must not result in a reduction to the NLF Payment Percentage below the NLF Payment Percentage prevailing immediately prior to such issue of Securities. Any adjustment to the NLF Payment Percentage as a result of such payment shall become effective on the first date on which the Ordinary Shares are traded ex-rights, ex-options or ex-warrants on the London Stock Exchange.

(D) Issue of Ordinary Shares

If and whenever BE plc (i) issues (otherwise than as mentioned in paragraph (B) above) wholly for cash any Ordinary Shares (other than Conversion Shares issued on the exercise of the NLF Conversion Rights or on the exercise of the Warrants (as defined in the Creditors Restructuring Agreement) or of any other rights of conversion into, or exchange or subscription for, or purchase of, Ordinary Shares), or (ii) grants (otherwise than as mentioned in paragraph (B) above) wholly for cash any options, warrants or other rights to subscribe for or purchase any Ordinary Shares, or sell any Ordinary Shares previously held as Treasury Shares wholly for cash in each case at a price per Ordinary Share in respect of which the aggregate consideration receivable (whether at the time of grant or upon exercise of the rights to subscribe for or purchase such Ordinary Shares) is less than 95 per cent. of the Current Market Price per Ordinary Share on the Dealing Day last preceding the date of announcement of the terms of such issue or grant, the Conversion Factor shall be adjusted by multiplying the Conversion Factor in force immediately prior to such issue or grant by the following fraction:

A + B

A + C

52

where:

A is the number of Ordinary Shares and Conversion Shares in issue immediately before the issue of such additional Ordinary Shares or the grant of such options, warrants or rights or the sale of such Treasury Shares;

B is the number of Ordinary Shares which the aggregate consideration (if any) receivable for the issue of such Ordinary Shares or, as the case may be, for the Ordinary Shares to be issued or otherwise made available upon the exercise of any such options, warrants or rights would purchase at such Current Market Price per Ordinary Share; and

C is the maximum number of Ordinary Shares to be issued pursuant to such issue of such additional Ordinary Shares or upon exercise of such options, warrants or rights or to be sold pursuant to the sale of the Treasury Shares.

Such adjustment shall become effective on the Record Date for such issue of additional Ordinary Shares or, as the case may be, the grant of such options, warrants or rights.

(E) Issue of Convertible Securities

If and whenever BE plc or any Subsidiary or (at the direction or request of or pursuant to any arrangements with BE plc or any Subsidiary) any other company, person or entity issues wholly for cash (otherwise than as mentioned in paragraphs (B), (C) or (D) above) any Securities (other than the New Bonds or the Conversion Shares) which by their terms of issue carry rights of conversion into, or exchange or subscription for, or purchase of, Ordinary Shares issued or to be issued by BE plc (or shall grant any such rights in respect of existing Securities so issued) or carry rights which may entitle such Securities to be redesignated as Ordinary Shares (other than the Conversion Shares), and the consideration per Ordinary Share receivable upon conversion, exchange, subscription or redesignation is less than 95 per cent. of the Current Market Price per Ordinary Share on the Dealing Day last preceding the date of announcement of the terms of issue of such Securities (or the terms of such grant), the Conversion Factor shall be adjusted by multiplying the Conversion Factor in force immediately prior to such issue (or grant) by the following fraction:

A + B

A + C

53

where:

A is the number of Ordinary Shares and Conversion Shares in issue immediately before such issue or grant;

B is the number of Ordinary Shares which the aggregate consideration (if any) receivable for the Ordinary Shares to be issued upon conversion or exchange or upon exercise of the right of subscription or purchase attached to such Securities or, as the case may be, for the Ordinary Shares to be issued or to arise from any such redesignation would purchase at such Current Market Price per Ordinary Share; and

C is the maximum number of Ordinary Shares to be issued upon conversion or exchange of such Securities or upon the exercise of such rights of subscription or purchase attached thereto at the initial conversion, exchange, subscription or purchase price or rate or, as the case may be, the maximum number of Ordinary Shares to be issued or to arise from any such redesignation.

Such adjustment shall become effective on the date of issue or grant.

(F) Modification of Rights

If and whenever there shall be any modification of the rights of conversion, exchange, subscription or purchase attaching to any such Securities as are mentioned in paragraph (E) above (other than in accordance with the terms (including terms as to adjustment) applicable to such Securities) so that following such modification the consideration per Ordinary Share receivable upon conversion, exchange, subscription or purchase is less than 95 per cent. of the Current Market Price per Ordinary Share on the Dealing Day last preceding the date of announcement of the proposals for such modification, the Conversion Factor shall be adjusted by multiplying the Conversion Factor in force immediately prior to such modification by the following fraction:

A + B

A + C

where:

A is the number of Ordinary Shares and Conversion Shares in issue immediately before such modification;

B is the number of Ordinary Shares which the aggregate consideration (if any) receivable by BE plc for the Ordinary Shares to be issued upon conversion or exchange or upon exercise of the right of subscription or purchase attached to such Securities, in each case as so modified, would purchase at such Current Market Price per Ordinary Share or, if lower, the existing conversion, exchange, subscription or purchase price of such Securities; and

54

C is the maximum number of Ordinary Shares to be issued upon conversion or exchange of such Securities or upon the exercise of such rights of subscription or purchase attached thereto at the modified conversion, exchange, subscription or purchase price or rate but giving credit in such manner as an independent investment bank of international repute, selected by BE plc and approved in writing by NLF, shall, acting as an expert, consider appropriate for any previous adjustment under this paragraph or paragraph (E) above.

Such adjustment shall become effective on the date of modification of the rights of conversion, exchange, subscription or purchase attaching to such Securities.

(G) Offer of Securities

Subject to paragraph (H) below, if and whenever BE plc or any of the Subsidiaries or (at the direction or request of, or pursuant to any arrangements with, BE plc or any of the Subsidiaries) any other company, person or entity shall offer any Securities in connection with which offer Ordinary Shareholders as a class are entitled to participate in arrangements whereby such Securities may be acquired by them (except where the Conversion Factor falls to be adjusted under paragraph (B) (or would fall to be so adjusted if the relevant issue or grant was at a price less than 95 per cent. of the Current Market Price per Ordinary Share on the relevant Dealing Day) or paragraph (C) above) the Conversion Factor shall be adjusted by multiplying the Conversion Factor in force immediately before the making of such offer by the following fraction:

A –	(	B –	D	)
			Nt
A

where:

A	is the Current Market Price of one Ordinary Share on the Dealing Day immediately preceding the date on which the terms of such offer are publicly announced;
B	is the Fair Market Value on the date of such announcement of the portion of the relevant offer attributable to one Ordinary Share; and
D	is the amount of any payment notified and paid to NLF by BE plc prior to or at the same time as such offer of  Securities

(where	D	does not exceed B).
	Nt

Any payments referred to in D above shall be at the discretion of BE plc, shall be made in addition to any other payment obligations of any member of the Group under this Agreement and must not result in a reduction to the NLF Payment Percentage below the NLF Payment Percentage prevailing immediately prior to such offer of Securities.

55

Any adjustment to the NLF Payment Percentage as a result of such payment shall become effective on the first date on which the Ordinary Shares are traded ex-rights on the London Stock Exchange.

(H) Further Adjustments

(i) If either:

(a) any party determines that an adjustment should be made to the NLF Payment Percentage as a result of one or more events or circumstances not referred to in paragraphs (A) to (G) above (even if the relevant event or circumstance is specifically excluded from the operation of paragraphs (A) to (G) above); or

(b) paragraph (A), (C) or (G) would otherwise apply but the value of

(	B  -	D	)	would equal or exceed A,
		Nt

NLF and BE plc shall request the Investment Bank to determine as soon as practicable what adjustment (if any) to the Conversion Factor is fair and reasonable to take account thereof and the date on which such adjustment should take effect.

(ii) Upon such determination such adjustment (if any) shall be made and shall take effect in accordance with such determination, provided that an adjustment shall only be made pursuant to this paragraph (H) if such investment bank is so requested to make such a determination not more than 50 Business Days after the date on which the relevant event or circumstance arises, and provided that where the circumstances giving rise to any adjustment pursuant to this Schedule 2 (Calculation of NLF Payment Percentage) have already resulted or will result in an adjustment to the Conversion Factor or where the circumstances giving rise to any adjustment arise by virtue of any other circumstances which have already given or will give rise to an adjustment to the Conversion Factor, such modification (if any) shall be made to the operation of the provisions of this Schedule 2 (Calculation of NLF Payment Percentage) as may be advised by the Investment Bank to be in their opinion appropriate to give the intended result.

(iii) The fees charged by the Investment Bank for making such a determination shall be shared equally by NLF and BE plc.

5. SUPPLEMENTARY PROVISIONS RELATING TO ADJUSTMENT OF THE CONVERSION FACTOR

(A) Where more than one event which gives or may give rise to an adjustment to the Conversion Factor occurs within such a short period of time that in the opinion of the Investment Bank the foregoing provisions would need to be operated subject to some modification in order to give the intended result, such modification shall be made to the operation of the foregoing provisions as may be advised by such Investment Bank to be in its opinion appropriate in order to give such intended result.

56

(B) No adjustment will be made to the Conversion Factor where Ordinary Shares or other Securities (including rights, warrants and options) are issued, offered, exercised, allotted, appropriated, modified or granted to, or for the benefit of, employees or former employees (including directors holding or formerly holding executive office) of BE plc or any of its Subsidiaries or any associated company or to trustees to be held for the benefit of any such person, in any such case pursuant to any employees’ share scheme (as defined in section 743 Companies Act 1985).

(C) If any doubt shall arise as to the appropriate adjustment to the Conversion Factor, a certificate of the Investment Bank shall be conclusive and binding on all concerned, save in the case of manifest or proven error.

(D) On any adjustment, the resultant Conversion Factor shall be rounded down to two decimal places. Any amount by which the Conversion Factor has been rounded down, shall be carried forward and taken into account in any subsequent adjustment.

6. DEFINITIONS

For the purposes of this Agreement “Current Market Price” means, in respect of an Ordinary Share at a particular date, the average of the bid and offer quotations published in the London Stock Exchange Daily Official List for one Ordinary Share for the five consecutive Dealing Days (in respect of which such quotations are published) ending on the Dealing Day (in respect of which such quotations are published) immediately preceding such date, provided that if at any time during the said five day period the Ordinary Shares shall have been quoted ex-dividend or ex-any other entitlement and during some other part of that period the Ordinary Shares shall have been quoted cum-dividend or cum-any other entitlement then:

(i) if the Ordinary Shares to be delivered do not rank for the dividend or entitlement in question, the quotations on the dates on which the Ordinary Shares shall have been quoted cum-dividend or cum-any other entitlement shall for the purpose of this definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend or other cash entitlement or, as the case may be, the value (as determined by the Investment Bank) of any entitlement or dividend (where that is other than cash) per Ordinary Share (excluding, in the case of a dividend in cash, any associated tax credit and less the tax (if any) falling to be deducted on payment thereof to a resident of the United Kingdom); or

(ii) if the Ordinary Shares to be delivered do rank for the dividend or entitlement in question, the quotations on the dates on which the Ordinary Shares shall have been quoted ex-dividend or ex-any other entitlement shall for the purpose of this definition be deemed to be the amount thereof increased by such similar amount,

57

and provided further that if the Ordinary Shares on each of the said five Dealing Days have been quoted cum-dividend or cum-any other entitlement in respect of a dividend or entitlement which has been declared or announced but the Ordinary Shares to be delivered do not rank for that dividend or entitlement, the quotations on each of such dates shall for the purposes of this definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend or other cash entitlement, or as the case may be, the value (as determined by the Investment Bank) of any entitlement or dividend (where that is other than cash) per Ordinary Share (excluding, in the case of a dividend in cash, any associated tax credit and less the tax (if any) falling to be deducted on payment thereof to a resident of the United Kingdom).

58

Schedule 3

Covenants

1. BE plc covenants to the Secretary of State and NLF that, prior to NLF’s entitlement to NLF Payments being satisfied in full by the exercise of the NLF Conversion Rights, it shall:

(A) not issue any shares other than Ordinary Shares save as contemplated by the terms of the restructuring referred to in the recitals to this Agreement without the prior written consent of NLF;

(B) keep available for issue, free from pre-emptive rights or other similar rights out of its authorised but unissued share capital such number and class of shares as would enable the NLF Conversion Right and all rights of subscription and exchange for and conversion into Ordinary Shares to be satisfied in full;

(C) use all reasonable endeavours to obtain and deliver to NLF any necessary report under section 103 of the Companies Act 1985 upon exercise of the NLF Conversion Rights;

(D) use all reasonable endeavours to procure that any Ordinary Shares to be issued upon, or resulting from conversion of the Conversion Shares (including any shares issued under clause 11.7), are admitted to the Official List of the UKLA and to trading on the London Stock Exchange as soon as reasonably practicable after the date on which NLF notifies BE plc that it intends to dispose of Conversion Shares pursuant to clause 11.8, and in relation to the preparation for such admission, shall consult with NLF and provide such information relating thereto as NLF may reasonably request;

(E) if (i) any offer is made to (a) all (or as nearly as may be practicable all) Ordinary Shareholders or (b) all (or as nearly as may be practicable all) Ordinary Shareholders other than the offeror and/or any associate of the offeror (as defined in section 430E(4) of the Companies Act 1985) to acquire the whole or any part of the issued ordinary share capital of BE plc, or (ii) if any person proposes a scheme with regard to such acquisition, give notice of such offer or scheme to NLF at the same time as any notice thereof is sent to its Ordinary Shareholders (or as soon as practicable thereafter) and use reasonable endeavours to ensure that NLF is given the opportunity of exercising the NLF Conversion Rights prior to expiry of the offer and that the offer extends to the shares issued to NLF upon conversion;

(F) not make any Cash Distribution or Capital Distribution in respect of Ordinary Shares to the extent that the aggregate of the Cash Distributions paid and Capital Distributions made in respect of the Ordinary Shares since the Restructuring Date would exceed the aggregate of A x (1-P) for each Financial Period since the Restructuring Date, where, in respect of each Financial Period:

A is the greater of zero and the Adjusted Net Cash Flow for that Financial Period; and

P is the Weighted Average Payment Percentage for that Financial Period,

unless at or prior to the date on which the Cash Distribution or Capital Distribution is made, an Additional Payment is made to NLF equal or up to:

(A × D)	–   C  ×	(	1 – G	×	A	)
(1 – A)			G		1 – A

as provided for in paragraph 2(B) of Schedule 2 (Calculation of NLF Payment Percentage);

(G) make additional payments to NLF pursuant to Schedule 2 (Calculation of NLF Payment Percentage) and do or desist from doing any other act to the extent necessary to prevent the NLF Payment Percentage exceeding 65 per cent.;

(H) not in any way modify the rights attaching to the Ordinary Shares with respect to voting, dividends or liquidation nor issue any other class of equity share capital carrying any rights which are more favourable than such rights but so that, subject to the other provisions of this Agreement, nothing in this paragraph (H) shall prevent:

(i) any consolidation, reclassification or subdivision of the Ordinary Shares or the conversion of any Ordinary Shares into stock or vice versa; or

(ii) any issue of equity share capital where the issue of such equity share capital results in an appropriate adjustment to the NLF Payment Percentage in accordance with Schedule 2 (Calculation of NLF Payment Percentage);

(I) procure that no Securities (other than Ordinary Shares), whether (i) issued by BE plc or any of its Subsidiaries or procured by BE plc or any of its Subsidiaries to be issued or (ii) issued without rights to convert into or exchange or subscribe for Ordinary Shares, shall subsequently be granted such rights exercisable at a consideration per Ordinary Share which is less than 95 per cent. of the Current Market Price per Ordinary Share at the close of business on the last Dealing Day preceding the date of the announcement of the proposed inclusion of such rights unless the same gives rise to an appropriate adjustment to the NLF Payment Percentage in accordance with Schedule 2 (Calculation of NLF Payment Percentage);

(J) not reduce its issued share capital, or any uncalled liability in respect thereof, or any non-distributable reserves, except:

(i) pursuant to the terms of issue of the relevant share capital;

(ii) by means of a purchase or redemption of share capital to the extent permitted by applicable law;

60

(iii) by way of transfer to reserves as permitted under applicable law;

(iv) as permitted by section 130(2) of the Companies Act; or

(v) where the reduction is permitted by applicable law and results in an appropriate adjustment to the NLF Payment Percentage in accordance with Schedule 2 (Calculation of NLF Payment Percentage); and

(K) provide NLF with sufficient prior written notice of any event or offer effected by or on behalf of BE plc or any member of the Group which affects or is available to Ordinary Shareholders, so as to ensure that NLF has adequate time to consider carefully, and, if it so decides, to exercise the NLF Conversion Rights (whether wholly or in part) in order to participate in, such offer or event.

2. Each BE Party covenants to the Secretary of State and NLF that, for so long as any member of the Group owns and operates any Power Station:

(A) it shall not announce or pay any Cash Distributions or make any Capital Distributions or make or enter into a legally binding commitment to make (or allow any member of the Group to make or enter into a legally binding commitment to make) any acquisitions of any undertaking or participating interest in an undertaking unless:

(i) as at the end of the immediately preceding Financial Period the amount of Cash and Collateral Amounts (each as disclosed in the Accounts in that Financial Period) equalled or exceeded the aggregate of:

(a) the NLF Payment (if any) for such preceding Financial Period;

(b) the amount allocated to the Forecast Expenditure Reserve for the current Financial Period;

(c) the aggregate amount of such Cash Distributions, Capital Distributions and the aggregate consideration for such acquisitions (less any amount allocated to the Forecast Expenditure Reserve in respect of any such acquisitions); and

(d) the Target Amount on the date on which such Cash Distribution is declared, Capital Distribution is made or acquisition (or legally binding commitment to make such acquisition) is made; and

(ii) as at the end of the then current Financial Period the amount of Cash and Collateral Amounts (each to be disclosed in the Accounts in that Financial Period) would or would be likely to equal or exceed the aggregate of:

(a) the aggregate amount of such Cash Distributions, Capital Distributions and the consideration for such acquisitions; and

61

(b) the Target Amount as at the end of the then current Financial Period.

(B) it shall not incur or enter into any legally binding commitment to incur expenditure (and shall procure that no member of the Group shall incur or enter into any legally binding commitment to incur expenditure) for any purpose other than:

(i) the Agreed Collateral Purposes in accordance with, and subject to, the Trading Policies;

(ii) covering lost revenue and costs from outages of generating stations;

(iii) meeting:

(a) working capital requirements (including the provision of collateral for such purposes);

(b) payments or repayments of principal and interest due in respect of outstanding Group Borrowings including, for the avoidance of doubt, any amounts to be paid under a Mandatory Repurchase Offer, as described in the terms applying to the New Bonds; and

(c) operating costs and expenses of the Group; and

(iv) funding expenditure in respect of any or all of the Power Stations and/or Eggborough, the primary purpose of which is any of the following:

(a) maintenance of the Power Stations and/or Eggborough;

(b) non-recurring maintenance of the Power Stations and/or Eggborough;

(c) repair of a capital nature to the Power Stations and/or Eggborough;

(d) enabling aggregate annual output of the Power Stations at a level which is around the highest annual output of the Power Stations in any one of the immediately preceding five Financial Periods (subject to a minimum of 68 TWh), such annual output calculation to be appropriately adjusted as Power Stations are Closed, provided that, without prejudice to the foregoing paragraphs of this paragraph 2(B), this paragraph (d) does not permit capital investment in excess of £20 million per annum (or such higher amount as the Secretary of State may, in her absolute discretion, agree from time to time) where the principal purpose of such capital investment is to enable the extension of the Scheduled Closure Date of one or more of the Power Stations; and/or

62

(e) enabling output at Eggborough at a level which is consistent with historical performance levels.

(any such expenditure incurred or to be incurred for purposes other than those set out in paragraph (i), (ii), (iii) or (iv) above being “Restricted Expenditure”) unless either:

(i) (a) as at the end of the immediately preceding Financial Period the amount of Cash and Collateral Amounts disclosed in the Accounts equalled or exceeded the aggregate of:

(1) the NLF Payment (if any) for such preceding Financial Period;

(2) the amount allocated to the Forecast Expenditure Reserve for the current Financial Period; and

(3) the Target Amount applying on the date on which the proposed expenditure is to be incurred (or the legally binding commitment to incur such expenditure is made); and

(b) as at the end of the then current Financial Period the amount of Cash and Collateral Amounts (each to be disclosed in the Accounts in that Financial Period) would or would be likely to equal or exceed the aggregate of:

(1) the amount of Restricted Expenditure incurred or to be incurred in the then current Financial Period; and

(2) the Target Amount as at the end of the then current Financial Period; or

(ii) the Restricted Expenditure is already provided for in the Forecast Expenditure Reserve;

(C) it shall not use, and shall procure that no member of the Group shall use, amounts allocated to the Forecast Expenditure Reserve for any purposes other than those set out in clause 10.1; and

(D) it shall (and shall procure that each member of the Group shall): (i) only adopt Trading Policies which are prudent in light of the Group’s on-going financial resources and obligations; and (ii) endeavour to comply with such Trading Polices.

63

3. A BE Party will not be deemed to be in breach of:

(A) paragraph 2(A) if, on the date on which it makes an acquisition of an undertaking or participating interest in an undertaking, it would otherwise be in breach of paragraph 2(A) but, at the time on which it made a legally binding commitment to make that acquisition, it was in compliance with the requirements of that paragraph.

(B) paragraph 2(B) if, on the date on which it incurs expenditure, it would otherwise be in breach of paragraph 2(B) but, at the time on which it made a legally binding commitment to incur that expenditure, it was in compliance with the requirements of that paragraph.

4. No member of the Group shall be restricted by paragraph 2 from:

(A) incurring expenditure, up to a maximum amount of:

(i) £2,000,000 for the Financial Period ending 31 March 2005;

(ii) £1,500,000 for the Financial Period ending 31 March 2006; and

(iii) £1,000,000 for each Financial Period thereafter,

on the development of renewable energy projects (a) identified and agreed by BE plc and the Secretary of State as at the Restructuring Date and (b) which would qualify for ROCs (as defined in Article 2 of The Renewables Obligation Order 2002), including costs incurred in the sale of such projects but excluding any costs of construction;

(B) exercising one or more options, identified and agreed by BE plc and the Secretary of State as at the Restructuring Date, to purchase wind farm developments pursuant to the “Option to Purchase and Development Services in Relation to Wind Farm Sites” dated 20 November 2001 between British Energy Renewables Ltd and Amec Services Ltd, subject to the aggregate exercise fees paid since 29 November 2002 not exceeding £10,000,000; or

(C) complying with its obligations under the agreed forms of each of the following:

(i) the New CTA;

(ii) the Amended EPL Facility Agreement;

(iii) the Share Option; and

(iv) the Asset Option,

(each as defined in the Creditors Restructuring Agreement).

64

5. Nothing in this Schedule 3 (Covenants) shall prevent any member of the Group from complying with its obligations under the Liabilities Documents or from implementing the restructuring in accordance with or as contemplated by the Creditors Restructuring Agreement.

6. As used in this Schedule 3 (Covenants):

“agreed form” has the meaning given to that expression in the Creditors Restructuring Agreement;

“equity share capital” means, in relation to BE plc its issued share capital excluding any part of that capital which, neither as regards dividends nor as regards capital carries any right to participate beyond a specified amount in a distribution; and

“ordinary share capital” means, in relation to BE plc, its issued share capital other than capital in respect of which the holders have a right to a dividend at a fixed rate but have no other right to share in the profits of BE plc.

65

Schedule 4

Form of NLF Cash Flow Statement

The basis for consolidation of the NLF Cash Flow Statement will be the same as for the Accounts, save that any partly owned subsidiary undertakings or undertaking which NLF has at any time agreed in writing, in its absolute discretion, not being unreasonably withheld, and on such terms as it may specify, shall be excluded from such consolidation. Each NLF Cash Flow statement shall be in the same or a substantially similar form to the following:

Increase/decrease in cash (as per the Accounts)	l
[Reconciling Items]1	l
Increase/decrease in Cash	l
Plus:  Payments to NLF2	l
Prior period transfer to Forecast Expenditure Reserve3	l
Reduction in Target Amount4	l
Cash Distributions paid in the Relevant Period5	l
Less: Amounts received from issue or sale of Ordinary Shares6	l
Transfer to Forecast Expenditure Reserve in Relevant Period7	l
Cash required to be retained to meet Target Amount8	l
Adjusted Net Cash Flow	l
Weighted Average Payment Percentage	l
NLF Payment	l

¹ Description of the items to reconcile cash as per the Accounts to Cash.

² These are the aggregate of any payments made by or on behalf of the Group to or to the order of NLF during the Relevant Period (excluding Decommissioning Payments and PWR Fuel Payments).

³ This is the amount allocated or reallocated to the Forecast Expenditure Reserve in respect of the calculation of the Adjusted Net Cash Flow for the preceding period by notice given pursuant to clause 10.1 or 10.4 within the first 10 Business Days of the Relevant Period.

⁴ This is the lesser of (a) the net reduction (if any) to the Target Amount during the Relevant Period made pursuant to clause 9.1(A) and (b) the amount of Cash as at the end of the Financial Period immediately preceding the Relevant Period (as disclosed in the NLF Cash Flow Statement for that Financial Period) less the Target Amount as reduced pursuant to clause 9.1(A).

⁵ This is the aggregate amount paid to shareholders by BE plc by way of Cash Distribution during the Relevant Period.

⁶ This is the aggregate amount received as a result of the issue of Ordinary Shares (including any subscription monies received in respect of the exercise of warrants) or any sale of Ordinary Shares held by BE plc as Treasury Shares out of treasury during the Relevant Period.

⁷ This is the amount allocated or reallocated to the Forecast Expenditure Reserve in respect of the calculation of the Adjusted Net Cash Flow for the Relevant Period by notice given pursuant to clause 10.1 or 10.4 within the first 10 Business Days of the financial period following the Relevant Period.

⁸ This is the net increase in Cash Reserves (if any) in the Relevant Period up to an amount not more than the Target Amount.

Schedule 5

Decommissioning Payments

Decommissioning Payments	Decommissioning Payment Dates
£5,000,000	31 March 2005
£5,000,000	30 June 2005
£5,000,000	30 September 2005
£5,000,000	31 December 2005
£5,000,000	31 March 2006
£5,000,000	30 June 2006
£5,000,000	30 September 2006
£5,000,000	31 December 2006
£5,000,000	31 March 2007
£5,000,000	30 June 2007
£5,000,000	30 September 2007
£5,000,000	31 December 2007
£5,000,000	31 March 2008
£5,000,000	30 June 2008
£5,000,000	30 September 2008
£5,000,000	31 December 2008
£5,000,000	31 March 2009
£5,000,000	30 June 2009
£5,000,000	30 September 2009
£5,000,000	31 December 2009
£5,000,000	31 March 2010
£4,375,000	30 June 2010

67

Decommissioning Payments	Decommissioning Payment Dates
£4,375,000	30 September 2010
£4,375,000	31 December 2010
£4,375,000	31 March 2011
£4,375,000	30 June 2011
£4,375,000	30 September 2011
£4,375,000	31 December 2011
£4,375,000	31 March 2012
£4,375,000	30 June 2012
£4,375,000	30 September 2012
£4,375,000	31 December 2012
£4,375,000	31 March 2013
£3,125,000	30 June 2013
£3,125,000	30 September 2013
£3,125,000	31 December 2013
£3,125,000	31 March 2014
£3,125,000	30 June 2014
£3,125,000	30 September 2014
£3,125,000	31 December 2014
£3,125,000	31 March 2015
£3,125,000	30 June 2015
£3,125,000	30 September 2015
£3,125,000	31 December 2015
£3,125,000	31 March 2016

68

Decommissioning Payments	Decommissioning Payment Dates
£1,875,000	30 June 2016
£1,875,000	30 September 2016
£1,875,000	31 December 2016
£1,875,000	31 March 2017
£1,875,000	30 June 2017
£1,875,000	30 September 2017
£1,875,000	31 December 2017
£1,875,000	31 March 2018
£1,875,000	30 June 2018
£1,875,000	30 September 2018
£1,875,000	31 December 2018
£1,875,000	31 March 2019
£1,875,000	30 June 2019
£1,875,000	30 September 2019
£1,875,000	31 December 2019
£1,875,000	31 March 2020
£1,875,000	30 June 2020
£1,875,000	30 September 2020
£1,875,000	31 December 2020
£1,875,000	31 March 2021
£1,875,000	30 June 2021
£1,875,000	30 September 2021
£1,875,000	31 December 2021

69

Decommissioning Payments	Decommissioning Payment Dates
£1,875,000	31 March 2022
£1,875,000	30 June 2022
£1,875,000	30 September 2022
£1,875,000	31 December 2022
£1,875,000	31 March 2023
£1,875,000	30 June 2023
£1,875,000	30 September 2023
£1,875,000	31 December 2023
£1,875,000	31 March 2024
£1,875,000	30 June 2024
£1,875,000	30 September 2024
£1,875,000	31 December 2024
£1,875,000	31 March 2025
£625,000	30 June 2025
£625,000	30 September 2025
£625,000	31 December 2025
£625,000	31 March 2026
£625,000	30 June 2026
£625,000	30 September 2026
£625,000	31 December 2026
£625,000	31 March 2027
£625,000	30 June 2027
£625,000	30 September 2027

70

Decommissioning Payments	Decommissioning Payment Dates
£625,000	31 December 2027
£625,000	31 March 2028
£625,000	30 June 2028
£625,000	30 September 2028
£625,000	31 December 2028
£625,000	31 March 2029
£625,000	30 June 2029
£625,000	30 September 2029
£625,000	31 December 2029
£625,000	31 March 2030
£625,000	30 June 2030
£625,000	30 September 2030
£625,000	31 December 2030
£625,000	31 March 2031
£625,000	30 June 2031
£625,000	30 September 2031
£625,000	31 December 2031
£625,000	31 March 2032
£625,000	30 June 2032
£625,000	30 September 2032
£625,000	31 December 2032
£625,000	31 March 2033
£625,000	30 June 2033

71

Decommissioning Payments	Decommissioning Payment Dates
£625,000	30 September 2033
£625,000	31 December 2033
£625,000	31 March 2034
£625,000	30 June 2034
£625,000	30 September 2034
£625,000	31 December 2034
£625,000	31 March 2035
£625,000	30 June 2035
£625,000	30 September 2035
£625,000	31 December 2035
£625,000	31 March 2036
£625,000	30 June 2036
£625,000	30 September 2036
£625,000	31 December 2036
£625,000	31 March 2037

72

Schedule 6

Form of Deed of Adherence

Part 1: Form of Deed of Adherence

THIS DEEDPOLL is made on [            ] by [            ], a company incorporated [in/under the laws of] [            ] under registered number [            ], whose registered office is at [            ] (the “Acceding Party”).

WHEREAS:

(A) By an agreement dated [            ], [            ] transferred to the Acceding Party the nuclear power generating station[s] at [            ] and the electricity generating business relating thereto (the “Power Station[s]”).

(B) This Deed Poll is entered into in compliance with the terms of clause 22 (Assignment) of the Contribution Agreement dated ·, 2004 between (1) the Secretary of State for Trade and Industry, (2) Nuclear Liabilities Fund Limited, (3) British Energy Generation (UK) Limited, (4) British Energy Generation Limited, (5) BE plc and (6) Holdings (as such agreement shall have been or may be amended, supplemented or novated from time to time) (the “Contribution Agreement”).

THIS DEED POLL WITNESSES as follows:

1. Words and expressions defined in the Contribution Agreement shall have the same meanings in this Deed Poll unless given a different meaning in this Deed Poll.

2. The Acceding Party undertakes to adhere to and be bound by the provisions of the Contribution Agreement, and to perform the obligations imposed by the Contribution Agreement which are to be performed on or after the date of this Deed Poll, in all respects as if the Acceding Party were a party to the Contribution Agreement and named therein as a party.

3. The Acceding Party represents and warrants to the persons referred to in paragraph 4 of this Deed Poll that as at the date hereof:

3.1 it has all necessary regulatory consents and approvals for undertaking (i) the Operation of [the]/[each] Power Station (but only to the extent that the nuclear reactors at each such Power Station have not permanently ceased generating electricity), and (ii) the Decommissioning of [the]/[each] Power Station and the Discharge of Uncontracted Liabilities in relation to [the]/[each] Power Station;

3.2 it is the [owner/operator] of the Power Station;

The Acceding Party also represents, warrants and covenants on the terms set out in clause 20 and 21 of the NLFA.

4. This Deed Poll is made for the benefit of (a) the original parties to the Contribution Agreement and (b) any other person or persons who after the date of the Contribution Agreement (and whether or not prior to or after the date of this Deed Poll) adheres to the Contribution Agreement.

5. References in Schedule 1 (Power Stations) of the Contribution Agreement to a power station being licensed to BEG or BEG(UK) shall be construed as a reference to the Power Station being licensed to the Acceding Party.

6. The address and facsimile number of the Acceding Party for the purposes of clause 24 (Notices) of the Contribution Agreement are as follows:

Party	Address	Facsimile no.	Attention
·	[Its registered office from time to time]	·	·

7. This Deed Poll shall be governed by and construed in accordance with English law.

8. The provisions of clause 32 (Jurisdiction) of the Contribution Agreement shall apply equally to this Deed Poll.

9. [The agent for the receipt of Service Documents on behalf of the Acceding Party for the purposes of clause 33 (Agent for Service) of the Contribution Agreement is · of ·.]

IN WITNESS of which this Deed Poll has been executed and delivered by the Acceding Party on the date which first appears above.

[Appropriate execution clause]

74

Part 2: Additional information to be delivered by a New Party

1. A certified copy of the Constitutional Documents of the assignee.

2. A certified copy of a resolution of the board of directors of the assignee:

(A) approving the terms of, and the transactions contemplated by, the Deed of Adherence and the Liabilities Documents and resolving that it execute the Deed of Adherence; and

(B) authorising a specified person or persons to execute the Deed of Adherence on its behalf.

3. A copy of any other authorisation or other document, opinion or assurance which the Secretary of State considers to be necessary or desirable in connection with the entry into and performance by the New Party of the transactions contemplated by the Deed of Adherence or for the validity and enforceability of any Liabilities Document.

4. Security documentation granting valid first ranking fixed and floating security in favour of NLF, in form and substance reasonably comparable to the security granted in favour of the Secretary of State under or in connection with the Credit Facility Agreement (with such amendments as NLF may reasonably require), to secure the Decommissioning Default Payment, together with all consents and approvals required for the creation of that security and/or such other security documentation as NLF may reasonably require for the purpose of creating security interests in favour of NLF over any or all of the assets and undertaking of the assignee, on such terms as NLF may reasonably require for the purposes of securing the Decommissioning Default Payment.

75

SIGNATORIES

SECRETARY OF STATE

SIGNED by a senior official of the

Department of Trade and Industry duly

authorised to sign on behalf of the Secretary of State:

SIGNED for and on behalf of

NUCLEAR GENERATION DECOMMISSIONING FUND LIMITED

acting by:

SIGNED by

as attorney for

BRITISH ENERGY GENERATION

(UK) LIMITED

SIGNED by

as attorney for

BRITISH ENERGY GENERATION

LIMITED

SIGNED by

as attorney for

BRITISH ENERGY GROUP PLC

SIGNED by

as attorney for

BRITISH ENERGY HOLDINGS PLC

76

EX-4.25

Exhibit 4.25

THE OBLIGORS

(AS DEFINED HEREIN)

NUCLEAR GENERATION DECOMMISSIONING FUND LIMITED

(TO BE RENAMED NUCLEAR LIABILITIES FUND LIMITED)

AND

THE SECRETARY OF STATE FOR TRADE AND INDUSTRY

DEBENTURE CREATING FIXED AND FLOATING

CHARGES IN RESPECT OF THE DECOMMISSIONING

DEFAULT PAYMENT

CONTENTS

Clause		Page
1.	Definitions And Interpretation	2
2.	Fixed Charges	12
3.	Floating Charge	13
4.	Perfection Of Security	16
5.	Nature And Protection Of Security	20
6.	Representations And Warranties	23
7.	Covenants	26
8.	Release	29
9.	Enforcement Events	31
10.	Enforcement Powers	31
11.	Extension And Variation Of Powers Conferred By Law	34
12.	Appointment Of Receivers	35
13.	Delegation	37
14.	Application Of Enforcement Proceeds	38
15.	Protection Of Third Parties	38
16.	Liability Of NLF, Receivers And Delegates	39
17.	Covenant To Pay	39
18.	Costs And Expenses	40
19.	Stamp Duty	41
20.	Currency Indemnity	41
21.	Certificates And Determinations	41
22.	Power Of Attorney	42
23.	Assignment And Assignation; Additional Obligors	42
24.	Amendments	43
25.	Notices	43
26.	Remedies And Waivers	44
27.	Partial Invalidity	44
28.	Perpetuity Period	45
29.	Execution As A Deed	45
30.	Contracts (Rights Of Third Parties) Act 1999	45
31.	Jurisdiction	45

32.	Governing Law	46
33.	Agent For Service	46
Schedule 1              OBLIGORS		54
Schedule 2              KEY PROPERTIES		55
Schedule 3              ORIGINAL CHARGED SECURITIES		56
Schedule 4              ACCESSION		57
Part A Form Of Accession Deed		57
Part B Other Accession Documents		59

DEBENTURE dated 14 January, 2005

(1) EACH COMPANY listed in Schedule 1 (Obligors) (each, an “Obligor” and together, the “Obligors”); and

(2) NUCLEAR GENERATION DECOMMISSIONING FUND LIMITED of 16 Rothesay Place, Edinburgh EH3 7SQ (registered in Scotland no. SC164685) (to be renamed Nuclear Liabilities Fund Limited) (“NLF”); and

(3) THE SECRETARY OF STATE FOR TRADE AND INDUSTRY, of One Victoria Street, London SW 1 H OET (the “Secretary of State”).

BACKGROUND

(A) In September 2002, British Energy Plc (“British Energy”) initiated discussions with the Secretary of State with a view to seeking immediate financial support and to enable a longer term restructuring of the Group to take place.

(B) In November 2002, British Energy announced the principles of a restructuring of the Group with its significant financial creditors which, together with other proposals agreed between British Energy and the Secretary of State, were intended to lead to a solvent restructuring of British Energy.

(C) British Energy, certain other members of the British Energy group and its significant financial creditors entered into a creditors’ restructuring agreement dated as of 30 September 2003 under the terms of which a solvent restructuring of the British Energy group would be effected.

(D) On 1 October 2003, British Energy, British Energy Generation Limited, British Energy Generation (UK) Limited, certain other members of the British Energy group, the NLF and the Secretary of State entered into an agreement (the “Government Restructuring Agreement”) under the terms of which they agreed to enter into the agreements that constitute the Nuclear Liabilities Agreement (as defined therein).

(E) The obligations of the parties to the Government Restructuring Agreement to enter into the Nuclear Liabilities Agreements are conditional on, inter alia, the Secretary of State being satisfied that certain members of the British Energy group have created valid fixed and floating security to secure the Decommissioning Default Payment (as defined in the Contribution Agreement entered into on the same date as this Deed between the Secretary of State, the NLF and certain members of the British Energy group (the “Contribution Agreement”)).

(F) The parties have agreed to enter into this Deed in order to create the security arrangements referred to in Recital (E).

- 1 -

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions

In this Deed:

“Accession Deed” means a deed in the form, or substantially the form, set out in Part A of Schedule 4 (Accession);

“Administration Step” means, in relation to any Obligor, any of the following:

(a) notice is given or filed in relation to the appointment of an administrator, or a petition is presented or application made for an administration order;

(b) a meeting of the shareholders or directors of an Obligor is convened to consider a resolution to make an administration application to a court or to file documents with a court for its administration, or any such resolution is passed; or

(c) the directors or shareholders of an Obligor request the appointment of an administrator;

“BAGS Deposit Deed” means the Corporate Deposit Deed between Citibank NA and BEG(UK) and dated 30 March 2004 (as in effect at the Execution Date);

“BACS Facility Collateral” means:

(a) the specified bank account and any other bank account (as from time to time re-designated or re-numbered) which may be opened by Citibank NA pursuant to the BACS Deposit Deed; and

(b) any moneys as at the date of the BACS Deposit Deed or at any time thereafter standing to the credit of the aforementioned bank accounts and all entitlements to interest and other rights, benefits and claims accruing to, or arising in connection with, those moneys or the aforementioned bank accounts at any time;

“Balancing and Settlement Code” means the Balancing and Settlement Code in force from time to time or any successor to it;

“Bank Accounts” means bank accounts opened or maintained by any Obligor with any bank or other person, including all credit balances now or at any time in future on such accounts, all debts from time to time represented by such credit balances and all each Obligor’s other rights accruing or arising in relation to each of such accounts;

“BE plc” means British Energy Group plc (no. 270184) of 3 Redwood Crescent, Peel Park, East Kilbride G74 5PR

“Billing Process Assets” has the meaning given in the Receivables Charging Agreement;

- 2 -

“Business Day” means a day (other than a Saturday or a Sunday) on which banks are open for business (other than solely for trading and settlement in euro) in London and Edinburgh;

“Charged Securities” means:

(a) the Original Charged Securities;

(b) any Further Charged Securities;

(c) all Derived Assets;

(d) all Dividends;

(e) the benefit of any warranties or covenants given or entered into in respect of any of the foregoing by any predecessor in title;

(f) all rights from time to time attached to any of the foregoing;

(g) all rights to acquire any of the foregoing; and

(h) all proceeds of sale of any of the foregoing;

“Collection Account” has the meaning given in the Receivables Charging Agreement;

“Connection and Use of System Code” means the connection and use of system code as in force from time to time or any successor to it;

“Contribution Agreement” has the meaning given in Recital (E);

“Costs and Expenses” means costs, charges, losses, liabilities, expenses and other sums (including legal, accountants’ and other professional fees) and any Taxes thereon;

“Credit Card Collateral” means any cash collateral, subject to a limit of £2,000,000, which is deposited by British Energy with HSBC Bank plc, is subject to a security interest in favour of HSBC Bank plc and is used to secure the Group’s liabilities to HSBC Bank plc pursuant to the Credit Card Facility Agreements;

“Credit Card Facility Agreements” means the Purchasing Card Agreement dated 21 November 1994 and the Corporate Card Agreement dated 7 January 1998, in each case between HSBC Bank plc and British Energy (as in effect at the Execution Date);

“Delegate” means a delegate or sub-delegate appointed pursuant to Clause 13 (Delegation);

“Derived Assets” means all Securities, rights or other property or assets of a capital nature which are offered, issued or paid at any time in respect of any of the Original Charged Securities or Further Charged Securities, including by way of bonus, rights, redemption, conversion, exchange, substitution, consolidation, sub-division, preference, warrant, option or purchase;

- 3 -

“Dissolution” of a person includes the bankruptcy, insolvency, amalgamation, reconstruction (other than as part of a solvent reconstruction or amalgamation the terms of which have been approved by the Secretary of State), reorganisation, administration, administrative or other receivership or dissolution or liquidation of that person or the entry by that person into a voluntary arrangement or composition or similar arrangement with any of its creditors, and any equivalent or analogous proceeding or arrangement in any jurisdiction by whatever name known and any step taken (including any Administration Step) for or with a view to any of the foregoing;

“Dividends” means all dividends, interest and other distributions and other income paid or payable in respect of the Original Charged Securities, the Further Charged Securities and any Derived Assets;

“EC Undertakings Deed” means the Deed relating to the Decision of the Commission of the European Communities entered into between British Energy and the Secretary of State on 8 October 2004;

“Electricity Generation Licence” means a licence to generate electricity issued pursuant to section 6(1)(a) of the Electricity Act 1989 (or any successor);

“Electricity Supply Business” has the meaning given in the EC Undertakings Deed;

“Electricity Supply Licence” means a licence to supply electricity issued pursuant to section 6(1)(d) of the Electricity Act 1989 (or any successor);

“Electricity Supply Subsidiary” has the meaning given in sub-clause 3.1.2(a) of Clause 3.1 (Creation);

“Enforcement” (and all grammatical variations or derivations thereof) means the taking of steps (or attempting to do so) by the NLF to:

(a) sell, repossess or take possession of any rights or assets the subject of a Security Interest;

(b) appoint a Receiver under this Deed;

(c) appoint an administrator in respect of an Obligor; or

(d) enforce any Security Interest or to exercise any rights or powers in relation to enforcement conferred by this Deed after any Security Interest has become enforceable,

unless such action is taken to preserve or protect (rather than to enforce) such Security Interest;

“Enforcement Event” means any of the following:

(a) a Default Event occurs; or

- 4 -

(b) any Secured Liability is not paid on the due date in accordance with Clause 17 (Covenant to pay) at the place at and in the currency in which it is expressed to be payable;

“Environmental Law” means all or any laws, statutes, rules, regulations, treaties, directives, by-laws, statutory codes of practice, circulars, guidance notes, orders, notices and demands, decisions of the courts or anything like any of the foregoing of any governmental authority or agency or any regulatory body in any jurisdiction in which any Obligor does business or owns assets relating to Environmental Matters applicable to any Group Member, the properties owned, leased, otherwise occupied or controlled from time to time by any Group Member and includes the Environmental Protection Act 1990, the Environment Act 1995, the Nuclear Installations Act 1965, the Radioactive Substances Act 1993, the Radioactive Material (Road Transport) Act 1991, the Water Resources Act 1991, the Control of Pollution Act 1974, the Natural Heritage (Scotland) Act 1991, the Water Industry Act 1991 and the Health and Safety at Work Act 1974;

“Environmental Licence” means any permit, licence, authorisation, consent or other approval required at any time by any Environmental Law in relation to any Group Member, the business carried on by any Group Member, the properties owned, leased to, otherwise occupied or controlled from time to time by any Group Member;

“Environmental Matters” means:

(a) the generation, deposit, keeping, treatment, transportation, transmission, handling, importation, exportation, processing, collection, sorting, presence or manufacture of any “waste” or “radioactive waste” (as defined in the Environmental Protection Act 1990 (as amended) or the Radioactive Substances Act 1993, respectively, or in any equivalent legislation or regulation in force in any jurisdiction in which any Group Member is incorporated, owns property or assets or carries on any business or operations), or any Relevant Substance;

(b) nuisance, noise, health and safety at work or elsewhere; and

(c) the pollution, conservation or protection of the environment (both natural and built) or of man or any living organisms supported by the environment or any other matter whatsoever affecting the environment or any part of it;

“Execution Date” means the date on which this Deed is executed by all parties to it;

“Excluded Receivables” means the trading or operating Receivables (including unbilled indebtedness) originated by BEG (or its permitted assignees or transferees under the Receivables Facility Agreement);

“Fixtures” means fixtures (including construction work in progress), fittings (including trade and other fixtures and fittings) and fixed plant, machinery and equipment;

- 5 -

“Floating Charge” means each of the floating charges created by, or pursuant to, Clause 3 (Floating Charge) together with any additional floating charge created by, or pursuant to, sub-clauses 4.2 (Original Charged Securities and Further Charged Securities) or 4.9 (Specific security) of Clause 4 (Perfection of Security);

“Further Charged Securities” means all Securities which may be owned legally, beneficially or otherwise by an Obligor after the Execution Date;

“Gas Shipper’s Licence” means a licence to arrange for the transportation of gas issued pursuant to section 7A(2) of the Gas Act 1986 (or any successor);

“Government Restructuring Agreement” has the meaning given in Recital (D);

“Grid Code” means the code prepared by the National Grid Company Plc pursuant to its transmission licence relating to the National Grid as amended or supplemented from time to time, or any successor to it;

“Group” means the Ultimate Parent Company and its Subsidiaries from time to time;

“Holding Company” means

(a) any holding company within the meaning of section 736 of the Companies Act 1985; and

(b) any parent undertaking as defined in section 258 of the Companies Act 1985;

“Holdings” means British Energy Holdings plc (no. 270186) of 3 Redwood Crescent, Peel Park, East Kilbride G74 5PR

“Insolvency Act” means the Insolvency Act 1986;

“Key Properties” means each property more particularly described in Schedule 2 (Key Properties), the proceeds of sale thereof and every interest therein which an Obligor has power at law or in equity to charge;

“LPA” means the Law of Property Act 1925;

“Negative Pledge Exceptions” means the exceptions to the negative pledge covenant, as set out in clause 21.2(B) of the NLFA;

“NLFA” has the meaning given in sub-clause 3.2.1(a) of Clause 3.2 (Assets excluded from Floating Charge);

“Nuclear Liabilities Agreements” has the meaning given in the Government Restructuring Agreement;

“Original Charged Securities” means the Securities listed or described in Schedule 3 (Original Charged Securities);

“Policies” has the meaning given in the Receivables Facility Agreement;

- 6 -

“Proceedings” means any proceeding, suit or action arising out of or in connection with this Deed;

“Real Property” means:

(a) any freehold or leasehold property in England and Wales;

(b) all heritable or leasehold property in Scotland;

(c) any land and other immovable property in any other jurisdiction anywhere else in the world;

(d) all buildings and Fixtures from time to time in or on any of the foregoing;

(e) the benefit of any covenants for title given or entered into in respect of any of the foregoing by any predecessor in title;

(f) all rights from time to time attached or appurtenant to any of the foregoing;

(g) all rights to acquire any of the foregoing; and

(h) all proceeds of sale of any of the foregoing;

“Receivables” means all book and other debts of any nature whatever (other than those represented by the Bank Accounts) and all other moneys due or owing at any time, to a Group Member and all proceeds, rights, securities and guarantees of any nature enjoyed or held by it in relation to any of the foregoing;

“Receivables Assets” means:

(a) the Excluded Receivables;

(b) the Collection Account;

(c) the Policies; and

(d) the Billing Process Assets,

in each case which are secured in favour of Barclays Bank plc from time to time pursuant to the Receivables Charging Agreement;

“Receivables Charging Agreement” means the Deed of Charge between Barclays Bank plc and BEG which may be entered into pursuant to the Receivables Facility Agreement;

“Receivables Facility Agreement” means the Master Trade Receivables Financing Facility between Barclays Bank plc and BEG and dated 25 August 2004, relating to the provision by Barclays Bank plc of a trade receivables purchase facility of up to £60,000,000 (as in effect at the Execution Date);

“Receiver” means any one or more persons, individually or together with additional persons, appointed as an administrative receiver (if permitted by law), receiver and manager, or other receiver appointed in respect of the Security Assets by the NLF pursuant to powers conferred by this Deed, statute or otherwise;

- 7 -

“Relevant Substance” means any substance whatsoever (whether in a solid or liquid form or in the form of a gas or vapour and whether alone or in combination with any other substance) and includes, without limitation, “radioactive substances” (as defined in the Radioactive Substances Act 1993) or “waste” or “radioactive waste” (as defined in the Environmental Protection Act 1990 (as amended) and in the Radioactive Substances Act 1993, respectively, or in any equivalent legislation or regulation in force in any jurisdiction in which any member of the Group is incorporated, owns property or assets or carries on any business or operations) which is capable or causing harm to man or any other living organism supported by the environment, or damaging the environment or public health or welfare;

“Reservations” means any general principles which are set out as qualification as to matters of law in the legal opinions delivered to the NLF and the Secretary of State (such opinions to be in a form agreed by the Secretary of State and the NLF);

“Scottish Assets” means such of the undertaking, property and assets present and future of each Obligor which is from time to time located in Scotland and such contractual and other rights and other incorporeal moveable property present and future of each Obligor which is governed by the law of Scotland or over which the creation or enforcement of any security is governed by the law of Scotland;

“Scottish Obligor” means an Obligor identified in Schedule 1 (Obligors) as a company incorporated in Scotland;

“Scottish Charged Securities” means all the Charged Securities which are, at any time, Scottish Assets;

“Secured Liabilities” means each and every present and future obligation and liability of each Obligor (whether actual or contingent and whether owed jointly or severally or in any other capacity whatever) which is, or is expressed to be, or may become, due, owing or payable to the NLF under or in connection with a Decommissioning Default Payment, together with all Costs and Expenses which the NLF may incur in enforcing or obtaining, or attempting to enforce or obtain, payment of any Decommissioning Default Payment or amount due under Clause 18 (Costs and expenses);

“Securities” means:

(a) shares, stock and debentures;

(b) warrants, options or other rights to subscribe, purchase, call for delivery of or otherwise acquire shares, stock or debentures; and

(c) any other assets and rights falling within any of paragraphs 11 to 13 (inclusive), paragraph 15 and, to the extent that the investment in question is one of the kind described in paragraphs 11 to 13 (inclusive) or paragraph 15, paragraph 14, in each case of Part II of Schedule 2 to the Financial Services and Markets Act 2000;

- 8 -

“Security Assets” means all or any of the assets and rights from time to time subject or expressed to be subject to a Security Interest;

“Security Interest” means any security interest conferred, constituted, created, expressed to be created or evidenced by or pursuant to this Deed from time to time;

“Subsidiaries” means:

(a) any subsidiary within the meaning of section 736 of the Companies Act 1985; and

(b) any subsidiary undertaking as defined in section 258 of the Companies Act 1985;

“Tax” means any present or future tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or delay in paying any of the same); and

“Trading Arrangement” means a transaction entered into in the ordinary course of business on arms-length terms and in accordance with trading policies adopted in accordance with schedule 3 of the Contribution Agreement relating to energy which is a commodity option, a commodity forward or future, commodity swap or other commodity transaction, including any grid trade or contract for differences and related environmental and renewable transactions, whether physically or financially settled.

1.2 Definitions in Contribution Agreement

Unless a contrary indication appears, a capitalised term: (a) used in the Contribution Agreement or in any notice given under or in connection with the Contribution Agreement; or (b) defined pursuant to the provisions of the Contribution Agreement, has the same meaning when used in this Deed.

1.3 Construction of particular terms

In this Deed, unless otherwise specified, any reference to:

1.3.1 any document being in “agreed form” shall be construed as referring to such document in the form agreed between the NLF and each Obligor and initialled by them for the purposes of identification only;

1.3.2 “assets” includes properties, revenues and rights of every kind, present, future and contingent, and whether tangible or intangible;

1.3.3 “authorisation” or “consent” shall be construed as including any authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration;

1.3.4 a “company” shall be construed so as to include any company, corporation or other body corporate, wherever and however incorporated or established;

- 9 -

1.3.5 “this Deed” or the Contribution Agreement or any other agreement or instrument is a reference to this Deed, the Contribution Agreement or other agreements or instrument as it may have been amended, supplemented, replaced or novated from time to time and includes a reference to any document which amends, supplements, replaces, novates or is entered into, made or given pursuant to or in accordance with any of the terms of this Deed or, as the case may be, the other relevant agreement or instrument;

1.3.6 “indebtedness” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

1.3.7 “law” includes common or customary law, principles of equity and any constitution, code of practice, decree, judgment, decision, legislation, order, ordinance, regulation, bye-law, statute, treaty or other legislative measure in any jurisdiction or any present or future directive, regulation, guideline, request, rule or requirement (in each case, whether or not having the force of law but, if not having the force of law, the compliance with which is in accordance with the general practice of persons to whom the directive, regulation, guideline, request, rule or requirement is intended to apply) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

1.3.8 references to a “person” shall be construed so as to include any individual, firm, company, government, state or agency of a state, local or municipal authority or government body or any joint venture, association or partnership (whether or not having separate legal personality);

1.3.9 “qualified person” means a person who, under the Insolvency Act, is qualified to act as a receiver of the property of any company with respect to which he is appointed or an administrative receiver of any such company;

1.3.10 a “regulation” includes any regulation, rule, official directive, request or guideline (whether or not having the force of law but, if not having the force of law, being a regulation, rule, directive, request or guideline with which a prudent person carrying on the same or similar business as any member of the Group would comply) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

1.3.11 “rights” includes all rights, title, benefits, powers, privileges, interests, claims, authorities, discretions, remedies, liberties, easements, quasi-easements and appurtenances (in each case, of every kind, present, future and contingent); and

1.3.12 “security” or “security interest” includes any mortgage, charge, pledge, lien, security assignment, hypothecation or trust arrangement for the purpose of providing security and any other encumbrance or security interest of any kind

- 10 -

having the effect of securing any obligation of any person (including the deposit of monies or property with a person with the intention of affording such person a right of set-off or lien) and any other agreement or any other type of arrangement having a similar effect.

1.4 Interpretation

1.4.1 Words importing the singular only shall include the plural and vice versa.

1.4.2 Words importing any gender shall include all other genders.

1.4.3 Words importing natural persons shall include corporations.

1.4.4 Unless a contrary indication appears, a reference to any “party” shall be construed so as to include its successors in title, permitted assignees and permitted transferees.

1.4.5 Unless a contrary indication appears, references to any provision of any law or regulation are to be construed as referring to that provision as it may have been, or may from time to time be, amended or re-enacted, and as referring to all bye-laws, instruments, orders and regulations for the time being made under or deriving validity from that provision.

1.4.6 Any reference to a “day” (including within the phrase “Business Day”) shall mean a period of 24 hours running from midnight to midnight.

1.4.7

(a) The rule known as the ejusdem generis rule shall not apply and accordingly general words introduced by the word “other” shall not be given a restrictive meaning by reason of the fact that they are preceded by words indicating a particular class of acts, matters or things.

(b) General words shall not be given a restrictive meaning by reason of the fact that they are followed by particular examples intended to be embraced by the general words.

1.4.8 The Schedules form part of this Deed and shall have the same force and effect as if expressly set out in the body of this Deed, and reference to this Deed shall include the Schedules.

1.4.9 A reference to a “clause” or a “Schedule” is a reference to a clause of, or a schedule to, this Agreement.

1.4.10 A reference to a “paragraph” is a reference to a paragraph within a clause or a Schedule.

1.5 Secretary of State instructions

1.5.1 The parties agree and acknowledge that where the NLF is entitled to exercise any discretion, or makes any decision or judgment which it is entitled or obliged to make, or otherwise is entitled or required to take any action, in

- 11 -

each case, in accordance with, or as contemplated by, this Deed, the NLF will in respect of any such matter:

(a) seek the instructions of the Secretary of State before taking any action, making any decision or judgement or exercising any discretion;

(b) take such action as the Secretary of State may instruct;

(c) act only in accordance with the instructions of the Secretary of State; and

(d) rely on the instructions received from the Secretary of State.

1.5.2 The parties agree and acknowledge that:

(a) the NLF shall not be liable under Clause 16.2 (The NFL’s Liabilities) or otherwise for any judgment, decision or discretion exercised or action taken by it in good faith in reliance on the instructions of the Secretary of State as described in paragraph 1.5.1, except in the case of fraud or wilful default; and

(b) the NLF shall not be liable for any delay or omission (or consequences arising as a result of such delay or omission) arising as a result of seeking such instructions.

2. FIXED CHARGES

2.1 Creation

As continuing security for the full and punctual payment, performance and discharge of all Secured Liabilities, each Obligor with full title guarantee (other than in respect of the Scottish Assets) and free from any other security interest (other than as permitted by the Negative Pledge Exceptions), creates the security interests set out in this Clause 2 in favour of the NLF.

2.2 Approval of Special Shareholder

The security interests created by each of BE plc, Holdings, British Energy and BEG(UK) under this Clause 2 shall not become effective until the consent in writing of the Special Shareholder (as defined in the Articles of Association of each of BE plc, Holdings, British Energy and BEG(UK)) respectively has been given and shall become effective on the date on which such consent is given.

2.3 Fixed Charges

2.3.1 Each Obligor hereby charges in favour of the NLF its rights in respect of the Key Properties by way of first legal mortgage.

2.3.2 Each Obligor charges in favour of the NLF by way of first fixed charge all of its rights in and to the Charged Securities.

2.3.3 Each Obligor pledges and transfers to the NLF (of the NLF’s nominee) all of its rights, title and interest in and to the Scottish Charged Securities and

- 12 -

undertakes to pledge and transfer to the NLF (or the NLF’s nominee) all of its rights, title and interest in any to any other Securities which become Scottish Charged Securities.

3. FLOATING CHARGE

3.1 Creation

3.1.1 As continuing security for the full and punctual payment, performance and discharge of all Secured Liabilities, each Obligor, with full title guarantee (other than in respect of the Scottish Assets) and free from any other security interest (other than as permitted by the Negative Pledge Exceptions), charges in favour of the NLF by way of first floating charge, all its present and future assets, property, business, undertaking and uncalled capital, and all rights under and in respect of any of the foregoing, including all the Security Assets expressed to be charged by Clause 2 (Fixed Charges).

3.1.2 Notwithstanding the foregoing, the Floating Charge shall rank second in priority:

(a) in respect of the Receivables Assets if and to the extent that such Receivables Assets are subject to a charge created by BEG (or, in circumstances in which the Electricity Supply Business is transferred from BEG to another wholly-owned Subsidiary of British Energy (the “Electricity Supply Subsidiary”) either pursuant to the EC Undertakings Deed or, in respect of any subsequent transfer of the Electricity Supply Business, in accordance with the Liabilities Documents, by the Electricity Supply Subsidiary) in favour of Barclays Bank plc pursuant to the Receivables Charging Agreement;

(b) in respect of a charge created pursuant to any refinancing of the receivables facility provided under the Receivables Facility Agreement on the condition that:

(i) such substitute charge complies with the relevant covenants applicable under the terms and conditions of the New Bonds; and

(ii) such charge does not adversely affect or diminish the Security Interests. In particular, but without limitation, any such substitute charge (1) must be granted by the same Obligor as under the Receivables Charging Agreement (or, in circumstances in which the Electricity Supply Business is transferred from BEG to the Electricity Supply Subsidiary either pursuant to the EC Undertakings Deed or, in respect of any subsequent transfer of the Electricity Supply Business, in accordance with the Liabilities Documents, by the Electricity Supply Subsidiary) and (2) must be granted only in respect of assets (or a class of asset) which are substantively the same as the Receivables Assets; and

- 13 -

(c) in respect of the BACS Facility Collateral if and to the extent that such SACS Facility Collateral is subject to a charge created by BEG(UK) in favour of Citibank NA pursuant to the SACS Deposit Deed.

3.2 Assets excluded from Floating Charge

3.2.1 Each Obligor’s rights and benefits under each Funding Agreement, including in each case any and all rights to make claims or otherwise require payment of any amount under, or performance of, any provision of any such agreement shall be excluded from the Security Assets which are subject to the Floating Charge. For the purposes of this Clause 3.2, “Funding Agreement” means:

(a) the Nuclear Liabilities Funding Agreement dated on or about the Execution Date between the Secretary of State, the NLF and the BE Parties (as defined therein) (the “NLFA”); and

(b) the Historic Liabilities Funding Agreement dated on or about the Execution Date between the Secretary of State and the BE Parties (as defined therein).

3.2.2 Any cash collateral, letters of credit or other form of credit support which are, or is, subject to a security interest (“Necessary Security”) used to secure obligations of either BEG, BEG(UK), British Energy Power and Energy Trading Limited (“BEPET”), Eggborough Power Limited (“EPL”), British Energy Trading Services Limited (“BETS”) or the Electricity Supply Subsidiary:

(a) under the Balancing and Settlement Code, the Connection and Use of System Code or the Grid Code, the terms of the relevant Obligor’s Electricity Generation Licence, Electricity Supply Licence or Gas Shipper’s Licence or any other agreement by which the relevant Obligor, EPL, BETS or the Electricity Supply Subsidiary obtains and maintains access to, or use of, transmission and distribution systems and participation in wholesale electricity markets in England, Wales or Scotland;

(b) in relation to Trading Arrangements of the relevant Obligor, EPL, BETS or the Electricity Supply Subsidiary, or procurement contracts with suppliers;

(c) under a third party agency, brokerage, clearing or settlement arrangement in respect of Trading Arrangements; or

(d) in connection with environmental licences and any other permits, licences or authorisations, or in compliance with any other regulatory requirements

(each an “Underlying Arrangement”) shall be excluded from the Security Assets which are subject to the Floating Charge, provided that:

(i) such Underlying Arrangement is entered into in the ordinary course of the relevant Obligor’s business; and

- 14 -

(ii) the entry into such Underlying Arrangement, and the grant of the Necessary Security, is not in breach of a relevant Obligor’s undertakings in the Contribution Agreement.

If, pursuant to the provisions of EC Undertakings Deed or, in respect of any subsequent transfer of the Electricity Supply Business, in accordance with the Liabilities Documents, the Electricity Supply Business is transferred from BEG to an Electricity Supply Subsidiary, the reference in this paragraph (B) to “BEG” shall be deemed to also refer to the Electricity Supply Subsidiary.

3.2.3 The Credit Card Collateral shall be excluded from the scope of the Security Assets which are subject to the Floating Charge, provided that:

(a) the grant of a Floating Charge over the Credit Card Collateral pursuant to this Deed would result in a breach of any of the Credit Card Facility Agreements (or the Deed of Charge dated 12 September 2003 and entered into between HSBC Bank plc and British Energy in connection with the Credit Card Facility Agreements (as in effect as at the Execution Date)); and

(b) the security interest over the Credit Card Collateral pursuant to the Credit Card Facility Agreements is granted in the ordinary course of the relevant Obligor’s business and complies with the relevant covenants applicable under the terms and conditions of the New Bonds.

3.3 Approval of Special Shareholder

The Floating Charge created by each of BE plc, Holdings, British Energy and BEG(UK) shall not become effective until the consent in writing of the Special Shareholder (as defined in the Articles of Association of each of BE plc, Holdings, British Energy and BEG(UK)) respectively has been given and shall become effective on the date on which such consent is given.

3.4 Ranking

3.4.1 Each Floating Charge shall rank behind all the fixed charges and mortgages created by, or pursuant to, Clause 2 (Fixed Charges), but shall rank in priority to any other security created on or after the Execution Date, except:

(a) as specified in Clause 3.1 (Creation); and

(b) for any security interest permitted to rank ahead of, or pari passu with, the Floating Charge by the Negative Pledge Exceptions.

3.4.2 The Scottish Obligors shall not create any fixed security interests or floating charge over any part of the Security Assets ranking in priority to or pari passu with the Floating Charge, except for any security interest permitted to rank ahead of, or pari passu with, the Floating Charge by the Negative Pledge Exceptions.

- 15 -

3.5 Crystallisation by notice

The NLF may (save in relation to a Floating Charge created by a Scottish Obligor or in relation to Scottish Assets):

3.5.1 at any time after any Administration Step has occurred; or

3.5.2 if the NLF considers any of the Security Assets to be in danger of being seized or sold under any form of distress, attachment, execution or other legal process or to be otherwise in jeopardy,

convert the Floating Charge into a fixed charge on all or such of the Security Assets of the Obligor as shall be specified (whether generally or specifically) by notice to each Obligor whose assets or rights are affected, provided, in the case of paragraph 3.5.1, that such Administration Step is continuing.

3.6 Automatic crystallisation

If, without the prior written consent of the NLF:

3.6.1 any Obligor creates or permits to subsist any security interest (other than as permitted by the Negative Pledge Exceptions) on, over or with respect to any of the Security Assets, or attempts to do so; or

3.6.2 any person levies or attempts to levy any distress, attachment, execution or other legal process against any of the Security Assets; or

3.6.3 an Enforcement Event occurs,

the Floating Charge shall, with effect from the instant before such event occurs, automatically convert into a fixed charge over the Security Assets (other than the Scottish Assets) which are the subject of such security interest or process or, in the case of the occurrence of an Enforcement Event, over all of that Obligor’s Security Assets (other than its Scottish Assets).

3.7 Qualifying floating charge

Paragraph 14 of Schedule B1 to the Insolvency Act applies to the Floating Charge created by each Obligor (other than BEG and BEG (UK)) pursuant to this Deed.

4. PERFECTION OF SECURITY

Each Obligor gives to the NLF and the Secretary of State the undertakings in this Clause 4, which shall remain in force from the Execution Date for so long as any of the Secured Liabilities is outstanding or any Security Interest has not been released or discharged.

4.1 Key Properties

4.1.1 It shall apply to HM Land Registry for a restriction in the following term to be entered on the register of the title to each Key Property:

“No disposition of the registered estate by the proprietor of the registered estate or made in exercise of powers conferred by any permitted mortgage or charge ranking after the Security Interests is to be registered without a written consent signed by the NLF or signed on behalf of the NLF by [ ]”

- 16 -

4.1.2 It shall apply to H.M. Land Registry for a notice to be entered on the register to the effect that this Deed secures obligations to make further payments under the Funding Agreements (as defined in Clause 3.2 (Assets excluded from Floating Charge).

4.2 Original Charged Securities and Further Charged Securities

Each Obligor shall, promptly and as soon as practicable after the Execution Date in the case of the Original Charged Securities (other than any Scottish Charged Securities), and as soon as practicable and in any event within five Business Days after each occasion on which any Securities become Further Charged Securities (other than any Scottish Charged Securities):

4.2.1 deposit with the NLF:

(a) all stock and share certificates, documents of title and other documentary evidence of ownership in relation to such Securities;

(b) transfers of such Securities:

(i) duly executed by the Obligor (or its nominee) with the name of the transferee left blank or, if the NLF so requires, in favour of the NLF (or the NLF’s nominee); and

(ii) duly stamped; and

(c) such other documents as the NLF may from time to time require for perfecting title to such Securities or for vesting or enabling the NLF to vest the same in the NLF (or its nominee) with the intent that the NLF may, following an Enforcement Event, without notice present them for registration;

4.2.2 enter details of the Security Interest in the register kept in accordance with section 407 of the Companies Act 1985;

4.2.3 notify any nominee or custodian holding any Original Charged Securities or Further Charged Securities on its behalf that they are held as security pursuant to the provisions of this Deed; and

4.2.4 notify any subsequent chargee or person acquiring any interest whatsoever in the Charged Securities of the Security Interest.

4.3 Scottish Charged Securities

Each Obligor shall, immediately on execution of this Deed, in the case of Original Charged Securities which are Scottish Charged Securities, and as soon as practicable

- 17 -

and in any event within five Business Days after each occasion on which any Securities become Further Charged Securities which are Scottish Charged Securities:

4.3.1 deliver to the NLF a valid executed transfer or transfers of all such Securities in favour of the NLF or its nominee, together with the relevant share certificate(s) and procure the registration of such Securities in the name of NLF or its nominee in accordance with the articles of association of each Scottish Obligor;

4.3.2 as soon as practicable thereafter, exhibit evidence satisfactory to the NLF that the transfer of such Securities to the NLF or its nominee has been approved by the board of directors of each Scottish Obligor and registered in accordance with the articles of association, and deliver or procure the delivery to the NLF of (a) share certificate(s) in the name of the NLF or its nominee in respect of such Securities; and

4.3.3 enter details of the Security Interest in the register kept in accordance with Section 422 of the Companies Act 1985.

4.4 Derived Assets and Dividends

Each Obligor shall, as soon as practicable and in any event within five Business Days of, the accrual, offer, issue or payment or other receipt by it, of any Derived Assets, perform each of the obligations set out in Clauses 4.2 (Original Charged Securities and Further Charged Securities) and 4.3 (Scottish Charged Securities).

4.5 Calls

Each Obligor shall duly and promptly pay, and indemnify the NLF (and its nominees) against, all calls and other moneys which may lawfully be required to be paid and all other liabilities, costs and demands that may be sustained, incurred or made against the NLF (including its nominees and custodians) in respect of any of the Charged Securities; and if it fails to pay any such call or other moneys due within five Business Days of the due date the NLF may elect to make such payments on behalf of the Obligor.

4.6 Liabilities

Each Obligor shall remain liable to observe and perform all of the other conditions and obligations assumed by it in respect of any of the Charged Securities. The NLF shall not be required to perform or fulfil any obligation of any Obligor in respect of any Charged Securities.

4.7 Voting rights, dividends, etc.

4.7.1 Prior to an Enforcement Event: Until any Enforcement Event occurs and after any Enforcement Event ceases to be continuing:

(a) all voting and other rights relating to the Charged Securities may be exercised by the relevant Obligor, or shall be exercised in accordance with its direction, for any purpose not inconsistent with the terms of the Nuclear Liabilities Agreements; and

- 18 -

(b) the relevant Obligor shall be entitled to receive and retain all Dividends paid in respect of the Charged Securities.

4.7.2 After an Enforcement Event: If any Enforcement Event has occurred and for so long as it is continuing:

(a) the NLF shall be entitled (in the name of the Obligor and without further consent or authority from it) to exercise or direct the exercise of all voting rights and other rights now or at any time relating to the Charged Securities;

(b) each Obligor shall comply or procure the compliance with any direction of the NLF in respect of the exercise of such voting and other rights and shall deliver to the NLF or its nominee such forms of proxy or other appropriate forms of authorisation to enable the NLF or its nominee to exercise such voting and other rights;

(c) the NLF shall be entitled to receive and retain all Dividends paid in respect of the Charged Securities and apply them in or towards the payment or discharge of the Secured Liabilities;

(d) the NLF shall be entitled and authorised to arrange for any of the Charged Securities which are in registered form to be registered in the name of the NLF or its nominee, if required by the NLF to perfect the Security Interest;

(e) the NLF may transfer or cause the transfer of any of the Charged Securities to be transferred and registered in the name of any purchaser or transferee; and

(f) each Obligor shall immediately on request of the NLF, execute and sign all transfers, powers of attorney and other documents and give such instructions and directions as the NLF may require for perfecting the NLF’s title to any of the Charged Securities or for vesting them in the NLF or any nominee or any purchaser or transferee.

4.8 Further assurance

In addition and without prejudice to any other provision of this Deed, each Obligor shall, at the request of the NLF or any Receiver but at its own cost, promptly take whatever action the NLF or any Receiver may from time to time consider necessary or desirable:

4.8.1 to ensure that each Security Interest is and remains valid, legally binding and enforceable;

4.8.2 to perfect, preserve or protect each Security Interest by or pursuant to this Deed or the priority of such Security Interests;

- 19 -

4.8.3 to facilitate the exercise of any and all of the rights vested or intended to be vested in the NLF or any Receiver by or pursuant to this Deed and to facilitate the realisation of the Security Assets;

4.8.4 to supplement the Security Interests where it is lawful to do so, including by way of granting a fixed charge over any Security Asset which is at the time of the request subject only to a floating charge; and

4.8.5 to create such further security interests over such of its assets and undertakings of the Obligors, and on such terms, as the NLF or Receiver requires provided that the creation of such security interests shall not cause a material default under any contract to which any member of the Group is party or a breach of law,

and for such purposes it shall in particular, but without limitation, execute all such documents, transfers, conveyances, assignments and assurances in respect of the Security Assets, and give all such notices, orders, instructions and directions as the NLF or any Receiver may reasonably consider necessary. The obligations of each Obligor under this Clause 4.8 shall be in addition to and not in substitution for the covenants for further assurance deemed to be included in this Deed by virtue of the Law of Property (Miscellaneous Provisions) Act 1994.

4.9 Specific security

4.9.1 Without prejudice to the generality of Clause 4.8 (Further Assurance) each Obligor shall, at its own cost, promptly execute and deliver to the NLF, in such form as the NLF may require, such other security over such of its assets and rights as shall be required by the NLF (whether generally or specifically, and whether for the purpose of obtaining legal title to the relevant assets or rights, creating security which is effective under the laws of a foreign jurisdiction, or otherwise) provided that the creation of such further security interests shall not cause a material default under any contracts to which any member of the Group is a party or a breach of law.

4.9.2 Each Obligor shall notify the NLF within 10 Business Days of the acquisition of any Real Property valued at £500,000 or more.

5. NATURE AND PROTECTION OF SECURITY

5.1 Continuing security

Each Security Interest shall be a continuing security and will extend to the ultimate balance of all the Secured Liabilities regardless of any intermediate discharge or payment in whole or in part.

5.2 Additional security

The Security Interest and the rights given to the NLF under this Deed shall be in addition to and shall not prejudice, or be prejudiced by, any other security or guarantee or any other right which the NLF has in respect of or in connection with any or all of the Secured Liabilities. All such rights may be exercised from time to time as often as the NLF may deem expedient.

- 20 -

5.3 Immediate recourse

Save in so far as inconsistent with Scots law, the NLF need not, before exercising any of the rights, title, benefit and interest conferred upon it by this Deed or by law (i) take action or obtain judgment against any Obligor or any other person in any court, (ii) make or file any claim or proof in the Dissolution of any Obligor or any other person or (iii) enforce or seek to enforce the recovery of the monies and liabilities hereby secured or enforce or seek to enforce any other security interest or guarantee.

5.4 Exercise of rights

Save in so far as inconsistent with Scots law, each of the Security Interests constitutes and effects an immediate and full mortgage or charge of the Security Assets and shall be effective, and the Security Interests intended to be created by this Deed shall be constituted, immediately upon its execution.

5.5 Performance of the Obligor’s obligations

5.5.1 Each Obligor shall remain at all times bound by and liable to perform all of the obligations and liabilities assumed by it under or in respect of the Security Assets to the same extent as if the Security Interests had not been created.

5.5.2 The exercise of any of the rights, benefits, interests or claims created pursuant to this Deed (whether by the NLF, any Delegate, Receiver or any of its or their agents or nominees or otherwise) shall not release any Obligor from any of its obligations towards the NLF.

5.5.3 The NLF shall not, by reason of this Deed or anything arising out of this Deed or anything done or in connection with it, have any obligation or liability whatsoever to any person (including the Obligors) to:

(a) perform any of the obligations assumed by the Obligors under or in respect of the Secured Liabilities or the Security Assets;

(b) enforce payment or performance of any obligations of any person or party to any of the Secured Liabilities; or

(c) make any enquiry as to the nature or sufficiency of any payment received by it under or in respect of this Deed or any of the Security Assets or to make any claim or take any action to collect any monies or to exercise any of the rights to which the NLF may be at any time entitled pursuant to this Deed, or to make any payment in respect of the Security Assets.

5.5.4 The provisions of this Clause 5.5 shall apply notwithstanding any other provision of this Deed or any contrary or inconsistent provision of any other agreement or document.

- 21 -

5.6 Waiver of defences

Without prejudice to the other provisions of this Clause 5, neither this Deed nor the Security Interests nor the liability of any Obligor for the Secured Liabilities shall be prejudiced or affected by:

5.6.1 any variation or amendment of, or waiver or release granted under or in connection with, any other security or any guarantee or indemnity or other document;

5.6.2 any time or waiver granted, or any other indulgence or concession granted, by the NLF to any Obligor or any other person;

5.6.3 the taking, holding, failure to take or hold, varying, realisation, non-enforcement, non-perfection or release by the NLF or any other person of any other security or any guarantee or indemnity or other document;

5.6.4 the Dissolution of any Obligor or any other person;

5.6.5 any change in the constitution of any Obligor;

5.6.6 any amalgamation, merger or reconstruction that may be effected by the NLF with any other person or any sale or transfer of the whole or any part of the property, undertaking or assets of the NLF to any other person;

5.6.7 the existence of any claim, set-off or other right which any Obligor may have at any time against the NLF or any other person;

5.6.8 the making or absence of any demand for payment or discharge of any Secured Liabilities on any Obligor or any other person, whether by the NLF or any other person;

5.6.9 any arrangement or compromise entered into by the NLF with any Obligor or any other person;

5.6.10 any assignment, transfer or other disposal of the rights and/or obligations of the NLF to a Secretary of State or another body acting as agent for and on behalf of the Crown; or

5.6.11 any other thing done or omitted or neglected to be done by the NLF or any other person or any other dealing, fact, matter or thing which, but for this provision, might operate to prejudice or affect any of the Security Interests or the liability of any Obligor for the Secured Liabilities.

5.7 New account

At any time after:

5.7.1 the NLF receives, or is deemed to be affected by notice (either actual or constructive) of any subsequent security interest or any disposition affecting any Security Asset, or part thereof or interest therein; or

- 22 -

5.7.2 the Dissolution of any Obligor,

the NLF may open a new account in the name of that Obligor (whether or not it permits any existing account to continue). If the NLF does not open such a new account, it shall nevertheless be treated as if it had done so at the time when the notice was received or was deemed to have been received or, as the case may be, the Dissolution commenced. As from that time, all payments made by that Obligor to the NLF or received by the NLF for the account of that Obligor shall be credited or treated as having been credited to the new account and will not operate to reduce the amount secured by this Deed at any time.

5.8 Non-competition

5.8.1 Until all the Secured Liabilities have been unconditionally and irrevocably paid and discharged in full, no Obligor shall (other than with the prior written consent of the NLF and pursuant to and in accordance with the Nuclear Liabilities Agreements):

(a) claim, rank, prove or vote as a creditor of any Obligor or its estate in competition with the NLF; or

(b) in any insolvency of an Obligor, receive, claim or have the benefit of any payment, distribution or security from or on account of any such Obligor, or exercise any right of combination, counter-claim, “flawed-asset” arrangement or set-off as against such party.

5.8.2 Each Obligor will hold on trust for, and forthwith pay or transfer to, the NLF any payment or benefit of security received by it contrary to the above. If any Obligor exercises any right of set-off, counterclaim or combination contrary to the above, it will forthwith pay an amount equal to the amount set-off, counterclaimed or combined to the NLF.

6. REPRESENTATIONS AND WARRANTIES

Each Obligor makes the representations and warranties set out in this Clause 6 to the NLF and the Secretary of State on the Execution Date.

6.1 Status

It is duly incorporated and validly existing under the law of its jurisdiction of incorporation.

6.2 Powers

It has the power to own its assets and carry on its business as it is being conducted, and it has the power to enter into, create security and perform all its obligations under this Deed and the transactions contemplated by this Deed.

6.3 Corporate authority

It has taken all necessary action to authorise its entry into, and the creation of security and the performance of all its obligations under, this Deed and the transactions contemplated by this Deed.

- 23 -

6.4 Obligations binding

The obligations expressed to be assumed by it under this Deed are, subject to the Reservations, legal, valid, binding and enforceable obligations.

6.5 Security valid

Each Security Interest is (subject to completion of all registrations required by law and the Reservations) legal, valid, binding and enforceable security having the priority and ranking which it is expressed to have.

6.6 Non-conflict with laws and other obligations

The execution and delivery of, the performance of its obligations under, and compliance with the provisions of, this Deed by it will not:

6.6.1 contravene any existing applicable law or regulation authorisation or permit or licence to which it is subject;

6.6.2 conflict with, or result in any breach of any of the terms of, or constitute a default under, any agreement or other instrument to which it is a party or is subject or by which it or any of its property is bound;

6.6.3 contravene or conflict with any provision of its constitutional documents; or

6.6.4 result in the creation or imposition of or oblige it or any of its Subsidiaries to create any security interest on any of its or such Subsidiaries’ undertakings, assets, rights or revenues.

6.7 Validity and admissibility in evidence

All authorisations required or desirable:

6.7.1 to enable it lawfully to enter into, exercise its rights and comply with its obligations under this Deed;

6.7.2 to permit the creation of security and ensure that (subject to completion of all registrations required by law and the Reservations) each Security Interest is legal, valid, binding and enforceable security having the priority and ranking it is expressed to have; and

6.7.3 to make this Deed admissible in evidence in its jurisdiction of incorporation, have been obtained or effected and are in full force and effect.

6.8 Choice of law

The choice of law specified in Clause 32 (Governing law) as the governing law of this Deed will be recognised and enforced in its jurisdiction of incorporation.

6.9 Enforcement of judgments

Any judgment obtained in England or Scotland in relation to this Deed will be recognised and enforced in its jurisdiction of incorporation.

- 24 -

6.10 No filing or stamp taxes

Under the law of its jurisdiction of incorporation it is not necessary that this Deed be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to this Deed or the creation of security or any of the transactions contemplated by this Deed.

6.11 No existing security

No security interest (other than as permitted by the Negative Pledge Exceptions) exists on, over or with respect to any of the Security Assets.

6.12 Pari passu ranking

Its payment obligations in respect of the Secured Liabilities rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

6.13 Litigation

No litigation, arbitration or administrative proceeding before any court, arbitral body, or agency has (to the best of its knowledge and belief) been started or, to the knowledge of its officers after due enquiry is, threatened:

6.13.1 to restrain the entry into, or performance or enforcement of or compliance with any of its material obligations under, this Deed;

6.13.2 to restrain the creation of the Security Interests; or

6.13.3 which may materially affect the value of, or its rights in respect of, the Security Assets.

6.14 Insolvency

6.14.1 No Default Event has occurred and is continuing in respect of it.

6.14.2 No Administration Step has been taken in respect of it which process is continuing.

6.14.3 No distress, distraint, charging order, garnishee order, execution, diligence or other process has been levied or applied for in respect of it.

6.15 No Immunity

Neither it nor any of its assets are entitled to immunity on the grounds of sovereignty or otherwise from any legislation or proceedings (which shall include suit, attachment prior to judgment, execution or other enforcement).

6.16 Key Properties

It is the sole legal and beneficial owner of the Key Properties described in Schedule 2 (Key Properties) under its name.

- 25 -

6.17 Charged Securities

Each Obligor represents and warrants to the NLF that:

6.17.1 it is the sole beneficial owner of the Charged Securities which it is making, or which it is required to make, subject to a Security Interest;

6.17.2 no security exists on, over or with respect to any of the Charged Securities, except for the Security Interests and security interests expressly permitted by the Negative Pledge Exceptions;

6.17.3 it has not sold, transferred, lent, assigned, parted with its interest in, disposed of, granted any option in respect of or otherwise dealt with any of its rights, in and to the Charged Securities, or agreed to do any of the foregoing (otherwise than as expressly permitted pursuant to the Nuclear Liabilities Agreements);

6.17.4 the Original Charged Securities, any Further Charged Securities and any Securities comprised in any Derived Assets are fully paid and there are no moneys or liabilities outstanding in respect of any of the Charged Securities; and

6.17.5 the Original Charged Securities, any Further Charged Securities and any Securities comprised in any Derived Assets have been duly authorised and validly issued and are free from any restrictions on transfer or rights of pre-emption.

6.18 Repetition

Each of the representations and warranties (excluding those set out in Clauses 6.13 (Litigation) and 6.14 (Insolvency)) will be correct and complied with in all respects at all times during the continuance of the Security Interests as if repeated then by reference to the then existing circumstances.

7. COVENANTS

The undertakings in this Clause 7 are given to the NLF and the Secretary of State by each Obligor and will remain in force from the Execution Date for so long as any of the Secured Liabilities is outstanding or any Security Interest has not been released or discharged.

7.1 Notice of Default

Each Obligor shall:

7.1.1 inform the NLF of any Default promptly upon becoming aware of the same; and

7.1.2 if so requested by the NLF, at any time, confirm to the NLF in writing that, save as previously notified to the NLF or the Secretary of State or as otherwise stated in such confirmation, no Default has occurred and is continuing.

- 26 -

For the purposes of this Clause 7.1, a “Default” means each of the following:

(a) the occurrence of a Default Event;

(b) breach by any Obligor of any provision of this Deed in circumstances in which such breach, if capable of remedy, is not remedied within 7 days of the date on which that Obligor receives a notice from the NLF requiring remedy; and

(c) a representation or warranty made or repeated (or deemed repeated) by or in respect of any Obligor in this Deed or in any written notice, certificate or statement referred to in or delivered by an Obligor under this Deed is or proves to have been incorrect or misleading in any material respect and such misrepresentation, if capable of remedy, is not remedied within 7 days after the date on which that Obligor receives notice from the NLF requiring remedy.

7.2 Consents and licences

Each Obligor shall obtain or cause to be obtained, maintain in full force and effect and comply in all material respects with the conditions and restrictions (if any) imposed in, or in connection with, every consent, authorization, licence or approval of governmental or public bodies or authorities or courts required by it in connection with the execution, delivery, validity, enforceability or admissibility in evidence of this Deed (other than the Secretary of State or the Secretary of State for Scotland in relation to any special share held individually or jointly by either such Secretary in any Group Member) and do, or cause to be done, all other acts and things which may from time to time be necessary under applicable law for the continued due performance of all its and its Subsidiaries’ respective obligations under this Deed.

7.3 Pari passu ranking

Each Obligor shall ensure that its obligations under this Deed shall at all times rank at least pari passu with all its other present and future unsecured and unsubordinated indebtedness with the exception of any obligations which are mandatorily preferred by-law and not by contract.

7.4 NLFA Covenants

Each Obligor shall comply with each of the undertakings and covenants given in clause 21 of the NLFA.

7.5 Licences and Environmental Laws

Each Obligor shall:

7.5.1 obtain and maintain and procure that each Group Member obtains and maintains in full force and effect each Licence required for the carrying on of its businesses (including all material Environmental Licences); and

7.5.2 ensure that its business and the business of each of its Subsidiaries complies in all material respects with all material Environmental Laws and all other material Environmental Licences.

- 27 -

7.6 Insurance

Each Obligor shall insure and will procure that each of its Subsidiaries will insure and keep insured all its properties and assets with underwriters or insurance companies of repute, or enter into insurance arrangements in relation to such properties and assets considered by its directors to be prudent in each case to such extent and against such risks as are required by the terms of the Licences, statute or regulation and as prudent companies engaged in business similar to those of that Obligor or the relevant Subsidiary normally insure or, in the case of other arrangements, enter into;

7.7 No merger

No Obligor will merge or consolidate with any other company or person without the consent of the Secretary of State.

7.8 Safety Regulations

Each Obligor shall, and shall procure that each of its Subsidiaries shall, conduct their respective businesses in compliance with all applicable laws, statues, rules, regulations, statutory codes of practice, orders, notices, demands and decisions of the courts or anything like any of the foregoing of any governmental authority or agency or regulatory body in any jurisdiction relating to the safe operation of power generation facilities and any related activities, nuclear safety and the security of nuclear installations and non-proliferation and the safeguards to be applied to fissile or radioactive material save where the result of non-compliance would be immaterial.

7.9 Additional security interests

Each Obligor shall, as soon as practicable and, in any event, within five Business Days of receiving instructions to do so from the NLF, execute and deliver to the NLF such deeds, agreements and instruments and otherwise do such acts and things as the NLF may reasonably require for the purpose of supplementing the Security Interests or for the purpose of creating such further security interests over any or all of the assets and undertaking of any of the Obligors, on such terms as the NLF may reasonably require, for the purpose of securing the Secured Liabilities, provided that the creation of such security interests shall not cause a material default under any contract to which any Group Member is party or breach of law. On creation of the relevant security interest, the relevant Obligor shall certify to the NLF that there is no such default or breach.

7.10 Authorisations

Each Obligor shall promptly:

7.10.1 obtain, comply with and do all that is necessary to maintain in full force and effect; and

7.10.2 supply certified copies to the NLF of,

any authorisation required under any law or regulation of its jurisdiction of incorporation to enable it to create security and perform its obligations under this Deed and to ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of this Deed and the Security Interests.

- 28 -

7.11 Compliance with laws

Each Obligor shall comply in all respects with all laws and regulations to which it may be subject, if failure so to comply would materially impair any Security Interest or its ability to perform its obligations under this Deed.

7.12 Charged Securities Covenants

7.12.1 No Obligor shall:

(a) sell, transfer, lend, assign, part with its interest in, dispose of, grant any option in respect of or otherwise deal with any of its rights in and to the Charged Securities, or agree to do any of the foregoing (otherwise than as permitted pursuant to the Nuclear Liabilities Agreements and the terms of this Deed);

(b) not take or omit to take any action which act or omission could materially and adversely affect or diminish the value of any of the Charged Securities;

7.12.2 Each Obligor shall:

(a) ensure that there are no moneys or liabilities outstanding in respect of any of the Charged Securities;

(b) ensure that the Original Charged Securities, any Further Charged Securities and any Securities comprised in any Derived Assets are free from any restriction on transfer or rights of pre-emption;

(c) without prejudice to sub-clause 4.5 (Calls) of Clause 4 (Perfection of Security), punctually pay all calls, subscription moneys and other moneys payable on or in respect of any of the Charged Securities;

(d) deliver to the NLF a copy of every circular, notice, report, set of accounts or other document received by that Obligor in respect of or in connection with any of the Charged Securities forthwith upon receipt by that Obligor of such document; and

(e) promptly deliver to the NLF all such information concerning the Charged Securities as the NLF may request from time to time.

8. RELEASE

8.1 Release of Security Assets

If the NLF is satisfied that:

8.1.1 all Secured Liabilities have been unconditionally and irrevocably paid or discharged in full;

8.1.2 security or a guarantee for the Secured Liabilities, in each case acceptable to the NLF, has been provided in substitution for this Deed; or

- 29 -

8.1.3 an Obligor is unconditionally entitled pursuant to any provision of any of the Nuclear Liabilities Agreements to have any Security Asset released from the Security Interests.

then, subject to Clause 8.2 (Reinstatement) and Clause 8.3 (Retention of Security Assets), the NLF shall at the request and cost of the Obligor take whatever action is necessary to release the Security Assets (or, in the case of paragraph 8.1.3 above, the relevant Security Assets), or such part thereof as may still be subsisting and vested in the NLF, from the Security Interests.

8.2 Reinstatement

8.2.1 Any re-assignment, retrocession, release, settlement or discharge (whether in respect of any of the Secured Liabilities or any security for those liabilities or otherwise) shall be conditional upon no payment to, or security provided to, the NLF in respect of the relevant Secured Liabilities being avoided, invalidated or reduced or required to be restored or paid away by virtue of any requirement having the force of law.

8.2.2 Where any such re-assignment, retrocession, release, settlement or discharge is made in whole or in part on the faith of any payment, guarantee, security or other disposition, transaction or arrangement which is or is required to be repaid, restored or otherwise avoided, invalidated or reduced by virtue of any requirement having the force of law, any such re-assignment, retrocession, release, settlement or discharge of, or other arrangement in connection with, the Security Assets shall ipso facto be treated as null and void and shall for all purposes be deemed not to have occurred, and the NLF shall be entitled to recover the value or amount of any such payment, guarantee, security or other disposition and the relevant Secured Liability shall continue as if the re-assignment, retrocession, release, settlement or discharge had not occurred.

8.3 Retention of Security Assets

If any Obligor requests the NLF to release any Security Assets from this Deed following any payment or discharge made or security interest or guarantee given in relation to the relevant Secured Liabilities by any person (a “Relevant Transaction”), and which the NLF reasonably considers, on the basis of independent legal advice, to be likely to be avoided or invalidated or reduced or required to be restored or paid away by virtue of any requirement having the force of law, the NLF shall be entitled to retain and shall not be obliged to release any of the relevant Security Assets or the security constituted by this Deed until the expiry of the Retention Period in relation to that Relevant Transaction. If, at any time before the expiry of that Retention Period, the Dissolution of such other person commences the NLF:

8.3.1 may continue to retain the relevant Security Assets and the Security Interest for a further period expiring on the later of the expiry of the Retention Period and the date on which all proceedings relating to such Dissolution are determined; and

- 30 -

8.3.2 shall not be obliged during such period to release any of the relevant Security Assets from the Security Interests.

8.4 Retention Period

For the purpose of Clause 8.3 (Retention of Security Assets), “Retention Period” means, in relation to any Relevant Transaction, the period which commences on the date when that Relevant Transaction was made or given, and which ends on the date falling one month after the expiration of the maximum period within which that Relevant Transaction can be avoided, reduced or invalidated by virtue of any applicable law.

9. ENFORCEMENT EVENTS

At any time when:

9.1.1 an Enforcement Event has occurred and is continuing; or

9.1.2 an Administration Step has occurred and is continuing,

the Security Interests shall become enforceable and the NLF shall be entitled (whether or not it shall have taken possession or appointed a Receiver) without any further notice to exercise the power of sale and other powers conferred by section 101 LPA (as varied by this Deed) and all or any of its rights and powers set out in this Clause 9 and Clause 10 (Enforcement powers) in relation to all or any part of the Security Assets (in respect of the Scottish Assets in so far as permitted by the law of Scotland) or otherwise conferred by law on mortgagees, chargees or receivers.

10. ENFORCEMENT POWERS

At any time after the Security Interests become enforceable, the NLF may do any or all of the following.

10.1 Exercise of powers

It shall be entitled, without notice to any Obligor, either itself (without first appointing a Receiver or notwithstanding the appointment of any Receiver) or acting jointly with or through the Receiver or any Delegate, in the name or on behalf of any Obligor or otherwise and at the cost of any Obligor to exercise all or any of the rights, powers and discretions set out in this Clause 10 to the fullest extent permitted by law.

10.2 Notice of Enforcement

It may give any notice to any person, giving directions (which shall apply to the exclusion of any directions given at any time by or on behalf of any Obligor, regarding the exercise of all or any of the rights, powers, discretions and remedies which would (but for this Deed) be vested in any Obligor under and in respect of the Security Assets.

10.3 Possession

It may enter upon, take immediate possession of, get in and collect all or any of the Security Assets.

- 31 -

10.4 Carry on business

It may manage and carry on any business of the relevant Obligor (including the right to enter into any contract or arrangement and to perform, repudiate, rescind or vary any contract or arrangement to which the Obligor is a party) as it sees fit.

10.5 Deal with Security Assets

It may sell, transfer, assign, redeem, exchange, hire out and lend the Security Assets, grant leases, tenancies, licences, rights of user and renewals (for any term and at any rent) and may accept surrenders of and re-enter upon leases, tenancies, licences and rights of user of the Security Assets, and otherwise apply, dispose of or realise any or all of the Security Assets (including in each case any Fixtures, which may be severed and sold separately from the real property containing them), either by public offer or auction, tender or private contract (with or without advertisement and in any lots) to any person (including the NLF) and for rents, premiums or other compensation or consideration (whether comprising cash, debentures or other obligations, investments or other valuable consideration of any kind, and whether payable or deliverable in a lump sum or by instalments) and generally in any manner and on any terms it thinks proper. It may give valid receipts for all monies and execute all assurances and things which it considers to be proper or desirable for realising any Security Asset.

10.6 Transfer business

Without prejudice to the generality of Clause 10.5 (Deal with Security Assets), it may do any of the following acts and things as may to it seem expedient:

10.6.1 promote or procure the formation of any new company, whether or not a wholly owned Subsidiary of the NLF;

10.6.2 subscribe for or acquire (for cash or otherwise) any Investment in or of such new company;

10.6.3 sell, transfer, assign, redeem, hire out and lend the Security Assets, and grant leases, tenancies, licences and rights of user of the Security Assets, to any such new company or any person whatsoever and accept as consideration or part of the consideration therefore any Investments in or of any such new company or person or allow the payment of the whole or any part of such consideration to remain deferred or outstanding; and

10.6.4 sell, transfer, assign, exchange and otherwise dispose of or realise any such Investments or deferred consideration or part thereof or any rights relating thereto.

10.7 Borrow money

For the purpose of exercising any of the rights conferred on it by or pursuant to this Deed or of defraying any costs, charges, losses, liabilities or expenses (including its remuneration) incurred by or due to it in the exercise thereof or for any other purpose, it may borrow or raise money either unsecured or on the security of the Security Assets (either in priority to the security under this Deed or otherwise) and generally on such terms and conditions as it may think fit. No person lending that money shall be concerned to enquire into the propriety or purpose of the exercise of this power or to check the application of any money so raised or borrowed.

- 32 -

10.8 Calls

It may make or require the directors of the relevant Obligor to make such calls in respect of any uncalled capital of the relevant Obligor as it may think expedient and may enforce payment of any call so made by action (in the name of the relevant Obligor or the Receiver as may be thought fit) or otherwise.

10.9 Covenants and guarantees

It may enter into bonds, covenants, commitments, guarantees, indemnities and like matters and make all payments needed to effect, maintain or satisfy them, as it sees fit.

10.10 Dealings with tenants

It may reach agreements and make arrangements with, and make allowances to, any lessees, tenants or other persons from whom any rents or profits may be receivable (including those relating to the grant of any licences, or the review of rent in accordance with the terms of, and the variation of, the provisions of any leases, tenancies, licences or rights of user affecting the Security Assets), in each case as it sees fit.

10.11 Rights of ownership

It may manage, use and apply all or any of the Security Assets and may exercise and do (or permit the relevant Obligor or its nominee to exercise and do) all such rights and things as it would be capable of exercising or doing if it were the absolute beneficial owner of the Security Assets and in particular, but without limitation, may exercise any rights of enforcing any security by foreclosure, sale or otherwise and all rights relating to the Security Assets and arrange for or provide all services which it may deem proper for the efficient management or use of the Security Assets or the exercise of such rights, in each case as it sees fit.

10.12 Protection of assets etc

It may make and effect all repairs, structural and other alterations, improvements and additions in or to the Security Assets (including the development or redevelopment of any Real Property) and may purchase or otherwise acquire any materials, articles, insurances or other things and do anything else in connection with the Security Assets as it may think desirable for the purpose of the protection or improvement of the Security Assets or making them productive or more productive, increasing their letting or market value, or protecting the Security Interests, in each case as it sees fit.

10.13 Compromise and settle claims

It may settle, adjust, refer to arbitration, compromise and arrange any claims, accounts, disputes, questions and demands with or by any person who is or claims to be a creditor of the relevant Obligor or relating in any way to the Security Assets, in each case as it sees fit.

- 33 -

10.14 Legal actions

It may bring, prosecute, enforce, defend and abandon actions, suits and proceedings in relation to the Security Assets or any of the businesses of the relevant Obligor, in each case as it sees fit.

10.15 Redemption of security

It may redeem or transfer to itself any prior security interest over the Security Assets or settle and pass the accounts of the prior mortgagee, chargee or encumbrancers, as it sees fit. Any accounts so settled and passed shall be conclusive and binding on the relevant Obligor, save in the case of manifest error. All principal monies, interest, costs, charges, losses, liabilities and expenses of and incidental to and such redemption and/or transfer shall be paid by each Obligor on demand.

10.16 Employees, etc.

It may appoint, hire and employ officers, employees, contractors, agents and advisors of all kinds and upon such terms as to remuneration or otherwise as it may think proper and may discharge any such persons and any such persons appointed, hired or employed by the relevant Obligor.

10.17 Insolvency Act

It may exercise all the powers set out in Schedule 1, Schedule B1 or (in the case of a Scottish Receiver) Schedule 2 to the Insolvency Act as in force at the Execution Date (whether or not in force at the date of exercise and whether or not the Receiver is an administrative receiver) and all powers added to Schedule 1, Schedule B1 or Schedule 2, as the case may be, to the Insolvency Act after the Execution Date.

10.18 Set-off and application of Bank Account balances

It may, at any time or times without restriction and without notice to the Obligor, regardless of the place of payment or booking branch, and without prejudice to any of its other rights, set off or otherwise apply any obligation (whether or not matured) owed by it to the Obligor, against any or all of the Secured Liabilities which are due and unpaid. For this purpose it may convert one currency into another at the rate of exchange determined by it in its absolute discretion to be prevailing at the date of set-off; and

10.19 Other rights

It may do all such other acts and things it may consider necessary or expedient for the realisation of any Security Asset or incidental to the exercise of any of the rights conferred upon it under or in connection with this Deed, the LPA or the Insolvency Act and may concur in the doing of anything which he has the right to do and to do any such thing jointly with any other person.

11. EXTENSION AND VARIATION OF POWERS CONFERRED BY LAW

11.1 Power of sale

11.1.1 Notwithstanding any other provisions of this Deed, the Secured Liabilities shall be deemed for the purposes of section 101 of the LPA to have become due and payable within the meaning of section 101 of the LPA, and the power

- 34 -

of sale and other powers conferred on mortgagees by the LPA as varied or extended by this Deed including the power to appoint a receiver or an administrative receiver shall arise, immediately on execution of this Deed.

11.1.2 Section 103 of the LPA shall not restrict the exercise by the NLF of the statutory power of sale conferred on it by section 101 of the LPA which power may be exercised by the NLF without notice to any Obligor on or at any time after an Enforcement Event has occurred and is continuing and the provisions of the LPA relating to and regulating the exercise of the said power of sale shall, so far as they relate to the Security Assets, be varied and extended accordingly.

11.1.3 Section 109(1) of the LPA shall not apply to this Deed.

11.2 Consolidation

The NLF shall, so far as it is lawful, be entitled to consolidate all or any of the Security Interests with any other securities whether now in existence or hereafter created. The restriction on the right of consolidating mortgage securities which is contained in sub-section 93(1) of the LPA shall not apply to this Deed.

11.3 Power of leasing

11.3.1 The statutory powers of leasing, letting, entering into agreements for leases or lettings and accepting and agreeing to accept LPA surrenders of leases conferred by sections 99 and 100 of the LPA may be exercised by the NLF at any time on or after the occurrence of an Enforcement Event. Whether or not the NLF is then in possession of the premises proposed to be leased, the NLF may make a lease or agreement for lease at a premium and for any length of term and generally without any restriction on the kinds of leases and agreements for lease that the NLF may make and generally without the necessity for the NLF to comply with any other provisions of sections 99 and 100 of the LPA. The NLF may delegate such powers to any person and such delegation shall not preclude the subsequent exercise of such powers by the NLF itself nor preclude the NLF from making a subsequent delegation thereof to some other person or any revocation of such delegation.

11.3.2 For the purposes of sections 99 and 100 of the LPA, the expression “mortgagor” shall include any encumbrancer deriving title under the original mortgagor and subsection (18) of section 99 of the LPA and subsection (12) of section 100 of the LPA shall not apply.

12. APPOINTMENT OF RECEIVERS

12.1 Appointment

At any time:

12.1.1 after any Security Interest has become enforceable (whether or not the NLF shall have taken possession of the Security Assets); or

12.1.2 at the written request of any Obligor to the NLF at any time,

- 35 -

the NLF may, without notice to any Obligor, appoint under seal or by instrument in writing signed by any officer or other person authorised for such purpose by it, one or more qualified persons to be Receiver. If the NLF appoints more than one person as Receiver, the NLF may give the relevant persons power to exercise all or any of the powers conferred on Receivers individually as well as jointly and to the exclusion of the other or others of them.

12.2 Scope of appointment

Any Receiver may be appointed either Receiver of all the Security Assets or of such part of the Security Assets as may be specified in the appointment. In the latter case, the rights and powers conferred by Clause 12.4 (Powers of Receivers) shall have effect as though every reference in that clause to “rights and powers” were a reference to rights and powers in respect of the part of such Security Assets so specified or any part thereof.

12.3 Removal

The NLF may, by deed or by instrument in writing signed by any officer or other person authorised for such purpose by it (so far as it is lawfully able and subject to any requirement of the court in the case of an administrative receiver) remove any Receiver appointed by it and may, whenever it deems expedient, appoint any one or more other qualified persons in place of or to act jointly with any other Receiver.

12.4 Powers of Receivers

12.4.1 Any Receiver appointed under this Deed will (subject to any contrary provision specified in his appointment but notwithstanding the Dissolution of the relevant Obligor) have:

(a) excluding in relation to the Scottish Assets, all the rights and powers conferred by the LPA on mortgagors and on mortgagees in possession and on any receiver appointed under the LPA, except that section 106 of the LPA does not apply;

(b) in addition, all the rights and powers of an administrative receiver set out in Schedule 1, Schedule B1 or, as the case may be, Schedule 2 to the Insolvency Act (and whether or not the Receiver is in fact an administrative receiver) and (in the event that the Receiver is an administrative receiver) all the powers exercisable by an administrative receiver by virtue of the provisions of the Insolvency Act; and

(c) in addition, all the rights and powers expressed to be conferred upon the NLF set out in Clause 10 (Enforcement powers) (in relation to the Scottish Assets in so far as permitted by the laws of Scotland).

12.4.2 If there is more than one Receiver holding office at the same time, each Receiver may (unless the document appointing him states otherwise) exercise all of the powers conferred on a Receiver under this Deed individually and to the exclusion of any other Receivers.

- 36 -

12.4.3 A Receiver who is an administrative receiver of the Obligor will have all the rights, powers and discretions of an administrative receiver under the Insolvency Act.

12.5 Agent of Obligor

Any Receiver shall for all purposes and at all times be and be treated as the agent of the relevant Obligor and accordingly any Receiver is deemed to be in the same position as a Receiver duly appointed by a mortgagee under the LPA. The Obligor shall be solely responsible for his contracts, engagements, acts, omissions, defaults and losses and for all liabilities incurred by him and for the payment of his remuneration. No Receiver shall at any time act as, or be deemed to be, agent of the NLF and a Receiver shall be entitled, in the exercise of the rights and powers conferred on it by this Deed, to deal or transact with the NLF or any company owned or controlled, whether directly or indirectly, by the NLF or otherwise with any person connected with the NLF, in relation to any Security Asset, including by way of sale of any Security Asset to the NLF or any company owned or controlled, whether directly or indirectly, by the NLF or otherwise with any person connected with the NLF. The NLF shall not incur any liability (either to the Obligor or to any other person) by reason of the appointment of any Receiver or for any other reason.

12.6 Remuneration

Subject to section 36 or, as the case may be, section 58 of the Insolvency Act, the NLF may from time to time fix the remuneration of any Receiver appointed by it (without being limited to the maximum rate specified in section 109(6) of the LPA if applicable) and may direct payment of such remuneration out of monies accruing to him as Receiver, but the relevant Obligor alone shall be liable for the payment of such remuneration and for all other costs, charges and expenses of the Receiver.

13. DELEGATION

13.1.1 The NLF and any Receiver may delegate, with prior notice to the relevant Obligor, by power of attorney or in any other manner to any person who in the reasonable opinion of the NLF or such Receiver (as the case may be) is appropriately qualified any right, power or discretion exercisable under this Deed.

13.1.2 Any such delegation may be made upon the terms (including power to sub-delegate) and subject to any regulations which the NLF or such Receiver (as the case may be) may think fit.

13.1.3 No such delegation will preclude the subsequent exercise of such power by the NLF or the Receiver or Delegate itself or preclude the NLF from making a subsequent delegation to some other person. Any such delegation may be revoked by the NLF or the Receiver or Delegate at any time.

13.1.4 Neither the NLF nor any Receiver will be in any way liable or responsible to any Obligor for any loss or liability arising from any act, default, omission or misconduct on the part of any Delegate.

- 37 -

14. APPLICATION OF ENFORCEMENT PROCEEDS

14.1 Suspense Account

Until the Secured Liabilities for which any other person may be liable as principal debtor or as co-surety with the Obligor have been paid or discharged in full (or would be once amounts held in the suspense accounts have been applied to such payment or discharge), the NLF (or any trustee or agent on its behalf) may place and retain on a suspense account, for as long as it considers fit, any monies received, recovered or realised under or in connection with this Deed to the extent of such Secured Liabilities without any obligation on the part of the NLF to apply them in or towards the discharge of such Secured Liabilities.

14.2 Payments

All monies arising from any Enforcement shall (except as may be otherwise required by applicable law) be held by the NLF and any Receiver (or any Delegate) and applied in the following order of priority (but without prejudice to the right of the NLF to recover any shortfall from any Obligor):

14.2.1 in or towards payment of all costs, charges, losses, liabilities and expenses of and incidental to the appointment of any Receiver (or any Delegate) and the exercise of any of his rights including his remuneration and all outgoings paid by him;

14.2.2 in or towards the payment or discharge of such of the Secured Liabilities in such order as the NLF in its absolute discretion may from time to time determine; and

14.2.3 after all the Secured Liabilities have been paid or discharged in full, in payment of any surplus to the Obligor or other person entitled to it,

and section 109(8) of the LPA (where applicable) shall be deemed varied and extended in such respect.

15. PROTECTION OF THIRD PARTIES

No person dealing with the NLF, any Receiver or any Delegate shall be bound to enquire:

15.1.1 whether any Secured Liabilities have become or remain due and payable;

15.1.2 whether any right or power which the NLF or any Receiver or Delegate is purporting to exercise has become or is exercisable;

15.1.3 whether any consents, regulations, restrictions or directions relating to such rights or powers have been obtained or complied with or otherwise; or

15.1.4 into the application of any money borrowed or raised or other proceeds of Enforcement.

All the protections given to purchasers from a mortgagee by sections 104 and 107 of the LPA, and to persons dealing with a receiver in sections 42(3) and 55(4) of the

- 38 -

Insolvency Act and in any other legislation for the time being in force, shall (if applicable) apply equally to any person purchasing from or dealing with the NLF, any Receiver or any Delegate.

16. LIABILITY OF NLF, RECEIVERS AND DELEGATES

16.1 Possession

If the NLF, any Receiver or any Delegate shall take possession of the Security Assets, it or he may at any time relinquish such possession.

16.2 The NLF’s liability

The NLF will not in any circumstances (whether by reason of taking possession of the Security Assets or for any other reason whatsoever and whether as mortgagee in possession or on any other basis whatsoever):

16.2.1 be liable to account to any Obligor or any other person for anything except the NLF’s own actual receipts; or

16.2.2 be liable to any Obligor or any other person for any costs, charges, losses, damages, liabilities or expenses arising from or connected with any realisation of the Security Assets or from any act, neglect, default, omission or misconduct of any nature of the NLF, or any of its officers, employees or agents in relation to the Security Assets, except to the extent that they shall be caused by the fraud or wilful default of the NLF or any of its respective officers, employees or agents.

16.3 Receiver’s liability

All the provisions of Clause 16.2 (The NFL’s Liability) shall apply, mutatis mutandis, in respect of the liability of any Receiver or Delegate or any officer, employee or agent of the NLF, any Receiver or any Delegate.

16.4 Indemnity

The NLF and every Receiver, Delegate, attorney, manager, agent or other person appointed by the NLF under this Deed shall be entitled to be indemnified out of the Security Assets in respect of all liabilities and expenses incurred by any of them in the execution or purported execution of any of its rights and against all actions, proceedings, costs, claims and demands in respect of any matter or thing done or omitted in anyway relating to this Deed or the Security Assets, and the NLF and any such Receiver, Delegate, attorney, manager, agent or other person appointed by the NLF under this Deed may retain and pay all sums in respect of them out of any monies received. The obligations contained in this Clause 16.4, shall survive the expiration of this Deed.

17. COVENANT TO PAY

17.1 Secured Liabilities

Each Obligor shall pay and discharge all Secured Liabilities at the time or times when, in the manner in which, and in the currencies in which, they are expressed to be due and payable.

- 39 -

17.2 Default interest

17.2.1 If any Obligor fails to pay any Secured Liability on its due date, it shall pay to the NLF on demand interest at such rate and calculated on such basis as may be, or have been, agreed in relation to the relevant Secured Liability or, to the extent not so agreed, at the rate determined by the NLF to be one per cent. per annum higher than the rate which would have been payable if the overdue amount had constituted a loan with interest at the rate of LIBOR in the currency of the overdue amount for successive interest periods, each of a duration selected by the NLF (acting reasonably). For the purpose of this paragraph (A), “LIBOR” means the rate per annum of the offered quotation for sterling deposits for one month which appears on Telerate screen 3750 on the Telerate Monitor Service (or such other page as may replace Page 3750 on that service or such other system as may be nominated by the British Banker’s Association as the information vendor for the purposes of displaying British Banker’s Association Settlement Rates) at or about 12 noon (showing the rate as at 11.00a.m.) on the first day of the applicable period.

17.2.2 Any interest payable under this Clause 17.2 shall accrue from:

(a) in the case of costs, charges, losses, liabilities, expenses and other sums referred to in Clause 18 (Costs and Expenses), the date on which the relevant cost, charge, loss, liability, expense or sum was expended, paid or debited on account by the NLF without the necessity of any demand being made for payment thereof; or

(b) in any other case, the date on which the relevant Secured Liability became due,

until full payment and discharge of the relevant Secured Liability (both before and after any judgment).

17.2.3 Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each interest period, but will remain immediately due and payable.

18. COSTS AND EXPENSES

Each Obligor shall indemnify the NLF on demand against all Costs and Expenses expended, paid, incurred or debited on account by the NLF in relation to this Deed, and/or any other document referred to in this Deed, including:

18.1.1 in connection with the stamping, filing, registration and perfection of this Deed;

18.1.2 in connection with the granting of any waiver or consent sought by any Obligor or in connection with any variation, amendment, extension or modification of, or supplemental to, this Deed;

- 40 -

18.1.3 in enforcing, protecting, preserving or realising, or attempting to enforce, protect, preserve or realise, the NLF’s rights under this Deed; and

18.1.4 in connection with or contemplation of any Proceedings or the recovery or attempted recovery of any of the Secured Liabilities.

19. STAMP DUTY

Each Obligor shall pay promptly, and in any event before any penalty becomes payable, all stamp, registration, documentary and similar Taxes, if any, payable in connection with the entry into, performance, enforcement or admissibility in evidence of this Deed or any other document referred to in this Deed, and shall indemnify the NLF against any Costs and Expenses with respect to, or resulting from, any delay in paying or omission to pay, any such Tax.

20. CURRENCY INDEMNITY

20.1 Currency indemnity

If, under any applicable law, whether pursuant to a judgment against an Obligor or the Dissolution of an Obligor or for any other reason, any payment under or in connection with this Deed is made or falls to be satisfied in a currency (the “Other Currency”) other than the currency in which the relevant payment is expressed to be payable (the “Required Currency”), then, to the extent that the payment actually received by the NLF (when converted into the Required Currency at the rate of exchange on the date of payment or, if it is not practicable for the NLF to make the conversion on that date, at the rate of exchange as soon afterwards as it is practicable for the NLF to do so or, in the case of a Dissolution, at the rate of exchange on the latest date permitted by applicable law for the determination of liabilities in such Dissolution) falls short of the amount expressed to be due or payable under or in connection with this Deed, each Obligor shall, as an original and independent obligation under this Deed, indemnify and hold the NLF harmless against the amount of such shortfall.

20.2 Rate of exchange

For the purpose of Clause 20.1 (Currency Indemnity), “rate of exchange” means the rate at which the NLF is able on the relevant date to purchase the Required Currency with the Other Currency and shall take into account any commission, premium and other costs of exchange and Taxes payable in connection with such purchase.

21. CERTIFICATES AND DETERMINATIONS

For all purposes, including any Proceedings:

21.1.1 a determination by the NLF; or

21.1.2 a copy of a certificate signed by an officer of the NLF,

of the amount of any indebtedness comprised in the Secured Liabilities or any applicable rate of interest shall, in the absence of manifest error, be conclusive evidence against any Obligor of the matters to which it relates.

- 41 -

22. POWER OF ATTORNEY

22.1 Appointment

Each Obligor appoints, irrevocably (within the meaning of section 4 of the Powers of Attorney Act 1971) and by way of security for the performance of its obligations under this Deed, the NLF, every Receiver and every Delegate severally to be the attorney of the Obligor, on its behalf and in its name or otherwise and as its act and deed, at such time and in such manner as the attorney may think fit:

22.1.1 to take any action which it is obliged to take under this Deed but has not taken promptly following a request to do so from the NLF or any Receiver; and

22.1.2 to take whatever action may be required for enabling the NLF and any Receiver and Delegate to exercise all or any of the rights, powers, authorities and discretions conferred on them by or pursuant to this Deed or by law,

and the taking of action by the attorney or attorneys shall (as between it and any third party) be conclusive evidence of its right to take such action.

22.2 Ratification

Each Obligor undertakes to ratify and confirm everything that any attorney does or purports to do in the exercise or purported exercise of the power of attorney in Clause 22.1 (Appointment).

23. ASSIGNMENT AND ASSIGNATION; ADDITIONAL OBLIGORS

23.1 The NLF

Nothing in this Deed shall prevent the assignment, assignation, transfer or other disposal of the right and/or obligations of the NLF to (a) its successors in title, (b) a Minister of the Crown, (c) the Treasury, (d) a department, non-departmental body or other agency of the Crown, (e) any body corporate established by statute some or all of the members of which are appointed by a Minister of the Crown or other government entity or (f) any person directly or indirectly wholly owned by, or held on trust for, the Secretary of State or other Minister of the Crown.

23.2 Obligors

The rights, interests and obligations of each Obligor under this Deed are personal to it. Accordingly, they are not capable of being assigned, transferred or delegated in any manner. Each Obligor undertakes that it shall not at any time assign or transfer, or attempt to assign or transfer, any of its rights, interests or obligations under or in respect of this Deed to any person without the consent of the Secretary of State and the NLF.

23.3 Additional Obligors

23.3.1 Subject to paragraph (D), the NLF may, by written notice to British Energy Group plc, require that any member of the Group who is not specified in Schedule 1 (Obligors) (each, an “Additional Obligor”) shall become an additional Obligor if it is lawful for that member to do so.

- 42 -

23.3.2 If such a notice is delivered, British Energy Group plc shall procure that within 5 Business Days of delivery of such a notice, the Additional Obligor delivers to the NLF:

(a) a duly completed and executed Accession Deed; and

(b) the documents specified in Part B of Schedule 4 (Accession) in form and substance satisfactory to the NLF.

23.3.3 Immediately upon execution of an Accession Deed:

(a) Schedule 1 (Obligors) shall be deemed to be amended to reflect the addition of the relevant Additional Obligor; and

(b) all references in this Deed to “Obligors” or “Obligor” shall be deemed to include the Additional Obligor.

23.3.4 The NLF may not, pursuant to paragraph 23.3.1, require either of the Eggborough Subsidiaries to become an Additional Obligor unless and until either:

(a) Eggborough Power Limited shall have ceased to own the Eggborough Plant;

(b) Eggborough Power (Holdings) Limited shall have ceased to own the shares in Eggborough Power Limited; or

(c) the Eggborough Security (as defined in the terms and conditions of the bonds constituted by the Trust Deed) is released in accordance with its terms (subject to the satisfaction of the foregoing tests).

24. AMENDMENTS

This Deed may not be amended, modified or waived in any respect whatsoever, without the prior written consent of the NLF given with express reference to this Clause 24 and expressly stated to be intended to operate as the NLF’s consent to such amendment, modification or waiver.

25. NOTICES

25.1 Communications in writing

All notices and other communications shall be given in the English language and in writing and, unless otherwise stated, may be made by letter or by facsimile transmission.

25.2 Addresses

The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with this Deed is that identified with its name below or any substitute address, fax number or department or officer as the Party may notify to the other Parties by not less than five Business Days’ notice.

- 43 -

Party	Address	Facsimile No.	Attention
NLF	78 Hatton Garden London EC1 N 8JA	020 7405 6736	Company Secretary
Obligors	Systems House Alba Campus Livingston EH54 7EG	01506 408 824	Company Secretary
The Secretary of State	One Victoria Street London SW11 OET	020 7215 0138	Head of BE Team Energy Group DTI

25.3 Delivery

Any communication or document made or delivered by one person to another under or in connection with this Deed will only be effective:

25.3.1 if by way of facsimile transmission, when received in legible form; or

25.3.2 if by way of letter, when delivered to the address specified in Clause 25.2 (Addresses) (or such alternative address as has been notified in accordance with that clause),

and, if a particular department or officer is specified as part of its address details provided under Clause 25.2 (Addresses), if addressed to that department or officer.

26. REMEDIES AND WAIVERS

No delay or omission by the NLF in exercising any right provided by law or under this Deed shall impair, affect, or operate as a waiver of, that or any other right. The single or partial exercise by the NLF of any right shall not preclude or prejudice any other or further exercise of that, or the exercise of any other, right. The rights of the NLF under this Deed are in addition to and do not affect any other rights available to it by law.

27. PARTIAL INVALIDITY

27.1.1 If, at any time, any provision of this Deed is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions under the law of that jurisdiction or any other jurisdiction, nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

27.1.2 The Parties shall enter into good faith negotiations, but without any liability whatsoever in the event of no agreement being reached, to replace any illegal,

- 44 -

invalid, or unenforceable provision with a view to obtaining the same commercial effect as this Deed would have had if such provision had been legal, valid and enforceable.

28. PERPETUITY PERIOD

The perpetuity period of the trusts created under this Deed shall be 80 years.

29. EXECUTION AS A DEED

Each of the Parties to this Deed intends it to be a deed and confirms that it is executed and delivered as a deed, in each case notwithstanding the fact that any one or more of the Parties may only execute this Deed under hand.

30. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

30.1 Rights of Receivers

Clause 16 (Liability of the NLF, Receivers and Delegates) confers a benefit on Receivers and, subject to the remaining provisions of this Clause 30, is intended to be enforceable by any Receiver by virtue of the Contracts (Rights of Third Parties) Act 1999. The parties to this Deed do not intend that any term of this Deed, apart from Clause 16 (Liability of the NLF, Receivers and Delegates) should be enforceable by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Deed.

30.2 Variations

Notwithstanding the provisions of Clause 30.1 (Rights of Receivers) this Deed may be rescinded or varied in any way and at any time by the parties to this Deed without the consent of any Receiver.

30.3 Proceedings

A Receiver shall be entitled to enforce the terms of Clause 16 (Liability of the NLF, Receivers and Delegates) only by way of proceedings in the courts specified in Clause 31 (Jurisdiction).

31. JURISDICTION

Each of the parties irrevocably agrees for the exclusive benefit of the NLF that the courts of England and Scotland are to have jurisdiction to settle any disputes which may arise out of or in connection with this Deed and accordingly any Proceedings may be brought in such courts. Each of the Obligors irrevocably waives (and irrevocably agrees not to raise) any objection it may now or hereafter have to the venue of any Proceeding being brought in any such court and any claim it may now or hereafter have that any Proceeding brought in any such court has been brought in an inconvenient forum and further irrevocably agrees that a judgment in any proceedings brought in the courts of England or Scotland shall be conclusive and binding upon them and may be enforced in the courts of any other jurisdiction. Any Proceedings brought by a Receiver to enforce the terms of Clause 16 (Liability of the NLF, Receivers and Delegates) must be brought in the courts of England or Scotland.

- 45 -

32. GOVERNING LAW

This Deed is governed by and shall be construed in accordance with English law save that in relation to the floating charges created by the Scottish Obligor and all Scottish Assets (and subject always to Chapter II of Part III of the Insolvency Act 1986 it shall be governed by the law of Scotland.

33. AGENT FOR SERVICE

33.1 Each person specified in Schedule 1 (Obligors) as being incorporated other than in England and Wales (each, an “Appointing Party”) irrevocably appoints BEG to be its agent for the receipt of Service Documents and agrees that any Service Document may be effectively served on it in connection with Proceedings in England and Wales by service on its agent effected in any manner permitted by the Civil Procedure Rules 1998.

33.2 If BEG at any time ceases for any reason to act as such in respect of any Appointing Party, that Appointing Party shall appoint a replacement agent having an address for service in England and Wales and shall notify the NLF of the name and address of the replacement agent. Failing such appointment and notification, the NLF shall be entitled by notice to appoint a replacement agent to act on behalf of the relevant Appointing Party. The provisions of this Clause 33 (Agent for Service) applying to service on an agent apply equally to service on a replacement agent.

33.3 A copy of any Service Document served on an agent shall be sent by post to the relevant Appointing Party: Failure or delay in so doing shall not prejudice the effectiveness of service of the Service Document.

33.4 “Service Document” means a claim form, application notice, order, judgment or other document relating to any Proceedings.

The parties consent to registration hereof for preservation and execution.

IN WITNESS of which this document has been executed as a deed and delivered on the date stated at the beginning of this Deed.

IN WITNESS WHEREOF these presents consisting of this and the 46 preceding pages and the Schedules annexed to it are executed as follows:

The Corporate seal of the SECRETARY OF

STATE FOR TRADE AND INDUSTRY hereunto

affixed is authenticated by Ruth Hannant

An Official in the Department of Trade and Industry

- 46 -

EXECUTED as a deed by	)
NUCLEAR GENERATION DECOMMISSIONING	)
FUND LIMITED	)
(to be renamed Nuclear Liabilities Fund Limited)	)

acting by a director and its secretary

or two directors

at

on the                      day

of January 2005

EXECUTED as a deed by

and

as attorneys for

BRITISH ENERGY GROUP PLC

at

on the                      day

of January 2005

in the presence of:

Signature of Witness

Name of Witness

Address of Witness

Occupation of Witness

- 47 -

EXECUTED as a deed by

and

as attorneys for

BRITISH ENERGY HOLDINGS PLC

at

on the                      day

of January 2005

in the presence of:

Signature of Witness

Name of Witness

Address of Witness

Occupation of Witness

EXECUTED as a deed by

and

as attorneys for

BRITISH ENERGY PLC

at

on the                      day

of January 2005

in the presence of:

Signature of Witness

Name of Witness

Address of Witness

Occupation of Witness

- 48 -

EXECUTED as a deed by

and

as attorneys for

BRITISH ENERGY GENERATION (UK) LIMITED

at

on the                      day

of January 2005                      day

in the presence of:

Signature of Witness

Name of Witness

Address of Witness

Occupation of Witness

EXECUTED as a deed by

and

as attorneys for

BRITISH ENERGY GENERATION LIMITED

at

on the                      day

of January 2005

in the presence of:

Signature of Witness

Name of Witness

Address of Witness

Occupation of Witness

- 49 -

EXECUTED as a deed by and

as attorneys for

BRITISH ENERGY POWER AND ENERGY TRADING LIMITED

at

on the                      day

of January 2005

in the presence of:

Signature of Witness

Name of Witness

Address of Witness

Occupation of Witness

EXECUTED as a deed by

and

as attorneys for

BRITISH ENERGY INVESTMENT LIMITED

at

on the                      day

of January 2005

in the presence of:

Signature of Witness

Name of Witness

Address of Witness

Occupation of Witness

- 50 -

EXECUTED as a deed by

and

as attorneys for

BRITISH ENERGY LIMITED

at

on the                      day

of January 2005

in the presence of:

Signature of Witness

Name of Witness

Address of Witness

Occupation of Witness

EXECUTED as a deed by

and

as attorneys for

BRITISH ENERGY INTERNATIONAL HOLDINGS LIMITED

at

on the                      day

of January 2005

in the presence of:

Signature of Witness

Name of Witness

Address of Witness

Occupation of Witness

- 51 -

EXECUTED as a deed by

and

as attorneys for

PEEL PARK FUNDING LIMITED

at

on the                      day

of January 2005

in the presence of:

Signature of Witness

Name of Witness

Address of Witness

Occupation of Witness

EXECUTED as a deed by

and

as attorneys for

BRITISH ENERGY TREASURY FINANCE LIMITED

at

on the                      day

of January 2005

in the presence of:

Signature of Witness

Name of Witness

Address of Witness

Occupation of Witness

- 52 -

EXECUTED as a deed by

and

as attorneys for

BRITISH ENERGY RENEWABLES LIMITED

at

on the                      day

of January 2005

in the presence of:

Signature of Witness

Name of Witness

Address of Witness

Occupation of Witness

EXECUTED as a deed by

and

as attorneys for

BRITISH ENERGY DIRECT LIMITED

at

on the                      day

of January 2005

in the presence of:

Signature of Witness

Name of Witness

Address of Witness

Occupation of Witness

- 53 -

SCHEDULE 1

OBLIGORS

This is the Schedule 1 referred to in the foregoing Debenture among British Energy Group plc, Nuclear Generation Decommissioning Fund Limited, Secretary of State for Trade and Industry and others dated January, 2005.

Company	Country of Incorporation
British Energy Group plc	Scotland
British Energy Holdings plc	Scotland
British Energy plc	Scotland
British Energy Generation (UK) Limited	Scotland
British Energy Generation Limited	England
British Energy Power and Energy Trading Limited	Scotland
British Energy Investment Limited	Scotland
District Energy Limited	England
British Energy International Holdings Limited	Scotland
Peel Park Funding Limited	Guernsey (with a branch registered in Scotland)
British Energy Treasury Finance Limited	Scotland
British Energy Renewables Limited	Scotland
British Energy Direct Limited	England

- 54 -

SCHEDULE 2

KEY PROPERTIES

This is the Schedule 2 referred to in the foregoing Debenture among British Energy Group plc, Nuclear Generation Decommissioning Fund Limited, Secretary of State for Trade and Industry and others dated      January, 2005.

All that land and property comprising the following (including all Real Property relating to that land and property of the type described in any of paragraphs (d) to (h) of the definition of Real Property in Clause 1.1 of this Deed, but excluding any Billing Process Asset):

Property description		Obligor
(A)	Sizewell Power Station and adjoining land, Suffolk - registered at H.M. Land Registry with Title Absolute under Title Numbers SK160398, SK160390, SK160388 and SKI 55462	BEG
(B)	Dungeness Power Station and adjoining land, Kent - registered at H.M. Land Registry with Title Absolute under Title Number K761827	BEG
(C)	Hinkley Point Power Station and adjoining land, Somerset - registered at H.M. Land Registry with Title Absolute under Title Numbers ST127567 and ST127518	BEG
(D)	Heysham Power Station and adjoining land, Lancashire - registered at H.M. Land Registry with Title Absolute under Title Number LA779195	BEG
(E)	Hartlepool Power Station and adjoining land, Cleveland - registered at H.M. Land Registry with Title Absolute under Title Number CE136369,	BEG

- 55 -

SCHEDULE 3

ORIGINAL CHARGED SECURITIES

This is the Schedule 3 referred to in the foregoing Debenture among British Energy Group plc, Nuclear Generation Decommissioning Fund Limited, The Secretary of State for Trade and Industry and others dated      January, 2005.

No. of Shares	Class of Shares	Issuer of Original Charged Securities
All issued ordinary shares		British Energy Holdings plc
All issued ordinary shares		BEG (UK)
All issued ordinary shares		BEG
All issued ordinary shares		British Energy Power and Energy Trading Limited
All issued ordinary shares		British Energy Investment Limited
All issued ordinary shares		District Energy Limited
All issued ordinary shares		British Energy International Holdings Limited
All issued ordinary shares		British Energy Treasury Finance Limited
All issued ordinary shares		British Energy Renewables Limited

- 56 -

SCHEDULE 4

ACCESSION

This is the Schedule 4 referred to in the foregoing Debenture among British Energy Group plc, Nuclear Generation Decommissioning Fund Limited, The Secretary of State for Trade and Industry and others dated      January, 2005.

Part A

Form of Accession Deed

THIS DEED POLL is made on [date] by [Acceding Party], a company incorporated [in/under the laws of] [    ] under registered number [    ], whose registered office is at [    ] (the “Additional Obligor”).

WHEREAS:

This Deed Poll is supplemental to the Debenture creating Fixed and Floating Charges in respect of the Decommissioning Default Payment dated January, 2005 and entered into between the Obligors (as defined therein) and Nuclear Liabilities Fund Limited (the “NLF”) (such agreement, as amended, supplemented or novated from time to time, the “DDP Debenture”).

THIS DEED POLL WITNESSES as follows:

1. Words and expressions defined in the DDP Debenture have the same meaning in this Deed Poll.

2. With effect from the date of this Deed Poll, the Additional Obligor undertakes to adhere to and be bound by the provisions of the DDP Debenture, and to perform the obligations imposed by the DDP Debenture, in all respects as if the Additional Obligor were a party to the DDP Debenture and named therein as an Obligor.

3. The Additional Obligor acknowledges and agrees that the execution of this Deed Poll shall not operate as a release of the obligations or liabilities of any other Obligor under the DDP Debenture.

4. The address and facsimile number of the Additional Obligor for the purposes of clause 25 (Notices) of the DDP Debenture are as follows:

Party	Address	Facsimile no.	FAO
•	[Its registered office from time to time]	•	•

5. This Deed Poll is governed and shall be construed in accordance with English law save that in relation to the floating charges created by the Scottish Obligors and all Scottish Assets (and subject always to Chapter II of Part III of the Insolvency Act 1986), it shall be governed by the law of Scotland.

- 57 -

6. The provisions of clause 31 (Jurisdiction) of the DDP Debenture shall apply equally to this Deed Poll.

7. [The agent for receipt of Service Documents on behalf of the Additional Obligor for the purposes of clause [1 (Agent for Service) of the DDP Debenture is [*] of [*].]

IN WITNESS of which this Deed Poll has been executed and delivered by the Additional Obligor on the date which first appears above.

[Insert execution block for Acceding Party]

- 58 -

Part B

Other accession documents

In respect of each proposed Additional Obligor:

(a) A copy of a resolution of the board of directors of that Company (or a Committee of that board), accompanied by a copy of a resolution of that board appointing the relevant Committee:

(i) approving the terms of this Deed and of the Accession Deed;

(ii) authorising a specified person or persons to execute the Accession Deed; and

(iii) authorising a specified person or persons on its behalf to sign and/or despatch all other documents to be signed and/or despatched by it in accordance with this Deed.

(b) A copy of the memorandum and articles of association and certificate of incorporation of the Additional Obligor.

(c) A specimen of the signature of each person authorised by the resolution referred to in paragraph (a) above.

(d) A certificate of an authorised signatory of the Additional Obligor certifying that each copy document specified in this Part B of Schedule 4 (Accession) is correct, complete and in full force and effect as at a date no earlier than the date of the Accession Deed.

(e) Any additional documents required by the NLF to enable the NLF to be granted security on terms satisfactory to it in respect of the Secured Liabilities.

(f) Such other documents and legal opinions as the NLF may reasonably require.

- 59 -

EX-4.26

Exhibit 4.26

Dated: 14 January 2005

THE SECRETARY OF STATE FOR TRADE AND INDUSTRY

BRITISH ENERGY GENERATION (UK) LIMITED

BRITISH ENERGY GENERATION LIMITED

BRITISH ENERGY GROUP PLC

-AND-

BRITISH ENERGY HOLDINGS PLC

OPTION AGREEMENT

CONTENTS

Clause		Page
1.	Interpretation	2
2.	Option	19
3.	Partial Closure Of Stations	22
4.	Consideration	24
5.	Sale And Acquisition Of A Station	24
6.	Excluded Assets And Re-Use Of Existing Equipment	25
7.	Completion Conditions	27
8.	Pre-Completion	28
9.	Access And Information	31
10.	Completion	34
11.	Allocation Of Costs	36
12.	Action After Completion	39
13.	Transfer Of Contracts	40
14.	Assumed Obligations	44
15.	Environmental Matters	45
16.	Risk And Insurance	47
17.	Employees	47
18.	Intellectual Property	49
19.	Records And Information	53
20.	Costs And Expenses	54
21.	Adjustment For Inflation	54
22.	Be Party Warranties And Undertakings	55
23.	Station Purchaser’s Remedies	56
24.	Acknowledgements	57
25.	Conduct Of Proceedings	57
26.	Interest	58
27.	Compliance With Applicable Law	59
28.	Indemnities	59
29.	Limitation On Liability	63
30.	Dispute Resolution	63
31.	Variation	65

32.	No Partnership	65
33.	Duties And Taxes	65
34.	Remedies And Waivers	66
35.	Assignment	67
36.	Entire Agreement	70
37.	Notices	70
38.	Announcements	72
39.	Confidentiality	72
40.	Counterparts	74
41.	Invalidity	74
42.	Contracts (Rights Of Third Parties) Act 1999	74
43.	Choice Of Governing Law	74
44.	Jurisdiction	74
45.	Change Of Law	75
46.	Agent For Service	75
SCHEDULE 1 POWER STATIONS PART 1: POWER STATIONS		77
SCHEDULE 2 OPTION NOTICE		79
SCHEDULE 3 DISPOSAL OF STATIONS		79
SCHEDULE 4 COMPLETION CONDITIONS		85
SCHEDULE 5 CONDUCT OF BUSINESS BEFORE COMPLETION		87
SCHEDULE 6 COMPLETION ARRANGEMENTS		89
SCHEDULE 7 GENERAL PRINCIPLES FOR ANCILLARY SERVICES CONTRACT		91
SCHEDULE 8 GENERAL PRINCIPLES FOR M&O CONTRACT		96
SCHEDULE 9 GENERAL PRINCIPLES FOR DEFUELLING AGREEMENT		101
SCHEDULE 10 GENERAL PRINCIPLES FOR PARTIAL CLOSURE M&O CONTRACT		106
SCHEDULE 11 REPRESENTATIONS AND WARRANTIES		111
SCHEDULE 12 PROVISION OF INFORMATION		120
SCHEDULE 13 PENSIONS		121
SCHEDULE 14 STATION ASSETS		122
SCHEDULE 15 STATION SITES		124

SCHEDULE 16 DUNGENESS B	144
SCHEDULE 17 HARTLEPOOL	148
SCHEDULE 18 HEYSHAM PART A : PROPERTY	152
SCHEDULE 19 HINKLEY POINT B	158
Part A:        Property	158
Part B:        Selling Beg Entity	158
Part C :        Encumbrances	158
Part D:        Property Agreements	158
Part E:        Property Documents	159
Part F:        Leases	160
Part G:        Occupational Leases	160
SCHEDULE 20 SIZEWELL B	162
Part A:        Property	162
Part B:        Selling Beg Entity	162
Part C:        Encumbrances	162
Part D:        Property Agreements	162
Part E:        Property Documents	163
Part F:        Leases	163
Part G:        Occupational Leases	163
SCHEDULE 21 HUNTERSTON B	165
Part A:        Property	165
Part B:        Seller	165
Part C:        Encumbrances	165
Part D:        Property Agreements	166
Part E:        Property Documents	167
Part F:        Lease	168
Part G:        Occupational Leases	169
SCHEDULE 22 TORNESS	171
Part A:        Property	171
Part B:        Seller	171
Part C:        Encumbrances	171
Part D:        Property Agreements	172
Part E:        Property Documents	173
Part F:        Lease	173
Part G:        Occupational Leases	174
SCHEDULE 23 EXCLUDED MARKS	177
Part A:        Registered Trade Marks And Applications	177
Part B:        Unregistered Trade Marks	179
SCHEDULE 24	180
Part A:        Hunterston Power Station	180
Part B:        Torness Power Station	190

OPTION AGREEMENT

DATE: 14 January, 2005

PARTIES:

(1) THE SECRETARY OF STATE FOR TRADE AND INDUSTRY, of One Victoria Street, London SW1H OET (the “Secretary of State”);

(2) BRITISH ENERGY GENERATION (UK) LIMITED, of Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC117121) (“BEG(UK)”);

(3) BRITISH ENERGY GENERATION LIMITED, of Barnett Way, Barnwood, Gloucester GL4 3RS (registered in England No. 03076445) (“BEG”);

(4) BRITISH ENERGY GROUP PLC, of Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC270184) (“BE plc”); and

(5) BRITISH ENERGY HOLDINGS PLC, of Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC270186) (“Holdings”).

BACKGROUND

(A) In 1996 the Secretary of State privatised certain parts of the nuclear generation industry in the United Kingdom through a sale of shares in British Energy Plc (“British Energy”).

(B) In September 2002, British Energy initiated discussions with the Secretary of State with a view to seeking immediate financial support and to enable a longer term restructuring of the Group to take place.

(C) In November 2002, British Energy announced the principles of a restructuring of the Group with its significant financial creditors which, together with other proposals agreed between British Energy and the Secretary of State, were intended to lead to a solvent restructuring of British Energy.

(D) British Energy, certain other members of the British Energy group and its significant financial creditors entered into a creditors’ restructuring agreement (the “Creditor Restructuring Agreement”) dated as of 30 September 2003 under the terms of which a solvent restructuring of the British Energy group would be effected. The solvent restructuring of the British Energy group to be thereby effected involved, inter alia, the creation of a new ultimate parent company, BE plc and a new wholly-owned subsidiary of BE plc, Holdings. BE plc and Holdings are the holding companies of British Energy, BEG and BEG(UK).

(E) The proposals agreed between the Secretary of State and British Energy in connection with the restructuring of British Energy include the grant to the Secretary of State by BEG and BEG(UK) of options to acquire certain of their assets.

(F) On 1 October 2003, British Energy, BEG, BEG(UK), certain other members of the Group, NLF and the Secretary of State entered into an agreement (the “Government

**** indicates information which has been omitted and filed separately with the Commission

- 1 -

Restructuring Agreement”) under the terms of which they agreed to enter into the agreements that constitute the Liabilities Documents (as defined below), including, amongst other agreements, this Agreement.

(G) Subject to the conditions set out in the Government Restructuring Agreement (which have been satisfied in full or waived in accordance with the terms thereof), the parties have agreed, inter alia, to enter into this Agreement in order to record the provisions governing the grant and exercise of the options described in Recital (E).

THE PARTIES AGREE as follows:

1. INTERPRETATION

1.1 In this Agreement (including the Recitals):

“Acquired Station”	has the meaning set out in clause 6.3;
“Acquisition Warranties”	has the meaning set out in clause 22.2;
“Additional Land”	means any land added to a Site Transfer pursuant to paragraph 1.1.1 or 1.2 of Part 1 of Schedule 15 (Station Sites);
“Agreed Rate”	in relation to interest accruing in respect of any day means a rate of 2 (two) per cent. above LIBOR;
“Agricultural Tenancies”	means (i) Minute of Lease between South of Scotland Electricity Board and Torness Farm dated 30 July and 5 August 1985 as varied by (1) Missives for Extension of lease dated 7 and 19 April 1995 and (2) Minute of Agreement between British Energy Generation (UK) Limited and Torness Farm dated 17 and 24 June 2001; (ii) Lease between Huntor Limited and Hunterston Estates Limited dated 24 December 1993 and 12 January 1994, as varied by Post Lease Agreement between Huntor Limited and Hunterston Estates Limited dated 12 and 20 January 1994; and (iii) Lease between British Steel Corporation and Messrs Deans and Sons dated 11 February and 6 March 1987 as varied by Extension of Lease between British Steel plc and Messrs Deans and Sons dated 16 July 1991 and 29 May 1992 so far as these affect the Scottish Stations and any Additional Land;

**** indicates information which has been omitted and filed separately with the Commission

- 2 -

“Ancillary Employee”	means an employee of any member of the Group engaged wholly or mainly in the provision of the Ancillary Services;
“Ancillary Services”	means the services being provided under an Ancillary Services Contract;
“Ancillary Services Contract”	means a contract for the provision of ancillary services entered into pursuant to, and in accordance with the terms of, clause 8.7.1;
“Appointing Parties”	has the meaning set out in clause 46.1;
“Assumed Obligations”	has the meaning set out in clause 14.2;
“BEG Entity”	means each of BEG and BEG(UK);
“BE Party”	means each of BEG, BEG(UK), BE plc and Holdings;
“BNFL Contracts”	means:
	(A)	the BNFL Historic Contracts;
	(B)	the agreement dated 16th May, 2003 between (1) BEG(UK), (2) British Nuclear Fuels plc, (3) British Energy plc and (4) British Energy Trading Services Limited regarding spent fuel management services;
	(C)	the agreement dated 16th May, 2003 between (1) BEG, (2) British Nuclear Fuels plc, (3) British Energy plc and (4) British Energy Trading Services Limited regarding spent fuel management services;
	(D)	the BNFL Ancillary Agreements; and
	(E)	the BNFL Front-end Agreements (as defined in the Creditor Restructuring Agreement);
“Board”	means the board of directors of BEG or BEG(UK), as the case may be;
“British Energy”	has the meaning given in Recital (A);
“Closed Reactor”	has the meaning set out in clause 3.1;

**** indicates information which has been omitted and filed separately with the Commission

- 3 -

“Completion”	means, in relation to any Station, completion of the sale and acquisition of that Station pursuant to the exercise by the Secretary of State of the relevant Station Option;
“Completion Conditions”	means the conditions (listed in Schedule 4 (Completion Conditions)) to the sale and acquisition of any Station pursuant to this Agreement;
“Completion Date”	has the meaning set out in clause 10.3;
“Contracts”	means all the contracts relating to the Operation of a Station current at the Completion Date to which any member of the Group is a party or the benefit of which is held in trust for any member of the Group or has been assigned to any member of the Group, but excluding:
	(A)	the Trading Contracts;
	(B)	the Station Intellectual Property Licences;
	(C)	contracts of employment;
	(D)	Leases;
	(E)	Occupational Leases;
	(F)	Property Agreements;
	(G)	Property Documents; and
	(H)	the BNFL Contracts,
	in each case relating to that Station;
“Deed of Adherence”	means a deed of adherence in the form or substantially in the form set out in Part 1 of Schedule 3 (Disposal of Stations);
“Deed of Release”	means a deed of release in the form or substantially in the form set out in Part 3 of Schedule 3 (Disposal of Stations);
“Defuelling Contract”	means a contract for the de-fuelling of a Station entered into pursuant to, and in accordance with, clause 8.7.3;

**** indicates information which has been omitted and filed separately with the Commission

- 4 -

“Disclosure Letter”	means, in relation to the sale and acquisition of a Station pursuant to this Agreement, the letter written by the selling BEG Entity to the relevant Station Purchaser disclosing facts relating to the Station for the purposes of clause 22 (BE Party Warranties and Undertakings);
“Dispute”	has the meaning given in clause 30.1;
“Due Date”	has the meaning given in clause 26.4;
“Early Closure Date”	has the meaning set out in clause 9.5;
“Early Closure Notice Date”	means the date on which the Secretary of State receives a Formal Notice of Early Closure in respect of a Station;
“Early Partial Closure Date”	has the meaning set out in clause 9.7;
“Early Partial Closure Notice Date”	means the date on which the Secretary of State receives a Formal Notice of Early Partial Closure in respect of a Station;
“Effective Date”	means:
	(A)	in respect of the exercise of an Option to Decommission:
		(i)	prior to the Scheduled Closure Date or Early Closure Date of that Station, the Scheduled Closure Date or Early Closure Date (as the case may be); and
		(ii)	on or after the Scheduled Closure Date or Early Closure Date of that Station, on Completion;
	(B)	in respect of the exercise of an Option to Operate:
		(i)	the earlier of Completion and the Scheduled Closure Date, in relation to a Station which Closes on its Scheduled Closure Date; and

**** indicates information which has been omitted and filed separately with the Commission

- 5 -

		(ii)	the later of the Early Closure Date and 65 Business Days after the Early Closure Notice Date, in relation to a Station which Closes on an Early Closure Date.
“Environmental Law”	means, in relation to either the Operation of the Station or in relation to any of the Station Sites, all applicable international treaties, laws, conventions or other agreements between states, European Union directives and regulations, statutes and subordinate legislation and other national, federal, state and local laws, common laws or civil code industry agreements, guidance notes or codes of conduct insofar as they relate to or apply to from time to Environmental Matters;
“Excluded Assets”	means the Strategic Spares and the Excluded Fuel;
“Excluded Fuel”	means, in respect of a Station, fuel located at that Station which has not been loaded into a reactor at Completion;
“Execution Date”	means the date on which this Agreement is signed by all parties to it;
“Exercise Period”	means the period during which an Option to Decommission or an Option to Operate may be exercised pursuant to clause 2.5, or a Partial Closure Option may be exercised pursuant to clause 3.5, and “Option to Decommission Exercise Period”, “Option to Operate Exercise Period” and “Partial Closure Option Exercise Period” shall be construed accordingly;
“Expert”	has the meaning set out in clause 30.5;
“Expert Resolution”	means resolution of a Dispute by an Expert pursuant to, and in accordance with the terms of, clause 30 (Dispute Resolution);
“Formal Notice of Early Closure”	has the meaning set out in clause 9.5;
“Formal Notice of Early Partial Closure”	has the meaning set out in clause 9.7;

**** indicates information which has been omitted and filed separately with the Commission

- 6 -

“Hunterston B”	means the Scottish Station known as Hunterston B (as described in paragraph 7 of Schedule 1 (Power Stations));
“Industry Document”	means:
	(A)     any Electricity Generation Licence;
	(B)      any of the documents referred to in paragraph 3 of Schedule 4 (Completion Conditions); and
	(C)      any other code, agreement, licence or any other document which the operator or owner of any Station is required (directly or indirectly) to be party to or comply with (in whole or in part) pursuant to any of the foregoing or any Applicable Law;
“Increased Excluded Liabilities”	means, where the Secretary of State has exercised a Station Option in respect of a Station, any increase in the Excluded Liabilities resulting from any act or omission of the Secretary of State (in her capacity as Station Purchaser) or the Station Purchaser after the Effective Date;
“Information”	means, in relation to a Station, all information, know-how and techniques (in whatever form held) including all:
	(A)     formulae, designs, specifications, drawings, data, manuals and instructions;
	(B)      customer lists, sales, marketing and promotional information;
	(C)      business plans and forecasts; and
	(D)     technical or other expertise,
	relating to that Station;
“Initial Resolution Period”	has the meaning given in clause 30.3;
“Information Technology”	means computer hardware, software, network and/or other information technology (whether embedded or otherwise);

**** indicates information which has been omitted and filed separately with the Commission

- 7 -

“Insolvency Event”	means, in relation to a person:
	(A)     an order being made, a petition being presented, or a meeting being convened to consider or pass a resolution for the winding up of that person;
	(B)      an administration order being made or a petition being presented for such an order in relation to that person;
	(C)      a voluntary arrangement being proposed under section 1 of the Insolvency Act 1986 in relation to that person;
	(D)     a receiver (which expression shall include an administrative receiver) being appointed in respect of any of the assets of that party;
	(E)      a distress, distraint, charging order, garnishee order, execution or other process being levied or applied for in respect of any of the assets of that party; or
	(F)      an event analogous to the foregoing has occurred in or outside England and Wales or Scotland in relation to that person;
“Intellectual Property”	means:
	(A)     patents, database rights and topography rights and rights in Information;
	(B)      subject to paragraph (C) below, copyrights (including rights in computer software) and rights in designs; and
	(C)      (in respect of each Station, only to the extent that they relate exclusively to that Station) trade marks, service marks and other rights in trade names, business names and signs,

**** indicates information which has been omitted and filed separately with the Commission

- 8 -

	(whether or not any of these is registered and including applications for registration of any such thing) and all rights or forms of protection of a similar nature or having equivalent or similar effect to any of these which may subsist anywhere in the world;
“Lease”	means where any part of a Station Site is held under a lease or occupational licence, the lease or occupational licence referred to in Part F of the applicable Property Schedule so far as subsisting at the time of transfer or any future lease or licence pursuant to which any part of that Station Site may be held (entered into with the consent of the Secretary of State), in each case so far as they relate to that Station Site and are subsisting at the Completion Date and as they may be supplemented, varied, renewed, extended or novated from time to time with such consent;
“Magnox”	means Magnox Electric plc of 1100 Daresbury Park, Daresbury, Cheshire WA4 4GB (No. 02264251);
“M&O Employees”	means individuals, to be identified pursuant to clause 17.5, who are engaged by a member of the Group to work wholly or mainly in connection with an M&O Contract whose contracts of employment as a consequence of the termination of the M&O Contract shall have effect after the termination of their M&O Contract as if originally made with the relevant Station Purchaser or Third Party Service Provider by virtue of the Regulations;
“M&O Contract”	means a contract for the maintenance and operation of a Station entered into pursuant to, and in accordance with, clause 8.7.2;
“New Requirement”	has the meaning set out in clause 7.7.1;
“NLFA”	means the Nuclear Liabilities Funding Agreement of even date between the Secretary of State, NLF and each of the BE Parties;

**** indicates information which has been omitted and filed separately with the Commission

- 9 -

“Occupational Leases”	means in relation to a Station Site and any Additional Land, the occupational leases, tenancies and licences the details of which are set out in Part G of the applicable Property Schedule so far as subsisting at the time of transfer and any future lease, underlease, sublease, licence agreement, tenancy or right to occupy in each case howsoever described (entered into with the consent of the Secretary of State such consent not being required in the case of grazing licences for less than one year not conferring security of tenure of land outside the security fence) in each case so far as they relate to that Station Site and any Additional Land and are subsisting at the Completion Date and as they may be supplemented, varied, renewed, extended or novated from time to time with such consent (such consent not being required in the case of grazing licences outside the security fence for less than one year not conferring security of tenure of land);
“Option Notice”	means an option notice in the form or substantially the form set out in Schedule 2 (Option Notice);
“Option to Decommission”	has the meaning set out in clause 2.4.1;
“Option to Operate”	has the meaning set out in clause 2.4.2;
“Partial Closure”	has the meaning set out in clause 3.1;
“Partial Closure Option”	means the right of the Secretary of State detailed in clause 3.2;
“Partial Closure M&O Contract”	means a contract for the maintenance and operation of a reactor at a Station entered into pursuant to, and in accordance with, clause 3.2;
“Plan”	means the plan relating to the Station Site annexed to the applicable Property Schedule;
“Plant and Machinery”	means, in relation to a Station, all the plant, machinery and other equipment including flasks, flatrols, motor vehicles, spares, loose tools, fittings and other items owned by, or leased to, any member of the Group;

**** indicates information which has been omitted and filed separately with the Commission

- 10 -

“Proceedings”	means any proceeding, suit or action arising out of or in connection with this Agreement;
“Property Agreements”	means, in relation to a Station Site, the agreements granting rights for the benefit of that Station Site including those agreements details of which are set out in Part D of the applicable Property Schedule so far as subsisting at the time of transfer and any future agreement (entered into with the consent of the Secretary of State) granting rights for the benefit of that Station Site in each case so far as they relate to that Station Site and as they may be supplemented, varied, renewed, extended or novated from time to time with such consent;
“Property Consents”	means all consents, approvals, authorisations or waivers required from third parties for the transfer, assignment or novation of any Property Agreement in favour of a Station Purchaser or for the performance of any Property Agreement by a Station Purchaser;
“Property Documents”	means, in relation to a Station Site, the documents details of which are set out in Part E of the applicable Property Schedule so far as subsisting at the time of transfer and in respect of which the Station Purchaser is required, in accordance with the terms of those documents, to enter into a deed of covenant or other arrangement with a third party, and any future such documents (entered into with the consent of the Secretary of State) affecting the title to that Station Site, in each case so far as they relate to that Station Site and are subsisting at the Completion Date and as they may be supplemented, varied, renewed, extended or novated from time to time with such consent;
“Property Schedule”	means one of Schedules 16 (Dungeness B) to 22 (Torness) and 24 (Hunterston);
“Records”	means, in relation to a Station, all books and records in material or computer or machine readable form containing Information relating to that Station or on which that Information is recorded;

**** indicates information which has been omitted and filed separately with the Commission

- 11 -

“Regulations”	means the Transfer of Undertakings (Protection of Employment) Regulations 1981;
“Relevant Change”	means, in respect of any Station, any change in or the introduction or coming into force of any Applicable Law or Industry Document which amends, replaces or introduces any provision relating to the operation, ownership or decommissioning of that Station or which is intended to apply to the owner or operator of that Station or a person holding an Electricity Generation Licence;
“Relevant Time”	means, in relation to the acquisition of a Station pursuant to the exercise of a Station Option:
	(A)     two years prior to the Scheduled Closure Date in relation to a Station which is scheduled to Close on its Scheduled Closure Date; and
	(B)      the Early Closure Notice Date or, if later, the date which is two years prior to the Early Closure Date of that Station, in relation to a Station which Closes on an Early Closure Date,
	except in respect of the exercise of an Option to Decommission after the Scheduled Closure Date or the Early Closure Date of a Station, in which case the Relevant Time shall be two years prior to Completion;
“Requirement”	has the meaning set out in clause 7.7.1;
“Scheduled Closure Date”	means, in relation to a Station or a reactor at a Station (as the case may be), the date set out opposite that Station or reactor (as the case may be) in Part 2 of Schedule 1 (Power Stations) or such other date as is determined from time to time in accordance with clause 10 of the NLFA;

**** indicates information which has been omitted and filed separately with the Commission

- 12 -

“Scottish Contracts”	means all the Contracts which are governed by and construed in accordance with the law of Scotland;
“Scottish Stations”	means Hunterston B and Torness;
“Service Document”	means a claim form, application, notice, order, judgement or other document relating to any Proceedings;
“Site Transfer”	means, in relation to the sale and acquisition of any Station pursuant to this Agreement, the assignment, transfer or disposition of the relevant Station Site in accordance with the relevant provisions of this Agreement;
“Sizewell B”	means the Station known as Sizewell B (as described in paragraph 6 of Part 1 of Schedule 1 (Power Stations));
Station”	means, in relation to each Station Site, that Station Site, the Station Assets relating to, and the business carried on at, that Station Site;
“Station Assets”	has the meaning set out in Schedule 14 (Station Assets);
“Station Employees”	means, in respect of any Station, individuals to be identified prior to Completion pursuant to clause 8.6 who are engaged by a BEG Entity or another member of the Group to work wholly or mainly in connection with, and are located at, that Station at Completion (otherwise than in breach of Schedule 5 (Conduct of Business before Completion)) whose contracts of employment as a consequence of the sale and acquisition of that Station under this Agreement have effect immediately after Completion as if originally made with the relevant Station Purchaser;
“Station Intellectual Property”	means, in relation to a Station, Intellectual Property owned by any member of the Group which:
	(A)     is or has in the three years prior to Completion been used in the Operation of that Station;

**** indicates information which has been omitted and filed separately with the Commission

- 13 -

	(B)      is needed to carry on the Operation of that Station in the same manner as it is carried on at Completion; or
	(C)      is needed to fulfil any of the Contracts (including, for this purpose, the BNFL Contracts) or any agreements, plans or projects relating to that Station as at Completion;
“Station Intellectual Property Licences”	means, in relation to a Station, all the agreements current at the Completion Date for that Station to which a member of the Group is a party, or which have been assigned to a member of the Group, and under which that Group member is licensed to use any Intellectual Property owned by a third party which:
	(A)     is or has in the three years prior to Completion been used in the Operation of that Station;
	(B)      is needed to carry on the Operation of that Station in the same manner as it is carried on at Completion; or
	(C)      is needed to fulfil any of the Contracts (including, for this purpose, the BNFL Contracts) or any agreements, plans or projects as at Completion relating to that Station;
“Station Option”	has the meaning set out in clause 2.1;
“Station Purchaser”	has the meaning set out in clause 2.1;
“Station Site”	means each nuclear power generating station more particularly detailed in Part A of each of the Property Schedules;
“Station Specific Spares”	means, in respect of a Station, any item of Plant and Machinery whose non-availability at that Station would potentially involve a loss of electricity generation at that Station in excess of 0.3TWh and which are retained by a BEG Entity as spare items of Plant and Machinery specifically in relation to such Station, including gas turbines, turbine components, transformers, generators and pump and gas circular components;

**** indicates information which has been omitted and filed separately with the Commission

- 14 -

“Station Third Party Licence Consents”	means all consents, approvals, authorisations or waivers required from third parties for the sub-license of any Station Intellectual Property Licence to the Station Purchaser;
“Stocks”	means, in relation to a Station, all stocks of consumable materials used by or in that Station at the Completion Date in respect of that Station, but excluding any Stocks within the definition of Excluded Assets;
“Strategic Spares”	means, in relation to a Station, any item of Plant and Machinery whose non-availability would potentially involve a loss of electricity generation at that Station in excess of 0.3TWh and which are retained by a BEG Entity as spare items of Plant and Machinery in relation to the Stations as a whole and not specifically in relation to any one Station including gas turbines, turbine components, transformers, generators and pump and gas circular components, but excluding the Station Specific Spares;
“Successor Government Entity”	has the meaning given in clause 35.7;
“Third Party Consents”	means all consents, approvals, authorisations or waivers required from third parties for the transfer, assignment or novation of any Contract in favour of a Station Purchaser or for the performance of any Contract by a Station Purchaser;
“Third Party Service Provider”	means any person, other than a Station Purchaser, who becomes or is anticipated to become the employer of any employee of any member of the Group by virtue of the Regulations following the agreement by that person with a Station Purchaser to undertake the operation and maintenance of any Station or provide any Ancillary Service;
“Torness”	means the Scottish Station known as Torness (as described in paragraph 8 of Part 1 of Schedule 1 (Power Stations));

**** indicates information which has been omitted and filed separately with the Commission

- 15 -

“Trading Contracts”	means any sales or purchase agreement, forward or futures agreement, contract for differences, swap, option agreement or other standard or non-standard trading agreement relating to the buying or selling of electricity, electricity capacity, gas, gas storage, gas capacity, oil, coal, Renewable Obligation certificates, whether physical or financial, and whether within the wholesale, Industrial & Commercial, or Small and Medium Enterprises markets and any such agreements or contracts relating to emission allowances under the European Union Emissions Trading Scheme or the equivalent under other local, national or supra-national schemes which seek to reduce, allocate or manage the levels of C02, SO2, NOX, heavy metals or other pollutants or emissions using a market-based mechanism;
“Transfer Date”	means, in respect of any Transferring Employee, the date on which the employment of that Transferring Employee transfers to the relevant Station Purchaser or Third Party Service Provider by virtue of the Regulations;
“Transferring Ancillary Employees”	means Ancillary Employees to be identified pursuant to clause 17.5 whose contracts of employment transfer to the relevant Station Purchaser or Third Party Service Provider by virtue of the Regulations at any time;
“Transferring Employee”	means employees, including but not limited to Station Employees, Transferring Ancillary Employees and M&O Employees who transfer to the relevant Station Purchaser or Third Party Service Provider by virtue of the Regulations;
“Transfer Time”	means 23.59 on a Transfer Date;
“Warranties”	means the representations and warranties set out in Schedule 11 (Representations and Warranties); and
“Warrantors”	has the meaning given in clause 22.2.

**** indicates information which has been omitted and filed separately with the Commission

- 16 -

1.2 In this Agreement, unless otherwise stated or the context requires otherwise:

1.2.1 words importing the singular only shall include the plural and vice versa;

1.2.2 words importing any gender shall include all other genders;

1.2.3 words importing natural persons shall include corporations;

1.2.4 any reference to a “party” shall be construed so as to include its successors in title, permitted assigns and permitted transferees;

1.2.5 references to a “company” shall be construed so as to include any company, corporation or other body corporate, wherever and however incorporated or established;

1.2.6 references to a “person” shall be construed so as to include any individual, firm, company, government, state or agency of a state, local or municipal authority or government body or any joint venture, association or partnership (whether or not having separate legal personality);

1.2.7 a reference to any statute or statutory provision shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted;

1.2.8 any reference to a “day” (including within the phrase “Business Day”) shall mean a period of 24 hours running from midnight to midnight;

1.2.9 a reference to any other document referred to in this Agreement is a reference to that other document as amended, varied, novated or supplemented at any time;

1.2.10        (A) the rule known as the ejusdem generis rule shall not apply and accordingly general words introduced by the word “other” shall not be given a restrictive meaning by reason of the fact that they are preceded by words indicating a particular class of acts, matters or things; and

(B) general words shall not be given a restrictive meaning by reason of the fact that they are followed by particular examples intended to be embraced by the general words;

1.2.11 the Schedules form part of this Agreement and shall have the same force and effect as if expressly set out in the body of this Agreement, and references to this Agreement shall include the Schedules;

1.2.12 references to any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall in respect of any jurisdiction other than England be deemed to include what most nearly approximates in that jurisdiction to the English legal term;

**** indicates information which has been omitted and filed separately with the Commission

- 17 -

1.2.13 a reference to a “clause”, “Part” or a “Schedule” is a reference to a clause or a Part of, or a schedule to, this Agreement;

1.2.14 a reference to a “paragraph” is a reference to a paragraph within a clause or Schedule;

1.2.15 references to times are to London time; and

1.2.16 with effect from the date (if any) that the United Kingdom adopts the Euro as its lawful currency in substitution for sterling:

(A) payments falling due under this Agreement shall be made by the payer to the recipient in Euros;

(B) no payments which would have been payable in sterling under this Agreement but for the adoption of the Euro by the United Kingdom as its lawful currency shall be made in sterling or national currency units;

(C) all amounts stated in sterling shall be converted into Euros at the fixed conversion rate provided for by the laws of England and Wales; and

(D) all amounts required to be calculated in sterling shall be calculated in Euros.

1.3 All headings and titles are inserted for convenience only. They are to be ignored in the interpretation of this Agreement.

1.4 A reference in this Agreement to a party’s knowledge, information or belief is deemed to include the knowledge, information and belief which such party would have if such party had made all usual and reasonable enquiries.

1.5 Where, in respect of any Station, the Station Purchaser is not the Secretary of State, the Secretary of State shall procure the performance by the Station Purchaser of all of the Station Purchaser’s obligations under this Agreement.

1.6 Except where specifically stated to the contrary in this Agreement, a reference to a “cost” or “expense” of any person shall not include any amount paid or payable in respect of VAT that is recoverable by that person or the representative member of its VAT group registration.

1.7 Where, in respect of any Station, a BEG Entity has sold that Station pursuant to and in accordance with the terms of clause 35 (Assignment), references in connection with that Station to a BEG Entity, as the case may be, shall be deemed to be a reference to the relevant assignee.

1.8 Capitalised terms not otherwise defined in this Agreement have the meanings ascribed to them in the NLFA.

**** indicates information which has been omitted and filed separately with the Commission

- 18 -

1.9 Any reference in this Agreement to “assignment” or cognate expressions shall, in respect of Scottish Contracts, be deemed to be a reference to “assignation” or the appropriate cognate expression.

1.10 Any reference in this Agreement to the “Scottish System” shall be deemed to be a reference to the high voltage system in operation in Scotland following BETTA “Go Live” and the parties shall, prior to BETTA “Go Live”, seek to agree any other appropriate amendments relating to the implementation of BETTA.

1.11 Any reference in this Agreement to the Station Purchaser’s “discretion” (or other cognate expression) shall be deemed to require the exercise of such discretion in a reasonable manner if the Station Purchaser is not the Secretary of State (or a Successor Government Entity).

2. OPTION

Grant of Station Options

2.1 In consideration of the Secretary of State entering into this Agreement and the other Liabilities Documents, each BEG Entity grants irrevocably to the Secretary of State, in respect of each Station, an option for the Secretary of State (or such person or persons as the Secretary of State shall nominate) (each a “Station Purchaser”) to purchase or procure the purchase of that Station in accordance with the terms of this Agreement (each such option being referred to as a “Station Option”).

2.2 The Secretary of State shall be entitled to exercise a Station Option in relation to any Station independently of the exercise of a Station Option in relation to any other Station, and the exercise of one Station Option shall not prevent the Secretary of State exercising a Station Option in relation to any other Station on the same or, subject to this Agreement, on any other date.

Manner of exercise

2.3 The Secretary of State shall exercise a Station Option in respect of any Station by delivering to the relevant BEG Entity a duly completed and signed Option Notice.

2.4 If the Secretary of State exercises a Station Option in respect of a Station, then that Station Option must be exercised in respect of the whole, but not part of, that Station and for the purposes of either:

2.4.1 carrying out the Decommissioning of that Station (an “Option to Decommission”); or

2.4.2 continuing to generate electricity at that Station for delivery in bulk to the National Grid (or the Scottish System in respect of the Scottish Stations) (an “Option to Operate”). In exercising an Option to Operate, the Secretary of State must indicate whether she (or the Station Purchaser) intends, after Completion, to continue bulk generation of electricity for delivery to the National Grid (or the Scottish System in respect of the Scottish Stations) herself or will require the relevant BEG Entity to do so pursuant to an M&O Contract.

**** indicates information which has been omitted and filed separately with the Commission

- 19 -

Exercise Periods

2.5 Subject to the other provisions of this Agreement:

2.5.1 the Secretary of State may exercise an Option to Decommission at any time, whether prior to or after the relevant Station’s Closure Date. The Secretary of State shall, in deciding when to exercise an Option to Decommission, have due regard to the stage of Decommissioning or the likely stage of Decommissioning of the Station at Completion, including the contractual arrangements which the relevant BEG Entity or other members of the Group has or have entered into in order to carry out the Decommissioning of that Station; and

2.5.2 the Secretary of State may exercise an Option to Operate:

(A) if the Closure Date of a Station is that Station’s Scheduled Closure Date, at any time up to and including the date which is two years prior to that Scheduled Closure Date; and

(B) if the relevant BEG Entity has served a Formal Notice of Early Closure in respect of a Station and the Early Closure Date is:

(i) more than 30 months after the Early Closure Notice Date, at any time up to and including the date which is two years prior to the specified Early Closure Date;

(ii) between 6 and 30 months after the Early Closure Notice Date, at any time up to and including the date which is six months after the Early Closure Notice Date; or

(iii) less than 6 months after the Early Closure Notice Date, at any time until the later of the Early Closure Date and 65 Business Days after the Early Closure Notice Date.

2.6 Prior to the expiry of the Option to Operate Exercise Period for each Station, the Secretary of State shall either:

2.6.1 exercise the Option to Operate in respect of that Station and notify the relevant BEG Entity in accordance with clause 2.4.2; or

2.6.2 notify the relevant BEG Entity that the Secretary of State does not wish to exercise the Option to Operate.

Exercise

2.7 Upon exercise of a Station Option in respect of any Station:

2.7.1 the relevant BEG Entity shall sell or, if clause 2.13 applies, transfer; and

**** indicates information which has been omitted and filed separately with the Commission

- 20 -

2.7.2 the relevant Station Purchaser shall acquire,

that Station subject to and in accordance with the provisions of this Agreement.

2.8 Subject to the provisions of this Agreement (and, in particular, clause 15 (Environmental Matters) and clause 28.4) the exercise of a Station Option and the acquisition of any Station following exercise of the Station Option shall not affect any rights of the Secretary of State or the Station Purchaser or any obligations of any member of the Group under any of the other Liabilities Documents including:

2.8.1 the obligation or liability of any member of the Group to discharge any Excluded Liabilities relating to that Station or any Excluded Historic Liabilities (as defined in the HLFA); and

2.8.2 the obligation of the Licensees to indemnify the Secretary of State in accordance with:

(A) clause 6.2(C) of the NLFA; and

(B) clause 3.4 of the HLFA.

2.9 Each of the Station Purchaser and the selling BEG Entity shall promptly notify the other upon becoming aware of circumstances which would give rise to an increase in Excluded Liabilities arising as a result of the exercise of a Station Option. The Station Purchaser:

2.9.1 shall consult with that BEG Entity with a view to minimising any such increase to those Excluded Liabilities; and

2.9.2 at the Station Purchaser’s discretion, may allow that BEG Entity access to the Station Site to mitigate those Excluded Liabilities.

Failure to exercise

2.10 If the Secretary of State fails, within the Option to Operate Exercise Period in respect of a Station, either to exercise the applicable Option to Operate or notify the relevant BEG Entity that she does not wish to exercise the Option to Operate, this shall be deemed to be notice by the Secretary of State of her intention not to exercise the Option to Operate, in which event the relevant BEG Entity shall be entitled to Close the Station on the later of:

2.10.1 the date of such deemed notice; and

2.10.2 the Scheduled Closure Date or Early Closure Date (as the case may be) of that Station.

Revocation of exercise

2.11 If the Secretary of State exercises a Station Option in respect of any Station and the acquisition of that Station is terminated pursuant to clause 7.5, 10.6.3 or 23.2, the Secretary of State may re-exercise the Station Option in respect of that Station at any time within the applicable Exercise Period. The right to re-exercise a Station Option under this clause 2.11 may only be exercised once.

**** indicates information which has been omitted and filed separately with the Commission

- 21 -

2.12 In addition to the right of the Secretary of State to terminate the acquisition of a Station pursuant to clauses 7.5, 10.6.3 and 23.2, the Secretary of State (without prejudice to her right to re-exercise at any time an Option to Decommission) may, prior to Completion, terminate the acquisition of a Station for any other reason provided that:

2.12.1 the Secretary of State may not then re-exercise an Option to Operate in respect of that Station; and

2.12.2 prior to such termination, the Secretary of State has notified the relevant BEG Entity of such termination and discussed with the relevant BEG Entity the likely effect of such proposed termination.

Nature of Station Purchaser

2.13 If at the time the Secretary of State exercises a Station Option, (i) legislation is in force in the form or substantially in the form of Chapter 2 of the Energy Act 2004 and (ii) the Station Purchaser is a publicly owned company or the NDA (within the meaning of such legislation), the Secretary of State may, by notice in writing to the relevant BEG Entity, elect that the transfer of all or any of the property, rights and liabilities to be transferred under this Agreement to the Station Purchaser following exercise of a Station Option be effected by a transfer scheme under that legislation. In such event:

2.13.1 the transfer scheme shall contain provisions that are no more onerous to each BE Party than the provisions of this Agreement;

2.13.2 the parties shall enter into such agreement modifying this Agreement to reflect the election made by the Secretary of State as may be agreed between the parties; and

2.13.3 the relevant BEG Entity shall consent for the purposes of such legislation to the transfer of the property, rights and liabilities by the transfer scheme. As security for the performance of its obligation to give such consent each BEG Entity irrevocably appoints the Secretary of State (with power to delegate) as its attorney to execute and deliver a document containing such consent.

3. PARTIAL CLOSURE OF STATIONS

Application of Partial Closure provisions

3.1 If, at any Station, one but not both of the reactors at any Station has Closed (a “Closed Reactor”):

3.1.1 prior to that Closed Reactor’s Scheduled Closure Date; or

3.1.2 where the Scheduled Closure Date of the other reactor at that Station has been extended, on the Closed Reactor’s Scheduled Closure Date, (in either case, a “Partial Closure”) the provisions of this clause 3 (Partial Closure of Stations) shall apply.

**** indicates information which has been omitted and filed separately with the Commission

- 22 -

Grant of Partial Closure Option

3.2 The Secretary of State may not exercise a Station Option in the event of a Partial Closure of a Station but may require the applicable BEG Entity to enter into a contract (a “Partial Closure M&O Contract”) for the continued operation of the Closed Reactor with effect from its Early Partial Closure Date:

3.2.1 upon terms and conditions to be agreed in accordance with the principles set out in Schedule 10 (General Principles for Partial Closure M&O Contract); and

3.2.2 on the basis that:

(A) all costs and expenses incurred as a result of operating the Closed Reactor on or after the Early Partial Closure Date shall be borne by the Secretary of State; and

(B) the payments and other benefits of operating the Closed Reactor relating to the period after the Early Partial Closure Date shall be for the account of the Secretary of State (and any such payments or benefits received by the relevant BEG Entity or any member of the Group shall be held on trust for, and paid promptly to the order of, the Secretary of State),

provided that the applicable BEG Entity shall not be required to enter into any such Partial Closure M&O Contract whose term extends beyond the Closure Date of the other reactor at that Station.

Manner of exercise

3.3 The Secretary of State shall exercise a Partial Closure Option in respect of any Station by delivering to the relevant BEG Entity written notification of the same.

3.4 The Secretary of State shall be entitled to exercise a Partial Closure Option in relation to any Station independently of the exercise of a Partial Closure Option in relation to any other Station, and the exercise of one Partial Closure Option shall not prevent the Secretary of State exercising a Partial Closure Option in relation to any other Station on the same or, subject to the other provisions of this Agreement, on any other date.

Exercise periods

3.5 If a BEG Entity has served a Formal Notice of Early Partial Closure in respect of a Station, the Secretary of State may exercise a Partial Closure Option as follows:

3.5.1 if the Early Partial Closure Date is more than 30 months after the Early Partial Closure Notice Date, the Partial Closure Option may be exercised at any time up to and including the date which is two years prior to the Early Partial Closure Date;

**** indicates information which has been omitted and filed separately with the Commission

- 23 -

3.5.2 if the Early Partial Closure Date is between six and 30 months after the Early Partial Closure Notice Date then the Secretary of State may exercise the Partial Closure Option at any time up to and including the date which is six months after the Early Partial Closure Notice Date; and

3.5.3 if the Early Partial Closure Date is less than six months after the Early Partial Closure Notice Date, the Secretary of State may exercise the Partial Closure Option at any time until the later of the Early Partial Closure Date and 65 Business Days after the Early Partial Closure Notice Date.

3.6 Prior to the expiry of the Partial Closure Option Exercise Period the Secretary of State shall:

3.6.1 exercise the Partial Closure Option in respect of that Station and notify the relevant BEG Entity in accordance with clause 3.3; or

3.6.2 notify the relevant BEG Entity that the Secretary of State does not wish to exercise the Partial Closure Option.

Failure to exercise

3.7 Failure to exercise the Partial Closure Option or notify the relevant BEG Entity in accordance with clause 3.6 shall be deemed to be notice by the Secretary of State of her intention not to exercise the Partial Closure Option, in which event that BEG Entity shall be entitled to effect Partial Closure of the Station on the later of:

3.7.1 the date of such deemed notice; and

3.7.2 the Early Partial Closure Date.

Application of Partial Closure provisions

3.8 The provisions of this clause 3 (Partial Closure of Stations) shall not apply to Sizewell B.

4. CONSIDERATION

Any Station acquired by a Station Purchaser following exercise of a Station Option shall be acquired in consideration of payment of £1 to the order of the relevant BEG Entity on the Completion Date.

5. SALE AND ACQUISITION OF A STATION

5.1 Upon the exercise by the Secretary of State of a Station Option to acquire any Station:

5.1.1 the relevant BEG Entity, as beneficial owner (or, in the case of the Scottish Stations, as owner) shall sell or procure the sale of, and the Station Purchaser shall acquire, the Station Assets relating to that Station;

5.1.2 the relevant BEG Entity, as beneficial owner (or in the case of the Scottish Stations as owner), shall sell or procure the sale of, and the Station Purchaser shall acquire, the Excluded Fuel (if any) which the Station Purchaser has indicated that it wishes to acquire pursuant to clause 6, (Excluded Assets and Re-use of Existing Equipment); and

**** indicates information which has been omitted and filed separately with the Commission

- 24 -

5.1.3 the relevant BEG Entity, as beneficial owner (or in the case of the Scottish Stations, as heritable proprietor), will sell, and the Station Purchaser will acquire, the Station Site relating to the Station in accordance with the terms of Schedule 15 (Station Sites),

in each case as at, and with effect from, Completion.

5.2 The rights of each BEG Entity to all Plant and Machinery at the Station Site which is leased to the relevant BEG Entity will be sold by it and acquired by the Station Purchaser subject to the rights of the relevant landlord arising under the law relating to landlord’s and tenant’s fixtures and the relevant lease,

5.3 Except for the Excluded Fuel referred to in clause 5.1.2, Excluded Assets are excluded from the sale and acquisition of each Station.

5.4 For the purposes of this clause 5 (Sale and Acquisition of a Station), references to “sell” and “sale” shall, if clause 2.13 applies, be deemed to be references to “transfer”.

6. EXCLUDED ASSETS AND RE-USE OF EXISTING EQUIPMENT

Excluded Assets

6.1 After the exercise of a Station Option in respect of a Station the relevant BEG Entity, in the period (limited to 12 months) prior to Completion, shall provide to the Station Purchaser, on an ongoing basis, written details of the Excluded Assets located at that Station. The Station Purchaser, as soon as reasonably practicable and in any event not less than 10 Business Days prior to Completion, shall notify such BEG Entity in writing of any Excluded Fuel which the Station Purchaser wishes to acquire (if any).

Strategic Spares

6.2 At any time after the Effective Date in respect of a Station, the relevant BEG Entity shall, at the request of the Station Purchaser, as soon as reasonably practicable deliver to that Station any Strategic Spare that the Station Purchaser may require for immediate use. The Station Purchaser shall, as soon as reasonably practicable after the date of such request, procure (at the Station Purchaser’s cost) the delivery to the relevant BEG Entity of a replacement for such Strategic Spare.

6.3 If a Station Purchaser requires delivery of a Strategic Spare pursuant to clause 6.2 for use at a Station (the “Acquired Station”) and:

6.3.1 prior to the replacement of that Strategic Spare pursuant to clause 6.2 a BEG Entity would (save for such delivery) have required that Strategic Spare for immediate use at another Station; and

**** indicates information which has been omitted and filed separately with the Commission

- 25 -

6.3.2 a reasonably prudent operator in the position of that BEG Entity would not, if the Acquired Station had not been transferred to the Station Purchaser, have used that Strategic Spare at the Acquired Station,

then the Station Purchaser shall promptly reimburse to the selling BEG Entity the net loss of revenue suffered by it (if any) as a direct result of the Station Purchaser having required delivery of a Strategic Spare under clause 6.2.

6.4 After Completion in respect of a Station, the Station Purchaser may, by notice to the selling BEG Entity, require that BEG Entity to remove promptly (or procure the prompt removal) from the relevant Station Site, and at the selling BEG Entity’s cost, any Strategic Spare specified by the Station Purchaser.

Excluded Fuel

6.5 If, pursuant to clause 6.1, the Station Purchaser notifies a BEG Entity that it wishes to purchase any Excluded Fuel, the purchase price of Excluded Fuel (including an amount in respect of the VAT payable on the supply of the Excluded Fuel by the relevant BEG Entity) shall be the cost of such fuel paid by that BEG Entity. If the Station Purchaser disagrees with the purchase price of any Excluded Fuel, the Station Purchaser may, after the Initial Resolution Period, refer the matter for Expert Resolution.

6.6 The purchase price for any Excluded Fuel sold to the Station Purchaser shall be paid by the Station Purchaser to the order of the selling BEG Entity on the Completion Date against the presentation of an appropriate VAT invoice addressed to the Station Purchaser.

Transfer of Station Assets for Decommissioning

6.7 Subject to clause 6.3, upon the commencement of Decommissioning at any Station acquired by a Station Purchaser pursuant to this Agreement, each BEG Entity shall be entitled, in consideration of £1 payable to the Station Purchaser (together with an amount equal to any VAT payable thereon), to have removed (at each BEG Entity’s own cost) any Plant and Machinery (including gas turbines, turbine components, transformers, generators and pump and gas circular components) located at that Station which is not required for the purpose of Decommissioning and which can be re-used by either or both of the BEG Entities at another Station. Prior to such removal the relevant BEG Entity shall notify the Station Purchaser of the Plant and Machinery it wishes to remove and will liaise with the Station Purchaser to ensure that such removal does not unduly disrupt the Operation of such Station.

6.8 The parties agree that, if any Plant and Machinery which is removed by a BEG Entity pursuant to clause 6.7 is subsequently sold or loaned by that BEG Entity to a third party, that BEG Entity shall promptly notify the Secretary of State of such sale or loan and the consideration received and an amount equal to the value of such consideration shall be payable by that BEG Entity to the order of the Secretary of State.

**** indicates information which has been omitted and filed separately with the Commission

- 26 -

7. COMPLETION CONDITIONS

Completion Conditions

7.1 The sale and acquisition of any Station pursuant to this Agreement is:

7.1.1 in the case of a Scottish Station, in all respects conditional upon the Completion Conditions (other than those conditions set out in paragraphs 3(A), 3(B), 3(D), 4 1. 5.1, 6.1 and 7.1 of Schedule 4 (Completion Conditions)); and

7.1.2 in the case of a Station other than a Scottish Station, in all respects conditional upon the Completion Conditions (other than those conditions set out in paragraphs 3(C), 3(E), 4.2, 5.2, 6.2 and 7.2 of Schedule 4 (Completion Conditions)),

being satisfied or waived in accordance with clause 7.3 on or before the relevant Completion Date.

Fulfilment and waiver of Completion Conditions

7.2 Subject to clause 7.3, from the Relevant Time:

7.2.1 the selling BEG Entity will use all reasonable endeavours to assist the Secretary of State and the Station Purchaser to fulfil the Completion Conditions (other than the condition detailed in paragraph 2(A) of Schedule 4 (Completion Conditions)) as soon as possible and in any event before the relevant Completion Date; and

7.2.2 the Secretary of State and the Station Purchaser will use all reasonable endeavours to fulfil or procure the fulfilment of the Completion Conditions as soon as possible and in any event before the relevant Completion Date.

7.3 The Secretary of State and the Station Purchaser may waive in whole or in part all or any of the Completion Conditions in connection with the sale and acquisition of any Station.

7.4 In connection with the acquisition of a Station, the selling BEG Entity shall immediately inform the Secretary of State and the Station Purchaser, and the Secretary of State and the Station Purchaser shall immediately inform that BEG Entity, in writing upon becoming aware of anything which will or may prevent any of the Completion Conditions from being satisfied by the relevant Completion Date.

Termination of acquisition

7.5 If, in connection with the sale and acquisition of any Station:

7.5.1 anything which would prevent any of the Completion Conditions from being satisfied by the relevant Completion Date (whether it does so because of any disclosure made under clause 7.4 or not) comes to the knowledge of the Secretary of State or the Station Purchaser; or

**** indicates information which has been omitted and filed separately with the Commission

- 27 -

7.5.2 any of those Completion Conditions is not fulfilled or waived by the Secretary of State and the Station Purchaser by the Completion Date,

the Station Purchaser may terminate the acquisition of the Station by notice in writing to the relevant BEG Entity. The provisions of this clause 7.5 are without prejudice to the Secretary of State’s right to re-exercise a Station Option in respect of that Station in accordance with clause 2.11.

Applicable Law

7.6 Without limitation to the other provisions of this Agreement, from the Relevant Time, BE plc shall upon the reasonable request of the Secretary of State or the Station Purchaser, use all reasonable endeavours to procure that each member of the Group shall assist the re-licensing of the Station Purchaser pursuant to Applicable Law.

Changes to Applicable Law and Industry Documents

7.7 If a Relevant Change occurs in relation to any Station:

7.7.1 the references to clearances, consents, permissions, documents, codes, agreements, licences and authorisations (each a “Requirement”) in the Completion Conditions shall be deemed to refer to each Requirement as amended, replaced or introduced by the Relevant Change (each a “New Requirement”); and

7.7.2 the Completion Conditions shall be deemed to include a condition that the Station Purchaser and the selling BEG Entity (as the case may be) have complied with each New Requirement and any other obligation or condition imposed by the Relevant Change (or any statute, regulation or contract enacted or imposed by such Relevant Change) as at, and with effect from, Completion.

8. PRE-COMPLETION

Conduct of business

8.1 The selling BEG Entity, in respect of each Station, shall use all reasonable endeavours to procure that from the Relevant Time until the earlier of:

8.1.1 the date on which the Secretary of State notifies that BEG Entity in accordance with clause 2.6.2 that the Secretary of State does not wish to exercise the Station Option;

8.1.2 Completion of the sale and acquisition of that Station; or

8.1.3 the sale and acquisition of that Station being terminated in accordance with clauses 7.5, 10.6.3 or 23.2,

the Station will be Operated in the ordinary and usual course and the selling BEG Entity shall not carry out any of the matters listed in Schedule 5 (Conduct of Business before Completion) without the prior consent in writing of the Station Purchaser (not to be unreasonably withheld).

**** indicates information which has been omitted and filed separately with the Commission

- 28 -

8.2 Prior to Completion neither of the BEG Entities shall, and BE plc shall procure that no other member of the Group shall, wilfully do anything inconsistent with, or which would or would be likely to prevent or materially adversely affect, the Secretary of State’s ability to exercise and effect either or both of the Option to Operate and the Option to Decommission, and the Station Purchaser’s ability to continue to Operate the Station after Completion in substantially the same manner as the relevant BEG Entity prior to Completion.

8.3 BE plc shall use its reasonable endeavours to procure that no member of the Group shall enter into any contract required for the Operation of a Station which cannot be assigned to a Station Purchaser pursuant to clause 13 (Transfer of Contracts) without a Third Party Consent.

8.4 From the date which is 36 months prior to a Station’s Scheduled Closure Date or, if the Station will Close on an Early Closure Date, from the date that the Board becomes aware that early Closure is likely (each, a “Benchmark Date”), the relevant BEG Entity shall, subject to clause 8.5, maintain that Station in accordance with the obligations under its Licence and shall not do anything to exacerbate the condition of the Station Site as at the Benchmark Date or the ability of a Station Purchaser to continue generation of electricity for delivery in bulk to the National Grid (or the Scottish System in respect of the Scottish Stations) following Completion, until the latest to occur of the following:

8.4.1 the expiry of the Option to Operate Exercise Period, or receipt of confirmation pursuant to clause 2.6.2 that the Secretary of State does not wish to exercise the Option to Operate;

8.4.2 if the Secretary of State exercises an Option to Operate, Completion; or

8.4.3 the date of commencement of an M&O Contract in respect of that Station.

8.5 If a Station has Closed on or prior to commencement of the Option to Operate Exercise Period, or Closes during such period, in either circumstance because of an unforeseen event requiring the Closure of the Station for regulatory or safety reasons, the relevant BEG Entity shall not be required to recommence generation of electricity for delivery in bulk to the National Grid (or the Scottish System in respect of the Scottish Stations) but instead shall not, until the earliest of the dates referred to in clauses 8.4.1, 8.4.2 and 8.4.3, do or omit to do anything which would or would be likely to have a material adverse effect on the ability of a Station Purchaser to continue or, as the case may be, recommence generation of electricity for delivery in bulk to the National Grid (or the Scottish System in respect of the Scottish Stations) following Completion, provided that nothing in this clause 8.5 shall require any member of the Group to incur any expenditure in order to reinstate the Station to the condition it was in immediately prior to such unforeseen event.

**** indicates information which has been omitted and filed separately with the Commission

- 29 -

Station Employees

8.6 As soon as reasonably practicable prior to Completion, the selling BEG Entity shall agree with the Station Purchaser the relevant Station Employees and shall disclose a list of such employees to the Station Purchaser.

Negotiations relating to post-Completion matters

8.7 Prior to Completion, the Secretary of State or the Station Purchaser shall discuss with each BE Party the terms on which that Station is to be Operated or Closed (as the case may be) following Completion. The parties agree that:

8.7.1 if the Station Purchaser intends itself to continue or, as the case may be, commence generation of electricity for delivery in bulk to the National Grid (or the Scottish System in respect of the Scottish Stations) at that Station after Completion, certain BE Parties (including the selling BEG Entity) may be required to enter into an agreement with the Secretary of State or the relevant Station Purchaser to provide any service or facility upon terms and conditions to be agreed in accordance with the principles, terms and conditions set out in Schedule 7 (General Principles for Ancillary Services Contract);

8.7.2 if the Station Purchaser intends the selling BEG Entity to continue or, as the case may be, commence generation of electricity for delivery in bulk to the National Grid (or the Scottish System in respect of the Scottish Stations) at that Station after Completion, certain BE Parties (including the selling BEG Entity) may be required to enter into a contract with the Secretary of State or the relevant Station Purchaser for the management and operation of that Station in accordance with the principles, terms and conditions set out in Schedule 8 (General Principles for M&O Contract), provided that no member of the Group shall be required to enter into any such contract whose term extends beyond the date which is five years after that Station’s Scheduled Closure Date or the date which is five years after that Station’s Early Closure Date (as the case may be); and

8.7.3 if the Station Purchaser intends to Close the Station after Completion, certain BE Parties (including the selling BEG Entity) may be required to (subject to that BEG Entity’s Licence obligations) enter into a contract with the Secretary of State or the relevant Station Purchaser for the de-fuelling of that Station and any such other matters relating to Closure in accordance with the principles, terms and conditions set out in Schedule 9 (General Principles for Defuelling Agreement).

8.8 Following the exercise of a Station Option in respect of a Scottish Station, the relevant BEG Entity shall consult with the Station Purchaser as regards any security of tenure which the tenants under the Agricultural Tenancies enjoy which prejudices Operation of the Scottish Station in question with a view to taking such steps as are reasonably required to avoid such prejudice.

**** indicates information which has been omitted and filed separately with the Commission

- 30 -

8.9 If the Station Purchaser and the BE Parties are unable to reach an agreement on the terms and conditions of any of the contracts referred to in clause 8.7 within the Initial Resolution Period, the Dispute will be referred for Expert Resolution.

Pension Arrangements

8.10 The parties acknowledge and agree to comply with the terms of Schedule 13 (Pensions) regarding the pension arrangements which may apply following the exercise of a Station Option.

9. ACCESS AND INFORMATION

General

9.1 Upon being given reasonable notice and so far as reasonably practicable, each BE Party shall give, or use reasonable efforts to procure that there is given, to the Secretary of State and the Station Purchaser (or any persons authorised by the Secretary of State), reasonable access in respect of each Station to:

9.1.1 the Station Site;

9.1.2 all the Records; and

9.1.3 the directors, officers, employees, agents and advisers of each member of the Group, who shall be instructed to give, as soon as reasonably practicable but subject to any applicable legal and confidentiality restrictions, all such information and explanations as are reasonably requested by the Secretary of State,

in each case in order to enable each of the Secretary of State and the Station Purchaser to exercise its rights and powers, and to perform its obligations, under this Agreement. For the avoidance of doubt, no BE Party shall be obliged to provide access pursuant to this clause 9.1 to the extent that such access is already being provided to the Secretary of State or Station Purchaser under this Agreement, the NLFA or otherwise.

Station specific information

9.2 If the Secretary of State gives notice in writing to a BE Party specifically requesting information pursuant to this clause 9.2, that BE Party shall, as soon as reasonably practicable, provide or use reasonable efforts to procure the provision of the information concerning that Station listed in Schedule 12 (Provision of Information) to the Secretary of State and the Station Purchaser (or their respective advisers).

Nature of Station specific information

9.3 The information to be provided pursuant to clause 9.2 shall be:

9.3.1 all such information and assistance as the Secretary of State may reasonably request, including reasonable access to the directors, officers, employees, agents and advisers of the Group (who shall be instructed to give, subject to any legal

**** indicates information which has been omitted and filed separately with the Commission

- 31 -

and confidentiality obligations, all such information and explanations as soon as reasonably practicable), in order to allow the Secretary of State to assess whether or not to exercise the Station Option in respect of that Station, save to the extent that such information or assistance has been, or is being, provided to the Secretary of State or a Station Purchaser in connection with any other Station under this Agreement, the NLFA or otherwise; and

9.3.2 provided to the Secretary of State and the Station Purchaser as soon as reasonably practicable, but in any event within 5 Business Days of being required to do so by the Secretary of State or the Station Purchaser.

The selling BEG Entity shall only be required to provide information pursuant to clause 9.2 to the extent that such information exists at the relevant time. For the avoidance of doubt, that BEG Entity shall not be required to create or procure the creation of such information in order to comply with a request by the Secretary of State.

Information relating to early Closure of a Station

9.4 Upon commencement of any economic assessment of a Station, the purpose of which is to allow or assist the Board to decide whether a Station should be Closed prior to its Scheduled Closure Date (whether following the occurrence of an unforeseen event causing or likely to cause that Station to cease operation, or having taken into account the economic benefits likely to be received from the continued operation of that Station to its Scheduled Closure Date against the costs and expenses likely to be incurred in the continued operation of that Station to its Scheduled Closure Date), the relevant BEG Entity shall:

9.4.1 promptly notify the Secretary of State of such commencement together with the actual or estimated date of Closure of that Station (upon any such date being discussed);

9.4.2 provide to the Secretary of State the final version of such assessment together with all information supporting such assessment which has been provided to the Board; and

9.4.3 provide to the Secretary of State all such other assistance and information as the Secretary of State may reasonably request, including providing access to its directors, officers and employees and using reasonable endeavours to procure access to its agents and advisers by instructing them to assist the Secretary of State (subject to any legal or confidentiality restrictions), in each case to allow the Secretary of State to assess whether or not to exercise the Station Option in respect of that Station.

For the avoidance of doubt, any routine operational analysis or discussion by the Board in connection with the Closure of a Station prior to its Scheduled Closure Date shall not trigger the obligation of the relevant BEG Entity to notify the Secretary of State pursuant to this clause 9.4 and nothing in this clause 9.4 shall require any member of the Group to provide the Secretary of State with any information or analysis in addition to that provided for, or assessed in connection with, such economic assessment.

**** indicates information which has been omitted and filed separately with the Commission

- 32 -

9.5 Upon the Board passing a resolution to Close a Station prior to its Scheduled Closure Date, the relevant BEG Entity shall promptly notify the Secretary of State of the relevant date of Closure (the “Early Closure Date”). Such notice shall be referred to as the “Formal Notice of Early Closure”.

Information relating to Partial Closure of a Station

9.6 Upon commencement of any economic assessment, the purpose of which is to allow or assist the Board to decide whether a Partial Closure of a Station should be effected (whether following the occurrence of an unforeseen event causing or likely to cause a Partial Closure, or having taken into account the economic benefits likely to be received from the continued operation of a reactor against the costs and expenses likely to be incurred in doing so), the relevant BEG Entity shall:

9.6.1 promptly notify the Secretary of State of such commencement together with the actual or estimated date of Partial Closure (upon any such date being discussed);

9.6.2 provide to the Secretary of State the final version of such assessment together with all information supporting such assessment which has been provided to the Board; and

9.6.3 provide to the Secretary of State all such other assistance and information as the Secretary of State may reasonably request, including providing access to the directors, officers and employees and using reasonable endeavours to procure access to its agents and advisers by instructing them to assist the Secretary of State (subject to any legal or confidentiality restrictions), in each case to allow the Secretary of State to assess whether or not to exercise the Partial Closure Option.

Any routine operational analysis or discussion by the Board in connection with the Partial Closure of a Station shall not trigger the obligation of the relevant BEG Entity to notify the Secretary of State pursuant to this clause 9.6 and nothing in this clause 9.6 shall require any member of the Group to provide the Secretary of State with any information or analysis in addition to that provided for, or assessed in connection with, such economic assessment.

Formal Notice of Early Partial Closure

9.7 Upon the Board passing a resolution for a Partial Closure of a Station the relevant BEG Entity shall promptly notify the Secretary of State of the relevant date of Partial Closure (the “Early Partial Closure Date”). Such notice shall be referred to as the “Formal Notice of Early Partial Closure”.

**** indicates information which has been omitted and filed separately with the Commission

- 33 -

Accuracy of information

9.8 Each BE Party shall take all reasonable care to ensure that to the best of its knowledge, information and belief all information provided pursuant to clauses 9.2, 9.4.2 and 9.6.2 (in each case other than information which has been prepared or produced by third party consultants) is true and accurate in all material respects.

Duration of information obligations

9.9 Each BE Party shall continue to provide or procure the provision of the information referred to in clause 9.2 and such other information as the Secretary of State or the Station Purchaser may reasonably request on a continuing basis until Completion, except to the extent that such information or assistance has been, or is being, provided to the Secretary of State in connection with any other Station under this Agreement, the NLFA or otherwise.

Exclusions

9.10 The parties acknowledge and agree that nothing in this clause 9 (Access and Information), permits the Secretary of State or any Station Purchaser to have:

9.10.1 any access to information held on NUPER; or

9.10.2 any on-line access to SERS.

10. COMPLETION

Time of Completion

10.1 The parties shall use their reasonable endeavours to effect Completion as soon as reasonably practicable after the Relevant Time, such Completion to take place at the time, date and location as the selling BEG Entity and the Station Purchaser shall agree.

10.2 Unless otherwise agreed by the Station Purchaser and the selling BEG Entity, Completion shall occur in any event:

10.2.1 in connection with the exercise of an Option to Decommission, on the latest to occur of the following;

(A) the date which is 36 months after exercise of the relevant Option to Decommission; and

(B) the Scheduled Closure Date or Early Closure Date (as the case may be) of the relevant Station; and

10.2.2 in connection with the exercise of an Option to Operate:

(A) on the Scheduled Closure Date in relation to a Station which is scheduled to Close on its Scheduled Closure Date;

**** indicates information which has been omitted and filed separately with the Commission

- 34 -

(B) on the Early Closure Date in relation to a Station for which the Early Closure Date is more than 30 months after the Early Closure Notice Date; and

(C) by no later than the date which is 36 months after exercise of the Option to Operate in all other circumstances.

10.3 Each date on which Completion occurs pursuant to clause 10.1 or 10.2 shall be a “Completion Date” for the purposes of this Agreement.

Obligations at Completion

10.4 At Completion:

10.4.1 the selling BEG Entity shall do or procure the carrying out of those things listed in paragraph 1 of Schedule 6 (Completion Arrangements);

10.4.2 the Station Purchaser shall do or procure the carrying out of those things listed in paragraph 2 of Schedule 6 (Completion Arrangements); and

10.4.3 the Secretary of State shall do or procure the carrying out of those things listed in paragraph 3 of Schedule 6 (Completion Arrangements).

Failure to perform Completion obligations

10.5	10.5.1	The Station Purchaser shall not be obliged to complete the acquisition of any Station unless all of the requirements of clause 10.4.1 have been complied with and (except where expressly contemplated by this Agreement) all of the Station Assets relating to the Station are included in the sale.
	10.5.2	The selling BEG Entity shall not be obliged to complete the sale of any Station unless all of the requirements of clauses 10.4.2 and 10.4.3 have been complied with.

10.6 If the obligations of the selling BEG Entity under clause 10.4.1 are not complied with on the Completion Date the Station Purchaser may:

10.6.1 defer Completion (so that the provisions of this clause 10 (Completion) shall apply to Completion as so deferred); or

10.6.2 proceed to Completion as far as practicable (without limiting its rights under this Agreement); or

10.6.3 terminate the acquisition of the Station by notice to the selling BEG Entity.

Where the Station Purchaser terminates the acquisition of a Station pursuant to clause 10.6.3, the selling BEG Entity shall reimburse promptly to the order of the Station Purchaser all costs and expenses incurred by the Secretary of State and the Station Purchaser prior to Completion in connection with the exercise of the relevant Station Option.

**** indicates information which has been omitted and filed separately with the Commission

- 35 -

10.7 Without limiting clause 34 (Remedies and Waivers), the Station Purchaser’s right to terminate the acquisition of a Station in accordance with clause 10.6.3 is not exclusive of any rights, powers and remedies provided by law.

10.8 Any provision of this Agreement, and any other documents referred to in it, which is capable of being performed after the sale and acquisition of a Station pursuant to this Agreement but which has not been performed at or before Completion and all warranties, indemnities, covenants and other undertakings and obligations contained in or entered into in accordance with this Agreement shall remain in full force and effect notwithstanding Completion.

11. ALLOCATION OF COSTS

Exercise of Station Option

11.1 Subject to any express provision to the contrary in this Agreement, if in respect of any Station the Secretary of State exercises a Station Option:

11.1.1 the costs and expenses incurred as a result of Operating that Station in the period up to (but excluding) the Effective Date shall be borne by the selling BEG Entity;

11.1.2 the payments and other benefits referable to the Operation of the Station in the period up to (but excluding) the Effective Date shall be for the account of the selling BEG Entity;

11.1.3 all costs and expenses incurred as a result of Operating that Station on or after the Effective Date shall be borne by the Station Purchaser. Such costs and expenses will include a commercially reasonable incentivisation margin to be agreed between the Station Purchaser and the selling BEG Entity having regard to the nature and scope of activity to be conducted by the selling BEG Entity and the allocation of liability in respect of such Operation; and

11.1.4 the payments and other benefits referable to the period after the Effective Date shall be for the account of the Station Purchaser, and any such payments and other benefits received by the selling BEG Entity or any member of the Group shall be held on trust for, and paid promptly to the order of, the Secretary of State.

Revocation of exercise of Station Option

11.2 If the Secretary of State terminates the acquisition of a Station following the exercise of a Station Option in respect of any Station pursuant to clause 2.12, the Secretary of State shall reimburse to the order of the selling BEG Entity an amount equal to all costs incurred by that BEG Entity in relation to that Station in complying with its obligations under this Agreement which it would not have incurred but for the exercise of the Station Option which has been terminated. The provisions of this clause 11.2 shall only apply in relation to the termination of a Station Option pursuant to clause 2.12 and not to the termination of the acquisition of a Station pursuant to clauses 7.5, 10.6.3 and 23.2.

**** indicates information which has been omitted and filed separately with the Commission

- 36 -

Non-exercise of Station Option

11.3 If in respect of any Station the Secretary of State notifies a BEG Entity in accordance with clause 2.6.2 that it does not wish to exercise the Option to Operate in respect of that Station, the costs and expenses:

11.3.1 relating to the Operation of that Station up to and including the Closure Date shall be borne by the relevant BEG Entity; and

11.3.2 relating to the Operation of the Station after the Closure Date shall be borne by the Secretary of State in accordance with and to the extent contemplated by the NLFA.

Time allocation

11.4 For the purposes of clause 11.1, any periodical receipts or payments that cannot be apportioned on the basis of production or usage shall be apportioned accordingly to the number of days to which such receipt or payment relates.

Cost reimbursement mechanic

11.5 Any costs and expenses incurred by any member of the Group which are to be borne by the Secretary of State pursuant to this clause 11 (Allocation of Costs) shall be reimbursed to the order of the selling BEG Entity as soon as practicable after receipt by the Secretary of State of evidence satisfactory to the Secretary of State (acting reasonably) that such costs and expenses have been reasonably and properly incurred.

11.6 Any costs and expenses incurred by the Secretary of State which are to be borne by any member of the Group pursuant to this clause 11 (Allocation of Costs) shall be reimbursed to the order of the Secretary of State as soon as practicable after receipt by the relevant BEG Entity of evidence satisfactory to that entity (acting reasonably) that such costs and expenses have been reasonably and properly incurred.

11.7 If the Secretary of State is not provided with at least 24 months’ notice prior to the deferral of the Scheduled Closure Date of a Station pursuant to clause 10.1 (A) of the NLFA, the relevant BEG Entity shall reimburse to the order of the Secretary of State an amount equal to all costs, expenses and losses incurred by the Secretary of State and, if applicable, the Station Purchaser as a result of such deferral.

Exercise of Option to Operate

11.8 If the Secretary of State exercises an Option to Operate in respect of any Station, the Secretary of State shall reimburse to the order of the selling BEG Entity the additional costs incurred by the relevant BEG Entity as a result of such exercise:

11.8.1 during the two years prior to the Scheduled Closure Date of that Station, in respect of a Station which Closes on its Scheduled Closure Date; and

**** indicates information which has been omitted and filed separately with the Commission

- 37 -

11.8.2 from the Early Closure Notice Date until the Early Closure Date of that Station or, if that Early Closure Date is more than two years after the Early Closure Notice Date, in the two years prior to that Early Closure Date.

11.9 For the purposes of clause 11.8 “additional costs” means those costs which the relevant BEG Entity incurs prior to the Effective Date in connection with the operation of the relevant Station which would not have been incurred but for the exercise of the Option to Operate by the Secretary of State less the aggregate of an amount equal to the benefits that that BEG Entity receives in connection with the operation of the relevant Station up to the Effective Date which would not have been received but for the exercise of the Option to Operate by the Secretary of State. If the amount of such benefits exceed the amount of such costs, the relevant BEG Entity shall pay an amount equal to such excess to the order of the Secretary of State promptly after the Effective Date.

Cost allocation generally

11.10 Except where expressly stated to the contrary in this Agreement, any costs or losses incurred by any member of the Group in complying with their respective obligations under this Agreement shall be borne by that person.

11.11 The Secretary of State acknowledges and agrees that the obligations of BEG and BEG(UK) to make the PWR Fuel Payments, save for any PWR Fuel Payments due and payable immediately prior to the Effective Date, shall cease with effect from Sizewell B’s Effective Date.

Costs disputes

11.12 If the Secretary of State and a BEG Entity are unable to reach agreement as to the amount of costs and expenses to be reimbursed pursuant to this clause 11 (Allocation of Costs) within 20 Business Days of the Secretary of State or the applicable BEG Entity notifying the other that she or it does not agree with the amount so claimed, the Dispute shall be referred for Expert Resolution.

Definition of “costs and expenses”

11.13 For the purposes of this clause 11 (Allocation of Costs) references to “costs and expenses” in relation to a Station means costs and expenses incurred directly at, or which are directly referable to, such Station and, for the avoidance of doubt, exclude:

11.13.1 any costs and expenses incurred by the Group which are not directly referable to the operation of the Station;

11.13.2 any costs and expenses incurred in connection with any of the Trading Contracts (except where dealt with under a separate agreement between the selling BEG Entity or any other member of the Group and the Station Purchaser); and

11.13.3 any amount paid or payable in respect of VAT to the extent that it is recoverable by any member of the Group.

**** indicates information which has been omitted and filed separately with the Commission

- 38 -

12. ACTION AFTER COMPLETION

12.1 As soon as possible after Completion, in respect of the sale and acquisition of any Station, the selling BEG Entity shall:

12.1.1 notify the relevant Station Employees of the sale of the Station to the Station Purchaser; and

12.1.2 join with the Station Purchaser in sending out a notice to all of that BEG Entity’s suppliers and customers and other business contacts in respect of the business carried on at that Station informing them of the sale and acquisition of the Station.

12.2 All correspondence, enquiries, notices or orders relating to the Station and/or the relevant Station Assets which are received by the selling BEG Entity on or after Completion shall immediately be passed to the Station Purchaser.

12.3 Except for stationery which bears any business name or mark relating to the selling BEG Entity (or another member of the Group) which shall immediately be passed onto such entity, if, at Completion, any stationery (including promotional material) is delivered or supplied to a Station Purchaser under this Agreement, the Station Purchaser may sell or otherwise dispose of such stationery or use that stationery. The Station Purchaser may also use on a costs free basis any of the Station Assets and any other materials bearing any trade mark, service mark, trade name, business name or sign (each, for the purposes of this clause 12.3, a “Trade Mark”) of the selling BEG Entity (or other member of the Group) for a period of:

12.3.1 2 months after Completion, in the case of any of the marks the subject of the trade mark registrations or applications listed in Part A of Schedule 23 (Excluded Marks) or the unregistered trade marks listed in Part B of Schedule 23 (Excluded Marks); or

12.3.2 2 months after receipt of notice from that BEG Entity in the case of any of its (or any other member of the Group’s) other Trade Marks or, in the case of a bona fide dispute as to whether a Trade Mark is a Trade Mark of the selling BEG Entity (or another member of the Group), within 2 months of the resolution of such dispute in accordance with clause 30 (Dispute Resolution), including by reference of the dispute to Expert Resolution if necessary,

if necessary for the proper Operation of that Station.

12.4 Subject to clause 12.3, the selling BEG Entity shall not, and BE plc shall procure that no member of the Group shall, do or omit to do anything which would prevent the Station Purchaser from obtaining the full benefit and enjoyment of the business goodwill (if any) relating to the business carried on at that Station and shall not do or omit to do anything to discourage customers and suppliers of the Station and the relevant Station Employees to deal with or work for the Station Purchaser in place of the selling BEG Entity, provided that nothing shall prejudice that BEG Entity from making factual statements to appropriate representatives of affected employees to comply with its obligations pursuant to Regulation 10 of the Regulations.

**** indicates information which has been omitted and filed separately with the Commission

- 39 -

12.5 The Secretary of State will not require any member of the Group following Completion to enter into any contract with, or provide any goods or services to:

12.5.1 more than one Station Purchaser in relation to any Stations in respect of which the Secretary of State has exercised an Option to Operate;

12.5.2 more than three Station Purchasers in relation to any Stations in respect of which the Secretary of State has exercised an Option to Decommission; or

12.5.3 more than two Station Purchasers in relation to any Stations in respect of which the Secretary of State has exercised an Option to Decommission and one person nominated by the Secretary of State in relation to any Station in respect of which the Secretary of State exercised an Option to Operate but which has Closed at the date of such contract or provision of goods or service.

12.6 The selling BEG Entity shall, and BE plc shall procure that each member of the Group shall, neither pending nor within 18 months after Completion directly or indirectly solicit or entice away from the employment of the Station Purchaser any employee who was at the relevant Completion Date employed at an annual salary in excess of £20,000, nor assist any other person to do the same, provided that nothing in this clause 12.6 shall prohibit any member of the Group from employing any individual who responds to a public advertisement which is not targeted at him and without further solicitation.

13. TRANSFER OF CONTRACTS

Assignment: no Third Party Consent required

13.1 A Station Purchaser shall become entitled upon Completion of the acquisition of any Station to the benefits and rights of the selling BEG Entity under the Contracts relating to such Station and this Agreement shall constitute an assignment of the benefit of all such Contracts (save for any Scottish Contracts) to the Station Purchaser with effect from Completion. This Agreement shall not constitute an assignment or attempted assignment or assignation of any Contract if the assignment or assignation or attempted assignment or assignation would constitute a breach of such Contract.

13.2 In respect of each Scottish Contract for which no Third Party Consent is required to assignation of the same, and assignation to the Station Purchaser is not a breach of such Scottish Contract, at and with effect from Completion the selling BEG Entity and the Station Purchaser shall enter into and validly execute in accordance with the Requirements of Writing (Scotland) Act 1995 an assignation of the relevant Scottish Contract in a form to be agreed between the selling BEG Entity and the Station Purchaser (or, where another member of the Group is party to the Scottish Contract in question, the selling BEG Entity shall procure that the relevant member of the Group enters into an assignation thereof). The Station Purchaser undertakes to the selling BEG Entity validly to intimate any such assignation to the third party under the Scottish Contract in question forthwith upon such assignation being entered into between the parties and at the same time to copy such intimation to the selling BEG Entity.

**** indicates information which has been omitted and filed separately with the Commission

- 40 -

Assignment: Third Party Consent required

13.3 Where a Third Party Consent is required to the assignment or assignation of the benefit of any Contract to a Station Purchaser, the Station Purchaser and the selling BEG Entity shall each be responsible (both before and after Completion and at their own expense) for obtaining, and shall each use all reasonable endeavours to obtain, any such Third Party Consent. Upon whichever is the later of Completion and any such Third Party Consent being obtained, this Agreement shall constitute an assignment of the benefit of the Contract (save for any Scottish Contracts) to which that Third Party Consent relates.

13.4 In respect of each of the Scottish Contracts where a Third Party Consent is required to effect the assignation of the same and assignation to the Station Purchaser is not a breach of such Scottish Contract, upon whichever is the later of Completion and any such Third Party Consent being obtained, the selling BEG Entity and the Station Purchaser shall enter into and validly execute in accordance with the Requirements of Writing (Scotland) Act 1995, an assignation of the relevant Scottish Contract in a form to be agreed between the selling BEG Entity and the Station Purchaser (or, where another member of the Group is party to the Scottish Contract in question, the selling BEG Entity shall procure that the relevant member of the Group enters into an assignation thereof). The Station Purchaser undertakes to the selling BEG Entity validly to intimate any such assignation to the third party under the Scottish Contract in question forthwith upon such assignation being entered into between the parties and at the same time to copy such intimation to the selling BEG Entity.

Novation

13.5 The Station Purchaser and the selling BEG Entity shall each be responsible (both before and after Completion and at their own expense) for entering into and procuring that all relevant third parties enter into a novation agreement (in a form satisfactory to the Station Purchaser (acting reasonably)) in respect of any Contracts specified by that Station Purchaser with the intent that, with effect from whichever is the later of Completion and the date such novation agreement is entered into, the Station Purchaser shall perform the Contract and be bound by it as if the Station Purchaser were a party to that Contract in lieu of the selling BEG Entity as from the date of its novation and the selling BEG Entity shall be released from the further performance of such Contract and any liability under such Contract. The Station Purchaser shall, by notice to the selling BEG Entity as soon as possible following the exercise of the Station Option by the Secretary of State, specify the Contracts to be novated pursuant to this clause 13.5.

Action pending Third Party Consent

13.6 After Completion, and until any necessary Third Party Consent to the assignment or assignation of a Contract is obtained or a novation agreement has been entered into in respect of a Contract in accordance with this clause 13 (Transfer of Contracts) or the

**** indicates information which has been omitted and filed separately with the Commission

- 41 -

Station Purchaser makes an election pursuant to clause 13.7, the following provisions shall apply:

13.6.1 if it is permissible under the Contract, the selling BEG Entity shall be treated as holding the benefit of that Contract on trust for the Station Purchaser and any benefit received by that BEG Entity under such Contract shall be promptly paid over to the Station Purchaser; and

13.6.2 if it is permissible under the Contract, the Station Purchaser shall perform on behalf of the selling BEG Entity, in accordance with and subject to the provisions of clause 14.4, the obligations of the selling BEG Entity under that Contract arising after Completion.

Failure to assign or novate Contracts

13.7 If any Third Party Consent to the assignment or assignation of a Contract is not obtained or a novation agreement is not entered into in respect of a Contract in accordance with this clause 13 (Transfer of Contracts) in either case within two months after the Completion Date (or such longer period as the selling BEG Entity and the Station Purchaser shall agree), that Contract shall, if the Station Purchaser elects in writing, be treated as having been excluded from the sale and acquisition of the relevant Station under this Agreement so that the parties’ obligations in respect of the assignment or novation of that Contract shall end immediately after such election is made, and neither party shall have any further obligation to the other relating to such Contract.

BNFL Contracts

13.8 Clause 13.9 shall apply in respect of the BNFL Contracts if the Secretary of State exercises a Station Option.

13.9 The Station Purchaser and the selling BEG Entity shall each be responsible (at its own expense) for obtaining and shall each use all reasonable endeavours to ensure that, as at and with effect from Completion, the counterparties to each BNFL Contract consent to the accession of the Station Purchaser to that contract on terms which provide for an equitable apportionment of the rights and obligations under each such contract. Any such apportionment shall be made having regard, amongst other things, to:

13.9.1 the number of Stations in connection with which a Station Option has been exercised; and

13.9.2 whether or not those Stations are operating or in the process of being decommissioned.

Without prejudice to the generality of this clause 13.9, the requirement to ensure an equitable apportionment of the rights and obligations under the BNFL Contracts shall apply to the fuel management services being provided under, and the liability allocation specified in, each BNFL Contract. The Station Purchaser and the selling BEG Entity shall ensure that, prior to the accession of the Station Purchaser to each BNFL Contract, appropriate amendments to each such contract are made to reflect the agreement reached between the parties.

**** indicates information which has been omitted and filed separately with the Commission

- 42 -

Contract termination

13.10 If requested to do so by the Secretary of State or a Station Purchaser, the relevant BEG Entity shall, with effect from Completion if the Contract specified in such request relates:

13.10.1 solely to the Station being acquired, terminate the Contract specified in such request except where such termination would constitute a breach of that Contract; and

13.10.2 to a number of Stations not all of which are being acquired, ensure that the provisions of the Contract which would otherwise apply to the Station being acquired are disapplied or terminated in so far as they affect the Station being acquired, except where such disapplication or termination would constitute a breach of that Contract.

Excluded Contracts

13.11 Without prejudice to any claims which a Station Purchaser might have under clause 23 (Station Purchaser’s Remedies) or otherwise, if in connection with the sale and acquisition of a Station under this Agreement, the selling BEG Entity has omitted to give full, complete and accurate details of, or to disclose the existence of, a Contract to the relevant Station Purchaser prior to Completion, then the Station Purchaser may elect in writing, within one month after becoming aware of such details or the existence of such Contract (as the case may be), that such Contract shall:

13.11.1 be excluded from the sale and acquisition of that Station under this Agreement so that the parties’ obligations under this Agreement in respect of the assignment or novation of that Contract shall end immediately after such election is made; or

13.11.2 be treated as and deemed to be a Contract to be assigned or novated with the intent that, amongst other things, the obligations of the selling BEG Entity with regard to the assignment, assignation or novation of Contracts under this clause 13 (Transfer of Contracts) shall apply to that Contract.

Further assurance

13.12 The Station Purchaser agrees to do each act reasonably requested of it by the selling BEG Entity to enable the performance by the selling BEG Entity of each Contract in accordance with this clause 13 (Transfer of Contracts).

**** indicates information which has been omitted and filed separately with the Commission

- 43 -

14. ASSUMED OBLIGATIONS

Assumption of obligations

14.1 Except as otherwise provided in this Agreement, the Station Purchaser undertakes to the selling BEG Entity that, with effect from Completion of the acquisition of a Station, it will properly assume and promptly discharge, pay and perform when due all Assumed Obligations in respect of that Station.

14.2 “Assumed Obligations” in connection with the sale and acquisition of a Station under this Agreement means:

14.2.1 subject to clause 14.4, all obligations and liabilities of the selling BEG Entity under the Contracts relating to that Station which have been assigned or novated to the Station Purchaser or which the Station Purchaser otherwise agrees to perform or assume responsibility for, in each case pursuant to clause 13 (Transfer of Contracts);

14.2.2 if clause 13.9 applies, those obligations and liabilities in respect of the BNFL Contracts which the Station Purchaser accedes to, or agrees to be bound by, under clause 13.9; and

14.2.3 all business rates, rents, expenses and other periodic outgoings in respect of the Station Site for any period of time after Completion.

Assumed Obligations do not include, subject to clause 15 (Environmental Matters) and clause 28.4, any Excluded Liabilities or any other liabilities of any member of the Group, or obligations for which any member of the Group is responsible under any provision of any Liabilities Document (subject to the terms and conditions set out in the relevant Liabilities Document).

Increased Excluded Liabilities

14.3 The Secretary of State shall be responsible for any Increased Excluded Liabilities and shall reimburse each BE Party in respect of any Increased Excluded Liabilities incurred by it.

Contract obligations

14.4 Except as otherwise provided in this Agreement, the Station Purchaser undertakes that from Completion of the acquisition of a Station it will perform the outstanding obligations and liabilities under the Contracts relating to that Station to the extent that they arise in respect of the operation of the Station by the Station Purchaser, provided that this undertaking shall cease to apply in relation to any Contract in respect of which the Station Purchaser makes an election pursuant to clause 13.7 or 13.11. Notwithstanding this undertaking, nothing in this Agreement shall:

14.4.1 require the Station Purchaser to perform any such obligation falling due for performance, or which should have been performed, before Completion, or to pay for services or products supplied or delivered to the selling BEG Entity before Completion;

**** indicates information which has been omitted and filed separately with the Commission

- 44 -

14.4.2 make a Station Purchaser liable for any act, default, neglect or omission in respect of any of the Contracts committed by the selling BEG Entity and occurring before Completion;

14.4.3 impose any obligation on a Station Purchaser for, or in respect of, any service performed by, or any product supplied by, the selling BEG Entity before Completion; or

14.4.4 require the Station Purchaser to perform any obligation under any of the contracts falling within paragraphs (A) to (H) of the definition of Contracts (except where dealt with under a separate agreement between the selling BEG Entity or any other member of the Group and the Station Purchaser) or is otherwise dealt with specifically under this Agreement,

and the BE Parties jointly and severally indemnify the Secretary of State and the Station Purchaser against all charges, claims, costs, demands, liabilities or losses whatsoever arising from any such matters under this clause 14.4 except to the extent that the Secretary of State or the Station Purchaser explicitly assumes responsibility (whether through express, or clear implication of, the provisions of this Agreement) for such charges, claims, costs, demands, liabilities or losses under this Agreement or, in respect of Contracts, under the terms of an agreed form assignment or novation agreement.

Selling BEG Entity’s continued obligations

14.5 Subject to the preceding provisions of this clause 14 (Assumed Obligations), the selling BEG Entity, in respect of each Station, shall continue to be responsible for and shall promptly discharge all debts, liabilities and obligations in connection with the Station which are not expressly the responsibility of the Station Purchaser under the terms of this Agreement (even if assumed by the Station Purchaser by operation of law).

Allocation of costs and benefits

14.6 The parties acknowledge and agree that at any time during which a party bears the costs and expenses relating to the Operation of a Station, that party shall be entitled to receive the rights and benefits of the Operation of that Station.

15. ENVIRONMENTAL MATTERS

15.1 The provisions of:

15.1.1 the NLFA insofar as it relates to Environmental Matters, including without limitation the provisions of clause 6 of the NLFA in relation to Excluded Liabilities; and

15.1.2 clause 28.3.2 of this Agreement insofar as it relates to Environmental Matters, (together the “BE Environmental Indemnification”) shall apply following the exercise of a Station Option, subject to the provisions of this clause 15 (Environmental Matters).

**** indicates information which has been omitted and filed separately with the Commission

- 45 -

15.2 If the Option to Operate is exercised in relation to a Station, the BE Environmental Indemnification shall not apply to any Environmental Matter in relation to that Station which is first caused, arises or comes into existence after the Effective Date, except to the extent resulting from a failure by any member of the Group to comply with the Minimum Performance Standard after the Effective Date but prior to Completion. For the purposes of this clause 15.2 “failure” does not include failures due to the instruction of the Secretary of State or Station Purchaser.

15.3 If the Option to Decommission is exercised in relation to a Station, the BE Environmental Indemnification shall not apply to any Environmental Matter in relation to that Station which is first caused, arises or comes into existence after the Effective Date.

15.4 If the Option to Operate or the Option to Decommission is exercised in relation to a Station:

15.4.1 the BE Environmental Indemnification shall not apply to any contamination or pollution of soil, surface water, sub-surface water or groundwater in relation to that Station which is not discovered and notified by the Secretary of State to the selling BEG Entity prior to the Station being placed into safestore and entering a quiescent and stable period of care and maintenance with no substantial ongoing active Decommissioning taking place in relation to that Station;

15.4.2 the BE Environmental Indemnification shall not apply to the extent that the relevant liability, loss, charge, cost or expense is created or increased as the result of receptors being introduced onto the Station Site following Decommissioning which are of increased sensitivity compared to those reasonably foreseeable in connection with general industrial use;

15.4.3 the BE Environmental Indemnification shall not apply to the costs of carrying out Environmental Works which are not required by the relevant regulatory authorities and bodies to be carried out, provided that the relevant person shall be entitled to establish the requirements of the relevant regulatory authorities and bodies by dealing with them in a reasonable manner consistent with the conduct of a reasonable and prudent operator of the Station who did not have the benefit of the BE Environmental Indemnification; and

15.4.4 the Secretary of State and any Station Purchaser making a claim under the BE Environmental Indemnification shall ensure that all reasonable steps are taken to mitigate any claim under the BE Environmental Indemnification in respect of Environmental Matters, provided that this obligation shall not prevent any person from carrying out investigations, making reports and otherwise dealing with the relevant regulatory authorities and bodies and third parties in a reasonable manner consistent with the conduct of a reasonable and prudent operator of the Station who did not have the benefit of the BE Environmental Indemnification.

**** indicates information which has been omitted and filed separately with the Commission

- 46 -

15.5 For the avoidance of doubt, the BE Environmental Indemnification does not apply to Decommissioning Only Environmental Works (as defined in Schedule 4 of the NLFA).

16. RISK AND INSURANCE

16.1 Risk in Station Assets shall pass to the Station Purchaser on the Effective Date of the sale and acquisition of those Station Assets.

16.2 The selling BEG Entity, in relation to the sale and acquisition of any Station, shall use reasonable endeavours to make arrangements with the insurers of that Station for the Station Purchaser to be substituted for the selling BEG Entity on Completion as the insured under all the insurance policies relating to that Station and will, if the Station Purchaser has been so substituted for the selling BEG Entity, at Completion, deliver a letter or letters from the relevant insurers confirming that the Station Purchaser is covered by the relevant policies in place of the selling BEG Entity until the next renewal date of the relevant policies.

17. EMPLOYEES

17.1 The parties envisage that the Regulations may apply as a consequence of the terms of this Agreement in a number of circumstances including, but not limited to, some or all of the following:

17.1.1 the sale and acquisition of any Station under this Agreement (unless the Station Purchaser enters into an M&O Contract);

17.1.2 the termination of an M&O Contract (unless the Station Purchaser enters into a Defuelling Contract);

17.1.3 the termination of a Partial Closure M&O Contract;

17.1.4 the termination of a Defuelling Contract;

17.1.5 the termination of an Ancillary Services Contract; and

17.1.6 the termination of the provision by a BE Party of any Ancillary Service.

Where the Regulations apply, the contracts of employment of the relevant Transferring Employees and any collective agreement made by or governing the relevant member of the Group and any Transferring Employee will have effect from the Transfer Time as if originally made between the relevant Station Purchaser or Third Party Service Provider and those Transferring Employees (subject to the provisions of the Regulations from time to time) unless any potential Transferring Employee objects to being transferred in accordance with Regulation 5(4A) of the Regulations. For the avoidance of doubt, nothing in this clause 17 (Employees) shall impose on the Station Purchaser any duties or obligations in respect of contracts of employment or collective agreements which do not transfer to it in accordance with the provisions of the Regulations or other applicable laws as in force at the relevant time.

**** indicates information which has been omitted and filed separately with the Commission

- 47 -

17.2 All wages, salaries (including but not limited to overtime payments, “standby” payments and other ancillary payments), liabilities in respect of the Pay As You Earn system and National Insurance contributions, car allowances, employer pension contributions, bonus payments insurance premiums payable, and all other periodic outgoings in respect of the Transferring Employees which relate to a period:

17.2.1 on or after the Transfer Time shall be borne by the relevant Station Purchaser; and

17.2.2 before the Transfer Time shall be borne by the relevant BE Party,

and any necessary apportionments shall be made as at the Transfer Time (save in relation to bonus payments which shall be dealt with in accordance with clause 17.3 below), and clauses 11.5, 11.6 and 11.12 shall apply in respect of any necessary reimbursements.

17.3 The Station Purchaser shall, at the end of the financial year in which the Transfer Date occurs, determine the bonus payable in respect of the Transferring Employees to the extent that relevant performance targets have been satisfied. The Station Purchaser shall notify the relevant BE Party of the total amounts of bonus payable and the proportion payable by the relevant BE Party pro-rated on a time basis in accordance with clause 17.2 above. Following such notification, clauses 11.5, 11.6 and 11.12 shall apply in respect of any necessary reimbursement.

17.4 The relevant BE Party shall comply with its obligations to inform and/or consult with the relevant Station Employees and/or their representatives pursuant to Regulations 10 and 10A of the Regulations and the Station Purchaser shall provide that BE Party in writing with all such information as may be necessary to enable that BE Party to comply with such obligations.

17.5 As soon as reasonably practicable prior to any Transfer Date the parties shall seek to agree the identity of the Transferring Employees and the relevant BE Party shall disclose a list of such Transferring Employees to the Station Purchaser.

17.6 Where any Transferring Employee becomes employed by the Station Purchaser or any Third Party Service Provider but is based at the premises of a member of the Group, then the BE Parties will negotiate with the Station Purchaser or Third Party Service Provider with a view to agreeing the terms of a licence for such employees to continue to be based at such premises on reasonable commercial terms having regard to the amount of space and services required.

17.7 Notwithstanding any contrary provision of this Agreement, the provisions of clause 28.4 shall be directly enforceable by the Third Party Service Provider referred to therein although the clause may be amended by the parties without the consent of such Third Party Service Providers.

**** indicates information which has been omitted and filed separately with the Commission

- 48 -

17.8 If it comes to the parties’ attention that the Regulations will shortly operate to transfer the contracts of employment of any employee employed by a member of the Group to a Third Party Service Provider, as a result of actions taken by a Station Purchaser, then the relevant BE Party and the Station Purchaser will negotiate with the Third Party Service Provider so that the rights and obligations of the Station Purchaser under clauses 17.1, 17.2, 17.3, 17.4, 17.5, 17.6, 28.1 (as applicable), 28.2 and 28.3 (as applicable) become the rights and obligations of the Third Party Service Provider.

17.9 If requested by a BE Party following the Transfer Time in respect of any Transferring Employee, the Station Purchaser shall provide or procure the provision of the services of any Essential Transferring Employee to the relevant BE Party on terms which shall be negotiated by the parties in good faith at the appropriate time on the basis of the terms of the relevant Ancillary Services Contract. For the purposes of this clause 17 (Employees), an “Essential Transferring Employee” shall mean any Transferring Employee who was engaged prior to the Transfer Time in the provision of services essential to the Operation of a Station which a BEG Entity continues to Operate, including but not limited to those services which are required by any Regulator to be provided in respect of such Station.

18. INTELLECTUAL PROPERTY

18.1 The selling BEG Entity hereby grants the Station Purchaser, or shall (as appropriate) procure the grant by the relevant member of the Group to the Station Purchaser, to come into effect at the Completion Date for each Station, a non-exclusive, royalty-free, perpetual, irrevocable licence under all Station Intellectual Property (excluding any Station Intellectual Property that is a Station Asset) related to that Station for the duration of the Operation of that Station (to the extent that such Station Intellectual Property is not already licensed to the Station Purchaser in connection with any other Station or otherwise on terms as favourable to the Station Purchaser as those of the licence described herein and the scope of which existing licence includes the relevant Station). Each such licence shall include the right to grant sub-licences to the extent necessary for the Operation of the relevant Station, and shall be freely assignable to any purchaser of such Station from the Station Purchaser (but not otherwise assignable).

18.2    18.2.1 Subject to clauses 18.2.2 and 18.2.3, during the continuation of each licence granted in clause 18.1, the selling BEG Entity shall, or shall procure that the relevant member of the Group shall:

(A) pay all renewal or other maintenance fees in respect of all Station Intellectual Property which is registered or is an application for registration;

(B) use its reasonable endeavours to prosecute to grant all Station Intellectual Property which is an application for registration; and

(C) use its reasonable endeavours to enforce against infringers and defend against challengers all Station Intellectual Property (save where the selling BEG Entity, in its sole but reasonable discretion, considers that such

**** indicates information which has been omitted and filed separately with the Commission

- 49 -

enforcement or defence is not reasonably likely to succeed or is not justified by the costs and expenses expected to be incurred therein), to the extent that such Station Intellectual Property is the subject of any such licence.

18.2.2 The Station Purchaser hereby indemnifies the selling BEG Entity on demand against all out-of-pocket costs and expenses (including all renewal and maintenance fees or other registry fees and all legal and agency charges) reasonably (having regard to the commercial interests of the selling BEG Entity and the Station Purchaser) incurred by the selling BEG Entity or any other member of the Group in complying with clause 18.2.1, provided, in the case of clause 18.2.1(C) that: (i) the selling BEG Entity consults with the Station Purchaser on a case-by-case basis in advance of taking enforcement or defence action and reasonably regularly throughout the course of such action; and (ii) if the Station Purchaser, in its sole but reasonable discretion, considers that such enforcement or defence is not reasonably likely to succeed or is not in the commercial interests of the Station Purchaser or is not justified by the costs and expenses expected to be incurred therein, it may refuse to indemnify the selling BEG Entity in which case the selling BEG Entity shall have no obligation to take any such action under clause 18.2.1(C), subject to invoicing by the selling BEG Entity on 30 day payment terms, save in the proportion representing the extent to which any such Station Intellectual Property is, at the time the cost or expense is incurred, also used in the Operation of any Station Operated by the selling BEG Entity or is otherwise used by the selling BEG Entity or any member of the Group or any licensees (other than the Station Purchaser) thereof. If the Station Purchaser reasonably considers that any material amount invoiced to it by the selling BEG Entity pursuant to this clause 18.2.2 is not payable by the Station Purchaser in accordance with this clause 18.2.2, the parties shall agree in good faith within 20 Business Days of the production of any such invoice what amount of such invoice is payable by the Station Purchaser in accordance with this clause 18.2.2. If the parties cannot reach agreement as aforesaid, the matter shall be referred for Expert Resolution. The selling BEG Entity shall pay over to the Station Purchaser such proportion of the financial benefits of any enforcement action taken pursuant to clause 18.2.1(C) in the proportion in which the Station Purchaser indemnifies the selling BEG Entity pursuant to this clause 18.2.2 against the costs and expenses incurred by the selling BEG Entity in connection with such enforcement.

18.2.3 If, during the continuation of each licence granted in clause 18.1, the selling BEG Entity or other relevant member of the Group, wishes to cease payment of renewal or other maintenance fees in respect of any Station Intellectual Property which is registered, or cease prosecution of any Station Intellectual Property which is an application for registration, in each case to the extent that such Station Intellectual Property is the subject of any such licence, the selling BEG Entity shall first notify the Station Purchaser and offer to assign such Station Intellectual Property to the Station Purchaser for a nominal consideration. Any such assignment shall be at the sole expense of the Station Purchaser.

**** indicates information which has been omitted and filed separately with the Commission

- 50 -

18.2.4 If, during the continuation of each licence granted in clause 18.1, the selling BEG Entity or other relevant member of the Group declines to enforce against infringers and defend against challengers any Station Intellectual Property that is the subject of such a licence, the Station Purchaser shall be entitled (but not obliged) to take such action, at its own cost and for its own benefit, as it sees fit to enforce or defend such Station Intellectual Property and the selling BEG Entity shall, subject to the Station Purchaser indemnifying the selling BEG Entity on demand against all reasonably incurred out-of-pocket costs and expenses (including costs orders), lend all reasonable assistance to the Station Purchaser as the Station Purchaser shall reasonably request including by joining or lending its name to any proceedings.

18.2.5 The Station Purchaser grants to the selling BEG Entity a non-exclusive, royalty-free, perpetual, irrevocable, non-transferable licence (with the right to sub-licence) under: (i) any Station Intellectual Property which is registered or which is an application for registration and which the Station Purchaser acquires from the selling BEG Entity pursuant to clause 18.2.3; and (ii) any Station Intellectual Property which is a Station Asset, in each case only: (a) for the Operation of all Stations in respect of which a Station Option has not been exercised; and (b) provided that the selling BEG Entity shall indemnify the Station Purchaser on demand against all out-of-pocket costs and expenses (including all renewal and maintenance fees or other registry fees and all legal and agency charges) reasonably (having regard to the commercial interests of the selling BEG Entity and the Station Purchaser) incurred by the Station Purchaser in relation to:

(A) the payment of renewal or other maintenance fees in respect of all such Station Intellectual Property which is registered or is an application for registration;

(B) the prosecution to grant all such Station Intellectual Property which is an application for registration; and

(C) the enforcement against infringers and defence against challengers of all such Station Intellectual Property,

(provided, in the case of clause 18.2.5(C) that: (i) the Station Purchaser consults with the selling BEG Entity on a case-by-case basis in advance of taking enforcement or defence action and reasonably regularly throughout the course of such action; and (ii) such action is reasonable taking into account the commercial interests of the selling BEG Entity) subject to invoicing by the Station Purchaser on 30 day payment terms, save in the proportion representing the extent to which any such Station Intellectual Property is, at the time the cost or expense is incurred, also used in the Operation of the Station Operated by the Station Purchaser or is otherwise used by the Station Purchaser any licensees (other than the selling BEG Entity) thereof. If the selling BEG Entity

**** indicates information which has been omitted and filed separately with the Commission

- 51 -

reasonably considers that any material amount invoiced to it by the Station Purchaser pursuant to this clause 18.2.5 is not payable by the selling BEG Entity in accordance with this clause 18.2.5, the parties shall agree in good faith within 20 Business Days of the production of any such invoice what amount of such invoice is payable by the selling BEG Entity in accordance with this clause 18.2.5. If the parties cannot reach agreement as aforesaid, the matter shall be referred for Expert Resolution. The Station Purchaser shall pay over to the selling BEG Entity such proportion of the financial benefits of any enforcement action taken pursuant to clause 18.2.1(C) above in the proportion in which the selling BEG Entity indemnifies the Station Purchaser pursuant to this clause 18.2.5 against the costs and expenses incurred by the Station Purchaser in connection with such enforcement.

18.3 To the extent that a Station Intellectual Property Licence relevant to a Station can be sub-licensed to the Station Purchaser without the need to obtain any Station Third Party Licence Consent, the selling BEG Entity hereby grants to the Station Purchaser, or shall (as appropriate) procure the grant by the relevant member of the Group to the Station Purchaser, to come into effect on the relevant Completion Date, a non-exclusive sub-licence under such Station Intellectual Property Licence for (to the extent permitted by the terms of such Station Intellectual Property Licence) the duration of the Operation of that Station.

18.4 If any Station Third Party Licence Consent is required for the grant of a sub-licence to the Station Purchaser under a Station Intellectual Property Licence, the selling BEG Entity shall, at its own cost, use its reasonable endeavours to procure as soon as reasonably practicable after the relevant Completion Date such Station Third Party Licence Consent free from all conditions, restrictions and charges (to the extent possible) for the grant by the selling BEG Entity, or (as appropriate) the relevant member of the Group, of a non-exclusive sub-licence to the Station Purchaser under such Station Intellectual Property Licence for (to the extent permitted by the terms of such Station Intellectual Property Licence) the duration of the Operation of that Station, such sub-licence also (without prejudice to the obligations on the selling BEG Entity in this clause 18.4) being subject to any terms imposed by the Station Third Party Licence Consent. Any fee or charge levied by a relevant third party as a condition to the Station Third Party Licence Consent shall be for the sole account of the Station Purchaser.

18.5 Each sub-licence granted pursuant to clause 18.3 or 18.4 shall be on the same terms mutatis mutandis as the relevant Station Intellectual Property Licence (including as to payment), and shall (to the extent permitted by the terms of the relevant Station Intellectual Property Licence or the terms of the relevant Station Third Party Licence Consent (if applicable)) include the right to grant further sub-licences to the extent necessary for the Operation of the relevant Station, and shall be freely assignable to any purchaser of such Station from the Station Purchaser (but not otherwise assignable).

18.6 The selling BEG Entity shall have no obligation under clause 18.3 or 18.4 to the extent that a Station Intellectual Property Licence is already sub-licensed to the Station Purchaser in connection with any other Station or otherwise on terms as favourable to the Station Purchaser as those of the licence described in clause 18.1 and the scope of which existing sub-licence includes the relevant Station.

**** indicates information which has been omitted and filed separately with the Commission

- 52 -

18.7 For the avoidance of any doubt, this Agreement shall not constitute a sub-licence or attempted sub-licence under any Station Intellectual Property Licence if the grant thereof would constitute a breach of such Station Intellectual Property Licence.

18.8 The selling BEG Entity shall at its own cost, from time to time at the request of the Station Purchaser, do or procure the doing of all such acts and execute or procure the execution of all such documents, in a form satisfactory to the Station Purchaser, which the Station Purchaser may reasonably consider necessary to give full effect to the rights granted to the Station Purchaser under this Agreement in respect of Station Intellectual Property and Station Intellectual Property Licences and to secure to the Station Purchaser the full benefit of the rights, powers and remedies conferred upon it in this Agreement in respect of Station Intellectual Property and Station Intellectual Property Licences. Without prejudice to the generality of the foregoing, the selling BEG Entity shall forthwith (but no earlier than Completion) on receipt of appropriate documents from the Station Purchaser execute or procure the execution of assignments of all Station Intellectual Property that is a Station Asset to be transferred to the Station Purchaser pursuant to this Agreement and registered or an application for registration and shall furthermore take such steps or procure the taking of such steps, as soon as reasonably practicable, as are reasonably necessary to enable the Station Purchaser to effect the registration of a change of proprietor of all such Station Intellectual Property. For the avoidance of doubt, nothing in this clause 18.8 shall in any way prejudice the dispute resolution procedure in clause 30 (Dispute Resolution).

18.9 The selling BEG Entity shall indemnify the Station Purchaser against all claims, damages, losses, costs and expenses to the extent caused by any whole or partial termination or variation of any Station Intellectual Property Licence sub-licensed to the Station Purchaser under clause 18.3 or 18.4 arising from any breach thereof or Insolvency Event or wilful termination or variation, in each case on the part of the selling BEG Entity or any member of the Group. If any Station Intellectual Property Licence is due to be wholly or partially terminated for any reason (except by reason of natural expiry), the selling BEG Entity shall, reasonably promptly upon becoming aware of the same, use its reasonable endeavours (at its own cost and expense) to procure that such whole or part of the Station Intellectual Property Licence affected is instead novated or assigned to the Station Purchaser. If it is not possible for the selling BEG Entity to procure such a novation or assignment (whether due to the Station Intellectual Property Licence having been terminated without the selling BEG Entity’s knowledge or otherwise), the selling BEG Entity shall use its reasonable endeavours to procure that the counterparty to the licence grants a licence to the Station Purchaser on terms equivalent to those of the terminated licence.

19. RECORDS AND INFORMATION

19.1 The selling BEG Entity shall, at Completion of the sale and acquisition of any Station, deliver to the Station Purchaser all the Records relating to that Station.

**** indicates information which has been omitted and filed separately with the Commission

- 53 -

19.2 Each Station Purchaser acknowledges that the selling BEG Entity may wish to inspect and/or copy any Records delivered to them under this Agreement for the purpose of dealing with its Tax affairs and, accordingly, each Station Purchaser shall, upon being given reasonable notice by the selling BEG Entity and subject to the selling BEG Entity giving such undertaking as to confidentiality as the Station Purchaser shall reasonably require, make such Records available to the selling BEG Entity for inspection (during Working Hours) and copying (at the selling BEG Entity’s expense) in each case for and only to the extent necessary for such purpose and for a period of two years from Completion.

19.3 In respect of any Records not delivered to a Station Purchaser following the sale and acquisition of a Station pursuant to this Agreement or any accounting or Tax records which contain information which relates in part (but not exclusively) to the Station, the selling BEG Entity shall, upon being given reasonable notice by the Station Purchaser and subject to the Station Purchaser or its agents giving such undertaking as to confidentiality as the selling BEG Entity shall reasonably require, make that part of such Records including accounting or Tax records which do relate to the Station available to the Station Purchaser or its agents for inspection (during Working Hours) and copying (at the Station Purchaser’s expense) in each case for a period of two years from Completion.

20. COSTS AND EXPENSES

Except as otherwise agreed in writing or as stated in this Agreement, each party shall pay its own costs and expenses in relation to the negotiation, preparation, execution and carrying into effect of this Agreement and other documents referred to in it.

21. ADJUSTMENT FOR INFLATION

21.1 The amounts specified in clause 12.6, and in paragraphs (A), B and (F) of Schedule 5 (Conduct of Business before Completion) and Schedule 11 (Representations and Warranties) are expressed in 1 March 2003 money values and shall be adjusted for inflation in accordance with the formula set out in clause 21.2.

21.2 The formula for adjusting the figures detailed in clause 21.1 is as follows:

Am	=	Ao x Rm
		Ro

where:
Am	is the relevant amount as adjusted;
Ao	is the relevant amount in March 2003 money values;
Ro	is the Retail Price Index for the month of March 2003, and is 179.9;
Rm	is the Retail Price Index for the month in which (i) payment is due, (ii) the event occurs which gives rise to the relevant amount, or (iii) calculation of the relevant amount is required (in each case the “relevant month”) and shall be estimated as follows if the Retail Price Index is not available:

**** indicates information which has been omitted and filed separately with the Commission

- 54 -

where:
m	is the month for which the index number is to be estimated;
n	is the number of months between the relevant month and the month in which the index number has been most recently published;
Rm-n	is the Retail Price Index for the month in which the index has been most recently published; and
Rm-n-3	is the Retail Price Index for the month three months prior to Rm-n.

22. BE PARTY WARRANTIES AND UNDERTAKINGS

Capacity Warranties

22.1 Each BE Party represents and warrants to the Secretary of State that each Warranty in paragraph 1 of Schedule 11 (Representations and Warranties) (“Capacity Warranties”) is true and accurate in all respects and not misleading at the Execution Date.

Acquisition Warranties

22.2 Following the exercise by the Secretary of State of a Station Option, BE plc, Holdings and the relevant selling BEG Entity (the “Warrantors”) shall represent and warrant to the Station Purchaser in respect of the relevant Station that the Capacity Warranties and each of the Warranties in paragraphs 2 to 16 of Schedule 11 (Representations and Warranties) (the “Acquisition Warranties”) are true and accurate in all respects and not misleading at the relevant Effective Date by reference to the facts and circumstances subsisting at that date.

22.3 In relation to the sale and acquisition of any Station pursuant to this Agreement, the selling BEG Entity will deliver to the Station Purchaser immediately before the Completion Date (if such date is not the same as the Effective Date) a letter confirming that the Capacity Warranties and the Acquisition Warranties have continued, and continue to be, accurate in all respects and not misleading from the Effective Date up to and as at the Completion Date (by reference to the facts and circumstances subsisting at that date), except as regards any matter or event occurring between the Effective Date in respect of that Station and the Completion Date, which are fully and fairly set out in such letter. Such confirmation shall confer the same rights on the Station Purchaser as if it were set out in this Agreement as an Acquisition Warranty.

**** indicates information which has been omitted and filed separately with the Commission

- 55 -

Disclosure

22.4 A Station Purchaser shall not be entitled to claim that any matter or event causes any of the Acquisition Warranties or the Capacity Warranty detailed in paragraph 1.4 of Schedule 11 (Representations and Warranties) (together, the “Disclosure Warranties”) in relation to a Station to be breached or renders any Disclosure Warranty misleading if it has been fully and fairly disclosed to that Station Purchaser in a Disclosure Letter delivered to the Station Purchaser at least 40 Business Days prior to the Effective Date (“Disclosure Date”).

22.5 Notwithstanding clause 22.4, where any matter or event occurs after the Disclosure Date that will or is likely to render any Disclosure Warranty inaccurate or misleading, the Station Purchaser shall not be entitled to claim that such matter or event causes the Disclosure Warranty to be breached or renders that Disclosure Warranty misleading if it has been fully and fairly disclosed in writing to the Station Purchaser at least 5 Business Days before the Completion Date.

22.6 In relation to the sale and acquisition of any Station pursuant to this Agreement the selling BEG Entity undertakes to disclose in writing to the Station Purchaser anything which is or may constitute a breach of or be inconsistent with any of the Disclosure Warranties immediately it comes to its notice at any time during the period from the Relevant Time in respect of that Station until the date which is 18 months after the relevant Completion Date.

Acknowledgement of reliance

22.7 Each BE Party acknowledges that the Secretary of State is entering into this Agreement in reliance upon representation in terms of the Capacity Warranties, made or to be made by each of them with the intention of inducing and actually inducing the Secretary of State to enter into this Agreement.

Warranties separate

22.8 Each of the Warranties shall be construed as being separate and independent and (except where expressly provided to the contrary) shall not be limited or restricted by reference to or inference from the terms of any other Warranty or any other term of this Agreement.

23. STATION PURCHASER’S REMEDIES

23.1 In relation to the sale and acquisition of any Station pursuant to this Agreement, a Station Purchaser shall be entitled to claim both before and, subject to clause 29 (Limitation on Liability), after Completion, that any of the Warranties has or had been breached or is or was untrue, inaccurate or misleading and, without limitation, to claim under any indemnity or covenant even if the Station Purchaser knew or could have discovered on or before Completion that the Warranty in question had been breached or was inaccurate or misleading, save where such knowledge or discovery arises by reason of full and fair disclosure under clause 22.3, 22.4 or 22.5.

**** indicates information which has been omitted and filed separately with the Commission

- 56 -

23.2 If, between the exercise of a Station Option and Completion, the Station Purchaser or the Secretary of State becomes aware (whether it does so by reason of any disclosure made under clause 22 (BE Party Warranties and Undertakings) or not) that any of the Warranties is or was materially inaccurate or misleading or that there has been any material breach or breaches of any of the Warranties or any other material term of this Agreement, the Secretary of State or Station Purchaser may terminate the acquisition of the Station by notice in writing to the selling BEG Entity. The provisions of this clause 23.2 are without prejudice to the Secretary of State’s right to re-exercise a Station Option in accordance with clause 2.2 in respect of that Station.

23.3 Without limiting clause 34 (Remedies and Waivers) the Secretary of State and Station Purchaser’s right to terminate the acquisition of a Station in accordance with clause 23.2 is not exclusive of any right, power and remedies provided by law.

23.4 Each of BE plc, Holdings and the selling BEG Entity undertakes that if any claim is made against either of them in connection with the sale of a Station to a Station Purchaser, neither it nor any member of the Group will make any claim against any Station Employee or Ancillary Employee on whom it may have relied before agreeing to any terms of this Agreement.

24. ACKNOWLEDGEMENTS

The parties agree and acknowledge that the provisions of this Agreement shall be without prejudice to the ability of each BEG Entity to extend the Scheduled Closure Date of any Station it Operates pursuant to the terms of the NLFA.

25. CONDUCT OF PROCEEDINGS

25.1 If following the exercise of a Station Option by the Secretary of State any member of the Group becomes aware of a matter which might give rise to any claim, action or demand (each, a “Claim”) by a third party against any member of the Group in relation to a Station which has transferred to the Station Purchaser under this Agreement or will be transferred to the Station Purchaser following the exercise of a Station Option by the Secretary of State, the selling BEG Entity or BE plc shall:

25.1.1 notify the Secretary of State and the Station Purchaser of the Claim; and

25.1.2 take such action and give such information and access to personnel, premises, documents and records to the Secretary of State and use reasonable endeavours to procure access to its professional advisers (by instructing them to assist the Secretary of State and Station Purchaser) as the Secretary of State may reasonably request, and the Secretary of State shall be entitled to require BE plc to take, or procure the relevant member of the Group to take, such action and give such information and assistance in relation to the Claim as the Secretary of State, acting reasonably, deems fit.

25.2 In any event, the Secretary of State shall be entitled at any stage to settle any Claim provided that she first consults with BE plc and, if applicable, the relevant member of the Group prior to settling such Claim and such consultation shall include a reasonable

**** indicates information which has been omitted and filed separately with the Commission

- 57 -

opportunity for BE plc and/or the relevant member of the Group to make representations to the Secretary of State in respect of the settlement of such Claim. The Secretary of State shall take reasonable account of such representations in making her decision to settle any Claim.

25.3 If the Secretary of State or Station Purchaser becomes aware of a matter which might give rise to a Claim by a third party against the Secretary of State or the Station Purchaser in relation to any matter in respect of which the Secretary of State or Station Purchaser may seek indemnification from BE plc or the selling BEG Entity under this Agreement, the Secretary of State and Station Purchaser shall:

25.3.1 notify BE plc or the selling BEG Entity of the Claim; and

25.3.2 take such action and give such information and access to personnel, premises, documents and records to BE plc or the selling BEG Entity and use reasonable endeavours to procure access to its professional advisers (by instructing them to assist the Secretary of State and Station Purchaser) as BE plc or the selling BEG Entity may reasonably request and BE plc or the selling BEG Entity shall be entitled to require Secretary of State or Station Purchaser to take such action and give such information and assistance in relation to the Claim as BE plc or the selling BEG Entity, acting reasonably, deems fit.

25.4 In any event, each of BE plc and the selling BEG Entity shall be entitled at any stage to settle any such Claim provided that it first consults with the Secretary of State and the Station Purchaser prior to settling such Claim and such consultation shall include a reasonable opportunity for the Secretary of State and the Station Purchaser to make representations to BE plc and the selling BEG Entity in respect of the settlement of such Claim. BE plc and the selling BEG Entity shall take reasonable account of such representations in making their decision to settle any Claim. This clause 25.4 shall operate without prejudice to the indemnity obligations set out in clause 28.3.

26. INTEREST

26.1 If a party fails to pay any sum payable by it under this Agreement on the due date for payment, it shall pay interest at the Agreed Rate on that sum for the period from and including the date up to (but excluding) the date of actual payment (after as well as before judgement).

26.2 Interest on each sum shall accrue from day to day and shall be compounded on each anniversary of the due date for payment.

26.3 Without limiting clause 34, (Remedies and Waivers), the right to receive interest under this clause 26 (Interest) in respect of any unpaid sum is not exclusive of any rights, powers and remedies provided by law in respect of the failure to pay the relevant sum on the due dates for payment or at all.

26.4 For the purposes of any calculation of interest payable under this Agreement, “LIBOR” shall be deemed to refer to LIBOR prevailing on the due date for payment (“Due Date”). If the relevant amount remains unpaid on the twentieth Business Day after the Due Date,

**** indicates information which has been omitted and filed separately with the Commission

- 58 -

subsequent interest shall be calculated by reference to the LIBOR prevailing on such date and thereafter, LIBOR shall be recalculated on the last business date of each subsequent twenty Business Day period until the date of actual payment of the amount due.

27. COMPLIANCE WITH APPLICABLE LAW

Notwithstanding any other provision of this Agreement, the parties acknowledge and agree that:

(A) nothing in this Agreement shall prevent each BEG Entity from taking such action as is necessary:

(i) in an emergency to prevent, mitigate or remedy any event that may prejudice the safety of employees or the public or may harm the environment; or

(ii) to comply with any Applicable Law including, without limitation, any breach of a limitation or condition of a licence or of an authorisation issued under the Radioactive Substances Act 1993,

and the responsibility for any costs and expenses arising in connection with action taken under this clause 27 (Compliance with Applicable Law) shall be determined in accordance with the provisions of clause 11 (Allocation of Costs); and

(B) neither of the BEG Entities are required, pursuant to this Agreement, to do any act or omit from doing any act if:

(i) any Regulator would consider such act or omission unacceptable; or

(ii) the act or omission would cause it to be in breach of Applicable Law.

28. INDEMNITIES

Secretary of State indemnities

28.1 Without restricting the rights of each BE Party from time to time or its ability to claim damages on any basis the Secretary of State shall indemnify and keep indemnified each BE Party, in relation to the transactions contemplated by this Agreement, in respect of all liabilities, losses, charges or costs properly and reasonably incurred, claims or demands (together, “Losses”) arising:

28.1.1 in connection with the employment of any Transferring Employee during the period on or after the Transfer Time including any changes to terms and conditions of employment by the Station Purchaser;

28.1.2 except in respect of redundancy costs as provided in clause 28.4, in connection with the termination of the employment of any Transferring Employee by the Station Purchaser on or after the Transfer Time;

**** indicates information which has been omitted and filed separately with the Commission

- 59 -

28.1.3 from any failure by the Station Purchaser to comply with its obligations under Regulation 10(3) of the Regulations in accordance with clause 17.4;

28.1.4 from any breach by the Station Purchaser of clause 17.2; and

28.1.5 except in respect of redundancy costs as provided in clause 28.4 from any other act or omission done by the Station Purchaser or Third Party Service Provider in relation to any Transferring Employee on or after the Transfer Time.

28.1A Without restricting the rights of the selling BEG Entity from time to time or its ability to claim damages on any basis, the Secretary of State shall indemnify and keep indemnified the selling BEG Entity, in relation to the transactions contemplated by this Agreement, in respect of all Losses arising:

28.1A.1 from the waiver in whole or in part of all or any of the Completion Conditions pursuant to clause 7.3;

28.1A.2 from Increased Excluded Liabilities, other than in relation to Environmental Matters; and

28.1A.3 relating to any Environmental Matter to which clause 15.2 or 15.3 applies.

Station Purchaser indemnities

28.2 The Station Purchaser shall indemnify the relevant BE Party in respect of all Losses arising in relation to any Station Employee (including but not limited to any liability arising out of the termination through resignation of any of the Station Employees) as a consequence of the Station Purchaser’s communications with any employee of the relevant BE Party regarding the acquisition of the relevant Station and/or terms or conditions of it or the Station Purchaser’s proposed changes to the relevant Station Employees’ terms and conditions of employment constituting an anticipatory repudiatory breach of any Station Employee’s employment contract.

BE Party indemnities

28.3 Without restricting the rights of the Secretary of State or any Station Purchaser or their ability to claim damages on any basis, each BE Party jointly and severally undertakes to indemnify each of the Secretary of State and the Station Purchaser in respect of all Losses incurred by the Secretary of State, or the Station Purchaser from time to time arising from:

28.3.1 save in respect of liabilities relating to Transferring Employees, any debts, liabilities and obligations in connection with any Station which are not expressly the responsibility of the relevant Station Purchaser under the terms of this Agreement or the other Liabilities Documents (even if assumed by the Station Purchaser by operation of law);

28.3.2 save in respect of liabilities relating to Transferring Employees, the Secretary of State or the Station Purchaser being or becoming liable for some or all of the Excluded Liabilities (by reason of law or otherwise) except where expressly stated otherwise in this Agreement;

**** indicates information which has been omitted and filed separately with the Commission

- 60 -

28.3.3 the employment of any Transferring Employee at any time prior to the Transfer Time by a BE Party or any member of the Group;

28.3.4 termination of the employment of any Transferring Employee prior to the Transfer Time or of any other person who was formerly assigned to any undertaking (as defined in the Regulations) carried on by a BE Party immediately prior to the transfer of that undertaking to the relevant Station Purchaser or Third Party Service Provider;

28.3.5 subject to clause 28.1.3, any failure by a BE Party to comply with its obligations under Regulation 10 of the Regulations;

28.3.6 any breach of clause 17.2 by a BE Party;

28.3.7 any other act or omission done by a BE Party in relation to any Transferring Employee on or before the Transfer Time.

Redundancy Costs indemnity

28.4 If any Transferring Employees are dismissed on the grounds of redundancy (as defined under section 139 of the Employment Rights Act 1996), the relevant BE Party shall indemnify the Station Purchaser or Third Party Service Provider for any Redundancy Costs incurred by it in the provided that the relevant BE Party’s liability shall be limited to the following fraction of the Redundancy Costs:

where:

A is the period of the redundant Transferring Employee’s continuous employment less any proportion of that Transferring Employee’s continuous employment which exists as a consequence of the Station Purchaser exercising an Option to Decommission or an Option to Operate under this Agreement (having regard to the date upon which the relevant BE Party expected to Close the Station and the actual Closure Date of the Station); and

B is the redundant Transferring Employee’s period of continuous employment with the BE Party and the Station Purchaser.

For the avoidance of doubt, A will include the period of employment after the Transfer Time during which the Transferring Employee would have continued in employment had he remained an employee of the relevant BE Party and shall exclude any period of employment after the date upon which a Transferring Employee would have been made redundant had the BE Party Closed the Station on its Scheduled Closure Date and shall exclude any period of employment after the date upon which a Transferring Employee would have been made redundant had the BE Party Closed the Station on its Scheduled Closure Date.

**** indicates information which has been omitted and filed separately with the Commission

- 61 -

28.5 For the purposes of clause 28.4, the term “Redundancy Costs” shall mean all payments that the Station Purchaser or Third Party Service Provider is obliged to pay to any Transferring Employee on the termination of their employment on the grounds of redundancy, whether under (i) section 135 of the Employment Rights Act 1996, (ii) the Transferring Employee’s contractual entitlement in place at the relevant Transfer Time or (iii) in accordance with a discretionary policy applied by BE in respect of the last set of redundancies prior to that Transfer Time which would have applied to the transferring Employee as of the Transfer Time. For the avoidance of doubt, Redundancy Costs:

28.5.1 shall be calculated by reference to the lesser of (i) the individual’s actual salary at the date of termination of employment and (ii) his notional salary being his actual salary at the Transfer Time increased on each anniversary thereof by the then current figure for the Retail Price Index plus 2% per annum, compounded;

28.5.2 shall exclude any compensation payable for the manner in which the dismissal is carried out (including but not limited to unfair dismissal and/or breach of the Sex Discrimination Act 1975, the Race Relations Act 1976 and the Disability Discrimination Act 1975);

28.5.3 shall exclude any ex gratia or non-contractual payment that the Station Purchaser or Third Party Service Provider agrees to provide to the Transferring Employee or any of its dependants or relatives except where covered by paragraph (iii) above; and

28.5.4 shall include any additional cost that is calculated by an actuary nominated by the Station Purchaser (and agreed by the actuary to the British Energy Generation Group of the Electricity Supply Pension Scheme (the “British Energy Scheme”) or in default of agreement determined by the scheme actuary to the Electricity Supply Pension Scheme (the “ESPS”)) as being payable by the Station Purchaser or Third Party Service Provider in the provision of an enhancement to the Transferring Employee’s pension entitlement to the extent that his entitlement to such enhancement arises consequent on his redundancy in accordance with the provisions of the pension scheme provided by the Station Purchaser or Third Party Service Provider; provided that if, but for this proviso, the additional cost would exceed the additional cost that would have been payable by the Transferring Employee’s employer under the rules of the British Energy Scheme consequent on redundancy if the Transferring Employee had remained in contributing membership of the British Energy Scheme on and after Completion and until being made redundant by the Station Purchaser or Third Party Service Provider (the “Notional British Energy Contribution”) (without taking account of the funding position of the British Energy Scheme), then the additional contribution for the purposes of this indemnity shall be limited to the amount of the Notional British Energy Contribution, which shall be determined by the actuary to the British Energy Scheme as a lump sum (and agreed by an

**** indicates information which has been omitted and filed separately with the Commission

- 62 -

actuary nominated by the Station Purchaser) (or in default of agreement determined by the scheme actuary to the ESPS) but provided further that the Transferring Employee’s salary for the purposes of the additional contribution shall be determined in accordance with clause 28.5.1.

Payment mechanics for indemnities

28.6 Any payment made under clause 28.1 or 28.2 shall be payable to the relevant BEG Entity or at that BEG Entity’s direction, whether or not it has attempted to enforce any rights against the Secretary of State or the Station Purchaser or any other person or otherwise.

28.7 Any payment under clause 28.3 shall be payable to the Secretary of State or the Station Purchaser (as the case may be) at her or its direction whether or not the Secretary of State or the Station Purchaser (as the case may be) has attempted to enforce any rights against a BE Party or any other person or otherwise.

28.8 Any payment under clause 28.4 shall be payable to the Station Purchaser or the Third Party Service Provider (as the case may be) at the direction of the Station Purchaser or the Third Party Service Provider (as the case may be) whether or not it has attempted to enforce any rights against a BE Party or any other person or otherwise.

29. LIMITATION ON LIABILITY

No claim shall be brought against a BE Party by the Secretary of State or the Station Purchaser (the “Claimant”) in respect of any of the Warranties unless the Claimant has given to that BE Party written notice (“Claim Notice”) of such claim specifying (in reasonable detail):

29.1.1 the matter which gives rise to the claim;

29.1.2 the nature of the claim; and

29.1.3 the amount claimed in respect thereof,

on or prior to the second anniversary of the relevant Completion Date. The liability of that BE Party in respect of such claim shall absolutely determine (if such claim has not been previously satisfied, settled or withdrawn) if legal proceedings in respect of such claim have not been commenced within six months of the service of such Claim Notice and, for this purpose, proceedings shall not be deemed to have been commenced unless they shall have been properly issued and validly served upon the relevant BE Party.

30. DISPUTE RESOLUTION

Negotiation

30.1 If a party becomes aware of a disagreement, dispute or controversy (a “Dispute”) arising out of or in connection with this Agreement, including any Dispute regarding the existence, validity or termination of this Agreement, it shall provide the other parties to the Dispute with a notice (a “Notice of Dispute”) including full particulars of the Dispute and any proposal for resolution of the Dispute.

**** indicates information which has been omitted and filed separately with the Commission

- 63 -

30.2 Upon delivery of a Notice of Dispute, the relevant parties (the “Disputing Parties”) shall promptly meet and in good faith use their reasonable endeavours to resolve that Dispute.

30.3 If the Disputing Parties are unable to reach agreement under clause 30.2 within 20 Business Days of delivery of a Notice of Dispute (the “Initial Resolution Period”), the Dispute shall be referred for resolution:

30.3.1 by an Expert in circumstances in which this Agreement expressly provides for reference of the Dispute to an Expert; and

30.3.2 by arbitration in all other circumstances.

Expert Resolution

30.4 If, pursuant to the terms of this Agreement, a Dispute requires resolution by an Expert, the Disputing Parties shall use their reasonable endeavours to agree the type and identity of the Expert to be appointed.

30.5 If the Disputing Parties do not agree, within 10 Business Days of the expiry of the Initial Resolution Period:

30.5.1 as to the type of Expert to be appointed, the matter shall be referred to the Chairman of the City Disputes Panel (“CDP”) who shall be requested to determine, as soon as practicable after such referral, the appropriate type of Expert to resolve the Dispute; or

30.5.2 as to the identity of the Expert to be appointed, the matter shall be referred to the President, Chairman or other senior representative of the appropriate professional body who shall be requested to determine, as soon as practicable after such referral, the identity of the Expert to resolve the Dispute.

If clause 30.5.1 applies, the Disputing Parties shall use their reasonable endeavours to agree the identity of the Expert within 10 Business Days of the CDP’s determination. If agreement on the identity of the Expert is not reached within such period, clause 30.5.2 shall apply. Any Expert selected pursuant to this clause 30.5 shall be an “Expert” for the purposes of the remaining provisions of this clause 30 (Dispute Resolution).

30.6 The procedure to be followed in order to resolve the Dispute shall be decided by the Expert, save that such procedure shall include the taking of submissions from each of the Disputing Parties.

30.7 Each Disputing Party shall provide or procure the provision to the Expert of all such information as the Expert shall reasonably require, including provision of such information by its advisers, and shall give all such assistance to the Expert as the Expert shall reasonably require and as shall be required to allow the Expert to reach a decision as soon as reasonably practicable.

30.8 The Expert shall be instructed to make a determination in respect of the Dispute within the shortest practical time from his appointment and to deliver a report to the Disputing Parties stating his opinion as to the matters under dispute.

**** indicates information which has been omitted and filed separately with the Commission

- 64 -

30.9 Any Expert shall act as an expert and not as an arbitrator.

30.10 The decision of the Expert shall, in the absence of fraud or manifest error, be final and binding on the parties in dispute.

30.11 The costs of the Expert shall be paid by the parties in dispute equally or as otherwise determined by the Expert.

Arbitration

30.12 If a Dispute arises which is not expressly required by this Agreement to be referred to Expert Resolution and it is not resolved by the Disputing Parties within the Initial Resolution Period (or such longer period as the parties may mutually agree), the Dispute shall be referred to arbitration in accordance with clause 30.13.

30.13 Any dispute to be referred to arbitration under this Agreement shall be referred to and finally resolved by arbitration under the Rules of the London Court of International Arbitration, which rules are deemed to be incorporated into this clause 30.13. The tribunal shall consist of one arbitrator. The seat of arbitration shall be London. The language of arbitration shall be English.

Interlocutory relief

30.14 Nothing in this Agreement shall prevent a party from applying to the court for interlocutory relief to preserve the position of the parties pending the resolution of a Dispute in accordance with the provisions of this Agreement unless the application for such relief is intended to impede the procedures detailed in this clause 30 (Dispute Resolution).

31. VARIATION

Subject to any other provisions of this Agreement, this Agreement shall not be varied unless such variation shall have been expressly agreed in writing by each of the parties to this Agreement (or one of its duly authorised representatives). For the avoidance of doubt, variations are not required to be agreed by the Station Purchaser (where the Station Purchaser is not the Secretary of State).

32. NO PARTNERSHIP

Nothing in this Agreement and no action taken by the parties shall constitute a partnership, association, joint venture or other co-operative entity between any of the parties.

33. DUTIES AND TAXES

33.1 In respect of the exercise of a Station Option, the Station Purchaser shall pay all present and future stamp, documentary and other like duties and taxes, including stamp duty reserve tax, if any, to which this Agreement or the grant or exercise of any Station Option may be subject or give rise.

**** indicates information which has been omitted and filed separately with the Commission

- 65 -

33.2 Any sums payable under this Agreement to:

33.2.1 a BE Party by the Secretary of State or a Station Purchaser; or

33.2.2 the Secretary of State or a Station Purchaser by a BE Party,

shall, if applicable, be deemed to be exclusive of VAT.

33.3 Where, notwithstanding the provisions of clause 33.3, a BE Party makes a supply to the Secretary of State or the Station Purchaser of a Station (or any part thereof) for VAT purposes and VAT is or becomes chargeable on such supply, the Secretary of State or the Station Purchaser shall pay to the BE Party (in addition to providing any other consideration specified in this Agreement for such supply) a sum equal to the amount of such VAT on the production of a valid VAT invoice in respect of such transfer in accordance with any instructions issued by the Secretary of State (including, without limitation, concerning the addressee of the invoice).

33.4 The BE Parties and the Secretary of State intend that the transfer of any Station or any part thereof is outside the scope of VAT either because article 5 of the Value Added Tax (Special Provisions) Order 1995 shall apply to the transfer of the Station or part thereof pursuant to this Agreement or because the transfer of the Station or part thereof is not deemed to be a supply in the course or furtherance of a business, and each BE Party and the Secretary of State agrees to use all reasonable endeavours to secure that such transfer is treated as being outside the scope of VAT. Such endeavours shall include the selling BEG Entity requesting a VAT ruling from HM Customs & Excise. If the relevant selling BEG Entity receives a ruling stating that VAT is due on the transfer of a Station (or any part thereof), each BE Party will provide reasonable assistance to the Secretary of State in contesting the ruling where in all the circumstances it is reasonable to contest such ruling.

33.5 The Secretary of State or the Station Purchaser, as applicable, warrants and undertakes that it will by no later than the Completion Date be registered for VAT and agrees that it will notify the selling BEG Entity if it will not after the Completion Date use the Station to carry on the same kind of business for VAT purposes as that carried on by the selling BEG Entity.

34. REMEDIES AND WAIVERS

34.1 No delay or omission by any party to this Agreement in exercising any right, power or remedy provided by law or under this Agreement or any other document referred to in it shall affect that right, power or remedy or operate as a waiver of it.

34.2 The single or partial exercise of any right, power or remedy provided by law or under this Agreement shall not preclude any other or further exercise of it or the exercise of any other right, power or remedy.

34.3 The rights, powers and remedies provided in this Agreement are cumulative and not exclusive of any rights, powers and remedies provided by law.

**** indicates information which has been omitted and filed separately with the Commission

- 66 -

35. ASSIGNMENT

Prohibition on assignment

35.1 Subject to the following provisions of this clause 35 (Assignment), no party may at any time:

35.1.1 assign all or any part of the benefit of, or its rights or benefits under, this Agreement;

35.1.2 make a declaration of trust in respect of or enter into any arrangement whereby it agrees to hold in trust for any other person all or any part of the benefit of, or its rights or benefits under, this Agreement; or

35.1.3 sub-contract or enter into any arrangement whereby another person is to perform any or all of its obligations under this Agreement.

Intra-Group assignment

35.2 Each BE Party may assign and transfer all or any part of its rights, benefits and obligations under this Agreement to a wholly-owned Subsidiary of the Group or to the Ultimate Parent Company if:

35.2.1 the assignee has a Station transferred to it by that BE Party;

35.2.2 the assignee holds all necessary Licences and other regulatory consents, authorisations and approvals for (a) undertaking the Operation of the Station, and (b) Decommissioning and Discharging Uncontracted Liabilities in relation to that Station (if the nuclear reactors at the Station have Closed);

35.2.3 the assignee delivers to the Secretary of State a duly completed and executed Deed of Adherence;

35.2.4 the Secretary of State has received all of the documents and other evidence listed in Part 2 of Schedule 3 (Documents to be provided by an assignee) in relation to that assignee;

35.2.5 the assignee has entered into a deed of adherence in respect of, and in accordance with the terms of, the NLFA, the Contribution Agreement and the Historic Liabilities Funding Agreement;

35.2.6 the assignee has become an Additional Guarantor in accordance with the Guarantee and has delivered all documents required in connection therewith; and

35.2.7 the parties have applied to the Chief Land Registrar for a restriction in the following form (or such other form to the same intent to be agreed between the Secretary of State and the Chief Land Registrar) to be entered in the proprietorship registers of the registered titles referred to in Schedule 16 (Dungeness B) to Schedule 20 (Sizewell B) inclusive: “No disposition of the Station Site by the proprietor of the Station Site is to be registered without a

**** indicates information which has been omitted and filed separately with the Commission

- 67 -

certificate signed on behalf of the Secretary of State for Trade and Industry confirming compliance with clause 35 of the Option Agreement dated January, 2005 between the Secretary of State for Trade and Industry, British Energy Generation (UK) Limited, British Energy Generation Limited, BE plc and Holdings.”

35.3 The transferring BE Party hereby undertakes to the Secretary of State to procure that any assignee referred to in clause 35.2 shall hold all the necessary licences and other regulatory consents, authorisations and approvals referred to in clause 35.2.2.

35.4 Each BEG Entity, at the date of any Deed of Adherence, accepts and agrees that any assignee executing a Deed of Adherence shall thereafter be treated for all purposes as if the assignee had executed this Agreement subject only to the provisions of the Deed of Adherence.

35.5 If a BEG Entity ceases to own any Station (save as a result of a breach of the disposal or assignment provisions in any of the Liabilities Documents), the Secretary of State accepts and agrees that:

35.5.1 any obligations arising under this Agreement after the date of such cessation shall cease immediately following the satisfaction of the conditions detailed in clause 35.2 and 35.3 in relation to all of the Stations disposed of by that BEG Entity; and

35.5.2 if required by that BEG Entity, the parties shall execute a Deed of Release.

Assignment to Third Parties

35.6 Each BE Party may assign and transfer all or any part of its rights, benefits and obligations under this Agreement to any person which is not a wholly-owned Subsidiary of the Group or the Ultimate Parent Company. Any such assignment or transfer must be effected pursuant to, and in accordance with, the provisions of clause 33.3 of the NLFA, such provisions to apply mutatis mutandis to an assignment or transfer under this Agreement.

Successor Government Entity

35.7    35.7.1 If the Secretary of State considers that it is expedient in order to facilitate the public sector’s administration and performance of this Agreement, the Secretary of State may notify the other parties to this Agreement that such of the Secretary of State’s rights and obligations under this Agreement as are specified in the notice (the “Substituted Rights and Obligations”) are to be assumed by another Government Entity (the “Successor Government Entity”).

35.7.2 If the Secretary of State issues a notice under clause 35.7.1, the Secretary of State shall, except where the Successor Government Entity is a Minister of the Crown or a government department, unconditionally and irrevocably guarantee the due and punctual performance by any Successor Government Entity of such obligations as are assumed by it.

**** indicates information which has been omitted and filed separately with the Commission

- 68 -

35.7.3 If a notification complying with the foregoing requirements is given by the Secretary of State, the parties to this Agreement shall enter into such further agreements as the Secretary of State may reasonably consider necessary in order to substitute the Successor Government Entity for the Secretary of State in respect of the Substituted Rights and Obligations and to make any consequential modifications to the Liabilities Documents that are necessary to give effect to the substitution.

35.7.4 The Secretary of State may not require any assumption of Substituted Rights and Obligations or the making of any consequential modifications to the Liabilities Documents under this clause 35.7 that will adversely affect any rights of any other party to this Agreement or that will impose any additional obligations on any other party to this Agreement.

35.7.5 In this clause 35.7, “Government Entity” means:

(A) a Minister of the Crown;

(B) a government department;

(C) a non-departmental government body;

(D) a body exercising functions on behalf of the Crown; or

(E) a body corporate established by statute some or all of the members of which are appointed by a Minister of the Crown.

Information to assignees

35.8 Each BEG Entity may disclose to a proposed assignee or Third Party Purchaser information in its possession relating to the provisions of this Agreement and the other parties which it is necessary to disclose for the purposes of the proposed assignment or disposal. Such disclosure is subject to the prior approval in writing of the other parties where the information is not publicly available.

Consequential Agreement amendments

35.9 The obligations of each BEG Entity to make the PWR Fuel Payments under the Contribution Agreement shall cease where Sizewell B has been disposed of, in accordance with the requirements of this clause 35 (Assignment), to a person which is not a member of the Group, provided that this clause 35.9 shall not affect the obligations of each BEG Entity in respect of any PWR Fuel Payment due and payable on or prior to the date of such disposal.

35.10 Where an assignee becomes a party in accordance with this clause 35 (Assignment), Schedule 1 (Power Stations) shall be amended to reflect the new ownership of the Stations.

**** indicates information which has been omitted and filed separately with the Commission

- 69 -

36. ENTIRE AGREEMENT

36.1 This Agreement and the other Liabilities Documents constitute the whole and only agreement between the parties relating to the subject matter of this Agreement and the other Liabilities Documents.

36.2 Each party acknowledges that in entering into this Agreement and the other Liabilities Documents it is not relying upon any pre-contractual statement which is not set out in one or more of the Liabilities Documents.

36.3 Except in the case of fraud, no party shall have any right of action against any other party to this Agreement arising out of or in connection with any pre-contractual statement except to the extent that it is repeated in one or more of the Liabilities Documents.

36.4 For the purposes of this clause 36 (Entire Agreement), “pre-contractual statement” means any draft, agreement, undertaking, representation, warranty, promise, assurance or arrangement of any nature whatsoever, whether or not in writing, relating to the subject matter of one or more of the Liabilities Documents made or given by any person at any time prior to the Execution Date.

37. NOTICES

37.1 A notice under this Agreement shall only be effective if it is in writing. Telexes and e-mail notices are not permitted but faxes are permitted.

37.2 Notices under this Agreement shall be sent to a party at its address or facsimile number and for the attention of the individual set out below:

Party	Address	Facsimile No.	Attention
The Secretary of State	One Victoria Street London SW 1H OET	020 7215 0138	Head of BE Team, Energy Group, DTI
BEG	c/o the Company Secretary, British Energy Group plc, Systems House, Alba Campus, Livingston EH54 7EG	******	c/o Company Secretary, British Energy Group plc
BEG(UK)	c/o the Company Secretary, British Energy Group plc, Systems House, Alba Campus, Livingston EH54 7EG	******	c/o Company Secretary, British Energy Group plc

**** indicates information which has been omitted and filed separately with the Commission

- 70 -

Party	Address	Facsimile No.	Attention
BE plc	c/o the Company Secretary, British Energy Group plc, Systems House, Alba Campus, Livingston EH54 7EG	******	c/o Company Secretary, British Energy Group plc
Holdings	c/o the Company Secretary, British Energy Group plc, Systems House, Alba Campus, Livingston EH54 7EG	******	c/o Company Secretary, British Energy Group plc

provided that a party may change its notice details on giving notice to the other parties of the change in accordance with this clause 37 (Notices). That notice shall only be effective on the day falling five clear Business Days after the notification has been received or such later date as may be specified in the notice.

37.3 Any notice given under this Agreement shall, in the absence of earlier receipt, be deemed to have been duly given as follows:

37.3.1 if delivered personally, on delivery;

37.3.2 if sent by first class post from the UK to a UK address, two clear Business Days after the date of posting;

37.3.3 if sent by first class airmail from the UK to an address outside the UK, five clear Business Days after the date of posting; and

37.3.4 if sent by facsimile, when clearly received in full.

37.4 Any notice given under this Agreement outside Working Hours in the place to which it is addressed shall be deemed not to have been given until the start of the next period of Working Hours in such place.

37.5 The provisions of this clause 37 (Notices) shall not apply in relation to the service of Service Documents.

**** indicates information which has been omitted and filed separately with the Commission

- 71 -

38. ANNOUNCEMENTS

38.1 Subject to clause 38.2 and 38.3, no announcement concerning the subject matter of this Agreement or any ancillary matter shall be made by any party without the prior written approval of the others, that approval not to be unreasonably withheld or delayed.

38.2 A party may, after consultation with the other parties, make an announcement concerning the subject matter of this Agreement or any ancillary matter if required by:

38.2.1 law (including but not limited to the selling BEG Entity’s information and consultation obligations under the Regulations); or

38.2.2 any securities exchange or regulatory or governmental body to which that party is subject or submits, wherever situated, including (amongst other bodies) the London Stock Exchange, the UK Listing Authority, the Financial Services Authority or The UK Panel on Takeovers and Mergers, whether or not the requirement has the force of law.

38.3 The Secretary of State may make an announcement to Parliament concerning the subject matter of this Agreement or any ancillary matter if she considers that it is appropriate to do so pursuant to her duty to Parliament but, when reasonably practicable, shall consult with BE plc prior to such announcement.

38.4 The restrictions contained in this clause 38 (Announcements) shall continue to apply without limit in time.

39. CONFIDENTIALITY

39.1 Each party shall treat as confidential all information obtained as a result of entering into or performing this Agreement which relates to:

39.1.1 the provisions of this Agreement;

39.1.2 the negotiations relating to this Agreement;

39.1.3 the subject matter of this Agreement;

39.1.4 the business and operations, assets, liabilities and financial position of the Group; or

39.1.5 another party.

39.2 Each party shall:

39.2.1 not disclose any such confidential information to any person other than any of its directors or employees of those of any of the Group who needs to know such information in order to discharge his duties; and

39.2.2 procure that any person to whom any such confidential information is disclosed by it complies with the restrictions contained in this clause 39 (Confidentiality) as if such person were a party to this Agreement.

**** indicates information which has been omitted and filed separately with the Commission

- 72 -

39.3 Notwithstanding the other provisions of this clause 39 (Confidentiality), a party may disclose any such confidential information:

39.3.1 if and to the extent required by law (including, for the purposes of this clause 39.3.1, applicable accounting standards) or for the purpose of any judicial proceedings;

39.3.2 if and to the extent required by any securities exchange or regulatory or governmental body to which that party is subject or submits, wherever situated, including (amongst other bodies) the UK Listing Authority, the London Stock Exchange, the Financial Services Authority or The UK Panel on Takeovers and Mergers, whether or not the requirement for information has the force of law;

39.3.3 if and to the extent required to vest the full benefit of this Agreement in that party;

39.3.4 if and to the extent required for the purpose of any dispute resolution pursuant to clause 30 (Dispute Resolution);

39.3.5 to its professional advisers, auditors and bankers;

39.3.6 if and to the extent the information has come into the public domain through no fault of that party;

39.3.7 if and to the extent required to perform its obligations under this Agreement;

39.3.8 if and to the extent the other parties have given prior written consent to the disclosure, such consent not to be unreasonably withheld or delayed; or

39.3.9 pursuant to clause 35.8;

39.3.10 to any of the following:

(A) the Bondholders and the Consenting Bondholders (each as defined in the Creditor Restructuring Agreement);

(B) Enron Capital and Trade Resources International Corporation, Total Gas & Power Limited, Teesside Power Limited;

(C) the EPL Lenders (as defined in the Creditor Restructuring Agreement).

and their respective actual or potential transferees, their respective professional advisers, auditors and bankers, and, if and to the extent required by any regulatory body or governmental body to which any of the entities referred to above respectively is subject or submits, whether or not the requirement for information has the force of law.

39.4 Any information to be disclosed pursuant to clauses 39.3.1, 39.3.2 and 39.3.3 shall be disclosed only after notice to the other parties.

**** indicates information which has been omitted and filed separately with the Commission

- 73 -

39.5 Notwithstanding any other provisions of this clause 39 (Confidentiality), the Secretary of State may disclose information to Parliament to the extent that she considers that it is appropriate to do so pursuant to her duty to Parliament but, where reasonably practicable, shall consult with BE plc prior to such disclosure.

39.6 The restrictions contained in this clause 39 (Confidentiality) shall continue to apply without limit in time.

40. COUNTERPARTS

40.1 This Agreement may be executed in any number of counterparts, and by the parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart.

40.2 Each counterpart shall constitute an original of this Agreement, but all the counterparts shall together constitute but one and the same instrument.

41. INVALIDITY

If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, that shall not affect or impair:

(A) the legality, validity or enforceability in that jurisdiction of any other provision of this Agreement; or

(B) the legality, validity or enforceability under the law of any other jurisdiction of that or any other provision of this Agreement.

42. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

The parties do not intend that any term of this Agreement should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Agreement save that the Station Purchaser shall be entitled to enforce the provisions of this Agreement.

43. CHOICE OF GOVERNING LAW

This Agreement is to be governed by and construed in accordance with English law.

44. JURISDICTION

44.1 The courts of England are to have jurisdiction to settle any dispute arising out of or in connection with this Agreement. Any Proceedings may be brought in the English courts.

44.2 Any Proceedings may also be brought in the courts of Scotland.

44.3 Any party may bring Proceedings in any court which has jurisdiction other than by virtue of clause 46 (Agent for Service).

44.4 This clause 44 (Jurisdiction) shall not limit the right of any party to bring Proceedings, to the extent permitted by law, in the courts of more than one jurisdiction at the same time.

**** indicates information which has been omitted and filed separately with the Commission

- 74 -

44.5 Each party waives (and agrees not to raise) any objection, on the ground of forum non conveniens or on any like ground, to the taking of Proceedings by another party in any court in accordance with this clause. Each party also agrees that a judgement against it in Proceedings brought in any jurisdiction in accordance with this clause 44 (Jurisdiction) shall be conclusive and binding upon it and may be enforced in any other jurisdiction.

44.6 Each party irrevocably submits and agrees to submit to the jurisdiction of the English courts and of any other court in which Proceedings may be brought in accordance with this clause 44 (Jurisdiction).

44.7 This clause 44 (Jurisdiction) takes effect subject to clause 30 (Dispute Resolution)

45. CHANGE OF LAW

45.1 If, by reason of a change to Applicable Law (a “Change”), the effect intended by the parties in respect of any provision of this Agreement is materially altered, the party affected by that Change (the “Affected Party”) may give a notice to the other parties detailing the particulars of that Change, its effect on the Affected Party and any measures proposed in relation thereto (the “Notice”).

45.2 Within 20 Business Days following the receipt of the Notice, the parties shall meet at the offices of the Affected Party to discuss the matters detailed in the Notice and each party shall co-operate in good faith to determine the measures (if any) which are desirable to ensure that the provisions of the Agreement affected by the Change continue to have the effect intended by the parties. If any such measures are agreed, each party will use all reasonable endeavours to implement those measures and shall agree with the other parties any consequential amendments to the Agreement.

45.3 For the avoidance of doubt:

45.3.1 subject to clause 41 (Invalidity) each party’s obligations under this Agreement shall remain in full force and effect notwithstanding any Change; and

45.3.2 each party may withhold its consent in respect of any measures detailed in any Notice or proposed changes to this Agreement in its sole and absolute discretion.

46. AGENT FOR SERVICE

46.1 Each of BEG(UK), BE plc and Holdings (the “Appointing Parties”) irrevocably appoints BEG to be its agent for the receipt of Service Documents and each agrees that any Service Document may be effectively served on it in connection with Proceedings in England and Wales by service on its agent effected in any manner permitted by the Civil Procedure Rules 1998 (as amended).

46.2 If the agent at any time ceases for any reason to act as such for some or all of the Appointing Parties, those Appointing Parties shall appoint a replacement agent having an address for service in England and Wales and shall notify the other parties of the name and address of the replacement agent. Failing such appointment and notification, the Secretary of State shall be entitled by notice to appoint a replacement agent to act on behalf of the Appointing Parties. The provisions of this clause 46 (Agent for Service) applying to service on an agent apply equally to service on a replacement agent.

**** indicates information which has been omitted and filed separately with the Commission

- 75 -

46.3 A copy of any Service Document served on an agent shall be sent by post to the relevant Appointing Parties. Failure or delay in so doing shall not prejudice the effectiveness of service of the Service Document.

**** indicates information which has been omitted and filed separately with the Commission

- 76 -

Schedule 1

Power Stations

Part 1: Power Stations

1. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 61 dated on or after 25 March 1996 and known as Dungeness “B” station.

2. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 59 dated on or after 25 March 1996 and known as Hartlepool nuclear power station.

3. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 60 dated on or after 25 March 1996 and known as Heysham 1 station.

4. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 60 dated on or after 25 March 1996 and known as Heysham 2 station.

5. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 62 dated on or after 25 March 1996 and known as Hinkley Point “B” station.

6. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. 63 dated on or after 25 March 1996 and known as Sizewell “B” station.

7. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. Sc 11 dated on or after 25 March 1996 and known as Hunterston “B” station.

8. The land described in Part 1 of and the nuclear installations described in Part II of Schedule 1 to Nuclear Site Licence No. Sc 10 dated on or after 25 March 1996 and known as Torness nuclear power station.

**** indicates information which has been omitted and filed separately with the Commission

- 77 -

Part 2: Scheduled Closure Dates

Station	Scheduled Closure Date
Dungeness B:	31 March, 2008
Reactor No. R21:	31 March, 2008
Reactor No. R22:	31 March, 2008
Hartlepool:	31 March, 2014
Reactor No. R1:	31 March, 2014
Reactor No. R2:	31 March, 2014
Heysham 1:	31 March, 2014
Reactor No. R1:	31 March, 2014
Reactor No. R2:	31 March, 2014
Heysham 2:	31 March, 2023
Reactor No. R7:	31 March, 2023
Reactor No. R8:	31 March, 2023
Hinkley Point B:	31 March, 2011
Reactor No. R3:	31 March, 2011
Reactor No. R4:	31 March, 2011
Sizewell B:	31 March, 2035
Hunterston B:	31 March, 2011
Reactor No. R3:	31 March, 2011
Reactor No. R4:	31 March, 2011
Torness:	31 March, 2023
Reactor No. R1:	31 March, 2023
Reactor No. R2:	31 March, 2023

**** indicates information which has been omitted and filed separately with the Commission

- 78 -

Schedule 2

Option Notice

To:	[Selling BEG Entity]
	FAO:  The Board of Directors

[Date]

Dear Sirs,

Option Agreement dated                  January, 2005 (the “Option Agreement”) between The

Secretary of State for Trade and Industry, British Energy Generation (UK) Limited,

British Energy Generation Limited, British Energy Group plc

and British Energy Holdings plc

We refer to the Option Agreement. This is an Option Notice issued pursuant to clause 2.3 of the Option Agreement.

We hereby give notice that we are exercising the Option to [Operate/Decommission] (as defined in the Option Agreement) Option for the purchase by [Station Purchaser] of the Station known as [name of Station] on and subject to the terms of the Option Agreement.

Yours faithfully,

For and on behalf of

The Secretary of State for Trade and Industry

**** indicates information which has been omitted and filed separately with the Commission

- 79 -

Schedule 3

Disposal of Stations

Part 1: Form of Deed of Adherence

THIS DEED POLL is made on [            ] by [            ], a company incorporated [in/under the laws of] [            ] registered number [            ], whose registered office is at [            ] (the “Acceding Party”).

WHEREAS:

(A) By an agreement dated [ ], [name of selling BEG Entity] (the “Seller”) agreed to transfer to the Acceding Party the nuclear power generating station[s] at [ ] (the “Station”) and the electricity generating business relating thereto.

(B) This Deed Poll is entered into in compliance with the terms of clause 35 (Assignment) of the Option Agreement dated January, 2005 between (1) the Secretary of State for Trade and Industry, (2) British Energy Generation (UK) Limited, (3) British Energy Generation Limited (4) British Energy Holdings plc and (5) British Energy Group plc (as such agreement shall have been or may be amended, supplemented or novated from time to time) (the “Option Agreement”).

THIS DEED POLL WITNESSES as follows:

1. Words and expressions defined in the Option Agreement shall have the same meanings in this Deed Poll unless given a different meaning in this Deed Poll.

2. The Acceding Party, in relation to the Station[s] undertakes to adhere to and be bound by the provisions of the Option Agreement, and to perform the obligations imposed by the Option Agreement in relation to the Station[s], which are to be performed on or after the date of this Deed Poll, in all respects as if the Acceding Party were a party to the Option Agreement and named therein as the Seller, except to the extent that the Option Agreement requires any Acceding Party which is not a member of the Group to warrant in respect of, or procure the performance of the obligations of, any member of the Group.

3. The Acceding Party represents and warrants to the Secretary of State that as at the date hereof:

3.1 it has all necessary regulatory consents and approvals for undertaking (i) the Operation of [the]/[each] Station[s] (but only to the extent that the nuclear reactors at each such Station[s] have not Closed), and (ii) the Decommissioning of [the]/[each] Station[s] and the Discharge of Uncontracted Liabilities in relation to [the]/[each] Station[s] (if the nuclear reactors at [the][each] Station[s] have Closed);

3.2 it is the [owner/operator] of the Station[s].

The Acceding Party also represents, warrants and covenants on the terms set out in clauses 20 and 21 of the NLFA.

**** indicates information which has been omitted and filed separately with the Commission

- 80 -

4. This Deed Poll is made for the benefit of (a) the original parties to the Option Agreement and (b) any other person or persons who after the date of the Option Agreement (and whether or not prior to or after the date of this Deed) undertakes to adhere to and be bound by the Option Agreement.

5. References in Schedule 1 (Power Stations) of the NLFA and Schedule 1 (Power Stations) of the Option Agreement to a Power Station being licensed to the Licensee shall be construed as a reference to the Power Station being licensed to the Acceding Party and each of those schedules shall be amended to show the Acceding Party as licensee of the Power Station.

6. The address and facsimile number of the Acceding Party for the purposes of clause 37 (Notices) of the Option Agreement are as follows:

Party and title of individual	Address	Facsimile No.	Attention
[•]	[•]	[•]	[•]

7. This Deed Poll is governed by and shall be construed in accordance with English law.

8. The provisions of clause 44 (Jurisdiction) of the Option Agreement shall apply equally to this Deed Poll.

9. [The agent for receipt of Service Documents on behalf of the Acceding Party for the purposes of clause 46 (Agent for Service) of the Option Agreement is [•] of [•]]¹

10. Except in relation to the Scottish Stations the Acceding Party shall apply to the Chief Land Registrar for a restriction in the following form (or such other form to the same intent to be agreed between the Secretary of State and the Chief Land Registrar) to be made in the proprietorship register of the registered title number of the Station Site or part of the Station Site:

“No disposition by the registered proprietor of the Station Site or any part thereof is to be registered unless a certificate is supplied for the Secretary of State for Trade and Industry confirming compliance with clause 35 of the Option 1 Agreement dated January, 2005 between The Secretary of State for Trade and Industry, British Energy Generation (UK) Limited, British Energy Generation Limited, British Energy Group plc and British Energy Holdings plc.”

IN WITNESS of which this Deed Poll has been executed and delivered by the Acceding Party on the date which first appears above.

[Appropriate execution clause.]

¹ Delete if Acceding Party is incorporated in England and Wales.

**** indicates information which has been omitted and filed separately with the Commission

- 81 -

Part 2: Documents to be provided by an assignee

The documents required to be provided in accordance with clause 35.2.4 are as follows.

1. A certified copy of the constitutional documents of the assignee.

2. A certified copy of a resolution of the board of directors of the assignee:

(A) approving the terms of, and the transactions contemplated by, the Deed of Adherence and resolving that it execute the Deed of Adherence; and

(B) authorising a specified person or persons to execute the Deed of Adherence on its behalf.

3. A guarantee (on terms satisfactory to the Secretary of State) from one or more members of the assignee’s group (as the Secretary of State in her reasonable discretion shall nominate) and “group” for the purposes of this paragraph 3 shall mean any direct or indirect holding company of the assignee and any subsidiary of such holding company or holding companies.

4. A copy of any other authorisation or other document, opinion or assurance which the Secretary of State considers to be necessary or desirable in connection with the entry into and performance of the transactions contemplated by the Deed of Adherence or for the validity or enforceability of the Deed of Adherence.

5. Evidence, satisfactory to the Secretary of State, of the assignee’s credit rating, or appropriate documentation evidencing perfected security, satisfactory to the Secretary of State, in favour of the Secretary of State for performance by the assignee of its obligations under this Agreement.

**** indicates information which has been omitted and filed separately with the Commission

- 82 -

Part 3: Form of Deed of Release

THIS DEED is made on [            ] by:

(1) THE SECRETARY OF STATE FOR TRADE AND INDUSTRY, of One Victoria Street, London SW1H OET (the “Secretary of State”);

(2) BRITISH ENERGY GENERATION (UK) LIMITED, of Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC117121) (“BEG(UK)”);

(3) BRITISH ENERGY GENERATION LIMITED, of Barnett Way, Barnwood, Gloucester GL4 3RS (registered in England No. 03076445) (“BEG”);

(4) BRITISH ENERGY GROUP PLC, of Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC270184) (“BE plc”);

(5) BRITISH ENERGY HOLDINGS PLC, of Systems House, Alba Campus, Livingston EH54 7EG (registered in Scotland No. SC270186) (“Holdings”); and

(6) [Acceding Party] of [*] (registered in [            ] no. [            ]) (“Acceding Party”).

WHEREAS:

(A) By an agreement dated [ ] [name of selling BEG Entity] (the “Seller”) transferred to the Acceding Party the nuclear power generating station[s] at [ ] (the “Station[s]”) and the electricity generating business relating thereto.

(B) The Seller wishes to be released and discharged from the Option Agreement (as defined below) and the Secretary of State, [BEG/BEG(UK)], BE plc and Holdings have agreed to release and discharge the Seller from the Option Agreement upon the terms of this Deed.

(C) This Deed is entered into in compliance with the terms of clause 35 (Assignment) of the option agreement dated January, 2005 between (1) the Secretary of State, (2) BEG, (3) BEG(UK), (4) BE plc and (5) Holdings (as such agreement shall have been or may be amended, supplemented or novated from time to time) (the “Option Agreement”).

THIS DEED WITNESSES as follows:

1. Words and expressions defined in the Option Agreement shall have the same meanings in this Deed unless given a different meaning in this Deed.

2. With effect from the date hereof and in consideration of the Acceding Party entering into a deed of adherence on the date hereof by which it agrees to be bound by the terms of the Option Agreement, the parties to this Deed (other than the Seller) hereby release and discharge the Seller from its obligations under the Option Agreement, other than clauses 38 (Announcements) and 39 (Confidentiality).

3. Notwithstanding the provisions of paragraph 2, nothing in this Deed shall affect or prejudice any claim or demand whatsoever which the Secretary of State or a Station Purchaser may have against the Seller in relation to the Option Agreement and arising out of matters prior to the date hereof.

**** indicates information which has been omitted and filed separately with the Commission

- 83 -

4. With effect from the date hereof and in consideration of the undertakings given by the Secretary of State and each Station Purchaser in paragraph 2, the Seller hereby releases and discharges the Secretary of State and each Station Purchaser from all obligations to observe, perform, discharge and be bound by the Option Agreement. Notwithstanding this undertaking and release, nothing in this Deed shall affect or prejudice any claim or demand whatsoever which the Seller may have against the Secretary of State or any Station Purchaser in relation to the Option Agreement and arising out of matters prior to the date hereof.

5. This Deed may be executed in any number of counterparts, and by the parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart. Each counterpart shall constitute an original of this Deed, but all the counterparts shall together constitute but one and the same instrument.

6. This Deed shall be governed by and construed in accordance with English law.

7. The provisions of clause 44 (Jurisdiction) of the Option Agreement shall apply equally to this Deed.

8. [The agent for receipt of Service Documents on behalf of the Acceding Party for the purposes of clause 46 (Agent for Service) of the Option Agreement is [•] of [•]]²

IN WITNESS of which this Deed has been executed and delivered by the parties on the date which first appears above.

[Appropriate Execution clauses]

² Delete if Acceding Party is incorporated in England and Wales.

**** indicates information which has been omitted and filed separately with the Commission

- 84 -

Schedule 4

Completion Conditions

1. Receipt of all such clearances as the Station Purchaser, acting reasonably, considers necessary or appropriate, from any court or government, statutory or regulatory body having jurisdiction to investigate the sale and acquisition of the Station or any of the Station Assets.

2. Receipt by the selling BEG Entity or the Station Purchaser (as the case may be), on terms reasonably satisfactory to the Station Purchaser (acting reasonably) of all consents and permissions required from all other relevant regulatory authorities and bodies in respect of the sale and acquisition of the Station or any of the Station Assets including:

(A) the consent of the Secretary of State in her capacity as Special Shareholder of BEG or BEG(UK) (as the case may be);

(B) in relation to the Licence issued to the selling BEG Entity the consent of the Health and Safety Executive to the transfer of the Station Site under Condition 3 of the relevant Nuclear Site Licence Conditions;

(C) the grant to the Station Purchaser (or such person as the Station Purchaser nominates as operator of the Station) of a nuclear site licence pursuant to section 3 of the Nuclear Installations Act 1965;

(D) all authorisations and site registrations required under the Radioactive Substances Act 1993 in respect of the Station Purchaser; and

(E) in respect of the exercise of an Option to Operate, the grant to the Station Purchaser of an Electricity Generation Licence.

3. The accession by the Station Purchaser to:

(A) the Balancing and Settlement Code;

(B) the Grid Code;

(C) the Scottish Grid Code;

(D) the Connection and Use of System Code;

(E) the Settlement Agreement for Scotland (in the capacity of a Generator Party (as defined therein)); and

(F) any other documents, code or agreement which the Station Purchaser is (or will on acquisition of the Station be) required to accede to pursuant to the Electricity Generation Licence or any of the foregoing documents.

4.1 The transfer to the Station Purchaser of the consent to discharge into controlled waters issued pursuant to Part III of the Water Resources Act 1991.

**** indicates information which has been omitted and filed separately with the Commission

- 85 -

4.2 The transfer to the Station Purchaser of the consent to discharge into controlled waters issued pursuant to Section 34 of the Control of Pollution Act 1974 or Part 1 of the Water Environment and Water Services (Scotland) Act 2003.

5.1 The transfer to, or succession of, the Station Purchaser of the licence to abstract issued pursuant to Part II of the Water Resources Act 1991.

5.2 The transfer to, or succession of, the Station Purchaser of a licence to abstract issued pursuant to Part 2 of the Water Environment and Water Services (Scotland) Act 2003.

6.1 The grant of the Environment Protection Act 1990 “IPC” authorisation and notice of transfer to the Environment Agency and transfer of “PPC” authorisation to the Station Purchaser.

6.2 The grant of the Environment Protection Act 1990 “IPC” authorisation and notice of transfer to the Scottish Environment Protection Agency and transfer of “PPC” authorisation to the Station Purchaser.

7.1 The grant of the section 17 Planning (Hazardous Substances) Act 1990 consent.

7.2 The grant of the section 15 Planning (Hazardous Substances) (Scotland) Act 1997 consent.

8.1 The certificates required by any restrictions on the registered titles to any Station Site being obtained.

8.2 In relation to Hunterston B, receipt by the selling BEG Entity from the Station Purchaser of a completed agreement in writing between the Station Purchaser (or such person as the Station Purchaser nominates as operator of the Station) and Magnox or its successor under and in terms of the Nuclear Site Licensees Co-operation Agreement between Scottish Nuclear Limited and Nuclear Electric plc entered into on or around 31st March 1996 (the “Co-operation Agreement’) mutatis mutandis in the same terms as the Co-operation Agreement, which agreement shall have been validly executed in self-proving manner in accordance with the provisions of the Requirements of Writing (Scotland) Act 1995 by the Station Purchaser (or such person as the Station Purchaser nominates as operator of the Station) and Magnox or its said successor.

9. Agreement by the parties of the terms of the relevant Ancillary Services Contract, Defuelling Contract or M&O Contract.

10. If clause 13.8 applies, accession by the Station Purchaser to each of the BNFL Contracts in accordance with the requirements of clause 13.9.

11. The allocation to the Station Purchaser of the allowances agreed pursuant to Schedule 14 (Station Assets).

**** indicates information which has been omitted and filed separately with the Commission

- 86 -

Schedule 5

Conduct of Business before Completion

The matters referred to in clause 8.1 are:

(A) except in respect of such contracts or variations to Contracts which have been approved pursuant to, and in accordance with the terms of, the NLFA, entering into any contract (which includes, amongst other things, any agreement, arrangement or commitment) or varying materially the terms of any Contract, the term of which will extend more than 12 months beyond the relevant Completion Date and has a total value exceeding £100,000;

(B) save in respect of any commitments which have been approved pursuant to, and in accordance with the terms of, the Contribution Agreement, making any capital commitment which will extend beyond the Completion Date with an individual contract value of £100,000 or more, including, for this purpose, the acquisition of any capital asset under a financial lease;

(C) creating, granting or issuing, or agreeing to create, grant or issue, any mortgages, charges (other than liens or charges arising by operation of law), debenture or other security interest over any of the Station Assets or Station Intellectual Property;

(D) failing to take any action required to maintain any insurance policies relating to the Station or the Station Assets in force or knowingly doing anything to make any such policy of insurance void or voidable;

(E) taking any steps to terminate (except on the grounds of gross misconduct, redundancy and capability) the contract of employment of any Station Employee before the Effective Date, and thereafter before Completion taking any such steps to terminate (except for redundancy) or giving or making or permitting to be given or made to any Station Employee any notice, communication, statement or representation which concerns the sale and acquisition of the Station or which may concern or affect his employment after Completion otherwise than in relation to making factual statements to appropriate representatives of the affected employees to the extent necessary to comply with the selling BEG Entity’s obligations under the Regulations;

(F) engaging any person earning a salary in excess of £50,000 or making any material variation to the terms and conditions of employment of the Station Employees or any of them other than salary increases in the ordinary course and at normal market rates;

(G) breaching the terms of, or failing to comply with, any Station Intellectual Property Licence;

(H)     (i)         entering into any agreement, tenancy or licence in respect of or affecting any part of the Station Site;

- 87 -

(ii) parting with possession, disposing of or agreeing to dispose of, or granting or agreeing to grant any option right of pre-emption or first refusal in respect of, any part of the Station Site or any interest therein; or

(iii) granting or agreeing to grant any rights over or creating any restriction, covenant or encumbrance affecting any part of the Station Site,

except (in the case of paragraphs (i), (ii) and (iii) above) the grant of grazing licences for less than one year not conferring security of tenure of land outside the security fence;

(I) in relation to the Agricultural Tenancies (except insofar as they are already secured tenancies), taking any actions which would result in the tenancies created by the Agricultural Tenancies being constituted as secured tenancies under or in terms of the Agricultural (Holdings) Scotland Acts;

(J) disposing of, allowing to lapse or granting any option, charge, mortgage, debenture, lien, right to acquire, pledge or exclusive or sole licence in respect of any material Station Intellectual Property or Station Intellectual Property Licence, or terminating any Station Intellectual Property Licence, or agreeing to do any such thing, in each case, to the extent that the same is likely to have a material adverse effect on the ability of the Station Purchaser to Operate the Station; or

(K) terminating any Contract, save where termination:

(i) results from a material breach of a Contract by any counterparty thereto;

(ii) is of a Contract no longer necessary or desirable for the Operation of the relevant Station; or

(iii) has been requested by the Secretary of State pursuant to clause 13.10.

- 88 -

Schedule 6

Completion Arrangements

1. At Completion of the sale and acquisition of a Station, the selling BEG Entity shall:

(A) deliver to the Station Purchaser all the Station Assets which are capable of transfer by delivery with the intent that legal and beneficial title to such Station Assets shall pass by and upon delivery;

(B) deliver to the Station Purchaser a Site Transfer duly executed by the selling BEG Entity together with all (if any) land certificates or charge certificates and all other title deeds and documents within the possession or control of the selling BEG Entity relating to that Station Site and duly executed releases in respect of any charges;

(C) deliver to the Station Purchaser:

(i) agreements duly executed by the relevant member of the Group for the assignment or novation of the benefit of the Contracts (subject to the requirement as to Third Party Consents);

(ii) if clause 13.8 applies, duly executed counterparts of any agreed form documents relating to the accession of the Station Purchaser to the BNFL Contracts or the amendment of such contracts;

(iii) all National Insurance and PAYE records in relation to the Station Employees fully completed and showing that payments are up-to-date;

(iv) those Records transferred under clause 5 (Sale and Acquisition of a Station) and required to be delivered under clause 19 (Records and Information);

(v) if the Station Purchaser has been substituted for the selling BEG Entity under clause 16, (Risk and Insurance) a copy of the relevant letter from insurers as referred to in that clause;

(vi) release or certificate of non-crystallisation duly executed by the chargee of any charge subsisting over any of the Station Assets;

(vii) all vehicle registration documents issued by the Department of Transport in respect of any motor vehicles comprising Station Assets, together with all current test certificates and all current road fund licences; and

(viii) all Property Consents which the selling BEG Entity has received;

(D) give or procure the grant of vacant possession of such of the Station Assets as are capable of possession to the Station Purchaser;

(E) in the event of Completion of the sale and acquisition of a Station pursuant to the exercise of an Option to Operate, ensure that the Station Assets at the

**** indicates information which has been omitted and filed separately with the Commission

- 89 -

Station comprise appropriate levels of Stock and Plant and Machinery, having regard to the date of Completion, the normal operating cycles of the business carried on at the Station and levels of Stock and Plant and Machinery in the two years prior to Completion;

(F) in the event of Completion of the sale and acquisition of a Station pursuant to the exercise of an Option to Decommission, ensure that the Station Assets at the Station comprise appropriate levels of Stock and Plant and Machinery having regard to the date of Completion, the stage of Decommissioning and the levels of Stock and Plant and Machinery in the two years preceding Completion;

(G) if required to do so by the Secretary of State, enter, or procure that the relevant BE Parties enter, into an Ancillary Services Contract pursuant to, and as referred to in, clause 8.7.1;

(H) if required to do so by the Secretary of State, enter, or procure that the relevant BE Parties enter, into an M&O Contract pursuant to, and as referred to in, clause 8.7.2; and

(I) if required to do so by the Secretary of State, enter, or procure that the relevant BE Parties enter, into a Defuelling Contract pursuant to, and as referred to in, clause 8.7.3.

2. At Completion, the Station Purchaser shall:

(A) pay the £1 consideration pursuant to, and as referred to in, clause 4 (Consideration);

(B) pay the purchase price of any assets agreed to be sold and purchased under clause 6 (Excluded Assets and Re-use of Existing Equipment) pursuant to that clause;

(C) if clause 13.8 applies, deliver to the selling BEG Entity duly executed counterparts of any agreed form documents relating to the accession of the Station Purchaser to the BNFL Contracts or the amendment of such contracts;

(D) enter into any Ancillary Services Contract, M&O Contract or Defuelling Contract required pursuant to, and as referred to in clause 8.7.1, 8.7.2 or 8.7.3 respectively; and

(E) validly intimate to the counterparty to each Scottish Contract any assignation of such contract assigned under paragraph 1(C)(i) of this Schedule 6 (Completion Arrangements).

3. At Completion, the Secretary of State shall deliver to the selling BEG Entity a duly executed release or certificate of non-crystallisation of any charge subsisting over any of the Station Assets of which she is the chargee unless such charge has crystallised on or before the Completion Date.

**** indicates information which has been omitted and filed separately with the Commission

- 90 -

Schedule 7

General Principles for Ancillary Services Contract

1. Definitions

For the purposes of this Schedule 7 (General Principles for Ancillary Services Contract):

“Initial Term”	has the meaning given in paragraph 4.1;
“Performance Standards”	has the meaning given in paragraph 6.1;
“Service Customer”	has the meaning given in paragraph 3.3;
“Service Provider”	has the meaning given in paragraph 3.1; and
“Services”	has the meaning given in paragraph 5.

2. Bases of Negotiation

Each Ancillary Services Contract will be negotiated by the parties to it on an arm’s length basis and in good faith in accordance with the principles set out in this Schedule 7 (General Principles for Ancillary Services Contract).

3. Parties

3.1 The relevant BEG Entity (the “Service Provider”);

3.2 Other BE Parties to the extent necessary or desirable for implementing the terms of each Ancillary Services Contract; and

3.3 The Secretary of State or the Station Purchaser (as the case may be) (the “Service Customer”).

4. Duration

Each Ancillary Services Contract will continue until the earlier of:

4.1 five years after the relevant Completion Date (the “Initial Term”); and

4.2 its termination by the Service Provider or Service Customer in accordance with the termination rights referred to in paragraph 11.

After the Initial Term, the Ancillary Services Contract will continue in effect until either the Service Customer or the Service Provider gives the other 6 months’ written notice in writing.

**** indicates information which has been omitted and filed separately with the Commission

- 91 -

5. Services

Each Ancillary Services Contract will require the Service Provider to provide those services and facilities which the Service Customer requests in connection with its (or a Third Party Service Provider’s) Operation of a Station, including payroll, human resources, legal, security, information technology and engineering support services (together the “Services”).

6. Performance Standards and Method of Performance

6.1 The Services will be provided in accordance with a method of delivery to be agreed, including programmes detailing projections relating to budgetary, operational and maintenance matters over a period to be agreed and procedures to be adopted in the provision of the Services. Notwithstanding the foregoing, the Services must comply with applicable law (including legal and regulatory licences and authorisations) and other appropriate standards to be agreed between the Service Customer and the Service Provider (together the “Performance Standards”) having regard to the nature and scope of the Services and the allocation of risk and liability between each party.

6.2 Each Ancillary Services Contract will specify the consequences of a failure of the Service Provider to perform any of the Services in accordance with the terms of such contract and include appropriate carve-outs such as where a failure arises because of express instructions from the Service Customer, force majeure or compliance with applicable law. Any liability of the Service Provider for costs incurred in connection with this obligation shall be limited to a monetary amount to be agreed.

7. Personnel

7.1 Each Ancillary Services Contract will require the Service Provider to provide appropriate staff in order to provide the Services. Such requirements will include provisions relating to personnel planning, key personnel, standards applicable to personnel and selection, appointment and removal mechanisms for personnel and sub-contractors.

7.2 The provision of personnel under each Ancillary Services Contract will be subject to the provisions of clauses 17 and 28 of the Agreement.

8. Information, Records and Access

Each Ancillary Services Contract will include obligations on the Service Provider in respect of records (including as to maintenance and reporting) relating to Service provision and access rights to such records in favour of the Service Customer with a view to ensuring that the Service Customer can, amongst other things, confirm that the Services are complying with the Performance Standards.

9. Fees, Station Revenue and Costs and Expenses

9.1 The fees to be paid to the Service Provider for the provision of the Services under each Ancillary Services Contract shall be negotiated in good faith on an arm’s length basis, such fees to be reasonable having regard to the nature and scope of the Services and the allocation of liability and risk between the parties to each contract. The Service Customer shall pay an amount equal to any VAT payable in respect of the Services.

**** indicates information which has been omitted and filed separately with the Commission

- 92 -

9.2 The Service Customer shall reimburse the Service Provider for costs and expenses incurred in the provision of the Services which are forecast in the budget for the applicable financial period. This right of reimbursement shall not apply to a list of excluded costs and expenses to be agreed for each Ancillary Services Contract.

9.3 The Ancillary Services Contract will also include a mechanism for the parties to such contract to determine responsibility for costs and expenses which have not been provided for in the budget for the applicable financial period.

10. Insurance

10.1 The Service Provider shall effect and maintain in full force and effect an insurance programme to be agreed with the Service Customer, including policies which a prudent service provider would effect and maintain and policies required by law.

10.2 The Service Customer may procure such insurances at the expense of the Service Provider and take such steps in respect of such insurances as the Service Customer may consider expedient or necessary if the Service Provider fails to take out and maintain insurance policies as referred to above.

11. Termination

11.1 Each Ancillary Services Contract will include termination rights in favour of the Service Customer and the Service Provider. Such rights will, where appropriate, include notice periods in connection with the exercise of any termination right and provide a grace period to allow for the defaulting party to remedy any breach before the termination becomes effective.

11.2 The circumstances in which termination rights which may be exercised by the Service Provider will include the following:

11.2.1 failure by the Service Customer to pay any fees due for the provision by the Service Provider of the Services; and

11.2.2 the occurrence of an insolvency event in respect of the Service Customer.

11.3 The circumstances in which termination rights which may be exercised by the Service Customer will include the following:

11.3.1 the occurrence of an insolvency event in respect of the Service Provider;

11.3.2 material breaches in respect of the Service Provider’s compliance with the Ancillary Services Contract (including in respect of the Services and compliance with the Performance Standards); and

11.3.3 where the Service Provider is prevented from or delayed in performing a substantial part of the Services for a prolonged period as a result of force majeure (which is continuing at the time the notice of termination is delivered) and as a result the Operation of the Station is materially adversely affected.

**** indicates information which has been omitted and filed separately with the Commission

- 93 -

11.4 Each Ancillary Services Contract may be terminated in respect of one or more Ancillary Services by giving at least 6 months’ notice in writing. The Service Customer may only serve such a notice after the first nine months of the Initial Term has expired. The Service Provider may only serve such a notice within the last six months of the Initial Term after the Initial Term has expired.

12. Consequences of Termination

12.1 If an Ancillary Services Contract is terminated, the Service Provider will transfer the provision of the Ancillary Services to the Service Customer or another nominated person over an agreed period in accordance with an agreed protocol.

12.2 The Ancillary Services Contract will also detail each party’s entitlements in respect of payments or compensation for any liability or loss actually incurred and arising as a result of or in connection with such termination.

13. Remedies

Each Ancillary Services Contract will:

13.1.1 provide that neither party is liable to the other for indirect or consequential loss;

13.1.2 include appropriate indemnities by the Service Provider which are consistent with the rights and obligations of the parties under the contract, including in respect of losses arising as a result of negligence and material breach; and

13.1.3 include an appropriate liquidated damage regime.

14. Other Provisions

Each Ancillary Services Contract will contain provisions which are standard for an agreement of its type and, to the extent appropriate, will be consistent with the approach taken in the equivalent provisions (if any) in the Liabilities Documents. These provisions will include the following:

14.1.1 allocation of losses in respect of environmental matters;

14.1.2 intellectual property provisions;

14.1.3 covenants;

14.1.4 representations and warranties;

14.1.5 assignment and sub-contracting rights and obligations;

14.1.6 contract management and change control mechanisms;

14.1.7 disaster recovery requirements;

**** indicates information which has been omitted and filed separately with the Commission

- 94 -

14.1.8 confidentiality;

14.1.9 force majeure, including entitlements of each party to the Ancillary Services Contract to terminate such contract if the force majeure event is prolonged in duration;

14.1.10 dispute resolution; and

14.1.11 governing law and jurisdiction.

**** indicates information which has been omitted and filed separately with the Commission

- 95 -

Schedule 8

General Principles for M&O Contract

1. Definitions

For the purposes of this Schedule 8 (General Principles for M&O Contract):
“Operator”	has the meaning given in paragraph 3.1;
“Performance Standards”	has the meaning given in paragraph 6.3;
“Service Customer”	has the meaning given in paragraph 3.3; and
“Services”	has the meaning given in paragraph 5.

2. Basis of Negotiation

Each M&O Contract will be negotiated by the parties to it on an arm’s length basis and in good faith in accordance with the principles set out in this Schedule 8 (General Principles for M&O Contract).

3. Parties

3.1 The relevant BEG Entity (the “Operator”);

3.2 Other BE Parties to the extent necessary or desirable for implementing the terms of each M&O Contract; and

3.3 The Secretary of State or the Station Purchaser (as the case may be) (the “Service Customer”).

4. Duration

Each M&O Contract will continue until the earlier of:

4.1 five years after the applicable Station’s Scheduled Closure Date or Early Closure Date (as the case may be); and

4.2 its termination by the Operator or Service Customer in accordance with the termination rights referred to in paragraph 14.

5. Services

Each M&O Contract will require the Operator to manage, operate and maintain the Station for the primary purpose of generating electricity in bulk for delivery to the National Grid or the Scottish System (in respect of the Scottish Stations) (together the “Services”).

6. Performance Standards and Method of Performance

6.1 The basis of Service provision will be that all operational and maintenance matters will be the responsibility of the Operator.

**** indicates information which has been omitted and filed separately with the Commission

- 96 -

6.2 The Services will be provided in accordance with a method of delivery to be agreed, including programmes detailing projections relating to budgetary, operational and maintenance matters over a period to be agreed and procedures to be adopted in the provision of the Services.

6.3 The Operator shall provide the Services on a basis to be agreed with the Service Customer with a view to ensuring that the Station is operated and maintained safely and efficiently. Notwithstanding the foregoing, the Services must comply with applicable law (including legal and regulatory licences and authorisations) and other appropriate standards to be agreed between the Service Customer and the Operator (together the “Performance Standards”) having regard to the nature and scope of the Services and the allocation of risk and liability between each party.

6.4 Each M&O Contract will specify the consequences of a failure of the Operator to perform any of the Services in accordance with the terms of such contract and include appropriate carve-outs such as where a failure arises because of express instructions from the Service Customer, force majeure or results from compliance with applicable law. Any liability of the Operator for costs incurred in connection with this obligation shall be limited to a monetary amount to be agreed.

7. Improvements

Improvements shall be subject to Service Customer approval, unless expressly stated to the contrary in the relevant M&O Contract. For the purposes of this paragraph 7, an “Improvement” means any change in, addition to, or modification of the Station (other than maintenance or repair) which is required by applicable law or which has the effect of extending the useful life of the Station or its components, lowering the operating costs of the Station or increasing the efficiency or reliability of the Station or otherwise improving the Station.

8. Procurement

The Operator will be responsible for procuring all spares and consumables normally required to provide the Services, including, where appropriate, implementing competitive tendering procedures for the procurements of those spares and consumables.

9. Title to Spares

Title to all parts and spares shall be vested in the Service Customer following acquisition by the Operator.

10. Personnel

10.1 Each M&O Contract will require the Operator to provide appropriate staff in order to provide the Services. Such requirements will include provisions relating to personnel planning, key personnel, standards applicable to personnel and selection, appointment and removal mechanisms for personnel and sub-contractors.

**** indicates information which has been omitted and filed separately with the Commission

- 97 -

10.2 The provision of personnel under each M&O Contract will be subject to the provisions of clauses 17 and 28 of the Agreement.

11. Information, Records and Access

Each M&O Contract will include obligations on the Operator in respect of records (including as to maintenance and reporting) relating to Service provision and access rights to such records in favour of the Service Customer with a view to ensuring that the Service Customer can, amongst other things, confirm that the Services are complying with the Performance Standards.

12. Fees, Station Revenue and Costs and Expenses

12.1 The fees to be paid to the Operator for the provision of the Services under each M&O Contract shall be negotiated in good faith on an arm’s length basis, such fees to be reasonable having regard to the nature and scope of the Services and the allocation of liability and risk between the parties to each contract. The Service Customer shall pay an amount equal to any VAT payable in respect of the Services.

12.2 All revenue raised from the Operation of the Station shall be for the account of the Service Customer, except to the extent agreed by the parties to the M&O Contract pursuant to the terms of any incentivisation regime detailed in such contract.

12.3 The Service Customer shall reimburse the Operator for costs and expenses incurred in the provision of the Services which are forecast in the budget for the applicable financial period. This right of reimbursement shall not apply to a list of excluded costs and expenses to be agreed for each M&O Contract.

12.4 The M&O Contract will also include a mechanism for the parties to such contract to determine responsibility for costs and expenses which have not been provided for in the budget for the applicable financial period.

13. Insurance

13.1 The Operator shall effect and maintain in full force and effect an insurance programme to be agreed with the Service Customer, including policies which a prudent operator of a Station would effect and maintain and policies required by law.

13.2 The Service Customer may procure such insurances at the expense of the Operator and take such steps in respect of such insurances as the Service Customer may consider expedient or necessary if the Operator fails to take out and maintain insurance policies as referred to above.

14. Termination

14.1 Each M&O Contract will include termination rights in favour of the Service Customer and the Operator. Such rights will, where appropriate, include notice periods in connection with the exercise of any termination right and provide a grace period to allow for the defaulting party to remedy any breach before the termination becomes effective.

**** indicates information which has been omitted and filed separately with the Commission

- 98 -

14.2 The circumstances in which termination rights which may be exercised by the Operator will include the following:

14.2.1 failure by the Service Customer to pay any fees due for the provision by the Operator of the Services; and

14.2.2 the occurrence of an insolvency event in respect of the Service Customer.

14.3 The circumstances in which termination rights which may be exercised by the Service Customer will include the following:

14.3.1 the occurrence of an insolvency event in respect of the Operator;

14.3.2 material breaches in respect of the Operator’s compliance with the M&O Contract (including in respect of the Services and compliance with the Performance Standards); and

14.3.3 where the Operator is prevented from or delayed in performing a substantial part of the Services for a prolonged period as a result of force majeure (which is continuing at the time the notice of termination is delivered) and as a result the Operation of the Station is materially adversely affected.

14.4 Each M&O Contract may, subject to agreement on detailed terms and conditions, contain provisions relating to partial termination by the Service Customer.

15. Consequences of Termination

15.1 If an M&O Contract is terminated, the Operator will transfer operations to the Service Customer or another nominated operator (including by the provision of transitional services) over an agreed period in accordance with an agreed protocol.

15.2 The M&O Contract will also detail each party’s entitlements in respect of payments or compensation for any liability or loss actually incurred and arising as a result of or in connection with such termination.

16. Remedies

Each M&O Contract will:

16.1.1 provide that neither party is liable to the other for indirect or consequential loss;

16.1.2 include appropriate indemnities by the Operator which are consistent with the rights and obligations of the parties under the contract, including in respect of losses arising as a result of negligence and material breach; and

16.1.3 include an appropriate liquidated damage regime.

17. Other Provisions

Each M&O Contract will contain provisions which are standard for an agreement of its type and, to the extent appropriate, will be consistent with the approach taken in the equivalent provisions (if any) in the Liabilities Documents. These provisions will include the following:

17.1.1 allocation of losses in respect of environmental matters;

**** indicates information which has been omitted and filed separately with the Commission

- 99 -

17.1.2 intellectual property provisions;

17.1.3 covenants;

17.1.4 representations and warranties;

17.1.5 assignment and sub-contracting rights and obligations;

17.1.6 contract management and change control mechanisms;

17.1.7 disaster recovery requirements;

17.1.8 confidentiality;

17.1.9 force majeure, including entitlements of each party to the M&O Contract to terminate such contract if the force majeure event is prolonged in duration;

17.1.10 dispute resolution; and

17.1.11 governing law and jurisdiction.

**** indicates information which has been omitted and filed separately with the Commission

- 100 -

Schedule 9

General Principles for Defuelling Agreement

1. Definitions

For the purposes of this Schedule 9 (General Principles for Defuelling Contract):

“Performance Standards”	has the meaning given in paragraph 6.3;
“Service Customer”	has the meaning given in paragraph 3.3;
“Service Provider”	has the meaning given in paragraph 3.1; and
“Services”	has the meaning given in paragraph 5.

2. Basis of Negotiation

Each Defuelling Contract will be negotiated by the parties to it on an arm’s length basis and in good faith in accordance with the principles set out in this Schedule 9 (General Principles for Defuelling Contract).

3. Parties

3.1 The relevant BEG Entity (the “Service Provider”);

3.2 Other BE Parties to the extent necessary or desirable for implementing the terms of each Defuelling Contract; and

3.3 The Secretary of State or the Station Purchaser (as the case may be) (the “Service Customer”).

4. Duration

Each Defuelling Contract will continue until the earlier of:

4.1 the date on which the defuelling of the reactors as the relevant Station is complete; and

4.2 its termination by the Service Provider or Service Customer in accordance with the termination rights referred to in paragraph 14.

5. Services

Each Defuelling Contract will require the Service Provider to provide all services which are necessary for, or which a prudent Service Provider would undertake in connection with, the defuelling of the relevant Station (the “Defuelling”) in respect of which a Station Option has been exercised (the “Services”).

**** indicates information which has been omitted and filed separately with the Commission

- 101 -

6. Performance Standards and Method of Performance

6.1 The basis of Service provision will be that all operational and maintenance matters relating to the Defuelling will be the responsibility of the Service Provider.

6.2 The Services will be provided in accordance with a method of delivery to be agreed, including programmes detailing projections relating to budgetary, operational and maintenance matters over a period to be agreed and procedures to be adopted in the provision of the Services.

6.3 The Service Provider shall provide the Services on a basis to be agreed with Service Customer with a view to ensuring that the Defuelling is carried out safely and efficiently. Notwithstanding the foregoing, the Services must comply with applicable law (including legal and regulatory licences and authorisations) and other appropriate standards to be agreed between the Service Customer and the Service Provider (together the “Performance Standards”) having regard to the nature and scope of the Services and the allocation of risk and liability between each party.

6.4 Each Defuelling Contract will specify the consequences of a failure of the Service Provider to perform any of the Services in accordance with the terms of such contract and include appropriate carve-outs such as where a failure arises because of express instructions from the Service Customer, force majeure or compliance with applicable law. Any liability of the Service Provider for costs incurred in connection with this obligation shall be limited to a monetary amount to be agreed.

7. Improvements

Improvements shall be subject to Service Customer approval, unless expressly stated to the contract in the relevant Defuelling Contract. For the purposes of this paragraph 7, an “Improvement” means any change in, addition to, or modification of the Station (other than maintenance or repair) which is required by applicable law or which has the effect of lowering the Defuelling or decommissioning costs.

8. Procurement

The Service Provider will be responsible for procuring all spares and consumables normally required to provide the Services, including, where appropriate, implementing competitive tendering procedures for the procurements of those spares and consumables.

9. Title to Spares

Title to all parts and spares shall be vested in the Service Customer following acquisition by the Service Provider.

10. Personnel

10.1 Each Defuelling Contract will require the Service Provider to provide appropriate staff in order to provide the Services. Such requirements will include provisions relating to personnel planning, key personnel, standards applicable to personnel and selection, appointment and removal mechanisms for personnel and sub-contractors.

**** indicates information which has been omitted and filed separately with the Commission

- 102 -

10.2 The provision of personnel under each Defuelling Contract will be subject to the provisions of clauses 17 and 28 of the Agreement.

11. Information, Records And Access

Each Defuelling Contract will include obligations on the Service Provider in respect of records (including as to maintenance and reporting) relating to Service provision and access rights to such records in favour of the Service Customer with a view to ensuring that the Service Customer can, amongst other things, confirm that the Services are complying with the Performance Standards.

12. Fees, Station Revenue and Costs and Expenses

12.1 The fees to be paid to the Service Provider for the provision of the Services under each Defuelling Contract shall be negotiated in good faith on an arm’s length basis, such fees to be reasonable having regard to the nature and scope of the Services and the allocation of liability and risk between the parties to each contract. The Service Customer shall pay an amount equal to any VAT payable in respect of the Services.

12.2 The Service Customer shall reimburse the Service Provider for costs and expenses incurred in the provision of the Services which are forecast in the budget for the applicable financial period. This right of reimbursement shall not apply to a list of excluded costs and expenses to be agreed for each Defuelling Contract.

12.3 The Defuelling Contract will also include a mechanism for the parties to such contract to determine responsibility for costs and expenses which have not been provided for in the budget for the applicable financial period.

13. Insurance

13.1 The Service Provider shall effect and maintain in full force and effect an insurance programme to be agreed with the Service Customer, including policies which a prudent Service Provider of a Station would effect and maintain and policies required by law.

13.2 The Service Customer may procure such insurances at the expense of the Service Provider and take such steps in respect of such insurances as the Service Customer may consider expedient or necessary if the Service Provider fails to take out and maintain insurance policies as referred to above.

14. Termination

14.1 Each Defuelling Contract will include termination rights in favour of the Service Customer and the Service Provider. Such rights will, where appropriate, include notice periods in connection with the exercise of any termination right and provide a grace period to allow for the defaulting party to remedy any breach before the termination becomes effective.

14.2 The circumstances in which termination rights which may be exercised by the Service Provider will include the following:

14.2.1 failure by the Service Customer to pay any fees due for the provision by the Service Provider of the Services; and

**** indicates information which has been omitted and filed separately with the Commission

- 103 -

14.2.2 the occurrence of an insolvency event in respect of the Service Customer.

14.3 The circumstances in which termination rights which may be exercised by the Service Customer will include the following:

14.3.1 the occurrence of an insolvency event in respect of the Service Provider;

14.3.2 material breaches in respect of the Service Provider’s compliance with the Defuelling Contract (including in respect of the Services and compliance with the Performance Standards); and

14.3.3 where the Service Provider is prevented from or delayed in performing a substantial part of the Services for a prolonged period as a result of force majeure (which is continuing at the time the notice of termination is delivered) and as a result the Operation of the Station is materially adversely affected.

14.4 Each Defuelling Contract may, subject to agreement on detailed terms and conditions, contain provisions relating to partial termination by the Service Customer.

15. Consequences of Termination

15.1 If a Defuelling Contract is terminated, the Service Provider will transfer operations to the Service Customer or another nominated Service Provider (including by the provision of transitional services) over an agreed period in accordance with an agreed protocol.

15.2 The Defuelling Contract will also detail each party’s entitlements in respect of payments or compensation for any liability or loss actually incurred and arising as a result of or in connection with such termination.

16. Remedies

Each Defuelling Contract will:

16.1.1 provide that neither party is liable to the other for indirect or consequential loss;

16.1.2 include appropriate indemnities by the Service Provider which are consistent with the rights and obligations of the parties under the contract, including in respect of losses arising as a result of negligence and material breach; and

16.1.3 include an appropriate liquidated damage regime.

17. Other Provisions

Each Defuelling Contract will contain provisions which are standard for an agreement of its type and, to the extent appropriate, will be consistent with the approach taken in the equivalent provisions (if any) in the Liabilities Documents. These provisions will include the following:

17.1.1 allocation of losses in respect of environmental matters;

**** indicates information which has been omitted and filed separately with the Commission

- 104 -

17.1.2 intellectual property provisions;

17.1.3 covenants;

17.1.4 representations and warranties;

17.1.5 assignment and sub-contracting rights and obligations;

17.1.6 contract management and change control mechanisms;

17.1.7 disaster recovery requirements;

17.1.8 confidentiality;

17.1.9 force majeure, including entitlements of each party to the Defuelling Contract to terminate such contract if the force majeure event is prolonged in duration;

17.1.10 dispute resolution; and

17.1.11 governing law and jurisdiction.

**** indicates information which has been omitted and filed separately with the Commission

- 105 -

Schedule 10

General Principles for Partial Closure M&O Contract

1. Definitions

For the purposes of this Schedule 10 (General Principles for Partial Closure M&O Contract):

“Performance Standards”	has the meaning given in paragraph 6.3;
“Service Customer”	has the meaning given in paragraph 3.3;
“Service Provider”	has the meaning given in paragraph 3.1; and
“Services”	has the meaning given in paragraph 5.

2. Basis of Negotiation

Each Partial Closure M&O Contract will be negotiated by the parties to it on an arm’s length basis and in good faith in accordance with the principles set out in this Schedule 10 (General Principles for Partial Closure M&O Contract).

3. Parties

3.1 The relevant BEG Entity (the “Service Provider”);

3.2 Other BE Parties to the extent necessary or desirable for implementing the terms of each Partial Closure M&O Contract; and

3.3 The Secretary of State or the Station Purchaser (as the case may be) (the “Service Customer”).

4. Duration

Each Partial Closure M&O Contract will continue until the earlier of:

4.1 five years after the relevant Station’s Scheduled Closure Date or Early Closure Date (as the case may be); and

4.2 its termination by the Service Provider or Service Customer in accordance with the termination rights referred to in paragraph 14.

5. Services

Each Partial Closure M&O Contract will require the Service Provider to manage, operate and maintain the Closed Reactor for the primary purpose of generating electricity in bulk for delivery to the National Grid or the Scottish System (in respect of the Scottish Stations) (together, the “Services”).

**** indicates information which has been omitted and filed separately with the Commission

- 106 -

6. Performance Standards and Method of Performance

6.1 The basis of Service provision will be that all operational and maintenance matters will be the responsibility of the Service Provider.

6.2 The Services will be provided in accordance with a method of delivery to be agreed, including programmes detailing projections relating to budgetary, operational and maintenance matters over a period to be agreed and procedures to be adopted in the provision of the Services.

6.3 The Service Provider shall provide the Services on a basis to be agreed with the Service Customer with a view to ensuring that the Closed Reactor is operated and maintained safely and efficiently. Notwithstanding the foregoing, the Services must comply with applicable law (including legal and regulatory licences and authorisations) and other appropriate standards to be agreed between the Service Customer and the Service Provider (together the “Performance Standards”) having regard to the nature and scope of the Services and the allocation of risk and liability between each party.

6.4 Each Partial Closure M&O Contract will specify the consequences of a failure of the Service Provider to perform any of the Services in accordance with the terms of such contract and include appropriate carve-outs such as where a failure arises because of express instructions from the Service Customer, force majeure or compliance with applicable law. Any liability of the Service Provider for costs incurred in connection with this obligation shall be limited to a monetary amount to be agreed.

7. Improvements

Improvements shall be subject to Service Customer approval, unless expressly stated to the contract in the relevant Partial Closure M&O Contract. For the purposes of this paragraph 7, an “Improvement” means any change in, addition to, or modification of the Station (other than maintenance or repair) which is required by applicable law or which has the effect of extending the useful life of the Station or its components, lowering the operating costs or increasing the efficiency or reliability of the Station or otherwise improving the Station.

8. Procurement

The Service Provider will be responsible for procuring all spares and consumables normally required to provide the Services, including, where appropriate, implementing competitive tendering procedures for the procurements of those spares and consumables.

9. Title to Spares

Title to all parts and spares shall be vested in the Service Customer following acquisition by the Service Provider.

10. Personnel

10.1 Each Partial Closure M&O Contract will require the Service Provider to provide appropriate staff in order to provide the Services. Such requirements will include

**** indicates information which has been omitted and filed separately with the Commission

- 107 -

provisions relating to personnel planning, key personnel, standards applicable to personnel and selection, appointment and removal mechanisms for personnel and sub-contractors.

10.2 The provision of personnel under each Partial Closure M&O Contract will be subject to the provisions of clauses 17 and 28 of the Agreement.

11. Information, Records and Access

Each Partial Closure M&O Contract will include obligations on the Service Provider in respect of records (including as to maintenance and reporting) relating to Service provision and access rights to such records in favour of the Service Customer with a view to ensuring that the Service Customer can, amongst other things, confirm that the Services are complying with the Performance Standards.

12. Fees, Station Revenue and Costs and Expenses

12.1 The fees to be paid to the Service Provider for the provision of the Services under each Partial Closure M&O Contract shall be negotiated in good faith on an arm’s length basis, such fees to be reasonable having regard to the nature and scope of the Services and the allocation of liability and risk between the parties to each contract. The Service Customer shall pay an amount equal to any VAT payable in respect of the Services.

12.2 The Service Customer shall reimburse the Service Provider for costs and expenses incurred in the provision of the Services which are forecast in the budget for the applicable financial period. This right of reimbursement shall not apply to a list of excluded costs and expenses to be agreed for each Partial Closure M&O Contract.

12.3 The Ancillary Services Contract will also include a mechanism for the parties to such contract to determine responsibility for costs and expenses which have not been provided for in the budget for the applicable financial period.

13. Insurance

13.1 The Service Provider shall effect and maintain in full force and effect an insurance programme to be agreed with the Service Customer, including policies which a prudent operator of a Station would effect and maintain and policies required by law.

13.2 The Service Customer may procure such insurances at the expense of the Service Provider and take such steps in respect of such insurances as the Service Customer may consider expedient or necessary if the Service Provider fails to take out and maintain insurance policies as referred to above.

14. Termination

14.1 Each Partial Closure M&O Contract will include termination rights in favour of the Service Customer and the Service Provider. Such rights will, where appropriate, include notice periods in connection with the exercise of any termination right and provide a grace period to allow for the defaulting party to remedy any breach before the termination becomes effective.

**** indicates information which has been omitted and filed separately with the Commission

- 108 -

14.2 The circumstances in which termination rights which may be exercised by the Service Provider will include the following:

14.2.1 failure by the Service Customer to pay any fees due for the provision by the Service Provider of the Services; and

14.2.2 the occurrence of an insolvency event in respect of the Service Customer.

14.3 The circumstances in which termination rights which may be exercised by the Service Customer will include the following:

14.3.1 the occurrence of an insolvency event in respect of the Service Provider;

14.3.2 material breaches in respect of the Service Provider’s compliance with the Partial Closure M&O Contract (including in respect of the Services and compliance with the Performance Standards); and

14.3.3 where the Service Provider is prevented from or delayed in performing a substantial part of the Services for a prolonged period as a result of force majeure (which is continuing at the time the notice of termination is delivered) and as a result the Operation of the Station is materially adversely affected.

14.4 Each Partial Closure M&O Contract may, subject to agreement on detailed terms and conditions, contain provisions relating to partial termination by the Service Customer.

15. Consequences of Termination

15.1 If a Partial Closure M&O Contract is terminated, the Service Provider will transfer operations to the Service Customer or another nominated Service Provider (including by the provision of transitional services) over an agreed period in accordance with an agreed protocol.

15.2 The Partial Closure M&O Contract will also detail each party’s entitlements in respect of payments or compensation for any liability or loss actually incurred and arising as a result of or in connection with such termination.

16. Remedies

Each Partial Closure M&O Contract will:

16.1.1 provide that neither party is liable to the other for indirect or consequential loss;

16.1.2 include appropriate indemnities by the Service Provider which are consistent with the rights and obligations of the parties under the contract, including in respect of losses arising as a result of negligence and material breach; and

16.1.3 include an appropriate liquidated damage regime.

**** indicates information which has been omitted and filed separately with the Commission

- 109 -

17. Other Provisions

Each Partial Closure M&O Contract will contain provisions which are standard for an agreement of its type and, to the extent appropriate, will be consistent with the approach taken in the equivalent provisions (if any) in the Liabilities Documents. These provisions will include the following:

17.1.1 allocation of losses in respect of environmental matters;

17.1.2 intellectual property provisions;

17.1.3 covenants;

17.1.4 representations and warranties;

17.1.5 assignment and sub-contracting rights and obligations;

17.1.6 contract management and change control mechanisms;

17.1.7 disaster recovery requirements;

17.1.8 confidentiality;

17.1.9 force majeure, including entitlements of each party to the Partial Closure M&O Contract to terminate such contract if the force majeure event is prolonged in duration;

17.1.10 dispute resolution; and

17.1.11 governing law and jurisdiction.

**** indicates information which has been omitted and filed separately with the Commission

- 110 -

Schedule 11

Representations and Warranties

1. Capacity

1.1 It is a company duly incorporated and validly existing under the laws of England and Wales or Scotland.

1.2 It has the requisite capacity, power and authority to enter into and perform this Agreement.

1.3 This Agreement constitutes valid and binding obligations of it in accordance with its terms.

1.4 The execution and delivery of this Agreement (and, in respect of any repetition of this representation and warranty on an Effective Date, the performance of its obligations in respect of the Completion under this Agreement) will not:

1.4.1 result in a breach of, or constitute a default under, any instrument by which it is bound; or

1.4.2 result in a breach of any order, judgment or decree of any court, governmental agency or regulatory body by which it is bound; or

1.4.3 require the consent of any person (except as set out in this Agreement),

other than (in the case of paragraphs 1.4.1 and 1.4.2) a breach or default that will not result in a Material Adverse Change (as defined in the Creditors Restructuring Agreement) or (in the case of paragraph 1.4.3) a consent the failure to obtain which will not result in a Material Adverse Change.

2. Effect of Sale

2.1 There is no provision of, or matter in respect of any material contract, agreement, arrangement, commitment, license or other instrument relating to the Station to which any member of the Group is a party or the benefit of which is held in trust for or has been assigned to any such person including any:

2.1.1 Contracts;

2.1.2 contract relating to the Station Site (or any part thereof);

2.1.3 contract relating to any Transferring Employee; or

2.1.4 consent, permission or approval which, in consequence of the change of ownership of that Station will or may result in any such instrument, or the rights, liabilities, obligations or interests of any member of the Group under any such instrument or any consent, permission or approval being terminated, modified, revoked or not renewed, the result of which, in any such case, is material to the Station or its Operation.

**** indicates information which has been omitted and filed separately with the Commission

- 111 -

2.2 There is no provision of, or matter in respect of, any material contract, agreement, arrangement, commitment, licence or other instrument which, in consequence of the change of ownership of that Station will or may require any member of the Group with an interest in the Station being required to sell any Station Asset or any person being entitled to buy any Station Asset, the result of which in any such case is material to the Operation of the Station.

2.3 Save for those set out in Schedule 4 (Completion Conditions), there are no other material consents, permissions or approvals required from any person in connection with Completion.

3. Ownership of Station Assets

3.1 Each of the Station Assets is owned solely both legally and beneficially by the selling BEG Entity and, where capable of possession, is in the possession of the selling BEG Entity and situated in the United Kingdom.

3.2 No option, right to acquire, mortgage, charge, pledge, lien (other than a lien arising by operation of law in the ordinary course of business) or other right exercisable by third parties or other form of security or encumbrance or equity on, over or affecting the whole or any part of the Station Assets is outstanding and there is no agreement or commitment to give or create any and, so far as the Warrantors are aware, no claim has been made by any person to be entitled to any.

3.3 Save for the Guarantee, no member of the Group is a party to or has any liability (present or future) under, any material guarantee or indemnity or letter of credit or any leasing, hiring, hire purchase, credit sale or conditional sale agreement relating to any of the Station Assets.

3.4 No member of the Group has agreed to acquire any of the Station Assets on terms that property in or title to it does not pass until full payment is made.

3.5 All consents, approvals, authorisations and waivers of third parties which are required for the transfer of the Station Assets to the Station Purchaser, including Third Party Consents, have been or will be obtained in writing and will be supplied to the Station Purchaser prior to Completion.

3.6 The selling BEG Entity confirms it has the right to transfer or to procure the transfer of legal and beneficial title to the Station (and in the case of the Scottish Stations, heritable title) and sell or procure the sale of the Station Assets relating thereto free from all liens, charges and encumbrances and from all other rights exercisable by, or claims by, third parties.

4. Operation

Save to the extent expressly provided to the contrary in this Agreement, the Station Assets comprise all the assets used in and which are material to the Operation of the Station and all the assets which are necessary for the continuation of the Operation of the Station as it is carried on by the selling BEG Entity.

**** indicates information which has been omitted and filed separately with the Commission

- 112 -

5. Litigation

No BE Party is, in respect of the Station to be acquired by the Station Purchaser, involved in any litigation, arbitration or other dispute resolution process, or administrative or criminal proceedings, or regulatory agency action whether as claimant, defendant or otherwise, and, so far as each BE Party is aware, no litigation, arbitration or other dispute resolution process, administrative or criminal proceedings by or against any BE Party in each case in respect of that Station is pending or threatened.

6. Contracts and Commitments

6.1 Full, complete and accurate details of each material Contract have been supplied to the Purchaser.

6.2 No Contract is an agency, distributorship, franchise, purchaser, licensing, management or joint venture agreement or arrangement affecting the Operation of the Station.

6.3 No Contract has a value which has material consequences in terms of expenditure or revenue expectations.

6.4 Each Contract relates to matters within the ordinary and usual course of the selling BEG Entity’s business.

6.5 No BE Party is under an obligation in relation to the Operation of a Station, and is not a party to any Contract, which cannot readily be fulfilled or performed by it on time and without undue or unusual expenditure of money or effort, save in the ordinary and usual course of the selling BEG Entity’s business.

6.6 No Contract restricts any BE Party’s freedom to carry on the whole or any part of the Operation of the Station or to use or exploit any of the Station Assets.

6.7 No BE Party is in material breach of any of the Contracts nor, so far as any BE Party is aware, is any other party to any Contract.

6.8 None of the Contracts is invalid, nor are there any grounds for determination, rescission, avoidance or repudiation of any Contract, and, so far as each BE Party is aware, there are no facts or circumstances likely to provide such grounds.

7. Intellectual Property

7.1 Nothing prevents the selling BEG Entity or any other relevant member of the Group from granting or would conflict with the grant of the licences and sub-licences provided for in clauses 18.1 to 18.5. For the purposes of this Warranty, if any Station Third Party Licence Consent is required as described in clause 18.4, such requirement shall be regarded as preventing the selling BEG Entity or other relevant member of the Group from granting a sub-licence under the relevant Station Intellectual Property Licence.

7.2 To the best of each BE Party’s knowledge, information and belief, the selling BEG Entity or another member of the Group either legally and beneficially owns free from all charges, options, mortgages, debentures, rights to acquire, pledges, liens, exclusive or

**** indicates information which has been omitted and filed separately with the Commission

- 113 -

sole licences, or challenges, or has a licence to use all Intellectual Property and Information necessary to Operate the Station materially in the manner currently carried on and to fulfil any existing agreements for the Station.

7.3 Details of all registered Station Intellectual Property (and applications for any such right) used or developed for use in connection with the Station have been provided to the Station Purchaser.

7.4 All renewal, application and other official registry fees due prior to the Completion Date for the maintenance of the material Station Intellectual Property have been paid or taken.

7.5 Details of all Station Intellectual Property Licences and all other material licences and agreements relating to any Station Intellectual Property that is a Station Asset granted by any member of the Group have been provided to the Station Purchaser and no member of the Group is, and to the best of the knowledge, information and belief of each BE Party, no third party is, in material breach (or breach that may give rise to a termination right) of any of the same. Notwithstanding the foregoing, to the extent that any BE Party is prohibited from disclosing such details by the terms of any applicable non-disclosure restrictions, it shall only be required to inform the Station Purchaser of the existence of such restrictions and the general impact such restricted details would have on the Operation of the Station and to discuss with the Station Purchaser means (and, where possible, effect such means), if any, for disclosing such restricted details without breaching such restrictions. For the purpose of this Warranty only, the definition of “Station Intellectual Property Licences” under clause 1.1 shall be read as if “Intellectual Property” included all trade marks, service marks and other rights in trade names, business names and signs whether they relate exclusively to the relevant Station or not.

7.6 To the best of the knowledge, information and belief of each BE Party, no person is or has been in the year prior to Completion infringing or making unauthorised use of any material Station Intellectual Property.

7.7 To the best of the knowledge, information and belief of each BE Party, the Operation of the Station has not in the year prior to Completion infringed or made any unauthorised use of any Intellectual Property owned by any third party.

8. Information Technology

8.1 Details of all material agreements and arrangements relating to Information Technology entered into by, or pursuant to which any benefit is obtained by, any member of the Group in relation to the Station have been provided to the Station Purchaser, and no member of the Group is and, to the best of the knowledge, information and belief of each BE Party, no other party is, in material breach (or a breach that may give rise to a termination right) of any such agreement or arrangement.

8.2 The selling BEG Entity or another BE Party either legally and beneficially owns or has a contractual right to use all Information Technology required for the Operation of the Station in the manner carried on currently and to fulfil any existing agreements.

**** indicates information which has been omitted and filed separately with the Commission

- 114 -

8.3 The Station has not within the last 12 months experienced any material disruption in its Operations as a result of (a) any security breach in relation to any Information Technology, (b) any failure (whether arising from any bug, virus, defect or otherwise), lack of capacity or other sub-standard performance of any Information Technology, or (c) any failure, interruption or defective operation of any Information Technology caused by the occurrence or processing of any date or dates.

9. Data Protection

9.1 The selling BEG Entity is (either by itself or part of a registration of the Group):

9.1.1 duly registered as a data controller under the Data Protection Act 1998 (or is deemed to be so registered by notification regulations made by virtue of section 19(3) of that Act) for all purposes for which registration is required in respect of the Station; or

9.1.2 exempt from section 17(1) of the Data Protection Act 1998 under paragraph 2 of schedule 14 to that Act and is duly registered as a data user under the Data Protection Act 1984 for all purposes for which registration is required in respect of the Station.

9.2 The selling BEG Entity has complied with all relevant requirements of the Data Protection Act 1984 at all times while that Act was in force and with all relevant requirements of the Data Protection Act 1998 (including the data protection principles set out in each of those Acts respectively).

10. Employees

10.1 The selling BEG Entity has maintained up-to-date, complete and accurate records regarding the employment of each Station Employee including, without limitation, income tax and social security contributions, health and safety matters and terminations of employment.

10.2 The contract of employment of each Station Employee may be terminated by the employer without damages or compensation (other than that payable by statute) by giving at any time three months’ or less notice.

10.3 No Station Employee with a salary in excess of £50,000 per annum has given notice terminating his contract of employment nor is under notice of dismissal.

10.4 No Station Employee has made or threatened (or is expected to make or threaten) any litigation, arbitration or mediation, administration or criminal proceeding in connection with or arising from his employment.

11. Grants and Allowances

Neither the sale of the Station nor anything else known to any BE Party will or is likely to result in all or any part of any grants, allowances, aids, subsidies, loans or guarantees paid or made available in relation to the Station during the last six years by, and all outstanding claims for any such grant, allowance, aid, subsidy, loan or guarantee directly or indirectly from, any supranational, national or local authority or government agency becoming repayable, forfeited or invalidated.

**** indicates information which has been omitted and filed separately with the Commission

- 115 -

12. Consents and Licences

12.1 All material licences, consents, permissions and approvals required for or in connection with the carrying on of the Operation of the Station in the manner currently carried on:

12.1.1 have been obtained;

12.1.2 are not limited to duration or subject to onerous conditions; and

12.1.3 are in full force and effect.

12.2 All reports, returns and information required by law or as a condition of any such licence, consent, permission or approval to be made or given to any person or authority in connection with the Operation of the Station have been made or given to the appropriate person or authority.

12.3 So far as each BE Party is aware, there are no facts or circumstances which might be expected to cause any such licence, consent, permission or approval to be revoked or not renewed.

13. Environmental Matters

All permits, licences, consents or authorisations required by Environmental Law relating to the Operation of the Station and/or in relation to the Station Sites have been obtained and are in full force and effect.

14. Accuracy and Adequacy of Information

14.1 Except for the information detailed in paragraph 14.2, each BE Party has taken all reasonable care to ensure that, to the best of its knowledge and belief, written information provided pursuant to:

14.1.1 clause 9.2 and Schedule 12 (Provision of Information) (other than any information provided pursuant to paragraph 5 of that Schedule); and

14.1.2 clauses 9.4.2 and 9.6.2 (in each case other than information which has been prepared or produced by third party consultants), is in every material particular true, accurate and not misleading.

14.2 Information which is a forecast or forward looking in nature or is an intention or opinion of any member of the Group (or any director or senior employee of the same) is honestly held and based on a reasonable analysis of the facts and circumstances on which such information is based.

14.3 No BE Party is aware of any other facts in relation to the information described in paragraphs 14.1 and 14.2, the omission of which would make any such information misleading in any material respect or would be likely to affect materially the import of such information.

**** indicates information which has been omitted and filed separately with the Commission

- 116 -

15. Station Sites

15.1 Title

15.1.1 The boundaries of the Station Site which is being acquired (the “relevant Station Sites”), each principal means of access and egress to the relevant Station Sites, the location of the relevant Station Site’s security fence and the extent of the selling BEG Entity’s ownership of adjacent land is accurately shown on the relevant Plan (except for the leases referred to in paragraph 8 of Part 1 of Schedule 15 (Station Sites)).

15.1.2 The selling BEG Entity is solely legally and beneficially entitled to each relevant Station Site (and in the case of any relevant Station Site relative to the Scottish Stations is heritable proprietor thereof).

15.1.3 The selling BEG Entity holds each relevant Station Site subject to the Leases and Occupational Leases, particulars of which are set out in the relevant Property Schedules for such Station Site, but is otherwise in physical possession and actual occupation of the whole of each relevant Station Site on an exclusive basis (and except as set out in the relevant Property Schedules for each relevant Station Site, no third party has or is entitled to have any right to possession, occupation or use of such Station Site).

15.1.4 Each relevant Station Site is held free from any mortgage or charge, whether legal or equitable, fixed or floating, (with the exception of the floating charges dated 26 September 2002 and 28 September 2002, the fixed charge dated 3 December 2002 in favour of the Secretary of State, the Standard Security dated 28 November 2002 and recorded in the General Register of Sasines applicable to the County of Ayr on 4 December 2002 in favour of the Secretary of State over Hunterston B and the Standard Security dated 28 November 2002 and recorded in the Division of the General Register of Sasines applicable to the County of East Lothian on 4 December 2002 in favour of the Secretary of State over Torness) and no person has or claims to have any lien on any of the relevant Station Sites or the documents of title.

15.1.5 Each Station Site has the use of all rights, quasi-rights and services (including, without limitation, electricity, water supply, sewerage plant, and telecommunications) which are necessary for the purposes of Operating such Station Site as it is currently Operated by the selling BEG Entity.

15.1.6 The Retained Land and each relevant Station Site together comprise all of the land required for Decommissioning that Station Site.

15.2 Matters affecting the Station Sites

15.2.1 None of the relevant Station Sites or any part thereof is affected by, or is to the knowledge of the selling BEG Entity likely to become so affected by any outstanding dispute, notice or complaint which affects or might in the future affect, in either case to a material extent, the use of any Station Site for the purposes of Operating or, as the case may be, Decommissioning such Station Site.

**** indicates information which has been omitted and filed separately with the Commission

- 117 -

15.2.2 No notice of any material breach of any of the restrictions, conditions and covenants (including any imposed by or pursuant to any Lease or Occupational Lease or agreement for any of the same and whether the selling BEG Entity is the landlord or the tenant thereunder) affecting any of the Station Sites which would have a material adverse effect on the Operation or Decommissioning of a Station Site has been received or is to the knowledge of the selling BEG Entity likely to be received.

15.2.3 There are no restrictive covenants or provisions, charges, restrictions, agreements, conditions or other contractual matters which preclude or limit the Operation of each relevant Station Site as it is carried on by the selling BEG Entity save as may be referred to in any of the documents mentioned in the Property Schedules.

15.3 Other

15.3.1 In relation to each Station Site, the current Decommissioning Plans and the Annual Liability Reports together with any updates required in accordance with clause 12 of the NLFA have been prepared in compliance with the obligations of the selling BEG Entity in the NLFA and contain adequate information to allow the Secretary of State to determine the extent of the Retained Land reasonably required from time to time for the purposes of Decommissioning such Station Site.

15.3.2 The selling BEG Entity warrants that the plans annexed at Part A of the applicable Property Schedules relating to each relevant Station Site are complete and accurate in all material respects.

16. Tax

16.1 All documents relating to the Station or any part thereof which are subject to stamp duty or any similar tax and by virtue of which any BE Party has any right have been duly stamped.

16.2 The selling BEG Entity has given to the Secretary of State full details of any part of the Station to which the provisions of Part XV of The Value Added Tax Regulations 1995 apply, including, in particular:

16.2.1 the identity (including in the case of leasehold property, the term of years), date of acquisition and cost of the relevant part of the Station; and

16.2.2 the proportion of the input tax for which credit has been claimed (either provisionally or finally in a tax year and stating which).

**** indicates information which has been omitted and filed separately with the Commission

- 118 -

16.3 No election (or application to elect) has been nor will be made before the Completion Date under paragraph 2 of Schedule 10 to the Value Added Tax Act 1994 in relation to the Station or any part thereof.

17. Interpretation

A reference to a matter or thing being “material” shall be treated as such if it:

(a) is material in respect of the Operation (whether in whole or in respect of a significant part) of the Station at the date on which the Warranty is being made; or

(b) has a value in excess of £100,000.

**** indicates information which has been omitted and filed separately with the Commission

- 119 -

Schedule 12

Provision of Information

The information to be provided to the Secretary of State and the relevant Station Purchaser pursuant to clause 9.2 is:

1. detailed breakdowns of the operating costs and revenues of the relevant Station for the previous 36 months together with forecasts for operating costs and revenues for the following 24 months (including details of the bases and assumptions of such forecasts but excluding price forecast information);

2. other existing financial information (such as management accounts) for that Station for the three years preceding the date of exercise of the Station Option;

3. environmental registers and schedules of Station Assets (including schedules of condition) in the form maintained by the relevant BE Party (if any);

4. a description of the general economic history of the Station in the previous five years, an analysis of expected future economic performance (including a detailed summary of all assumptions on which such analysis is based); and

5. any other information regarded by the selling BEG Entity (acting reasonably) as pertinent to the past, current and/or future Operation of that particular Station.

**** indicates information which has been omitted and filed separately with the Commission

- 120 -

Schedule 13

Pensions

1. Having undertaken extensive discussions in good faith, the parties recognise that as at the Execution Date it would be premature to seek to agree terms for any pension arrangements that might apply following the exercise of a Station Option. Accordingly, no such terms are provided for in this Agreement but the parties recognise that such pension arrangements might be the subject of further discussions at a date closer to the Scheduled Closure Date for any Station.

2. As from the Execution Date, each BEG Entity shall, following receipt thereof, provide to the Secretary of State (or to such advisers as the Secretary of State may nominate) a copy of:

(a) each final actuarial valuation report produced after the Execution Date by the scheme actuary for each Group of the Electricity Supply Pension Scheme under which employees of any Station accrue benefits from time to time; and

(b) each annual trustees’ report and accounts produced after the Execution Date for each such Group.

**** indicates information which has been omitted and filed separately with the Commission

- 121 -

Schedule 14

Station Assets

The Station Assets, in respect of any Station, means:

(A) Plant and Machinery;

(B) the benefit (and burden) of the Contracts (or, if clause 13.8 applies, a proportion thereof in respect of the BNFL Contracts);

(C) such Station Intellectual Property as is exclusively used, acquired for use, held for use or developed for use in connection with the relevant Station at the Completion Date;

(D) nuclear fuel located at that Station other than nuclear fuel which, as at the Completion Date, is Excluded Fuel;

(E) the Station Specific Spares; and

(F) all other property, assets (including the Stocks) and rights of the members of the Group used solely in connection with the Operation of the Station at Completion, including all the rights and property relating to the same, but excluding:

(i) cash in hand or at the bank used in the business carried on at that Station;

(ii) amounts recoverable in respect of Taxation relating to that Station attributable to periods ended on or before, or transactions occurring on or before, the Effective Date;

(iii) the Station Intellectual Property, save as referred to in paragraph 1(C) above;

(iv) the Excluded Assets; and

(v) the Station Sites; and

(G) all allowances which are allocated to that Station under any Emissions Trading Scheme from time to time or, where allowances are allocated under any Emissions Trading Scheme by reference to a group of Stations including the Station and not specifically to an individual Station, a fair and reasonable proportion of the allowances allocated by reference to that group of Stations.

In relation to this sub-paragraph (G):

(i) “Emissions Trading Scheme” means the European Union Emissions Trading Scheme or other local, national or supranational schemes which seek to reduce, allocate or manage the levels of CO2, SO2, NOX, heavy metals or other pollutants or emissions using a market-based mechanism;

(ii) the quantity of allowances which are deemed to be allocated to a Station shall be determined by reference to the quantity allocated to the Station or the relevant group of Stations under the rules of the relevant Emissions Trading Scheme; and

**** indicates information which has been omitted and filed separately with the Commission

- 122 -

(iii) the selling BEG Entity shall use its best efforts to ensure that the Station Purchaser receives the full benefit of the quantity of allowances determined in accordance with sub-paragraphs (i) to (ii) above.

In respect of each Completion, the Station Assets referred to in this Schedule 14 (Station Assets) must satisfy the requirements of paragraph 1(E) or 1(F) (as the case may be) of Schedule 6 (Completion Arrangements).

**** indicates information which has been omitted and filed separately with the Commission

- 123 -

Schedule 15

Station Sites

Part 1

1. Site Transfer

1.1 Where and to the extent that the boundaries of the land required in order for the Station Purchaser to obtain the nuclear site licence required by paragraph 2(C) of Schedule 4 relating to the Station Site are not identical to the boundaries more particularly detailed in Part A of the applicable Property Schedule:

1.1.1 there shall be added to the Site Transfer any additional land so required to the extent that such additional land is comprised in the Retained Land (as defined in Part 2 of this Schedule) ; and

1.1.2 subject to paragraph 1.2 of this Part of this Schedule, there shall be excluded from the Site Transfer any part of the land coloured blue on the relevant Plan which is not so required.

1.2 There shall also be added to the Site Transfer such additional land as is shown as required for the purpose of Decommissioning the Station Site on the plan annexed to or forming part of the most recent Decommissioning Plans for the Station Site delivered to the NDA from time to time (a copy of which shall be provided by the selling BEG Entity to the Secretary of State in accordance with the provisions of the NLFA).

1.3 Land added to the Site Transfer pursuant to these paragraphs 1.1.1 and 1.2 of this Part of this Schedule shall be transferred subject to and (where appropriate) with the benefit of all matters affecting it at the date of this Agreement and any matters arising after the date of this Agreement otherwise than by reason of the voluntary act of the selling BEG Entity or its successors in title.

2. Matters to which the sale is subject

2.1 The land comprised in the Site Transfer is sold subject to and (where appropriate and subject to the provisions of paragraphs 3 and 7 of Part 2 of this Schedule) with the benefit of all matters affecting it at Completion, including (without limitation) the following:

2.1.1 all local land charges and all matters capable of registration as local land charges (including without prejudice to the generality of the foregoing, planning permissions with conditions, planning agreements, highway agreements, conservation area orders, agreements with the local authorities and smoke control orders);

2.1.2 all notices served and orders, demands, proposals or requirements made by any local or other competent authority;

**** indicates information which has been omitted and filed separately with the Commission

- 124 -

2.1.3 all exceptions and reservations of whatever nature, all rights of way, water, light, air or other rights, easements, servitudes and wayleaves, restrictions, burdens and conditions (whether constituted in the title deeds or otherwise) and (in addition, in relation to the Scottish Stations) all other matters stated or referred to in the title deeds in respect of the Scottish Stations (including without prejudice to the generality of the foregoing the title deeds and others specified in Part A and Part B of Schedule 24);

2.1.4 all overriding interests, as defined by Schedule 3 as varied, so far as applicable, by Schedule 12 of the Land Registration Act 2002 and, in respect of the Scottish Stations, all overriding interests as defined in the Land Registration (Scotland) Act 1979 as amended;

2.1.5 all matters recorded in registers open to public inspection; and

2.1.6 the matters referred to in the Property Schedules so far as they relate to the land comprised in the Site Transfer and are still subsisting and capable of taking effect at Completion.

3. Vacant Possession

3.1 The land comprised in the Site Transfer will be sold with vacant possession of the whole on Completion, subject to all Occupational Leases so far as any of them are still existing and capable of taking effect and, in the case of the Scottish Stations, all rights of tenants under the Agricultural Holdings (Scotland) Acts as regards security of tenure.

4. Title

4.1 In the case of any part of the land comprised in the Site Transfer title to which is registered at H.M. Land Registry, the selling BEG Entity shall show proof of title in accordance with rules to be made pursuant to Schedule 10 of the Land Registration Act 2002 or, in the absence of such rules, as if section 110 of the Land Registration Act 1925 continued in effect.

4.2 In the case of any part of the land comprised in the Site Transfer the title to which is freehold and is not registered at H.M. Land Registry, the selling BEG Entity shall deduce title from and commencing with a good root of title not less than fifteen years old.

4.3 In the case of any part of the land comprised in the Site Transfer the title to which is leasehold and is not registered at H.M. Land Registry, the selling BEG Entity shall deduce title from and commencing with the Lease.

4.4 The selling BEG Entity shall procure that any financial charges affecting the land comprised in the Site Transfer (with the exception of the financial charges held by the Secretary of State) are discharged on or before the Completion Date.

5. Site Transfer

5.1 On the Completion Date, the selling BEG Entity will deliver to the Station Purchaser a duly executed Site Transfer with full title guarantee (except in relation to the Scottish

**** indicates information which has been omitted and filed separately with the Commission

- 125 -

Stations where the selling BEG Entity will deliver a validly executed disposition granting warrandice (excepting therefrom the Occupational Leases, servitudes, wayleaves and rights of way) to the Station Purchaser) together with a duplicate which duplicate shall be executed and unconditionally delivered by the Station Purchaser to the selling BEG Entity at Completion.

5.2 The Site Transfer shall include the matters referred to in Part 2 of this Schedule.

5.3 Without prejudice to section 162 of the Law of Property Act 1925, the perpetuity period applicable to a Site Transfer shall be eighty years from the date of the Site Transfer.

6. Transfer of property agreements

6.1 Subject to paragraph 6.3 and 6.4 of this Part of this Schedule, a Station Purchaser shall become entitled upon Completion of the acquisition of the land comprised in the Site Transfer to the benefits and rights and shall be responsible for complying with the obligations on the part of the selling BEG Entity under the Property Agreements (insofar as they are then subsisting and relate to such Station Site) and the selling BEG Entity shall assign with full title guarantee the Property Agreements relating to the land comprised in the Site Transfer to the Station Purchaser on the Completion Date.

6.2 In the case of any Property Agreements relating to the land comprised in the Site Transfer relative to the Scottish Stations (the “Scottish Property Agreements”), subject to paragraph 6.3 of this Part of this Schedule, a Station Purchaser shall become entitled upon Completion of the acquisition of the land comprised in the Site Transfer relative to any Scottish Station to the benefits and rights and shall be responsible for complying with the obligations on the part of the selling BEG Entity under such Scottish Property Agreements (insofar as they are then subsisting and relate to such Station Site) and provided such Scottish Property Agreements are transmissible to successors or third parties, assignation would not breach any such Scottish Property Agreement and no Property Consent is required to the assignation of any such Scottish Property Agreement, at and with effect from Completion the selling BEG Entity and the Station Purchaser shall enter into and validly execute in self-proving manner in accordance with the Requirements of Writing (Scotland) Act 1995, an assignation of the relevant Scottish Property Agreements in a form to be agreed between the selling BEG Entity and the Station Purchaser (or where another member of the Group is party to the Scottish Property Agreements in question, the selling BEG Entity shall procure that the relevant member of the Group enters into an assignation thereof). The Station Purchaser undertakes to the selling BEG Entity validly to intimate any such assignation to the third party under the Scottish Property Agreements in question forthwith upon the said assignation being entered into between the parties and at the same time to copy the said intimation to the selling BEG Entity.

6.3 The selling BEG Entity shall not assign or attempt to assign any Property Agreement if the assignment or attempted assignment would constitute a breach of such Property Agreement, in which case paragraph 6.5 of this Part of this Schedule, will apply.

**** indicates information which has been omitted and filed separately with the Commission

- 126 -

6.4     6.4.1 Where a Property Consent is required to the assignment of any Property Agreement to a Station Purchaser, the Station Purchaser and the selling BEG Entity shall each be responsible (both before and after Completion and at their own expense) for obtaining and shall each use all reasonable endeavours to obtain any such Property Consent. Upon whichever is the later of Completion and any such Property Consent being obtained, the selling BEG Entity shall assign with full title guarantee the Property Agreement (excepting any Scottish Property Agreement) to which that Property Consent relates.

6.4.2 In respect of the Scottish Property Agreements, where a Property Consent is required to assignation of any such Scottish Property Agreement and assignation to the Station Purchaser is not a breach of such Scottish Property Agreement and is permissible under such Scottish Property Agreements upon whichever is the later of Completion and any such Property Consent being obtained the selling BEG Entity and the Station Purchaser shall enter into and validly execute in accordance with the Requirements of Writing (Scotland) Act 1995, an assignation of the relevant Scottish Contract (in a form to be agreed between the selling BEG Entity and the Station Purchaser) (or where another member of the Group is party to the Scottish Property Agreements in question, the selling BEG Entity shall procure that the relevant member of the Group enters into an assignation thereof). The Station Purchaser undertakes to the selling BEG Entity validly to intimate any such assignation to the third party under the Scottish Property Agreements in question forthwith upon the said assignation being entered into between the parties and at the same time to copy the said intimation to the selling BEG Entity.

6.5 Where a Property Agreement is not assignable, the Station Purchaser and selling BEG Entity shall each be responsible (both before and after Completion and at their own expense) for entering into and procuring that all relevant third parties enter into a novation agreement in a form satisfactory to the Station Purchaser (acting reasonably) in respect of that Property Agreement with the intent that, with effect from whichever is the later of Completion and the date such novation agreement is entered into, the Station Purchaser shall perform the obligations on the part of the selling BEG Entity contained in the Property Agreement and be bound by it as if the Station Purchaser were a party to that Property Agreement in lieu of the selling BEG Entity as from the date of its novation and the selling BEG Entity shall be released from the further performance of such Property Agreement and any liability under such Property Agreement.

**** indicates information which has been omitted and filed separately with the Commission

- 127 -

6.6 After Completion and pending an election being made by the Station Purchaser in accordance with paragraph 6.7 of this Part of this Schedule in relation to the relevant Property Agreement, until any necessary Property Consent to the assignment of a Property Agreement is obtained in accordance with paragraph 6.4 of this Part of this Schedule or a novation agreement has been entered into in respect of a Property Agreement in accordance with paragraph 6.5 of this Part of this Schedule, the following provisions shall apply:

6.6.1 the selling BEG Entity shall be treated as holding the benefit of that Property Agreement on trust for the Station Purchaser and any benefit shall be promptly paid over to the Station Purchaser; and

6.6.2 the Station Purchaser shall perform on behalf of the selling BEG Entity, in accordance with and subject to the provisions of clause 14.4 as if the Property Agreement were a Contract, the obligations of the selling BEG Entity under that Property Agreement arising after Completion.

6.7 If any Property Consent is not obtained or a novation agreement is not entered into in respect of a Property Agreement in accordance with this paragraph 6 of this Part of this Schedule in either case within twelve months after the Completion Date (or such longer period as the selling BEG Entity and the Station Purchaser shall agree), that Property Agreement shall, if the Station Purchaser elects in writing, be treated as having been excluded from the sale of the land comprised in the Site Transfer under this Agreement so that the parties’ obligations in respect of that Property Agreement shall end immediately after such election is made, and neither party shall have any further obligation to the other relating to such Property Agreement (but without prejudice to any antecedent breach of the provisions of this paragraph 6 of this Schedule).

6.8 Without prejudice to any claims which a Station Purchaser might have under clause 23 (Station Purchaser’s Remedies) or otherwise, if in connection with the sale and acquisition of the land comprised in the Site Transfer, the selling BEG Entity has omitted to give full, complete and accurate details of or to disclose the existence of a Property Agreement to the relevant Station Purchaser then the Station Purchaser may elect in writing, within one month after becoming aware of such details or the existence of such Property Agreement (as the case may be), that such Property Agreement shall:

6.8.1 be excluded from the sale and acquisition of that Station Site so that the parties’ obligations in respect of that Property Agreement shall end immediately after such election is made (but without prejudice to any antecedent breach of the provisions of this paragraph 6 of this Part of this Schedule); or

6.8.2 be treated as and deemed to be a Property Agreement to be assigned or novated with the intent that, amongst other things, the obligations of the selling BEG Entity with regard to the assignment or novation of Property Agreements under this paragraph 6 of this Part of this Schedule shall continue to apply to that Property Agreement.

**** indicates information which has been omitted and filed separately with the Commission

- 128 -

7. Property Documents

The Station Purchaser shall enter into such deeds of covenant, agreements, deeds, undertakings or other arrangements in favour of third parties as such third parties may be entitled to require under any of the Property Documents in relation to the transfer of the land comprised in the Site Transfer and/or the assignment of the applicable Property Agreement.

8. Transfer or assignment of leases

8.1 The lease of offices at the administration block at Hinkley Point Power Station which is registered at H.M. Land Registry with Title Number ST127518 shall be transferred to the Station Purchaser at the written request of the Station Purchaser on the later of the Completion Date in relation to Hinkley Point Power Station and the date on which the Station Purchaser confirms in writing to the selling BEG Entity that the Station Purchaser complies with the conditions set out in clauses 3.15 and 3.16 of that lease. Where such a request has been made, after such Completion Date, and pending completion of such transfer, the Station Purchaser shall have the unrestricted use and occupation of these offices and shall perform, on behalf of the selling BEG Entity (but at the Station Purchaser’s sole cost, risk and expense), the obligations of the selling BEG Entity under that lease and shall indemnify the selling BEG Entity and keep the selling BEG Entity fully indemnified against all liabilities, losses, actions, proceedings, costs, demands and expenses brought or made against or incurred by the selling BEG Entity arising from the fact that the conditions set out in clauses 3.15 and 3.16 of the lease have not been complied with.

8.2 The lease of Hill Wood at Sizewell A Power Station which is registered at H.M. Land Registry with Title Number SK160388 shall be transferred to the Station Purchaser at the written request of the Station Purchaser on the later of the Completion Date in relation to Sizewell A Power Station and the date on which the Station Purchaser confirms in writing to the selling BEG Entity that the Station Purchaser complies with the conditions set out in clauses 3.17 and 3.18 of that lease. Where such a request has been made, after the Completion Date, and pending completion of such transfer, the Station Purchaser shall have the unrestricted use and occupation of these offices and shall perform, on behalf of the selling BEG Entity (but at the Station Purchaser’s sole cost, risk and expense), the obligations of the selling BEG Entity under that lease and shall indemnify the selling BEG Entity and keep the selling BEG Entity fully indemnified against all liabilities, losses, actions, proceedings, costs, demands and expenses brought or made against or incurred by the selling BEG Entity arising from the fact that the conditions set out in clauses 3.17 and 3.18 of the lease have not been complied with.

8.3 The lease of part of the seabed at Sizewell B dated 18 August 2000 contains a prohibition against assignment or underletting. At the written request of the Station Purchaser, the Station Purchaser and the selling BEG Entity shall each be responsible (both before and after Completion and at their own expense) for applying for a novation of that lease to the Station Purchaser in accordance with paragraph 6.5 of this Part of this Schedule (as if the lease were a Property Agreement). Where such a request has been

**** indicates information which has been omitted and filed separately with the Commission

- 129 -

made, after the Completion Date in relation to Sizewell and pending the novation of the lease to the Station Purchaser the Station Purchaser shall have the unrestricted use and occupation of that part of seabed (subject to the terms of the lease) and shall perform, on behalf of the selling BEG Entity (but at the Station Purchaser’s sole cost, risk and expense), the obligations of the selling BEG Entity under that lease and shall indemnify the selling BEG Entity and keep the selling BEG Entity fully indemnified against all liabilities, losses, actions, proceedings, costs, demands and expenses brought or made against or incurred by the selling BEG Entity arising from the provisions of the lease or the acts or omissions of the Station Purchaser.

8.4 Any transfer pursuant to paragraphs 8.1 or 8.2 of this Part of this Schedule shall:

8.4.1 be made with full title guarantee subject to and (where appropriate) with the benefit of:

(A) all matters affecting the property comprised in the relevant transfer at the date of the transfer other than those arising by reason of the voluntary act of the selling BEG Entity or its successors in title after the date of this Agreement but including without limitation those referred to in paragraphs 2.1.1 to 2.1.5 of this Part of this Schedule; and

(B) in the case of a transfer pursuant to paragraph 8.1 of this Part of this Schedule, the entries on the registers of Title Number ST127518 (except for any financial charges) and in the case of a transfer pursuant to paragraph 8.2 of this Part of this Schedule, the entries on the registers of Title Number SK160388 (except for any financial charges);

8.4.2 contain a covenant as described in paragraph 2 of Part 2 of this Schedule adapted as necessary in respect of the subject matter of the transfer;

8.4.3 contain the same provisions as are contained in paragraph 8 of Part 2 of this Schedule; and

8.4.4 with the object and intention of affording to the selling BEG Entity a full and sufficient indemnity, but not further or otherwise, contain a covenant by the Station Purchaser to comply after the date of the transfer with all matters subject to which the property comprised in the relevant transfer is transferred and are binding on the selling BEG Entity and are still subsisting and capable of taking effect.

9. Title Restrictions

9.1 Provided that the Station Purchaser complies with its obligations under paragraph 7 of this Part of this Schedule, and that either:

9.1.1 the circumstances referred to in clause 7.2.2 of the Nuclear Site Licensees Nuclear Safety Agreement dated 22 April 1996 (the “Nuclear Site Licensees Nuclear Safety Agreement”) apply; or

**** indicates information which has been omitted and filed separately with the Commission

- 130 -

9.1.2 notwithstanding that the circumstances referred to in clause 7.2.2 of the Nuclear Site Licensees Nuclear Safety Agreement do not apply, Magnox (or the then counterparty to the said agreement) has granted express consent to the transfer of the land comprised in the Site Transfer to the Station Purchaser

the selling BEG Entity shall provide to the Station Purchaser at Completion or as soon thereafter as such conditions are satisfied the following certificates which are required by restrictions entered on the proprietorship registers of the titles to the relevant Station Sites:

Dungeness B Power Station

(a) a certificate that the Station Purchaser has covenanted in accordance with paragraph 4 in the Fourth Schedule to a transfer dated 31 March 1996 referred to in the Charges Register to Title Number K761827;

(b) a certificate that the restrictions on dealings imposed by the Nuclear Site Licensees Nuclear Safety Agreement do not apply or (as appropriate) that Magnox (or the then counterparty to the said agreement) has granted express consent to the transfer of the Station Site to the Site Purchaser; and

(c) a certificate that the restrictions on dealing imposed by a Deed of Covenant dated 2 December 2002 made between (1) The Secretary of State (2) Magnox and (3) BEG do not apply.

Hinkley Point B Power Station

(a) a certificate that the Station Purchaser has covenanted in accordance with paragraph 5 in the Fourth Schedule to a transfer dated 31 March 1996 referred to in the Charges Register to Title Number ST127567;

(b) a certificate that the Station Purchaser has covenanted in accordance with paragraph 4.1 of the Tenth Schedule and/or paragraph 4.2 of the Tenth Schedule to a transfer dated 31 March 1996 referred to in the Charges Register to Title Number ST127567 or that those paragraphs do not apply;

(c) a certificate that the restrictions on dealings imposed by the Nuclear Site Licensees Nuclear Safety Agreement do not apply or (as appropriate) that Magnox (or the then counterparty to the said agreement) has granted express consent to the transfer of the Station Site to the Site Purchaser; and

(d) a certificate that the restrictions on dealing imposed by a Deed of Covenant dated 2 December 2002 made between (1) The Secretary of State (2) Magnox and (3) BEG do not apply.

Sizewell B Power Station

(a) a certificate that the Station Purchaser has covenanted in accordance with paragraph 5 in the Fourth Schedule to a transfer dated 31 March 1996 referred to in the Charges Register to Title Number SK160398;

**** indicates information which has been omitted and filed separately with the Commission

- 131 -

(b) a certificate that the restrictions on dealings imposed by the Nuclear Site Licensees Nuclear Safety Agreement do not apply or (as appropriate) that Magnox (or the then counterparty to the said agreement) has granted express consent to the transfer of the Station Site to the Site Purchaser;

(c) a certificate that the restrictions on dealing imposed in favour of any site licensed under the Nuclear Installations Act 1965 or any legislation amending or replacing that Act do not apply to the transfer of the Station Site to the Site Purchaser; and

(d) a certificate that the restrictions on dealing imposed by the Deed of Covenant dated 2 December 2002 made between (1) The Secretary of State (2) Magnox and (3) BEG do not apply.

9.2 As security for the performance of its obligation to give the certificates referred to in paragraph 9.1 of this Part of this Schedule, the selling BEG Entity irrevocably appoints the Secretary of State (with power to delegate) as its attorney to execute and deliver documents containing one or more such certificates.

10. Apportionments

10.1 All rents, rates and other outgoings in respect of the land comprised in the Site Transfer for the period up to but excluding the Effective Date shall be borne by the selling BEG Entity and for any period from and including the Effective Date shall be borne by the Station Purchaser.

10.2 All rents, licence fees and other income receivable under any Occupational Lease shall in respect of the period up to but excluding the Effective Date belong to the selling BEG Entity and in respect of the period from and including the Effective Date shall belong to the Station Purchaser.

**** indicates information which has been omitted and filed separately with the Commission

- 132 -

Part 2

1. Definitions

1.1 In this Part of this Schedule the following definitions apply in relation to the land comprised in a Site Transfer:

“Access Road” means the access road coloured orange on the relevant Plan;

“Access Ways” means the principal means and emergency means of access to and egress from the land comprised in the relevant Site Transfer existing at the date of this Agreement by road (including the Access Road) and (if applicable) rail or such suitable replacement of, alternative to or variation of such means of access and egress of no less substantial construction and capacity as may be approved by the Secretary of State after the date of this Agreement and before the date of the Site Transfer;

“conduits” means pipes, wires, cables, drains, sewers, culverts and associated apparatus, installations and equipment and other similar items;

“Deed of Covenant” means the draft deed set out in Part 3 of this Schedule;

“Retained Land” means:

(a) for the purpose of paragraph 1.1.1 of Part 1 of this Schedule, the aggregate of the land shown coloured green on the relevant Plan and the land shown coloured blue on the relevant Plan but excluding the land shown coloured pink on the relevant Plan; and

(b) for the purpose of the Site Transfer, the aggregate of the land shown coloured green on the relevant Plan, the land shown coloured blue on the relevant Plan and the Services Corridor but excluding the land the subject of the Site Transfer;

“Selling BEG Entity’s Adjoining Land” means the land shown edged red on the relevant Plan but excluding the land comprised in the Site Transfer; and

“Services Corridor” means the Access Road and to the extent that such land forms part of the Selling BEG Entity’s Adjoining Land the strips of land measuring 5 metres wide on either side of the Access Road.

1.2 Areas are shown coloured on the Plan for the purpose of identification only.

2. Indemnity covenant

With the object and intention of affording to the selling BEG Entity a full and sufficient indemnity, but not further or otherwise, the Station Purchaser will covenant and undertake in the Site Transfer or if the Station Purchaser or selling BEG Entity shall reasonably so require in a separate deed of covenant (or in the case of any Site Transfer relative to one of the Scottish Stations, such agreements or deeds or undertakings or Deed of Conditions as appropriate and as agreed between the selling BEG Entity and the

**** indicates information which has been omitted and filed separately with the Commission

- 133 -

Station Purchaser) to comply with all matters subject to which the land comprised in the relevant Site Transfer is sold, including, without limitation:

2.1.1 the matters referred to in the applicable Property Documents;

2.1.2 the obligations arising under the applicable Leases;

2.1.3 the obligations arising under the applicable Occupational Leases;

2.1.4 the obligations arising under the applicable Property Agreements; and

2.1.5 in the case of the Scottish Stations, in addition, all burdens, obligations, conditions, restrictions, servitudes, wayleaves and rights of way affecting that Scottish Station,

after the date of the Site Transfer insofar as they relate to the land comprised in the relevant Site Transfer and are binding on the selling BEG Entity and are still subsisting and capable of taking effect.

3. Easements, servitudes and rights granted

3.1 The land comprised in the Site Transfer shall be transferred with full title guarantee (or warrandice (excepting therefrom the Occupational Leases, servitudes, wayleaves and rights of way in the case of the Scottish Stations)) together with the following easements, servitudes and rights which are to be granted to the Station Purchaser and the owners and occupiers for the time being of the land comprised in the Site Transfer for the benefit of the land comprised in the Site Transfer and any contiguous land in the ownership or occupation of the Station Purchaser at the date of the Site Transfer (including land occupied pursuant to the right to be granted pursuant to paragraph 3.1.4 of this Part of this Schedule) and are to be exercisable in common with the selling BEG Entity and its successors in title and the persons to whom the selling BEG Entity (or its successors) may (with the consent where requisite of the Secretary of State in relation to the Retained Land) grant or have granted similar rights and other persons who may be entitled to use them:

3.1.1 The right (which, in the case of the Scottish Stations insofar as the selling BEG Entity can competently grant same) is granted to pass and repass with or without vehicles and (if applicable) trains and wagons at all times for the purpose of access and egress over and along the Access Ways existing at the date of the Site Transfer or such suitable alternative or varied Access Ways of no less substantial construction and capacity as may from time to time be substituted in whole or in part for the then existing Access Ways by the selling BEG Entity or its successors in title at its or their cost as may be approved by the Station Purchaser or its successors (acting reasonably where not the Secretary of State) which shall thenceforth be known as the Access Ways;

3.1.2 the right to use all conduits existing at the date of the Site Transfer laid through, under or over the Selling BEG Entity’s Adjoining Land and serving the land comprised in the Site Transfer or laid pursuant to provisions to be included in

**** indicates information which has been omitted and filed separately with the Commission

- 134 -

the Site Transfer by reason of paragraph 3.1.3 of this Part of this Schedule subject to the right of the selling BEG Entity and its successors in title after the date of the Site Transfer at its or their own cost to divert, relay or reposition any such conduits subject to their providing such suitable alternative or varied conduits of no less substantial construction and capacity as may be approved by the Secretary of State where those conduits are laid through, under or over the Retained Land;

3.1.3 subject to paragraph 3.2 of this Part of this Schedule, the right to enter and remain upon the Retained Land with equipment in order to lay further conduits through, under or over the Retained Land;

3.1.4 save insofar as reasonably suitable alternative land in the ownership or control of the Station Purchaser and/or the Secretary of State is available, the right to enter and remain upon and carry out works on so much of the Retained Land as the Station Purchaser may reasonably require from time to time for the purposes of the Decommissioning of the Station and subject to the terms of any agreement or rights then affecting such Retained Land, provided that where any part of the Retained Land is no longer reasonably required by the Station Purchaser for the purposes of this paragraph 3.1.4, the Station Purchaser shall give notice in writing to the selling BEG Entity to that effect and from the date of that notice the provisions of this paragraph 3.1.4 shall cease to apply to that part of the Retained Land;

3.1.5 subject to the provisions of the Occupational Leases, the right to enter and remain upon the Selling BEG Entity’s Adjoining Land with equipment in order to inspect, test, maintain, cleanse and repair (including where necessary renewal and replacement):

(A) the Access Ways;

(B) the conduits situated within the Selling BEG Entity’s Adjoining Land referred to in paragraph 3.1.2 of this Part of this Schedule;

(C) to the extent reasonably required, the Station Site security fence; and

(D) to the extent reasonably required, the buildings and structures on the land comprised in the Site Transfer; and

3.1.6 the right of support from the Selling BEG Entity’s Adjoining Land for the land comprised in the Site Transfer.

3.2 Where the Station Purchaser wishes to lay further conduits through, under or over the Retained Land (but not wholly through, under or over the Services Corridor), the selling BEG Entity may, subject to the Station Purchaser being reasonably satisfied:

3.2.1 that laying such further conduits wholly through, under or over the Services Corridor would not affect the costs or efficiency of Operating or Decommissioning the Station Site; and

**** indicates information which has been omitted and filed separately with the Commission

- 135 -

3.2.2 that the Station Purchaser has received a satisfactory undertaking from the selling BEG Entity to indemnify the Station Purchaser against any costs arising as a result of specifying, designing and installing such further conduits wholly through, under or over the Service Corridor which would not have arisen had the further conduits been laid in the location within the Retained Land originally selected by the Station Purchaser,

require that such further conduits are laid wholly through, under or over the Services Corridor.

4. Exceptions and reservations

The Site Transfer shall except and reserve the following exceptions and reservations in favour of the selling BEG Entity and the owners and occupiers for the time being of the Selling BEG Entity’s Adjoining Land which exceptions and reservations shall, in the case of a Site Transfer relative to any of the Scottish Stations, be created heritable and irredeemable servitude rights or wayleaves as appropriate:

4.1.1 the right (in common with others, where applicable) to use all conduits existing at the date of the Site Transfer laid through, under or over the land comprised in the Site Transfer and serving the Selling BEG Entity’s Adjoining Land subject to the right of the Station Purchaser and its successors in title after the date of the Site Transfer at its or their own cost to divert, relay or reposition any such conduits and the provisions of the relevant paragraph in the Site Transfer shall apply to such conduits in such new positions;

4.1.2 the right to lay further conduits under or through the land comprised in the Site Transfer and make such connections and install apparatus for such purpose as are reasonably necessary to enable the selling BEG Entity and its successors in title to establish a connection to the National Grid or the Scottish System;

4.1.3 to enter and remain upon the land comprised in the Site Transfer with equipment in order to inspect, test, maintain, cleanse and repair (including where necessary renewal and replacement):

(A) the conduits situated within the land comprised in the Site Transfer referred to in paragraphs 4.1.1 and 4.1.2 of this Part of this Schedule; and

(B) such connections and/or apparatus within the land comprised in the Site Transfer as relate to the selling BEG Entity’s connection to the National Grid; and

4.1.4 the right of support from the land comprised in the Site Transfer for the Selling BEG Entity’s Adjoining Land.

4.1.5 (where the land comprised within the Site Transfer includes the whole or part of the Access Road) the right to pass and repass with or without vehicles at all times for the purpose of access and egress over and along the Access Road (or such part) existing at the date of the Site Transfer or such suitable alternative

**** indicates information which has been omitted and filed separately with the Commission

- 136 -

Access Road (or such part) of no less substantial construction and capacity as may from time to time be substituted in whole or in part for the then existing Access Road (or such part) by the Station Purchaser or its successors in title at its or their cost as may be approved by the selling BEG Entity or its successors (acting reasonably).

5. Selling BEG Entity’s Covenants and obligations

5.1 In the Site Transfer, the selling BEG Entity shall covenant with or undertake to the Station Purchaser that the selling BEG Entity and its successors in title shall observe and perform the following covenants and obligations to the intent that such covenants are taken for the benefit and protection of each and every part of the land comprised in the Site Transfer and any other contiguous land in the ownership or occupation of the Station Purchaser at the date of the Site Transfer or used pursuant to the right granted in paragraph 3.1.4 of this Part of this Schedule insofar as such parts are capable of benefiting from them and so as to bind the applicable parts of the Selling BEG Entity’s Adjoining Land and each and every part of them whoever may own them from time to time:

5.1.1 subject to the Station Purchaser paying a fair proportion of the cost incurred in so doing, to maintain, repair and renew as and when necessary the Access Ways so far as they are within the Selling BEG Entity’s Adjoining Land or the selling BEG Entity otherwise has the right to do so or to procure the same;

5.1.2 subject to the Station Purchaser paying a fair proportion of the cost incurred in so doing, to maintain, repair and renew as and when necessary the conduits on the selling BEG Entity’s Adjoining Land serving the land comprised in the Site Transfer or such other contiguous land at the date of the Site Transfer or the land used pursuant to the right granted by paragraph 3.1.4 of this Part of this Schedule in common with the Selling BEG Entity’s Adjoining Land;

5.1.3 by way of indemnity only to maintain and keep the conduits on the land comprised in the Site Transfer which exclusively serve the Selling BEG Entity’s Adjoining Land in good repair and condition;

5.1.4 except in relation to Retained Land situated in Scotland, not to make a disposal of the Retained Land or any part of it to a third party other than by way of a grazing licence for less than one year not conferring security of tenure without first delivering to the Secretary of State a deed in the form of the Deed of Covenant duly executed by the third party. For the avoidance of doubt, disposal of any Retained Land in Scotland or any part of it to a third party by way of a grazing licence for less than one year not conferring security of tenure shall be permitted;

5.1.5 not to carry out any development (as defined in section 55 of the Town and Country Planning Act 1990 and section 26 of the Town and Country Planning (Scotland) Act 1997) on the Retained Land after the date of the Site Transfer which might reasonably be expected to interfere with the prompt and efficient carrying out and completion of the Decommissioning of the Station without the consent of the Secretary of State;

**** indicates information which has been omitted and filed separately with the Commission

- 137 -

5.1.6 except in relation to the Scottish Stations, to supply without delay when so requested the certificates required in order to enable registration at H.M. Land Registry to occur where the conditions covered by the restrictions have been satisfied;

5.1.7 when considering or planning any matter which may involve the entry onto the land comprised in the Site Transfer pursuant to the rights to be included in the Site Transfer by reason of paragraphs 4.1.1, 4.1.2 or 4.1.3 of this Part of this Schedule or otherwise affect the land comprised in the Site Transfer and save in case of emergency, to consult in detail with the Station Purchaser or its successors at an early stage about the proposals and their possible effect on:

(A) the present or future use of the land comprised in the Site Transfer;

(B) its current occupiers and their rights;

(C) the value of the land comprised in the Site Transfer;

(D) the Decommissioning of the Station

and to take the Station Purchaser’s representations into account;

5.1.8 in exercising any rights of entry or carrying out works on the land comprised in the Site Transfer, to give advance notice of such intended entry or works which is reasonable in the circumstances (except in case of emergency when such notice as is possible shall be given) and to comply with all proper security and safety arrangements notified in writing from time to time by the Station Purchaser to the selling BEG Entity or its successors and to comply at all times with any requirements of the Station Purchaser’s nuclear site licence granted in respect of the whole or part of the land comprised in the Site Transfer under the Nuclear Installations Act 1965 and notified in writing from time to time by the Station Purchaser to the selling BEG Entity or its successors and forthwith to remedy any physical damage caused to the land comprised in the Site Transfer in the exercise of such rights; and

5.1.9 to join with the Station Purchaser in marking the boundary of the land comprised in the Site Transfer and of any land used pursuant to paragraph 3.1.4 of this Part of this Schedule.

6. Station Purchaser’s Covenants and obligations

6.1 In the Site Transfer, the Station Purchaser shall covenant with or undertake to the selling BEG Entity that the Station Purchaser and its successors in title shall observe and perform the following covenants and obligations to the intent that such covenants and obligations are taken for the benefit and protection of each and every part of the Selling BEG Entity’s Adjoining Land insofar as such parts are capable of benefiting from them

**** indicates information which has been omitted and filed separately with the Commission

- 138 -

and so as to bind the land comprised in the Site Transfer and each and every part of it whoever may own it from time to time:

6.1.1 to pay a fair proportion of the cost incurred in maintaining, repairing and renewing as and when necessary the Access Ways so far as they are within the Selling BEG Entity’s Adjoining Land or the selling BEG Entity is obliged to do so;

6.1.2 subject to the selling BEG Entity paying a fair proportion of the cost incurred in so doing, to maintain, repair and renew as and when necessary the conduits on the land comprised in the Site Transfer serving the Selling BEG Entity’s Adjoining Land at the date of the Site Transfer in common with the land comprised in the Site Transfer;

6.1.3 by way of indemnity only to maintain and keep the conduits on the Selling BEG Entity’s Adjoining Land which exclusively serve the land comprised in the Site Transfer in good repair and condition;

6.1.4 except in relation to the Scottish Stations, not to dispose of the land comprised in the Site Transfer or any part of it to a third party other than by way of a grazing licence for less than one year not conferring security of tenure without first delivering to the selling BEG Entity or its successors in title a deed in the form of the Deed of Covenant duly executed by the third party;

6.1.5 except in relation to the Scottish Stations, to supply without delay when so required the certificates required in order to enable registration at H.M. Land Registry to occur where the conditions covered by the restrictions shall have been satisfied;

6.1.6 when considering or planning any matter which may involve the entry onto the Selling BEG Entity’s Adjoining Land pursuant to the rights to be included in the Site Transfer by reason of paragraph 3.1.5 of this Part of this Schedule or otherwise affect the Selling BEG Entity’s Adjoining Land and save in case of emergency, to consult in detail with the selling BEG Entity or its successors at an early stage about the proposals and their possible effect on:

(A) the present or future use of the Selling BEG Entity’s Adjoining Land;

(B) its current occupiers and their rights;

(C) the value of the Selling BEG Entity’s Adjoining Land so far as reasonably possible;

and where the Station Purchaser is not the Secretary of State to take the selling BEG Entity’s representations into account;

6.1.7 in exercising any rights of entry or carrying out works on the Selling BEG Entity’s Adjoining Land to give advance notice of such intended entry or works which is reasonable in the circumstances (except in case of emergency when

**** indicates information which has been omitted and filed separately with the Commission

- 139 -

such notice as is possible shall be given) and to comply with all proper security and safety arrangements notified in writing from time to time by the selling BEG Entity or its successor to the Station Purchaser and forthwith to remedy any physical damage caused to the Retained Land in the exercise of such rights;

6.1.8 to join with the selling BEG Entity at the Station Purchaser’s cost in marking the boundary of the land comprised in the Site Transfer and of any land used pursuant to paragraph 3.1.4 of this Part of this Schedule;

6.1.9 at such time as the land used pursuant to paragraph 3.1.4 of this Part of this Schedule is no longer required for the purposes of the Decommissioning of the Station, to remove all structures erected by the Station Purchaser on such land and any concrete so laid in such land for or during such use; and

6.1.10 in the case of a Site Transfer relative to a Scottish Station, the foregoing covenants, undertakings and obligations by the Station Purchaser shall be created real burdens and obligations upon and affecting the land comprised in the Site Transfer and each and every part of it whoever may own it from time to time for the benefit and protection of the Selling BEG Entity’s Adjoining Land and each and every part thereof and the owners thereof from time to time.

7. No Implied Rights

The Site Transfer shall include a declaration to the effect that except in relation to the rights expressly granted and such rights, easements, servitudes, wayleaves and privileges as are required for the Operating of the Station Site, all rights, easements, servitudes, wayleaves and privileges of whatever nature which would otherwise be granted in favour of the land comprised in the Site Transfer over the Selling BEG Entity’s Adjoining Land whether under the rule in Wheeldon v Burrows (1879) or section 62 of the Law of Property Act 1925 or otherwise or implied of necessity shall be excluded.

8. Modification of implied covenants/exclusions from warrandice

8.1 In all cases where the selling BEG Entity transfers or assigns with full title guarantee:

8.1.1 for the purpose of section 6(2)(a) of the Law of Property (Miscellaneous Provisions) Act 1994:

(A) matters recorded in registers open to public inspection (including without limitation the registers at H. M. Land Registry);

(B) all matters evident or ascertainable from the documents of title; and

(C) all such matters as are referred to in Schedule 15 of the Option Agreement dated the     day of January, 2005 and made between (1) The Secretary of State for Trade and Industry (2) British Energy Generation (UK) Limited (3) British Energy Generation Limited (4) British Energy Group plc and (5) British Energy Holdings plc;

are deemed to be within the actual knowledge of the Transferee notwithstanding the provisions of section 6(3) of that Act;

**** indicates information which has been omitted and filed separately with the Commission

- 140 -

8.1.2 the covenant set out in section 4(1) of the Law of Property (Miscellaneous Provisions) Act 1994 shall not extend to any breach of the terms of a lease concerning the state, repair, decoration and condition of the property;

8.1.3 in the case of any transfer which relates to a lease, the parties shall in the transfer apply to the Chief Land Registrar to make an appropriate entry on the register of title;

8.1.4 in the case of the Scottish Stations, the Station Purchaser shall be deemed to be purchasing with full knowledge of all matters evident or contained in the recorded or registered title deeds relating to that Scottish Station or which could have been disclosed by examination of the title deeds of the Scottish Stations, all matters disclosed in the Property or Personal Register, the Register of Charges and company file of the selling BEG Entity, and in the General Register of Sasines or in the Land Register of Scotland relative to that Scottish Station and all burdens, obligations, conditions, restrictions, servitudes, wayleaves and other affecting that Scottish Station or referred to or contained in the documents listed in Parts A or B of Schedule 24 as appropriate; and

8.1.5 in the case of the Scottish Stations, there shall be excluded from warrandice all Occupational Leases, servitudes, wayleaves and rights of way.

9. H.M. Land Registry/Land Register Of Scotland

9.1 the Site Transfer, the selling BEG Entity and the Station Purchaser shall covenant to apply (or to consent to the other’s application) to the Chief Land Registrar to:

9.1.1 note on the register of the selling BEG Entity’s title to the Selling BEG Entity’s Adjoining Land and the Station Purchaser’s title to the land comprised in the Site Transfer the relevant easements, covenants and other matters contained in the Site Transfer. In the case of the Selling BEG Entity’s Adjoining Land situated in Scotland and any land comprised in the Site Transfer relative to a Scottish Station, the parties shall enter into and deliver and record in the General Register of Sasines or register in the Land Register, as appropriate, such deeds and documents as to effect the intent of this clause;

9.1.2 enter on the selling BEG Entity’s title to the Retained Land (excepting any Retained Land in Scotland) a restriction in the following form (or as may be agreed between the Station Purchaser and the Chief Land Registrar to the same effect):-

“Except under an order of the registrar, no transfer by the registered proprietor of the Retained Land or any part thereof is to be registered unless a certificate is supplied by the proprietor for the time being of the land comprised in Title Number [    ] [the land comprised in the Site Transfer] confirming compliance with clause [clause corresponding with

**** indicates information which has been omitted and filed separately with the Commission

- 141 -

paragraph 5.1.41] of the transfer of the land comprised in Title Number [    ] [the land comprised in the Site Transfer] dated [    ] and made between (1) [the selling BEG Entity] and (2) [the Station Purchaser]”; and

9.1.3 enter on the Station Purchaser’s title to the land comprised in Title Number [    ] [the land comprised in the Site Transfer] a restriction in the following form (or as may be agreed between the selling BEG Entity and the Chief Land Registrar to the same effect):

“Except under an order of the registrar, no disposition by the registered proprietor of the land comprised in the Site Transfer or any part thereof is to be registered unless a certificate is supplied by the proprietor of the time being of land comprised in Title Number [    ] [the Retained Land] confirming compliance with clause [clause corresponding with paragraph 6.1.4] of the transfer of the land comprised in Title Number [    ] [the land comprised in the Site Transfer] dated [    ] and made between (1) [the selling BEG Entity] and (2) [the Station Purchaser]”.

9.2 In relation to any Site Transfer in respect of the Scottish Stations the Station Purchaser undertakes to the selling BEG Entity to record in the Register of Sasines or register in the Land Register of Scotland as appropriate the relevant Site Transfer within 10 Business Days after Completion. At Completion the Station Purchaser undertakes to the Seller to procure that the Station Purchaser’s solicitors shall deliver to the selling BEG Entity’s solicitors a letter of obligation in terms to be agreed between the parties relative to such undertaking.

10. Registration of this Agreement

Except in relation to the Scottish Stations the parties shall apply to the Chief Land Registrar to register a notice or (if the application is made after the Land Registration Act 2002 comes into force a unilateral notice as referred to in that Act) of this Agreement against the title to each of the Station Sites, and the titles to the leases referred to in paragraphs 8.1 and 8.2 of Part 1 of this Schedule.

**** indicates information which has been omitted and filed separately with the Commission

- 142 -

Part 3: Deed of Covenant

THIS DEED made the      day of                      20

BETWEEN:-

(1) THE TRANSFEREE: [                    ] (whose registered office is at [                            ])

AND

(2) THE STATION SITE OWNER/[RETAINED LAND OWNER]: [                    ] (whose registered office is at [                            ])

SUPPLEMENTAL TO a transfer (“the Transfer”) dated [                    ] made between [the selling BEG Entity] [(“the Retained Land Owner”)] (1) and [the Station Purchaser] [(“the Station Site Owner”)] (2) and expressions defined in the Transfer have the same meanings in this Deed.

WITNESSES that the Transferee, being the transferee of the land comprised in title number [            ] covenants for itself and its successors in title with the [Station Site Owner]/[Retained Land Owner] and its successors in title to observe and perform the covenants on the part of [the selling BEG Entity] [Station Purchaser] contained in the Transfer

IN WITNESS whereof

**** indicates information which has been omitted and filed separately with the Commission

- 143 -

Schedule 16

Dungeness B

Part A : Property

Dungeness B Power Station, Lydd, Kent TN29 9PXP as shown edged blue on the plan annexed to this Schedule marked “Plan 1 - Dungeness B” being part of the land comprised in title number K761827

Part B : Selling BEG Entity

BEG

Part C : Encumbrances

1. The documents contained in or referred to in the entries on the Property and Charges Registers of title number K761827 at the date of this Agreement save for any charges to secure money.

2. Licence dated 1 August 1972 and made between (1) CEGB (2) The Folkestone and District Water Company.

Part D : Property Agreements

Date	Document	Parties
12.12.1968	Deed of Grant of easement for cooling water tunnels and gabion mattress	(1)    The Crown Estate Commissioners (2)    CEGB
16.06.1978	Licence concerning emergency water supply	(1)    J Chalken and Others
		(2)    CEGB
	(together with letter dated 25th March 1996 from Hall Aggregates (South East) Limited (as successors to J Chalken and others) to AGR & PWR Co Limited (now BEG) confirming their consent to the assignment of the licence from Nuclear Electric Limited to AGR and PWR Co Limited)
17.05.1967	Deed of Grant for Radio Mast	(1)    RHV Moorhead & Others (2)    CEGB
13.02.1969	CW Intake & Outfall	(1)    Lydd Corporation (2)    CEGB
25.11.1982	Licence for setting up and use of two environmental monitors and four tacky shades on Dungeness Estate	(1)    Trustees of the Dungeness Estate (2)    CEGB

**** indicates information which has been omitted and filed separately with the Commission

- 144 -

Undated	Letter of undertaking for costs at Denge Water Treatment	(1)    AGR & PWR Company Limited
		(2)    Nuclear Electric plc
31.03.1996	Deed of Grant rights for emergency escape	(1)    Nuclear Electric plc
		(2)    AGR & PWR Company Limited
25.04.1996	Licence to extract shingle	(1)    Shepway District Council
		(2)    Nuclear Electric plc
25.04.1996	Licence to extract shingle	(1)    Trustees of the Dungeness Estate
		(2)    Nuclear Electric plc

Part E : Property Documents

Date	Document	Parties
31.03.1990	Interface Agreement	(1)    The National Grid Co plc
		(2)    Nuclear Electric plc
13.02.1995	Interface Agreement	(1)    Dungeness A & B Power Stations
		(2)    Property Services
31.03.1996	Transfer	(1)    Nuclear Electric plc
		(2)    AGR & PWR Company Limited
22.04.1996	Nuclear Site Licensees Nuclear Safety Agreement	(1)    Magnox Electric plc
		(2)    Nuclear Electric plc

Part F: Leases

Not applicable.

**** indicates information which has been omitted and filed separately with the Commission

- 145 -

Part G: Occupational Leases

Date	Document	Parties
31.05.1990	Lease for a term of 999 years.	National Grid
31.03.1996	Licence to share use of Helicopter Pad	(1)    AGR & PWR Company Limited
		(2)    Nuclear Electric plc
31.03.1996	Lease of Visitors’ Centre	(1)    AGR & PWR Company Limited
		(2)    Nuclear Electric plc
31.03.1996	Licence to use car parking spaces	(1)    AGR & PWR Company Limited
		(2)    Nuclear Electric plc

**** indicates information which has been omitted and filed separately with the Commission

- 146 -

[Plan of Dungeness B Power Station Redacted] ****

**** indicates material omitted and filed separately with the Commission

- 147 -

Schedule 17

Hartlepool

Part A : Property

1. Hartlepool Nuclear Power Station, Tees Road as shown edged blue on the plan annexed to this Schedule marked “Plan 2 - Hartlepool” being part of the land comprised in title number CE136369.

2. The mines and minerals comprised within a Conveyance dated 13 February 1975 and made between (1) Leathers Chemical Co Ltd and (2) CEGB.

3. The mines and minerals comprised within a Conveyance dated 5 April 1962 and made between (1) The Tees Conservancy Commissioners and (2) CEGB.

Part B : Selling BEG Entity

BEG

Part C : Encumbrances

1. The documents contained in or referred to in the entries on the Property and Charges Registers of Title No. CE136369 save for any charges to secure money.

2. Conveyance of mines and minerals dated 13 February 1975 and made between (1) Leathers Chemical Co Ltd and (2) CEGB

Part D : Property Agreements

Date	Document	Parties
01.04.1970	Wayleave for CW Tunnel	(1)    Hartlepool County Borough
		(2)    CEGB
21.10.1970	Deed of Grant for the CW Tunnel	(1)    Tees & Hartlepool Port Authority
		(2)    CEGB
11.06.1973	Deed of Grant two tunnels (CW)	(1)    Crown Estates Commissioners
		(2)    CEGB
11.06.1973	Deed of Grant two Outfalls and one Intake	(1)    Crown Estates Commissioners
		(2)    CEGB

**** indicates information which has been omitted and filed separately with the Commission

- 148 -

27.08.1974	Deed of Grant CW Tunnel	(1)    The Trustees of Seaton Carew Golf Club
		(2)    CEGB
12.10.1976	Deed of Covenant Mines and Minerals	(1)    The Crown Estate Commissioners
		(2)    CEGB

**** indicates information which has been omitted and filed separately with the Commission

- 149 -

Part E : Property Documents

Date	Document	Parties
31.03.1996	Transfer	(1)    Nuclear Electric plc
		(2)    AGR & PWR Company Ltd
31.03.1990	Option over land fronting Tees Road and Option Notice	(1)    Nuclear Electric plc
		(2)    National power plc
31.03.1996	Interface Agreement	(1)    The National Grid Company plc
		(2)    Nuclear Electric plc
29.03.1996	Deed of Covenant Mines and Minerals	(1)    Tees & Hartlepool Port Authority Ltd
		(2)    AGR & PWR Company Ltd

Part F : Leases

Not applicable.

Part G : Occupational Leases

Date	Document	Parties
30.03.1990	Lease of Hartlepool Seaton Road Sub-Station	(1)    CEGB
		(2)    The North Eastern Electricity Board
31.03.1990	Lease of National Grid Sub-Station	(1)    Nuclear Electric plc
		(2)    The National Grid Company plc

**** indicates information which has been omitted and filed separately with the Commission

- 150 -

[Plan of Hartlepool Power Station Redacted] ****

**** indicates material omitted and filed separately with the Commission

- 151 -

Schedule 18

Heysham

Part A : Property

Heysham Nuclear Power Station, Heysham as shown edged blue on the plan annexed to this Schedule marked “Plan 3 - Heysham” being part of the land comprised in title number LA779195.

Part B : Selling BEG Entity

BEG

Part C : Encumbrances

1. The documents contained in or referred to in the entries on the Property and Charges Registers of title number LA779195 save for any charges to secure money.

2. Grant of Easement dated 15 September 1983 and made between (1) CEGB and (2) British Gas Corporation.

Part D : Property Agreements

Date	Document	Parties
20.05.1970	Agreement	(1)    British Railway Board
		(2)    CEGB
13.03.2001	Deed of Easement	(1)    Heysham Port Limited
		(2)    British Energy Generation Limited
21.02.1983	Licence - Permission for Dose Meter	(1)    British Railways Board
		(2)    CEGB
10.11.1983	Licence - 5 Dosemeters and 1 Tackishade Collector	(1)    Sealink UK Limited
		(2)    CEGB
15.03.1982	Cooling water outfall	(1)    Crown Estate Commissioners
		(2)    CEGB
26.10.1981	Easement Cooling Water Outfall	(1)    The Lord of the Manor of Heysham
		(2)    CEGB

**** indicates information which has been omitted and filed separately with the Commission

- 152 -

15.03.1982	Cooling water outfall	(1)    Crown Estate Commissioners
		(2)    CEGB
10.06.1982	Easement for 132kV cables	(1)    Heysham Golf Club
		(2)    CEGB
10.01.1980	Surface Water Outfall at Red Nab	(1)    The Lord of the Manor of Heysham
		(2)    CEGB
25.11.1988	100mm Water Main at Moneyclose	(1)    CEGB
		(2)    North West Water Authority
28.04.1981	Emergency Access Route	(1)    ICI Limited
		(2)    Trimpell Limited
		(3)    Shell UK Limited
		(4)    CEGB
23.03.1972	Deed relating to Overhead Lines and Towers	(1)    Trimpell Limited
		(2)    Heysham Golf Club Ltd
		(3)    CEGB
12.05.1981	Deed of Variation Lines & Towers	(1)    Trimpell Limited
		(2)    Heysham Golf Club Ltd
		(3)    CEGB
16.02.1981	Owner’s Consent YYG/1/3/1	(1)    ICI Ltd
		(2)    CEGB
10.02.1981	Occupier’s Consent YYG/1/3/1	(1)    Heysham Golf Club Ltd
		(2)    CEGB
16.02.1981	Owner’s Consent YYH/1/3/1	(1)    ICI Ltd
		(2)    CEGB

**** indicates information which has been omitted and filed separately with the Commission

- 153 -

10.02.1981	Occupier’s Consent YYG/1/3/1	(1)    Heysham Golf Club Ltd
		(2)    CEGB
06.07.1972	Line Oversailing Railway YYG/1/4	(1)    British Railways Board
		(2)    CEGB
31.03.1996	Assignment (Rights in uncompleted Deed of Exchange)	(1)    Nuclear Electric plc
		(2)    AGR & PWR Company Limited

Part E : Property Documents

Date	Document	Parties
13.03.2001	Deed of Easement	(1)    Heysham Port Limited
		(2)    British Energy Generation Limited
31.03.1996	Transfer	(1)    Nuclear Electric plc
		(2)    AGR & PWR Co Ltd
30.03.1990	Interface Agreement	(1)    CEGB
		(2)    The North Western Electricity Board
31.03.1996	Deed of Novation - Interface Agreement 31.03.1990	(1)    Nuclear Electric plc
		(2)    The North Western Electricity Board
		(3)    AGR & PWR Co Limited
31.03.1990	Interface Agreement - Heysham 1	(1)    The National Grid Company plc
		(2)    Nuclear Electric plc
31.03.1990	Interface Agreement - Heysham 2	(1)    The National Grid Company plc
		(2)    Nuclear Electric plc

**** indicates information which has been omitted and filed separately with the Commission

- 154 -

31.03.1996	Deed of Novation - Interface Agreement 31.03.1990	(1)    Nuclear Electric plc
		(2)    The National Grid Company plc
		(3)    AGR & PWR Co Limited

Part F : Leases

Not applicable.

Part G : Occupational Leases

Date	Document	Parties
21.03.1988	Lease of Substation at Heysham 1	(4)    CEGB
		(5)    North Western Electricity Board
29.08.2003	Lease of Education Block	(6)    BEG
		(7)    The Lancashire Wildlife Trust Limited

**** indicates information which has been omitted and filed separately with the Commission

- 155 -

[Plan of Heysham Power Station Redacted] ****

**** indicates material omitted and filed separately with the Commission

- 156 -

BLANK PAGE

**** indicates information which has been omitted and filed separately with the Commission

- 157 -

Schedule 19

Hinkley Point B

Part A : Property

Hinkley Point B Power Station, Hinkley Point, Stogursey as shown edged blue on the plan annexed to this Schedule marked “Plan 4 - Hinkley Point” (but excluding the land hatched in black on that plan) being part of the land comprised in title number ST127567.

Part B : Selling BEG Entity

BEG

Part C : Encumbrances

1. The documents contained in or referred to in the entries on the Property and Charges Registers of title number ST127567 save for any charges to secure money.

2. Agreement relating to cable and duct dated 21 December 1999 and made between (1) BEG and (2) British Telecommunications plc.

Part D : Property Agreements

Date	Document	Parties
24.01.1964	Deed of Grant Cooling Water Intake	(1)    Crown Estate Commissioners (2)    CEGB
06.10.1969	Deed of Grant CW Intake	(1)    Crown Estate Commissioners (2)    CEGB
20.10.1975	Licence Sewage Pipeline Across Foreshore	(1)    Wessex Water (2)    CEGB
25.01.1989	Licence Tacky Shade Collector No. 1	(1)    Fairfield Estate (2)    CEGB
20.01.1989	Licence Tacky Shade Collector No. 6 (Owner’s Consent)	(1)    Somerset County Council (2)    CEGB
15.08.1988	Licence Tacky Shade Collector No. 6 (Occupier’s Consent)	(1)    D Hobbs (2)    CEGB
08.02.1989	Licence Tacky Shade Collector No. 5	(1)    R Johnson (2)    CEGB

**** indicates information which has been omitted and filed separately with the Commission

- 158 -

Date	Document	Parties
15.08.1988	Licence Tacky Shade Collector No. CT1	(1)    C F Knox (2)    CEGB
15.08.1988	Licence Tacky Shade Collectors No. CT2 and CT3	(1)    G H Cole (2)    CEGB
15.08.1988	Licence Tacky Shade Collector CT4	(1)    HR Shepherd (2)    CEGB
15.08.1988	Licence Tacky Shade Collector CT7	(1)    R J Rood (2)    CEGB
15.08.1988	Licence Tacky Shade Collector CT8	(1)    Ellicott Brothers (2)    CEGB
15.04.1988	Licence Tacky Shade Collector CT9	(1)    CE Covett (2)    CEGB
06.10.1986	Licence Tacky Shade Collector at Totney Farm, Blackford, Wedmore	(1)    J Comer (2)    CEGB
16.07.1982	Permission to attach TLD monitoring devices to SWEB Poles	(1)    SWEB (2)    CEGB
30.09.1982	Permission to attach TLD monitoring devices to BT Poles	(1)    BT (2)    CEGB
02.11.1983	Licence for 15 TLD Sites	(1)    Avon & Somerset Police Authority (2)    CEGB

Part E : Property Documents

Date	Document	Parties
31.03.1996	Transfer	(1)    Nuclear Electric plc (2)    AGR & PWR Co Ltd
09.09.1996	Supplemental Transfer	(1)    Magnox Electric (2)    Nuclear Electric
31.03.1996	Interface Agreement	(1)    National Grid Co plc (2)    AGR & PWR Co Ltd
22.04.1996	Nuclear Site Licensees Nuclear Safety Agreement	(1)    Magnox Electric (2)    Nuclear Electric

**** indicates information which has been omitted and filed separately with the Commission

- 159 -

Part F : Leases

Date	Document	Parties
31.03.1996	Licence to use car parking spaces at Hinkley Point A	(1)    Nuclear Electric plc (2)    AGR & PWR Co Ltd

Part G : Occupational Leases

Date	Document	Parties
31.03.1996	Lease of Ferrous-Sulphate Dosing Plant	(1)    AGR & PWR Co Ltd (2)    Nuclear Electric plc
31.03.1996	Licence to use Car Parking Spaces at Hinkley Point B	(1)    AGR & PWR Co Ltd (2)    Nuclear Electric plc
31.03.1996	Licence to share use of Helicopter Landing Site at Hinkley Point	(1)    AGR & PWR Co Ltd (2)    Nuclear Electric plc
11.01.2002	Lease of Visitor’s Centre and Lecture Room and side letter dated 11 January 2002	(1)    British Energy Generation Ltd (2)    Magnox Electric plc
28.06.2004	Licence - Grazing Land at Hinkley Point B	(1)    British Energy Generation Ltd (2)    C F Knox
31.03.1990	Substation Lease with supplemental deed of covenant dated 31.03.1996 between (1) National Grid Co plc (2) AGR & PWR Co Ltd (3) Nuclear Electric plc	(1)    AGR & PWR Co Ltd (2)    National Grid
31.03.1996	Lease of part of first and third floors, administration block

**** indicates information which has been omitted and filed separately with the Commission

- 160 -

[Plan of Hinkley B Power Station Redacted] ****

**** indicates material omitted and filled separately with the Commission

- 161 -

Schedule 20

Sizewell B

Part A : Property

Sizewell B Power Station, Suffolk as shown edged blue on the plan annexed to this Schedule marked “Plan 5 - Sizewell B” being the land comprised in title number SK160398.

Part B : Selling BEG Entity

BEG

Part C : Encumbrances

1. The documents contained in or referred to in the entries on the Property and Charges Registers of title number SK160398 save for any charges to secure money.

2. Agreement dated 29 April 1996 and made between (1) CEGB and (2) Suffolk Coastal District Council relating to rights of access to the foreshore.

3. Agreement dated 20.05.1964 Septic Tank - Vulcan Arms (1) CEGB and (2) Thorpeness Limited

Part D : Property Agreements

Date	Document	Parties
19.07.1977	Deed of Grant	(1)    Crown Estate Commissioners (2)    CEGB
28.02.1990	Deed of Grant	(1)    Crown Estate Commissioners (2)    CEGB
04.09.1991	Deed	(1)    Crown Estate Commissioners (2)    Nuclear Electric Pic
22.04.1998	Consent for Sluice	(1)    Environment Agency (2)    Nuclear Electric Ltd

**** indicates information which has been omitted and filed separately with the Commission

- 162 -

Part E : Property Documents

Date	Document	Parties
31.03.1996	Transfer	(1)    Nuclear Electric plc (2)    AGR & PWR Co Ltd
29.03.1996	Deed of Covenant	(1)    AGR & PWR Co Ltd (2)    Nuclear Electric plc (3)    The National Grid Company plc
31.03.1996	Coastal Management Agreement	(1)    Nuclear Electric plc (2)    AGR & PWR Co Ltd
22.04.1996	Nuclear Site Licensees Nuclear Safety Agreement	(1)    Magnox Electric plc (2)    Nuclear Electric plc

Part F : Leases

Not applicable

Part G : Occupational Leases

Date	Document	Parties
31.03.1996	Lease of Electricity Sub-Station	(1) AGR & PWR Co Ltd (2) Nuclear Electric plc
31.03.1996	Lease of Reservoir	(1) AGR & PWR Co Ltd (2) Nuclear Electric plc
31.03.1996	Licence to share Helicopter Landing Site	(1) AGR & PWR Co Ltd (2) Nuclear Electric plc
31.03.1990	Substation Lease

**** indicates information which has been omitted and filed separately with the Commission

- 163 -

[Plan of Sizewell B Power Station Redacted]****

**** indicates material omitted and filed separately with the Commission

- 164 -

Schedule 21

Hunterston B

Part A : Property

Hunterston B Power Station, West Kilbride, Ayrshire, as shown edged blue on the plan annexed to this Agreement marked “Plan 6 - Hunterston B” being part of the land comprised in the subjects described in Notice of Title by Scottish Nuclear Limited recorded in the Division of the General Register of Sasines applicable to the County of Ayr on 14 October 1991.

Part B : Seller

BEG(UK)

Part C : Encumbrances

1. All burdens, conditions, obligations, restrictions, wayleaves, servitudes and others including those contained or referred to in the documents listed in Part A of Schedule 24.

2. Minute of Agreement between Scottish Power plc and Scottish Nuclear Limited dated 13 and 29 May and recorded in the Division of the General Register of Sasines applicable to the County of Ayr on 4 November 1991.

3. Deed of Conditions by Scottish Nuclear Limited dated 27th March and recorded in the Division of the General Register of Sasines applicable to the County of Ayr on 3rd April 1996.

4. The documents contained in or referred to in Notice of Title in favour of Scottish Nuclear Limited recorded in the Division of the General Register of Sasines applicable to the County of Ayr on 14 October 1991.

5. Any public rights of way and a cycle way.

6. Disposition by Scottish Nuclear Limited in favour of Nuclear Electric plc dated 27th March and recorded in the Division of the General Register of Sasines applicable to the County of Ayr on 3rd April 1996.

7. Standard Security by British Energy Generation (UK) Limited in favour of The Nuclear Generation Decommissioning Fund Limited.

**** indicates information which has been omitted and filed separately with the Commission

- 165 -

Part D : Property Agreements

Date	Document	Parties
11.02.1987 & 06.03.1987	Contract of Co-partnership (assigned to Huntor Limited/BEG (UK) Limited has right pursuant to Section 67 of Electricity Act 1989)	(1)    British Steel Corporation (2)    Messrs. John P Deans & Sons
11.02.1987 & 06.03.1987	Agreement	(1)    British Steel Corporation (2)    Messrs. Deans & Sons
16.07.1991 & 29.05.1992	Supplementary Agreement	(1)    British Steel plc (2)    Messrs. John P Deans & Sons
20.02.1989	Minute of Agreement	(1)    SSEB (2)    Clyde Port Authority
10.06.1970	Minute of Agreement	(1)    The Ayrshire and Bute Water Board (2)    SSEB
5.07.1967	Minute of Agreement	(1)    Miss Hunter of Hunterston (2)    SSEB
13.07.1955	Owners Consent under Electricity Supply Acts	(1)    Miss Eleonora Hunter
14.07.1955		(2)    SSEB
16.11.1960	Owners Consent under Electricity Supply Acts	(1)    Miss Eleonora Hunter
18.11.1960		(2)    SSEB
13.8.1958	Owners Consent under Electricity Supply Acts	(1)    Miss Eleonora Hunter
15.9.1958		(2)    SSEB
5.11 1975	Owners Consent under Electricity Supply Acts	(1)    British Steel Corporation (2)    SSEB

**** indicates information which has been omitted and filed separately with the Commission

- 166 -

Date	Document	Parties
6.03.1962	Servitude	(1)    The Crown Estates Commissioners
recorded GRS (Ayr) 02.04.1962		(2)    SSEB (except insofar as rights granted to Nuclear Electric plc in terms of Disposition by Scottish Nuclear Limited in favour of Nuclear Electric plc recorded GRS (Ayr) 3rd April 1996).
13.06.1973 recorded GRS (Ayr) 22.06.1973	Grant of Servitude	(1)    The Crown Estates Commissioners (2)    SSEB
25.06.1976 & 14.09.1976	Partnership Agreement	(1)    British Steel Corporation (2)    Hunterston Estates Limited (3)    Neil Hunter
02.08.1993	Assignation (to which BEG (UK) Limited has right pursuant to S.67 of Electricity Act 1989).	(1)    British Steel plc (2)    Huntor Limited
Part E : Property Documents
Date	Document	Parties
13 & 29.05 1991 recorded in the Division of the General Register of Sasines applicable to County of Ayr	Minute of Agreement (Interface Agreement)	(1) Scottish Power plc (2) Scottish Nuclear Limited

**** indicates information which has been omitted and filed separately with the Commission

- 167 -

Date	Document	Parties
04.11.1991 27.03.1996 and recorded in the Division of the General Register of Sasines applicable to the County of Ayr 03.04.1996.	Deed of Conditions	Scottish Nuclear Limited
1996	Nuclear Site Licensees Co-operation Agreement	(1)    Scottish Nuclear Limited (2)    Nuclear Electric plc
1991	Scottish Nuclear Site Licence Provisions Agreement	(1)    Scottish Nuclear Limited (2)    Scottish Power plc
25.06.1976 & 14.09.1976	Partnership Agreement	(1)    British Steel Corporation (2)    Hunterston Estates Limited (3)    Neil Hunter
02.08.1993	Assignation (to which BEG (UK) Limited has right pursuant to S.67 of Electricity Act 1989).	(1)    British Steel plc (2)    Huntor Limited
29 May 1991	Sanctions Agreement	(1)    Scottish Power plc (2)    Scottish Nuclear Limited

Part F : Lease

Not applicable

**** indicates information which has been omitted and filed separately with the Commission

- 168 -

Part G : Occupational Leases

Date	Document	Parties
11.02.1987 & 06.03.1987	Lease	(1)    British Steel Corporation (2)    Messrs. Deans & Sons
16.07.1991 & 29.05.1992	Extension of Lease	(1)    British Steel plc (2)    Messrs. Deans & Sons
27.03.1996	Lease	(1)    Scottish Nuclear Limited (2)    Nuclear Electric plc
24.12.1993 & 12,13.01.1994	Lease	(1)    Huntor Limited
		(2)    Hunterston Estates Limited
13 & 20.01.1994	Post Lease Agreement	(1)    Huntor Limited (2)    Hunterston Estates Limited
13 & 29.05.1991 and recorded GRS (East Lothian) 04.11.1991	Minute of Agreement (Interface Agreement)	(1)    Scottish Power plc (2)    Scottish Nuclear Limited (sub-station occupations)

Occupations by contractors on site (in terms of Contract - no Leases in place).

**** indicates information which has been omitted and filed separately with the Commission

- 169 -

[Plan of Hunterston B Power Station Redacted]****

**** indicates material omitted and filed separately with the Commission

- 170 -

Schedule 22

Torness

Part A : Property

Torness Power Station, Torness, East Lothian, as shown edged blue on the plan annexed to this Agreement marked “Plan 7 - Torness” being part of the land comprised in the subjects described in Notice of Title by Scottish Nuclear Limited dated 16th May 1996 and recorded in the Division of the General Register of Sasines applicable to the County of East Lothian on 21st May 1996.

Part B : Seller

BEG(UK)

Part C : Encumbrances

1. All burdens, conditions, restrictions, obligations, wayleaves, servitudes and others including those contained or referred to in the documents listed in Part B of Schedule 24.

2. Minute of Agreement between Scottish Power plc and Scottish Nuclear Limited dated 13th and 29th May and recorded in the said Division of the General Register of Sasines on 4th November both months of 1991.

3. The documents contained in or referred to in Notice of Title by Scottish Nuclear Limited dated 16th May 1996 and recorded in the Division of the General Register of Sasines applicable to the County of East Lothian on 21st May 1996.

4. Any public rights of way.

5.	30.08.1990	&	Access Agreement	(1) East Lothian District Council
	5.04.1991
				(2) Scottish Nuclear Limited
6.			Access Agreement	(1) East Lothian District Council
				(2) Mrs. Hazel Margaret Wager and Others

7. Standard Security by British Energy Generation (UK) Limited in favour of The Nuclear Generation Decommissioning Fund Limited.

**** indicates information which has been omitted and filed separately with the Commission

- 171 -

Part D : Property Agreements

Date	Document	Parties
3.07.1967	Minute of Agreement	(1)      Scottish Gas Board
		(2)      SSEB
30.07.1974	Minute of Agreement	(1)      SSEB
		(2)      The Associated Portland Cement Group Limited
07.12.1990	Minute of Agreement	(1)      Scottish Power plc
		(2)      Scottish Nuclear Limited
22.04. & 15.08.1967	Agreement	(3)      Colonel Victor Charles Vereker
		(4)      SSEB
30.11.1979	Undertaking	(1)      SSEB
17.10.1980	Grant of Right to Dredge	(1)      Crown Estate Commissioners
		(2)      SSEB
28.01.1926	Consent to Placing of Poles under the Telegraph Acts 1863-1916
14.04.1955	Consent to Placing of Poles under the Telegraph Acts 1863-1954
09.07.1985 & 17.07.1985	Partnership Agreement	(1)      South of Scotland Electricity Board
		(2)      Jack Walker Taylor

**** indicates information which has been omitted and filed separately with the Commission

- 172 -

Part E : Property Documents
Date	Document	Parties
1991	Scottish Nuclear Site Licence Provisions Agreement	(1)    Scottish Nuclear Limited (2)    Scottish Power plc
13 & 29.05.1991 and recorded GRS (East Lothian) 04.11.1991	Minute of Agreement (Interface Agreement)	(1)    Scottish Power plc (2)    Scottish Nuclear Limited
30.07.1985 & 05.08.1985	Partnership Agreement	(1)    South of Scotland Electricity Board (2)    Jack Walker Taylor
29 May 1991	Sanctions Agreement	(1)    Scottish Power plc (2)    Scottish Nuclear Limited
30.08.1990 & 05.04.1991 and recorded GRS (East Lothian) 16.05.1991	Access Agreement	(1)    East Lothian District Council (2)    Scottish Nuclear Limited

Part F : Lease

Not applicable

**** indicates information which has been omitted and filed separately with the Commission

- 173 -

Part G : Occupational Leases

Date	Document	Parties
11.10.1989	Missives of Let	(1)    South of Scotland Electricity Board (2)    R McEwan
26.02.1975	Resumption Agreement	(1)    Scottish Development Department (2)    Alexander R Brown
13.04.1994	Missives of Let	(1)    Scottish Nuclear Limited (2)    R McEwan
24.01.1995 & 07.02.1995	Missives of Let	(1)    Scottish Nuclear Limited (2)    R McEwan
07.04.1995 & 19.04.1995	Extension of Lease	(1)    Scottish Nuclear Limited (2)    Torness Farm
13 & 29.05.1991 and recorded GRS (East Lothian) 04.11.1991	Minute of Agreement (Interface Agreement)	(1)    Scottish Power plc (2)    Scottish Nuclear Limited (sub-station occupations)
08.08.1973	Offer to Let House and Garden Ground at No. 26 Thornton Loch	(1)    Secretary of State (2)    Norman Robertson
25.12.1949	Missives of Let of No. 24 Thorntonloch	(1)    Secretary of State for Scotland (2)    George Sanderson
30.11.1973	Offer to Let House and Garden Ground at No. 22 Thornton Loch	(1)    Secretary of State for Scotland (2)    George Rudkin

**** indicates information which has been omitted and filed separately with the Commission

- 174 -

Date	Document	Parties
02.07.1986 & 08.07.1986	Minute of Lease	(1)    South of Scotland          Electricity Board (2)    Thorntonloch Holding No. 21
02.07.1986 & 08.07.1986	Minute of Agreement	(1)    South of Scotland          Electricity Board (2)    Thorntonloch Holding No. 21
03.08.1978 & 15.08.1978	Agreement	(1)    South of Scotland          Electricity Board (2)    Jack Walker Taylor
30.07.1985 & 05.08.1985	Minute of Lease	(1)    South of Scotland          Electricity Board (2)    Torness Farm
21.02.1985 & 08.03.1985	Minute of Agreement	(1)    South of Scotland          Electricity Board (2)    Jack Walker Taylor
14.12.91 onwards	Lease - Links Cottage	(1)    Scottish Power plc (2)    Mrs O Walker
17.06.2001 & 24.06.2001 and registered BCS 29.01.2002	Minute of Agreement	(1)    British Energy Generation (UK) Limited (2)    Torness Farm
30.08.1990 & 05.04.1991 and recorded GRS (East Lothian) 16.05.1991	Access Agreement	(1)    East Lothian District Council (2)    Scottish Nuclear Limited

Occupations by contractors on site (in terms of Contract - no leases in place)

Use of roll-on/roll-off ferry facility by a semi-rigid RNLI lifeboat.

**** indicates information which has been omitted and filed separately with the Commission

- 175 -

[Plan of Torness Power Station Redacted]****

**** indicates material omitted and filed separately with the Commission

- 176 -

Schedule 23

Excluded Marks

Part A : Registered Trade Marks and Applications

Country	Trade Mark	Registration Application No.	Class(es)	Status
UK	JOULES Logo (series of 5)	2108193	9, 14, 16, 18, 21, 25, 26, 28, 35, 41	Registered
	JOULES (word) (series of 2)	2108192A	9	Registered
	JOULES (word) (series of 2)	2108192B	14, 16, 18, 21, 25, 26, 28, 35, 41	Registered
UK	SCOTTISH NUCLEAR & logo	1529636	9	Registered
	SCOTTISH NUCLEAR & Logo	1529637	11	Registered
	SCOTTISH NUCLEAR & Logo	1529638	16	Registered
	SCOTTISH NUCLEAR & Logo	1529639	35	Registered
	SCOTTISH NUCLEAR & Logo	1529640	37	Registered
	SCOTTISH NUCLEAR & Logo	1529641	39	Registered
	SCOTTISH NUCLEAR & Logo	1529642	40	Registered

**** indicates information which has been omitted and filed separately with the Commission

- 177 -

Country	Trade Mark	Registration Application No.	Class(es)	Status
	SCOTTISH NUCLEAR & Logo	1529643	41	Registered
	SCOTTISH NUCLEAR & Logo	1529644	42	Registered
UK	ENERGY TO GROW Energy to Grow (Series of 2)	2200089	9, 11, 14, 16, 18, 21, 25, 26, 28, 35, 36, 37, 38, 39, 40, 41, 42	Registered
UK	British Energy & Device (Series of 4)	2050987	1, 4, 7, 9, 11, 16, 35, 36, 37, 39, 40, 41, 42	Registered
	BRITISH ENERGY	2170504	9, 11, 16, 39, 40, 41, 42	Registered
UK	Sun Device (Series of 3)	2235725	1, 4, 7, 9, 11, 12, 14, 16, 17, 18, 21, 25, 26, 28, 35, 36, 37, 38, 39, 40, 41 & 42	Registered
UK	IMPACT	2316691	35, 42	Registered
EU (CTM)	BRITISH ENERGY	2247062	1, 4, 7, 9, 11, 16, 17, 25, 35, 36, 37, 38, 39, 40, 41 & 42	Registered
EU (CTM)	Sun Device	2257863	1, 4, 7, 9, 11, 16, 17, 25, 35, 36, 37, 38, 39, 40, 41 & 42	Pending

**** indicates information which has been omitted and filed separately with the Commission

- 178 -

Part B : Unregistered Trade Marks

Nuclear Electric

British Energy Generation

British Energy Renewables

Bepower

British Energy Online

British Energy Direct

**** indicates information which has been omitted and filed separately with the Commission

- 179 -

Schedule 24

Part A : HUNTERSTON POWER STATION

1. Minute of Agreement between Ayrshire & Bute Water Board and SSEB dated 10^th and 25^th June 1970.

2. Copy Disposition by Eleonora Hunter in favour of SSEB dated 5^th July 1967.

3. Copy Disposition by Robert Montgomery in favour of British Steel Corporation dated 29^th and 30^th April 1974 and recorded 11^th July 1974.

4. Two copies of Deed of Servitude by Neil Hunter in favour of SSEB dated 15^th, 20^th and 26^th May 1971 and recorded GRS Ayr 3^rd June 1974.

5. Two copies of Deed of Servitude by Neil Hunter in favour SSEB dated 26^th and 29^th March 1971 and recorded GRS Ayr 23^rd April 1974.

6. Extract Copy Deed of Servitude by BSC in favour of SSEB dated 20^th December 1976 and recorded GRS Ayr 29^th June 1977.

7. Copy Disposition by Ladyland Limited in favour of SSEB dated 1^st October 1981.

8. Copy Disposition by Ladyland Limited in favour of British Steel Corporation dated 20^th February and 14^th July 1978 and recorded GRS Ayr 12^th September 1978.

9. Deed of Conditions by Scottish Nuclear Limited (together with copy of same) dated 27^th March 1996 and recorded GRS Ayr 3^rd April 1996.

10. Search for Incumbrances over subjects known as Hunterston in the County of Ayr to 17^th April 1989.

11. Copy Minute of Waiver by Ladyland Limited in favour of Huntor Limited dated 31^st January 1994 and recorded GRS April 1994.

12. Owners Consent by Eleonora Hunter in favour of SSEB dated 13^th August and 5^th September 1958.

13. Correspondence between SSEB and Mrs I R McKay dated October/November 1960.

14. Copy Notice of Title in favour of Scottish Nuclear Limited dated 13^th September 1991.

15. Copy Notice of Title in favour of Eleonora Hunter dated 19^th and 20^th October 1954 and recorded 1^st May 1958.

16. Copy Disposition by Neil Hunter in favour of Ladyland Limited dated 10^th March 1976 and recorded 21^st April 1976.

17. Copy Disposition by Ladyland Limited in favour of SSEB dated 25^th June 1976 and recorded 12^th July 1976.

**** indicates information which has been omitted and filed separately with the Commission

- 180 -

18. Extract Disposition by Neil Hunter in favour of British Steel Corporation dated 11^th and 16^th May 1975 and recorded 26^th May 1975.

19. Extract Disposition by Eleonora Hunter in favour of Neil A K C Patrick dated 9^th April 1969 and recorded 11^th April 1969.

20. Extract Deed of Servitude by The Secretary of State for Scotland in favour of British Steel Corporation dated 30^th March 1988 and recorded 22^nd November 1988.

21. Copy Disposition by Robert A Montgomery in favour of Hunterston Development Company dated 30^th May 1975 and recorded 2^nd June 1975.

22. Copy Disposition by Neil A Hunter in favour of Hunterston Development Company Limited dated 11^th May 1975 and recorded 2^nd June 1975.

23. Copy Disposition by Neil A Hunter in favour of Ladyland Limited dated 10^th March 1976 and recorded 21^st April 1976.

24. Deed of Servitude containing Disposition by Robert S Montgomery in favour of SSEB dated 22^nd March 1972 and recorded 18^th April 1972.

25. Copy Owners Consent by Eleonora Hunter in favour of SSEB dated 16^th and 18^th November 1960.

26. Copy Owners Consent by British Steel Corporation in favour of SSEB dated 5^th November 1975.

27. Owners Consent by Eleonora Hunter in favour of SSEB dated 13^th and 14^th July 1955.

28. Search for Incumbrances over lands at Hunterston dated 1982.

29. Extract Lease between Scottish Nuclear Limited and Nuclear Electric plc dated 27^th March 1996 and registered in the Books of Council & Session on 24^th May 1996.

30. Extract Sasine in favour of Robert Hunter recorded 12^th August 1829 together with copy of same.

31. Copy Disposition by Neil Hunter in favour of British Steel Corporation dated 30^th April 1974 and recorded 7^th May 1974.

32. Deed of Servitude by British Steel Corporation in favour of Bellway (Builders) Limited dated 26^th June 1986 and recorded GRS Ayr 8^th August 1986.

33. Copy Instrument of Sasine in favour of Robert Hunter dated 22^nd February 1838.

34. Copy Disposition by Miss Eleonora Hunter in favour of Neil Aylmer Kennedy-Cochrane-Patrick of Ladyland dated 9^th April 1969 and recorded 11^th April 1969.

35. Copy Agreement between Hunterston Development Company Limited and British Steel Corporation dated 9^th and 10^th October 1974.

**** indicates information which has been omitted and filed separately with the Commission

- 181 -

36. Extract Deed of Servitude by British Steel Corporation in favour of Hunterston Development Company Limited dated 24^th September 1981 and recorded 22^nd April 1982.

37. Copy Feu Disposition by The Right Honourable Matthew Baron Glenarthur in favour of the Trustees of the late Robert Kirk Simpson and the Trustees of the late James Craig Simpson dated 4^th March 1927 and recorded GRS Ayr 29^th March 1927.

38. Instrument of Disentail by Lieutenant General Sir Aylmer Hunter Weston dated 25^th December 1926 and recorded GRS Ayr 8^th April 1927.

39. Minute of Waiver by Ladyland Limited in favour of Huntor Limited dated 31^st January 1994 and recorded GRS Ayr 17^th February 1994.

40. Certificate of Registration of the Limited Partnership - Deans & Son (Southannan Fields) dated 16^th April 1997.

41. Feu Disposition by Baron Glenarthur to Trustees of Robert Kay Simpson and Trustees of James C Simpson dated 4^th March 1927 and recorded 29^th March 1927.

42. Disposition by the Trustees of Daniel Crawford in favour of William and John Crawford dated 23^rd September 1858 and 12^th July 1859 and recorded 27^th September 1859.

43. Instrument of Sasine in favour of Robert Hunter recorded 12^th August 1829.

44. Instrument of Sasine in favour of Robert Hunter recorded 22^nd February 1838.

45. Search for Incumbrances over Hunterston Estate, Ayr to 17^th March 1994.

46. Search for Incumbrances over three plots of ground in the Parish of West Kilbride and County of Ayr at Hunterston Estate to 1^st March 1993.

47. Letter from Dundas & Wilson to the Partners of Messrs John P Deans & Son dated 9^th August 1993 intimating assignation by British Steel plc in favour of Huntor Limited.

48. Large plan headed “Poles and stays and underground cable on Lands of Hunterston Estate” drawing number DG6996R/2 dated 26^th September 1957.

49. Search for Incumbrances over 112.90, 211 and 95.51 acres in West Kilbride to 10^th August 1993.

50. Search for Incumbrances over land at Hunterston to 17^th March 1994.

51. Search for Incumbrances over 1.25 acres, 56 acres, 8.5 acres and salmon fishings in the Parish of West Kilbride, Ayr to 12^th October 1995.

52. Copy Disposition by Scottish Nuclear Limited in favour of Nuclear Electric plc (unsigned draft) dated 1996 (principal dated 27^th March 1996, recorded GRS Ayr 3^rd April 1996).

**** indicates information which has been omitted and filed separately with the Commission

- 182 -

53. Copy Deed of Servitude by Brisbane Glen Estate Company Limited in favour of Ladyland Limited dated 28^th July 1976 and recorded GRS Ayr 9^th September 1976.

54. Copy Disposition by Eleonora Hunter of Hunterston in favour of SSEB dated 24^th June 1958 and recorded GRS Ayr 9^th July 1958.

55. Minute of Agreement between Eleonora Hunter of Hunterston and SSEB dated 5^th July and 18^th August 1967.

56. Extract Disposition and Deed of Entails by Robert C Hunter and spouse in favour of Robert Hunter recorded 22^nd February 1938.

57. Extract Disposition by Trustees of Lieutenant General Sir Aylmer Hunter-Weston in favour of Eleonora Hunter dated 19^th and 20^th October 1954 and recorded GRS Ayr 22^nd October 1954.

58. Extract Trust Disposition and Settlement by Lady Hunter-Weston dated 26^th October 1951 and recorded in the Books of Council and Session 1^st March 1954.

59. Extract Trust Disposition and Settlement and Codicil by Lieutenant General Sir Aylmer Hunter-Weston dated 9^th March 1940 and recorded in the Books of Council and Session 19^th June 1940.

60. Deed of Excambion between Huntor Limited and Ladyland Limited dated 24^th December 1993 and recorded GRS Ayr 17^th February 1994.

61. Copy Disposition by Neil Aylmer Hunter with consent of Hunterston Development Company Limited in favour of British Steel Corporation dated 30^th April 1974.

62. Interim Report on Search over Hunterston A & B Power Station West Kilbride dated 4^th June 1996 together with Search in Presentment Book also dated 4^th June 1996.

63. Interim Report on Search against 7.750 acres part of Hunterston Estate dated 4^th June 1996 together with Search in Presentment Book also dated 4^th June 1996.

64. Interim Report on Search against 5.95 acres at Hunterston West Kilbride dated 4^th June 1996 together with Search in Presentment Book also dated 4^th June 1996.

65. Interim Report on Search over land at Hunterston dated 4^th June 1996 together with Search in Presentment Book also dated 4^th June 1996.

66. Interim Report on Search over subjects in West Kilbride dated 4^th June 1996 together with Search in Presentment Book also dated 4^th June 1996.

67. Search in Presentment Book dated 4^th June 1996.

68. Interim Report on Search over 7.750 acres part of Hunterston Estate, Ayr dated 25^th March 1996.

69. Interim Report on Search over land at Hunterston, Ayr dated 25^th March 1996.

**** indicates information which has been omitted and filed separately with the Commission

- 183 -

70. Interim Report on Search for 5.95 acres at Hunterston, West Kilbride dated 25^th March 1996.

71. Interim Report on Search over Hunterston A & B Power Stations West Kilbride dated 28^th March 1996.

72. Search for Incumbrances over 5.95 acres of ground at Hunterston, West Kilbride to 12^th October 1995.

73. Interim Report on Search over 5.95 acres at Hunterston, West Kilbride dated 31^st January 1996.

74. Interim Report on Search over 5.95 acres of ground at Hunterston, West Kilbride dated 8^th January 1996.

75. Search for Incumbrances over 169.80 acres, 431.68 acres and 95.51 acres of land at Hunterston to 12^th October 1995.

76. Interim Report on Search over 169.80 acres, 431.68 acres and 95.51 acres of land at Hunterston dated 8^th January 1996.

77. Search for Incumbrances over 7.750 acres at Hunterston, Ayr to 12^th October 1995.

78. Interim Report on Search over 7.750 acres at Hunterston, Ayr dated 8^th January 1996.

79. Interim Report on Search over 1.25 acres, 56 acres, 8.5 acres and salmon fishings in Ayr dated 8^th January 1996 together with Search in Presentment Book dated 8^th January 1996.

80. Copy Compulsory Purchase Order 1981 dated 1^st December 1981 relating to the Gretna/Stranraer/Glasgow/Stirling Trunk Road (Bridge Mill and other diversion).

81. Search for Incumbrances over foreshore ex adverso farm and lands of Burnside and Chapeldonan dated 1989.

82. Notice of Title in favour of Scottish Nuclear Limited dated 13^th September 1991 and recorded GRS Ayr 14^th October 1991.

83. Copy Disposition by Eleonora Hunter in favour of SSEB dated 18^th June 1968 and recorded 24^th July 1968.

84. Copy Disposition by Eleonora Hunter in favour of SSEB dated 24^th June 1958 and recorded 9^th July 1958.

85. Disposition by Eleonora Hunter of Hunterston in favour of SSEB dated 5^th July 1967 recorded GRS Ayr 11^th July 1967.

86. Disposition by Ladyland Limited in favour of SSEB dated 25^th June 1976 recorded GRS Ayr 12^th July 1976.

87. Disposition by Eleonora Hunter of Hunterston in favour of SSEB dated 18^th June 1968 recorded GRS Ayr 24^th July 1968.

**** indicates information which has been omitted and filed separately with the Commission

- 184 -

88. Disposition by Ladyland Limited in favour of SSEB dated 1^st October 1981 and recorded GRS Ayr 22^nd October 1981.

89. Disposition by the Trustees under a Deed of Trust and Disposition by Lieutenant Colonel George Jardine Kidston Montgomery of South Annan in favour of SSEB dated 7th, 15^th and 20^th January 1959 and recorded GRS Ayr 5^th February 1959.

90. Extract Deed of Excambion between British Steel Corporation and SSEB dated 15^th and 20^th August 1978 and recorded GRS Ayr 4^th October 1978.

91. Grant of Servitude by The Crown Estate Commissioners in favour of SSEB dated 6^th March 1962 and recorded GRS Ayr 2^nd April 1962.

92. Grant of Servitude by The Crown Estate Commissioners in favour of SSEB dated 30^th June 1973 recorded GRS Ayr 27^th June 1973.

93. Extract Deed of Servitude by Neil A Hunter in favour of SSEB dated 15^th, 20^th and 26^th May 1971 and recorded 3^rd June 1971.

94. Deed of Servitude containing Disposition by Neil A Hunter in favour of SSEB dated 26^th and 29^th March and 1st April and recorded 23^rd April 1974.

95. Copy Disposition by SSEB in favour of Eleonora Hunter of Hunterston dated 23^rd December 1964 and recorded GRS Ayr 22^nd February 1965.

96. Copy Disposition by SSEB in favour of Secretary of State for Scotland dated 1^st February 1960.

97. Extract Disposition by SSEB in favour of British Steel Corporation dated 13^th August 1974 and recorded 28^th August 1974.

98. Coy Disposition by Neil A Hunter in favour of British Steel Corporation dated 11^th and 16^th May 1975 recorded 26^th May 1975.

99. Extract Disposition by Robert A Montgomery in favour of British Steel Corporation dated 13^th and 16^th May 1975 and recorded 26^th May 1975.

100. Extract Deed of Excambion between British Steel Corporation and SSEB dated 15^th and 29^th August 1978 and recorded 4^th October 1978.

101. Copy Disposition by British Steel Corporation in favour of James Niven Grant and Annette Margaret Grant dated 30^th November 1982 and recorded GRS Ayr 22^nd December 1982.

102. Copy Deed of Excambion between Huntor Limited and Ladyland Limited dated 24^th December 1993.

103. Copy Disposition by British Steel Corporation in favour of The Secretary of State for Scotland dated 8^th April 1986 and recorded GRS Ayr 13^th May 1986.

**** indicates information which has been omitted and filed separately with the Commission

- 185 -

104. Copy Disposition by British Steel Corporation in favour of the Secretary of State for Scotland dated 14^th July 1983 and recorded GRS Ayr 17^th August 1983.

105. Certificate of Registration of a Charge by British Energy Generation UK Limited dated 13^th December 2002 together with certified true copy Standard Security by British Energy Generation UK Limited in favour of The Secretary of State for Trade and Industry dated 28^th November 2002

106. Wayleave Consent by Eleonora Hunter of Hunterston in favour of SSEB dated 8^th and 20^th May 1960.

107. Deed of Servitude by Neil Aylmer Hunter of Hunterston with consent of the Trustees of Dame Grace Strang Steel or Hunter-Weston in favour of SSEB dated 15^th, 20^th and 26^th May 1971 and recorded GRS Ayr 3^rd June 1971.

108. Deed of Servitude by Neil Aylmer Hunter of Hunterston with consent of the Trustees of Dame Grace Strang Steel or Hunter-Weston and the Hunterston Development Company in favour of SSEB dated 26^th and 29^th March and 1^st April 1974 and recorded GRS Ayr 23^rd April 1974.

109. Minute of Agreement between SSEB and Costain Civil Engineering Limited and Taylor Woodrow Construction Limited dated 10^th and 12^th January and 3^rd March 1989.

110. Minute of Agreement between SSEB and Clyde Port Authority dated 20^th February and 3^rd March 1989.

111. Copy Agreement between Scottish Power plc and Scottish Nuclear Limited dated 13^th and 29^th May 1991 and recorded GRS Ayr 4^th November 1991 (Interface Agreement).

112. Interim Report on Search over subjects in West Kilbride dated 25^th March 1996.

113. Coal Authority Coal Mining Report over Hunterston B, Hunterston, Ayrshire dated 15^th January 1996.

114. Coal Authority Coal Mining Report over land at Portencross, Ayrshire dated 17^th January 1996.

115. Coal Authority Coal Mining Report over land at Portencross, Ayrshire dated 30^th January 1996.

116. Acknowledgement from The Church of Scotland General Trustees of redemption of standard charge constituted over 108.138 acres at Hunterston by SSEB dated 24^th October 1958.

117. Copy Disposition by SSEB in favour of William Adam dated 14^th August 1987.

118. Copy of plan referred to in Disposition by Eleonora Hunter of Hunterston in favour of SSEB dated 24^th June 1958 (drawing number 1000/2/15/165).

119. Copy Interim Report on Search over Estate of Hunterston, West Kilbride, dated 20^th November 2002.

**** indicates information which has been omitted and filed separately with the Commission

- 186 -

120. Copy Interim Report on Search over Estate of Hunterston, West Kilbride, dated 28^th November 2002.

121. Copy Lease between Hunterston Bulk Handling Limited and Scottish Nuclear Limited dated 10^th September and 9^th October 1997 and registered in Books of Council and Session 30^th October 1997.

122. Copy Sanctions Agreement between Scottish Power plc and Scottish Nuclear Limited dated 29^th May 1991.

123. Copy Disposition by Huntor Limited in favour of Scottish Nuclear Limited dated 21^st March 1996 and recorded GRS 7^th April 1996.

124. Deed of Servitude by Clydeport Operations Limited in favour of Huntor Limited regarding access rights at Hunterston, Ayrshire dated 20^th & 22^nd March 1996.

125. Deed of Servitude by Huntor Limited, Scottish Nuclear Limited and Clydeport Operations Limited in favour of Hunterston Development Company Limited dated 20^th & 22^nd March 1996.

126. Disposition by British Energy Generation (UK) Limited in favour of Ladyland Limited dated 11^th October 1999.

127. Disposition by Scottish Nuclear Limited in favour of Clydeport Limited dated 22^nd March 1996.

128. Deed of Servitude by Clydeport Operations Limited in favour of Scottish Nuclear Limited dated 20^th & 22^nd March 1996.

129. Lease by Huntor Limited in favour of Hunterston Estates Limited dated 24^th December 1993 and 12^th and 13^th January 1994.

130. Memorandum from Cunninghame District Council dated 26^th January 1996 regarding Hunterston B, Hunterston, West Kilbride.

131. Copy Interim Report on Search over (i) 169.80 acres (ii) 431.68 acres and (iii) 95.51 acres of land at Hunterston dated 8^th January 1996.

132. Copy Interim Report on Search over 5.95 acres at Hunterston, West Kilbride dated 25^th March 1996.

133. Copy Interim Report on Search over 5.95 acres of ground at Hunterston, West Kilbride dated 8^th January 1996.

134. Copy Interim Report on Search over 7.750 acres part of Hunterston Estate, Ayr dated 25^th March 1996.

135. Copy Interim Report on Search over land at Hunterston, Ayr dated 25^th March 1996.

136. Scottish Nuclear Site Licence Provisions Agreement between Scottish Nuclear Limited and Scottish Power plc dated 1991.

**** indicates information which has been omitted and filed separately with the Commission

- 187 -

137. Nuclear Use of System Agreement between Scottish Power plc and Scottish Nuclear Limited dated 1991.

138. Nuclear Site Licencees Corporation Agreement between Scottish Nuclear Limited and Nuclear Electric plc dated 1996.

139. Deed of Servitude containing Disposition by Huntor Limited, Scottish Nuclear Limited and Clydeport Operations Limited dated 20^th and 22^nd March 1996 recorded GRS (Ayr) 1^st April 1996.

140. Disposition by Scottish Nuclear Limited in favour of Clydeport Operations Limited dated 22^nd March 1996 and recorded GRS (Ayr) 3^rd April 1996.

141. Deed of Servitude containing Disposition by Clydeport Operations Limited in favour of Scottish Nuclear Limited dated 20^th and 22^nd March and recorded GRS (Ayr) 3^rd April 1996.

142. Copy Final Search in the Register of Charges against British Energy Generation (UK) Limited dated 10^th June 2003 and Search in Charges Register from 1^st April 1989 to 31^st May 2003.

143. Disposition by British Steel in favour of Huntor Limited recorded GRS Ayr 10^th August 1993.

144. Discharge by Hunterston Development Limited in favour of Huntor Limited regarding servitude right of access.

145. Copy Disposition by Huntor Limited in favour of Ladyland Limited recorded GRS Ayr 17^th February 1994.

146. Disposition by Ladyland Limited in favour of Huntor Limited recorded GRS Ayr 17^th February 1994.

147. Search for Incumbrances up to 4^th December 2002 over area of ground part of Hunterston Estates, West Kilbride.

148. Search for Incumbrances over subjects at Hunterston Estates, West Kilbride, Ayr - 6^th April 1992.

149. Post Lease Agreement between Huntor Limited and Hunterston Estates Limited dated 12^th, 13^th and 20^th January 1994.

150. Letter from Maclay Murray & Spens to Hunterston Estates Limited dated 26^th July 1993.

151. Interim Report on Search in the Register of Sasines and in the Register of Inhibitions and Adjudications brought down to 13^th September 2004.

152. Coal Authority Search dated 1^st June 2004.

153. Search in the Register of Charges and Company File against British Energy Generation (UK) Limited brought down to 29^th September 2004.

**** indicates information which has been omitted and filed separately with the Commission

- 188 -

154. SPH Combined Property Search dated 4^th June 2004.

155. Interim Charges Search against British Generation (UK) Limited from 30^th September 2004 to 4^th January 2005.

156. Searches for Incumbrances for the period from 5^th December 2002 to 4^th January 2005 and 13^th October 1995 to 4^th January 2005.

**** indicates information which has been omitted and filed separately with the Commission

- 189 -

Part B : Torness Power Station

1. Lease between Scottish Power plc and Scottish Nuclear Limited dated 20^th November and 2^nd December 1991.

2. Certificate of Registration of a Charge created by British Energy Generation UK Limited dated 13^th December 2002 together with certified true copy Standard Security by British Energy Generation UK Limited in favour of The Secretary of State for Trade and Industry dated 28^th November 2002.

3. Deed of Servitude by Scottish Nuclear Limited in favour of Scottish Power plc dated 30^th April 1991.

4. Interim Report on Search over Torness Power Station dated 4^th June 1996 together with Search in Presentment Book also dated 4^th June 1996.

5. Copy Agreement between Colonel Victor Charles Vereker Cowley and SSEB dated 22^nd April and 5^th May 1977.

6. Extract Undertaking by SSEB dated 30^th November 1979 and recorded Books of Council & Session 11^th January 1980.

7. Copy Stopping-up Order dated 18^th December 1979.

8. Grant of Right to Dredge by the Crown Estate Commissioners in favour of SSEB dated 17^th October 1980.

9. Copy Notice of Title in favour of Scottish Nuclear Limited dated 16^th May 1996 and recorded GRS East Lothian 21^st May 1996.

10. Notice of Title in favour of Scottish Nuclear Limited dated 30^th September 1991 and recorded GRS East Lothian 14^th October 1991.

11. Certified true copy Disposition by Secretary of State for Scotland in favour of John Charles McFarlane dated 4^th November 1982.

12. Deed of Restriction by The Governor & Company of the Bank of Scotland in favour of John Charles McFarlane dated 15^th April 1983 and recorded GRS East Lothian 17^th May 1983.

13. Extract Conveyance by Victor C V Cowley in favour of SSEB dated 1^st March 1975 and recorded GRS East Lothian 11^th March 1975.

14. Copy Disposition by Jack Walker Taylor in favour of SSEB dated 29^th September 1989.

15. Copy Minute of Agreement between SSEB and the Associated Portland Cement Manufactures Limited dated 30^th July and 23^rd September 1974 and recorded Books of Council & Session 29^th October 1974.

**** indicates information which has been omitted and filed separately with the Commission

- 190 -

16. Copy Disposition by Jack Walker Taylor in favour of the Secretary of State for Scotland dated 26^th September and 8^th October 1978 and recorded GRS East Lothian 17^th November 1978.

17. Grant of Right to Dredge by Crown Estate Commissioners in favour of SSEB dated 7^th October 1980.

18. Discharge by Alexander Robert Brown dated 29^th April 1980.

19. Copy Search for Incumbrances over Six Holding Thorntonloch Dunbar dated 27^th October 1983.

20. Receipt and Discharge by James Sanderson in favour of SSEB dated 11^th December 1975.

21. Deed of Servitude by Blue Circle Industries plc in favour of SSEB dated 29^th January 1988 and recorded GRS East Lothian 3^rd March 1988.

22. Copy Search for Incumbrances over 350.748 acres at Dunbar, East Lothian to 3^rd March 1988.

23. Two copies of Notice of Title in favour of Scottish Nuclear Limited dated 16^th May 1996.

24. Extract Disposition by Lieutenant Colonel John P N H Grant to Andrew Renwick recorded 28^th April 1922.

25. Extract Disposition by Lieutenant Colonel John Patrick Nisbet Hamilton Grant to Board of Agriculture for Scotland recorded 16^th September 1921.

26. Extract Feu Disposition by Secretary of State for Scotland to East Lothian County Council dated 30^th July 1963 and recorded 17^th September 1963.

27. Extract Disposition by John C McFarlane in favour of SSEB dated 21^st April 1983 and recorded 17^th May 1983.

28. Extract Access Agreement between East Lothian District Council and Scottish Nuclear Limited dated 30^th August 1990 and 5^th April 1991 and recorded 16^th May 1991.

29. Extract Disposition by Governors of East Lothian Educational Trust to SSEB dated 8^th June 1962 and recorded 21^st June 1962.

30. Copy Disposition by Secretary of State for Scotland in favour of SSEB dated 28^th June 1978 and recorded GRS East Lothian 14^th July 1978.

31. Copy Disposition by Victor Charles Vereker in favour of Blue Circle Industries Limited dated 1^st September 1978 and recorded GRS East Lothian 25^th September 1978.

32. Extract Disposition by Secretary of State for Scotland in favour of SSEB dated 28^th June 1978 and recorded 14^th July 1978.

**** indicates information which has been omitted and filed separately with the Commission

- 191 -

33. Copy Disposition by Jack Walker Taylor with consent of The Royal Bank of Scotland Limited in favour of SSEB dated 15^th and 23^rd November 1976 and recorded GRS (East Lothian) 9^th December 1976.

34. Feu Disposition by SSEB in favour of Alexander Robert Brown and Mrs Mary Gray or Brown dated 24^th April 1980.

35. Extract Disposition by Trustees of David R Bowe in favour of SSEB dated 2nd 6^th and 7^th January 1977 and recorded 11^th January 1977.

36. Copy Offer of Let by Department of Agriculture & Fisheries for Scotland to James Thorburn, Holding No. 9 Thorntonloch.

37. Interim Report on Search over Torness Off-Site Emergency Support and Control Centre, Cockenzie dated 26^th February 1996.

38. Interim Report on Search over subjects at Torness dated 12^th January 1996.

39. Interim Report on Search over Torness Power Station and lands at Torness dated 17^th April 1996.

40. Letter from Messrs Ross Harper & Murphy dated 1^st November 1989 accepting Offer of Let by SSEB to R McEwan dated 11^th October 1989.

41. Copy Undertaking by SSEB dated 30^th November 1979 and recorded Books of Council & Session 11^th January 1980 together with copy Stopping-up Order and correspondence.

42. Plan from Counter-Disposition by SSEB in favour of Jack Walker Taylor dated 18^th August and 23^rd December 1987.

43. Disposition by Secretary of State for Scotland in favour of SSEB dated 6^th May 1988 and recorded GRS East Lothian 12^th July 1988.

44. Notice of Title in favour of Scottish Nuclear Limited dated 16^th May 1996 and recorded GRS East Lothian 21^st May 1996.

45. Extract Conveyance by Victor Charles Vereker Cowley in favour of SSEB dated 1^st, March 1975 and recorded 11^th March 1975.

46. Disposition by the Trustees of David Rutherford Bowe in favour of SSEB dated 2nd 6^th and 7^th January 1977 and recorded GRS East Lothian 11^th January 1977.

47. Disposition by Jack Walker Taylor with consent of The Royal Bank of Scotland Limited in favour of SSEB dated 15^th and 23^rd November 1976 and recorded GRS East Lothian 9^th December 1976.

48. Disposition by The Secretary of State for Scotland in favour of SSEB dated 28^th June 1978 and recorded GRS East Lothian 14^th July 1978.

49. Disposition by East Lothian District Council in favour of SSEB dated 28^th September 1978 and recorded GRS East Lothian 17^th October 1978.

**** indicates information which has been omitted and filed separately with the Commission

- 192 -

50. Feu Disposition by The Crown Estate Commissioners in favour of South of Scotland Electricity Board dated 17^th October 1980 and recorded GRS East Lothian 30^th January 1981.

51. Extract Conveyance by Victor C V Cowley in favour of SSEB dated 4^th October 1982 and recorded GRS East Lothian 8^th October 1982.

52. Extract Conveyance and Deed of Servitude by Jack Walker Taylor in favour of South of Scotland Electricity Board dated 23^rd December 1987, 23^rd March 1988 and 5^th September 1988 and recorded GRS East Lothian 15^th September 1988.

53. Extract Disposition by The Secretary of State for Scotland in favour of SSEB dated 6^th May 1988 and recorded GRS East Lothian 12^th July 1988.

54. Disposition by Jack Walker Taylor in favour of SSEB dated 29^th September 1989 and recorded GRS East Lothian 16^th October 1989.

55. Extract Registered Feu Disposition by SSEB in favour of Alexander R Brown dated 24^th April 1980 and recorded GRS East Lothian 8^th May 1980.

56. Disposition by Jack Walker Taylor in favour of SSEB dated 29^th September 1989 and recorded GRS East Lothian 16^th October 1989.

57. Copy Deed of Excambion between SSEB and Jack Walker Taylor dated 18^th August and 23^rd December 1987 and recorded GRS East Lothian 15^th September 1988.

58. Disposition by Lieutenant Colonel John Patrick Nisbet Hamilton Grant in favour of Mark Turnbull Simpson recorded GRS Haddington 23^rd November 1921.

59. Extract Conveyance by Colonel Victor Charles Vereker Cowley in favour of SSEB dated 4^th October 1982 and recorded GRS East Lothian 8^th October 1982 (two copies).

60. Extract Notice of Title in favour of the Trustees of David R Bowe dated 25^th March 1954 recorded 5^th May 1954.

61. Disposition by Biel & Dirleton Estates Limited in favour of David Rutherford Bowe dated 29^th and 30^th October 1948 and recorded GRS East Lothian 23^rd November 1948.

62. Notice of Title in favour of the Trustees of David Rutherford Bowe dated 25^th March 1954 recorded GRS East Lothian 5^th May 1954.

63. Disposition by Biel & Dirleton Estates Limited in favour of David Rutherford Bowe dated 28^th June 1946 and recorded GRS East Lothian 12^th July 1946.

64. Deed of Servitude by Jack Walker Taylor in favour of SSEB dated 23^rd May and 27^th June 1989 and recorded GRS East Lothian 28^th July 1989.

65. Copy Feu Disposition by Secretary of State for Scotland in favour of the County Council of the County of East Lothian dated 30^th July 1963 and recorded GRS East Lothian 17^th September 1963.

**** indicates information which has been omitted and filed separately with the Commission

- 193 -

66. Copy Feu Charter by M G C Nisbet Hamilton Ogilvie in favour of Royal National Life Boat Institution (undated).

67. Search for Incumbrances over 0.186 acres at Innerwick, Dunbar dated 1978.

68. Copy Deed of Servitude by Scottish Nuclear Limited in favour of Scottish Power plc dated 30^th April 1991.

69. Copy Disposition by Secretary of State for Scotland with consent of Thomas Thomson Craig in favour of Universal Building Society dated 20^th and 28^th August 1970 and recorded 7^th September 1970.

70. Deed of Restriction by The Royal Bank of Scotland plc in favour Brian Burns Ainsley and George Alexander Ainsley dated 4^th November 1988 and recorded GRS East Lothian 14^th February 1989.

71. Extract Deed of Servitude containing Disposition by SSEB in favour of Lothian Regional Council dated 18^th June 1984 and recorded 24^th July 1984.

72. Copy Disposition by Ella Graham McGregor and Ina Graham McGregor in favour of SSEB dated 14^th October 1993 and recorded GRS East Lothian 8^th November 1993.

73. Copy Disposition by The Governors of the East Lothian Educational Trust in favour of SSEB dated 18^th June 1962 and recorded 21^st June 1962.

74. Extract Minute of Agreement between Scottish Gas Board and SSEB dated 3^rd and 12^th July 1967 and recorded GAS East Lothian 24^th August 1967.

75. Agreement between Scottish Power plc and Scottish Nuclear Limited dated 7^th October 1990.

76. Copy Consent to the placing of works under Telegraph Acts 1863 to 1916 dated 28^th January 1926.

77. Consent to the place of works under Telegraph Acts 1863 to 1954 dated 14^th April 1955.

78. Charges Search against Scottish Power plc to 8^th April 1996.

79. Interim Report on Search over Torness Off-Site Emergency Support and Control Centre, Cockenzie dated 25^th March 1996.

80. Search for Incumbrances over subjects at Torness dated 29^th February 1996.

81. Interim Report on Search for Incumbrances over 27 and 29 East Crosscauseway, Edinburgh dated 27^th May 1931.

82. Copy Interim Report on Search over area of ground at Torness Power Station, Torness dated 20^th November 2002.

83. Copy Interim Report on Search over area of ground at Torness Power Station, Torness dated 28^th November 2002.

**** indicates information which has been omitted and filed separately with the Commission

- 194 -

84. Copy Coal Mining Report, Torness Power Station, Torness dated 15^th January 1996.

85. Copy Sanctions Agreement between Scottish Power plc and Scottish Nuclear Limited dated 1991.

86. Partnership Agreement between South of Scotland Electricity Board and Jack Walker Taylor dated 9^th and 17^th July 1985.

87. Minute of Agreement between Scottish Power plc and Scottish Nuclear Limited dated 13^th and 29^th May 1991 and recorded GRS (East Lothian) 4^th November 1991 (Interface Agreement).

88. Copy Final Search in the Register of Charges against British Energy Generation (UK) Limited dated 10^th June 2003.

89. Minute of Lease between South of Scotland Electricity Board and Torness Farm dated 30^th July and 5^th August 1985.

90. Minute of Agreement between SSEB and Torness Farm dated 8^th August, 30^th July both 1985.

91. Minute of Agreement between South of Scotland Electricity Board and Jack Walker Taylor dated 21^st February and 8^th March 1985.

92. Agreement between South of Scotland Electricity Board and Jack Walker Taylor dated 3^rd and 15^th August 1978.

93. Mineral Lease between Jack Walker Taylor and South of Scotland Electricity Board dated 3^rd and 15^th August 1978.

94. Copy Missives of Lease between Robert McEwan and South of Scotland Electricity Board dated 11^th October and 1^st November 1989.

95. Minute of Lease between South of Scotland Electricity Board and Thorntonloch Holding No. 21 dated 2^nd and 8^th July 1986.

96. Minute of Agreement between South of Scotland Electricity Board and Thorntonloch Holding No. 21 dated 2^nd and 8^th July 1986.

97. Missives of Lease between Secretary of State for Scotland and James Thorburn dated 1^st November and 9^th November 1974.

98. Missives of Lease between Secretary of State for Scotland and Alexander R Brown dated 9^th March and 3^rd April 1974.

99. Missives of Lease between Secretary of State for Scotland and Alexander R Brown dated 25^th and 29^th May 1967.

100. Missive of Let between Secretary of State for Scotland and Charles Cunningham Brown dated 28^th March 1950.

**** indicates information which has been omitted and filed separately with the Commission

- 195 -

101. Grazing Agreement for Scottish Nuclear Limited and R McEwan relative to Paddock Skateraw, Torness dated 3^rd and 19^th April 1994.

102. Disposition by Secretary of State for Scotland in favour of South of Scotland Electricity Board dated 28^th June and recorded 14^th July 1978.

103. Copy draft Assignation by South of Scotland Electricity Board in favour of Scottish Nuclear Limited - relative to Partnership Agreement between South of Scotland Electricity Board and Jack Walker Taylor dated 9^th and 17^th July 1985 (unsigned).

104. Copy Contract of Limited Partnership between South of Scotland Electricity Board and Alexander Robert Brown dated 2^nd and 8^th July 1986.

105. Copy Minute of Agreement between British Energy Generation (UK) Limited and Torness Farm dated 17^th and 24^th June 2001 and registered BCS 29^th January 2002.

106. Lease between South of Scotland Electricity Board and Torness Farm dated 30^th July and 5^th August 1985.

107. Offer to Let house and garden ground at number 26 Thorntonloch by Secretary of State to Norman Robertson dated 8^th August 1973.

108. Offer to Let house and garden ground number 22 Thorntonloch from Secretary of State for Scotland to George Rudkin dated 30^th November 1973.

109. Tenancy Offer by Alexander MacKay to the Secretary of State for Scotland dated 9^th January 1962.

110. Missives of Let regarding number 24 Thorntonloch to the Secretary of State for Scotland from George Sanderson dated 20^th December 1949.

111. Offer to Let holding number 21 Thorntonloch (enlarged) by Secretary of State to Alex Brown dated 9^th March 1971.

112. Offer to Let regarding number 21 Thorntonloch from Department of Agriculture and Fisheries to Alex Brown dated 25^th May 1967.

113. Lease between Scottish Nuclear Limited and Oliver Walker constituted by missives dated 14^th December 1961 - Links Cottage, Skateraw.

114. Company Search against British Energy Generation (UK) Limited from 1^st April 1989 to 24^th November 2002.

115. Interim Report on Search in the Register of Sasines and in the Register of Inhibitions and Adjudications brought down to 13^th September 2004.

116. Coal Authority Searches dated 24^th and 26^th May 2004.

117. Search in the Register of Charges and Company File against British Energy Generation (UK) Limited brought down to 29^th September 2004.

**** indicates information which has been omitted and filed separately with the Commission

- 196 -

118. SPH Combined Property Search dated 4^th June 2004.

119. Interim Charges Search against British Generation (UK) Limited from 30^th September 2004 to 4^th January 2005.

120. Search for Incumbrances for the period from 14^th September 2004 to 6^th January 2005.

**** indicates information which has been omitted and filed separately with the Commission

- 197 -

IN WITNESS of which this document has, for the purposes of the appointment of the Secretary of State as an attorney pursuant to clause 2.13.3 and paragraph 9.2 of Schedule 15 (Station Sites), been signed and delivered as a deed on the date which appears on page 1 above.

SIGNED as a deed by	)
and by	)
as attorneys for BRITISH ENERGY GENERATION LIMITED
in the presence of:
Signature of witness:
Name of witness:
Address of witness:
Occupation of witness:
SIGNED as a deed by	)
and by	)
as attorneys for BRITISH ENERGY GENERATION (UK) LIMITED
in the presence of:
Signature of witness:
Name of witness:
Address of witness:
Occupation of witness:

**** indicates information which has been omitted and filed separately with the Commission

- 198 -

EX-4.27

Exhibit 4.27

DATED: 14 January, 2005

THE GUARANTORS

NUCLEAR GENERATION DECOMMISSIONING FUND LIMITED

(to be renamed Nuclear Liabilities Fund Limited)

- AND -

THE SECRETARY OF STATE FOR TRADE AND INDUSTRY

GUARANTEE AND INDEMNITY

CONTENTS

Clause		Page
1	INTERPRETATION	2
2	GUARANTEE AND INDEMNITY	4
3	ADDITIONAL GUARANTORS; RELEASE OF GUARANTORS	8
4	LATE PAYMENT	10
5	REPRESENTATIONS AND WARRANTIES	10
6	UNDERTAKINGS	11
7	NO SET-OFF OR WITHHOLDING	16
8	SET-OFF BY GUARANTEED PARTY	17
9	LIABILITY	17
10	REMEDIES AND WAIVERS	17
11	INVALIDITY	18
12	CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999	18
13	FURTHER ASSURANCE	18
14	ENTIRE AGREEMENT	18
15	ASSIGNMENT	19
16	NOTICES	19
17	COSTS AND EXPENSES	20
18	COUNTERPARTS	20
19	CHOICE OF GOVERNING LAW	20
20	JURISDICTION	20
21	AGENT FOR SERVICE	21
Schedule 1 Guarantors		22

Schedule 2 Form of Accession Deed	23
Schedule 3 Documents for Additional Guarantors	24
Schedule 4 Material Subsidiaries	25

GUARANTEE AND INDEMNITY

DATE: 14 January, 2005

PARTIES:

(1) THE GUARANTORS, being at the date of this deed the persons specified in Schedule 1 (Guarantors);

(2) NUCLEAR GENERATION DECOMMISSIONING FUND LIMITED of 16 Rothesay Place, Edinburgh EH3 7SQ (registered in Scotland No. SC164685) (to be renamed Nuclear Liabilities Fund Limited) (“NLF”); and

(3) THE SECRETARY OF STATE FOR TRADE AND INDUSTRY of One Victoria Street, London SW1H OET (the “Secretary of State”).

BACKGROUND

(A) In 1996 the Secretary of State privatised certain parts of the nuclear generation industry in the United Kingdom through a sale of shares in British Energy Plc (“British Energy”).

(B) To facilitate the privatisation, a segregated fund was established for the purpose of providing arrangements for funding certain nuclear decommissioning liabilities of BEG and BEG(UK), and for this purpose the Nuclear Trust and NLF were established.

(C) In September 2002, British Energy initiated discussions with the Secretary of State with a view to seeking immediate financial support and to enable a longer term restructuring of British Energy to take place. In November 2002, British Energy announced the principles of a restructuring of the Group with its significant financial creditors which, together with other proposals agreed between British Energy and the Secretary of State, were intended to lead to a solvent restructuring of British Energy.

(D) British Energy, certain other members of the British Energy group and its significant financial creditors entered into a creditors’ restructuring agreement dated as of 30 September 2003 (the “Creditors Restructuring Agreement”) under the terms of which a solvent restructuring of the British Energy group would be effected. The solvent restructuring of the British Energy group to be thereby effected involved, inter alia, the creation of a new ultimate parent company, British Energy Group plc (“BE plc”) and a new wholly-owned subsidiary of BE plc, British Energy Holdings plc (“Holdings”). BE plc and Holdings will become the holding companies of BEG and BEG (UK).

(E) The proposals agreed between the Secretary of State and British Energy in connection with the restructuring of British Energy require British Energy and the other Guarantors to guarantee the obligations of the Licensees, the Ultimate Parent Company and Holdings under the Liabilities Documents.

(F) On 1 October 2003, British Energy, BEG, BEG (UK), certain other members of the British Energy group, NLF and the Secretary of State entered into an agreement (the “Government Restructuring Agreement”) under the terms of which they agreed to enter into the agreements that constitute the Liabilities Documents including, amongst other agreements, this Deed.

1

(H) Subject to the conditions set out in the Government Restructuring Agreement (which have been satisfied in full or waived in accordance with the terms thereof), the parties have agreed, inter alia, to enter into this Deed to record the provisions relating to the guarantee referred to in Recital E.

THIS DEED PROVIDES as follows:

1 INTERPRETATION

1.1 In this Deed (including the Recitals):

“Accession Deed”	means a document substantially in the form set out in Schedule 2 (Form of Accession Deed);
“Accounts”	means the consolidated annual accounts of the Group prepared in accordance with UK GAAP for the purposes of the Companies Act 1985 and audited and reported upon by the auditors of the Ultimate Parent Company as the main accounts of the Group;
“Additional Guarantor”	means a person which becomes an additional guarantor pursuant to, and in accordance with, clause 3 (Additional Guarantors; Release of Guarantors);
“Default Event”	has the meaning given to that expression in the Contribution Agreement;
“Eggborough Subsidiaries”	means Eggborough Power (Holdings) Limited and Eggborough Power Limited;
“Guaranteed Obligations”	has the meaning set out in clause 2.1;
“Guaranteed Party”	means the Secretary of State, NLF and any assignee or nominee of the Secretary of State under any of the Liabilities Documents (including, without limitation, any Station Purchaser and the Nirex Purchaser) to the extent that any such assignee or nominee has had rights under the Liabilities Documents vested in it by virtue of a permitted assignment or nomination of such rights;
“Guarantors”	means each person specified in Schedule 1 (Guarantors) and each Additional Guarantor, unless it has ceased to be a Guarantor in accordance with clause 3 (Additional Guarantors; Release of Guarantors);
“Material Subsidiary”	has the meaning given in Schedule 4 (Material Subsidiaries);

2

“Nirex Purchaser”	has the meaning given in the Nirex Option Agreement;
“Nuclear Liabilities Funding Agreement”	means the nuclear liabilities funding agreement of even date between the NLF, BEG(UK), BEG, BE plc, Holdings and the Secretary of State pursuant to which the NLF and the Secretary of State undertake to fund certain nuclear decommissioning and other liabilities of the Licensees;
“Obligors”	has the meaning given in clause 2.1;
“Proceedings”	means any proceeding, suit or action arising out of or in connection with this Deed;
“Service Documents”	means a claim form, application notice, order, judgement or other document relating to any Proceedings;
“Station Purchaser”	has the meaning given in the Option Agreement; and
“Trust Deed”	means the trust deed constituting the New Bonds between Holdings (as Issuer), The Law Debenture Trust Corporation p.l.c. (as Trustee) and certain members of the Group (as Guarantors).

1.2 In this Deed, unless otherwise stated:

1.2.1 words importing the singular only shall include the plural and vice versa;

1.2.2 references to any “party” shall be construed so as to include its successors in title, permitted assigns and permitted transferees;

1.2.3 references to a “company” shall be construed so as to include any company, corporation or other body corporate, wherever and however incorporated or established;

1.2.4 references to a “person” shall be construed so as to include any individual, firm, company, government, state or agency of a state, local or municipal authority or government body or any joint venture, association or partnership (whether or not having separate legal personality);

1.2.5 a reference to any statute or statutory provision shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted;

1.2.6 any reference to a “day” (including within the phrase “Business Day”) shall mean a period of 24 hours running from midnight to midnight;

1.2.7 a reference to any other document referred to in this Deed is a reference to that other document as amended, varied, novated or supplemented at any time;

3

1.2.8	(A)	the rule known as the ejusdem generis rule shall not apply and accordingly general words introduced by the word “other” shall not be given a restrictive meaning by reason of the fact that they are preceded by words indicating a particular class of acts, matters or things; and
	(B)	general words shall not be given a restrictive meaning by reason of the fact that they are followed by particular examples intended to be embraced by the general words;

1.2.9 the Schedules form part of this Deed and shall have the same force and effect as if expressly set out in the body of this Deed, and reference to this Deed shall include the Schedules;

1.2.10 references to any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official, or any legal concept or thing shall in respect of any jurisdiction other than England be deemed to include what most nearly approximates in that jurisdiction to the English legal term; and

1.2.11 a reference to a “clause”, “paragraph” or a “Schedule” is a reference to a clause or paragraph of, or a schedule to, this Deed.

1.3 All headings and titles are inserted for convenience only. They are to be ignored in the interpretation of this Deed.

1.4 Capitalised terms not otherwise defined in this Deed have the meanings ascribed to them in the Nuclear Liabilities Funding Agreement, or, if any such term is not defined in the Nuclear Liabilities Funding Agreement, in the Trust Deed (including any term incorporated in the Trust Deed by reference).

2 GUARANTEE AND INDEMNITY

Guarantee

2.1 In consideration of the Secretary of State and NLF entering into the Liabilities Documents, the Guarantors hereby unconditionally and irrevocably guarantee to the Guaranteed Parties the due and punctual performance and observance by the Licensees, Holdings and the Ultimate Parent Company (the “Obligors”) of all of their respective obligations, commitments and undertakings under or pursuant to each of the Liabilities Documents (the “Guaranteed Obligations”).

2.2 If and whenever an Obligor defaults for any reason whatsoever in the performance or satisfaction of any Guaranteed Obligation, each Guarantor shall forthwith upon demand unconditionally perform (or procure performance of) and satisfy (or procure satisfaction of) such Guaranteed Obligation in the manner prescribed by the Liabilities Document and so that the same benefits shall be conferred on the Guaranteed Parties as would have been received if such Guaranteed Obligation had been duly performed and satisfied by the applicable Obligor. However, nothing in this clause 2.2 shall require a Guarantor to perform any obligation of an Obligor (excluding any payment obligation) the performance of which by the Guarantor would be in breach of any law or regulation if performed by the Guarantor.

4

2.3 As a separate and independent obligation, the Guarantors agree that any Guaranteed Obligation expressed to be undertaken by an Obligor (including in each case and without limitation, any payment expressed to be payable under this Deed) which may not be enforceable against or recoverable from such Obligor whether:

2.3.1 by reason of any legal limitation or incapacity on or of the Obligor; or

2.3.2 by reason of any other fact or circumstance whatsoever (and whether any such fact or circumstance shall have been known to any Guaranteed Party or not),

shall nevertheless be enforceable against each Guarantor as though it were the sole or principal obligor and shall be performed, satisfied or paid by that Guarantor on demand. However, nothing in this clause 2.3 shall require a Guarantor to perform any obligation of an Obligor (excluding, in each case, any payment obligation) the performance of which by the Guarantor would be in breach of any law or regulation if performed by the Guarantor.

Indemnity

2.4 As an original and independent obligation under this Deed, each Guarantor shall:

2.4.1 indemnify the Guaranteed Parties and keep the Guaranteed Parties indemnified against any loss or liability of whatever kind and all costs and expenses properly incurred by any of them (including, in each case and without limitation, in connection with preserving or enforcing, or attempting to preserve or enforce, its rights under this Deed) resulting from:

(A) the failure by an Obligor to perform or satisfy any of the Guaranteed Obligations; or

(B) any of the Guaranteed Obligations being or becoming void, voidable, unenforceable or ineffective; and

2.4.2 pay on demand the amount of such cost, loss, expense or liability whether or not any of the Guaranteed Parties has attempted to enforce any rights against an Obligor or any other person or otherwise.

Effect of other provisions, events and documents on guarantee and indemnity

2.5 The obligations of each Guarantor under this Deed:

2.5.1 are in addition to and not in substitution for any other guarantee, indemnity or any security which any or all of the Guaranteed Parties may at any time hold for the performance of the Guaranteed Obligations (whether under this Deed, another Liabilities Document or otherwise); and

5

2.5.2 may be enforced by each of the Guaranteed Parties in its sole and absolute discretion without first having recourse to any such other guarantee and, indemnity or security, without taking any steps or proceedings against an Obligor or any other person, and without resorting to any other means of procuring the performance or satisfaction of the relevant Guaranteed Obligation.

2.6 No Guarantor shall be released or discharged from any of its obligations under this Deed, nor shall any of such obligations be in any way prejudiced or affected, by:

2.6.1 any invalidity, unenforceability, illegality or voidability of any Guaranteed Obligation expressed to be assumed or owed by an Obligor or of the obligations of any other Guarantor; or

2.6.2 any variation or amendment of, or waiver or release of, the Guaranteed Obligations; or

2.6.3 time being given, or any other indulgence or concession being granted, by any of the Guaranteed Parties to an Obligor or any other person; or

2.6.4 the taking, holding, failure to take or hold, varying, realisation, non-enforcement, non-perfection or release by any of the Guaranteed Parties or any other person of any other guarantee, indemnity or any security for any of the Guaranteed Obligations; or

2.6.5 any change in the constitution of an Obligor; or

2.6.6 a Default Event occurring in relation to an Obligor or any Guarantor; or

2.6.7 any amalgamation, merger or reconstruction that may be effected by NLF with any other person or any sale or transfer of the whole or any part of the undertaking and assets of NLF to any other person; or

2.6.8 the existence of any claim, set-off or other rights which the Guarantor may have at any time against an Obligor, the Guaranteed Parties or any other person, or which an Obligor may have at any time against any or all of the Guaranteed Parties whether in connection with this Deed or otherwise; or

2.6.9 the granting by any or all of the Guaranteed Parties to an Obligor or any Guarantor of any other financial accommodation or the withdrawal or restriction by any or all of the Guaranteed Parties of any financial accommodation, or the absence of any notice to the Guarantor of any such granting, withdrawal or restriction; or

2.6.10 any arrangement or compromise entered into by any or all of the Guaranteed Parties with an Obligor or any Guarantor or any other person; or

2.6.11 any other thing done or omitted or neglected to be done by any or all of the Guaranteed Parties or any other person; or

6

2.6.12 any other dealing, fact, matter or thing which, but for this provision, might operate to exonerate or discharge the Guarantor from, or otherwise prejudice or affect, any of the Guarantor’s obligations under this Deed.

Restrictions connected with guarantee and indemnity

2.7 Until the Guaranteed Obligations have been discharged and satisfied in full no Guarantor shall, without the prior written consent of the Secretary of State:

2.7.1 be subrogated to any rights of any or all of the Guaranteed Parties arising under any document, or in respect of any proof in a Default Event in respect of an Obligor or otherwise howsoever; or

2.7.2 in respect of any sum payable or paid under this Deed, seek to enforce repayment from an Obligor or another surety, whether by subrogation, indemnity, contribution or otherwise, or to exercise any other right, claim or remedy in respect of the amount so paid or payable; or

2.7.3 for so long as any Guaranteed Party has an outstanding claim or proof, claim payment of any other sum for the time being due to it from an Obligor or another surety, save for sums (i) arising in the ordinary course of business (ii) payable pursuant to the Liabilities Documents or (iii) payable pursuant to any intra-Group arrangement implemented to facilitate the payment of such sums, nor shall any Guarantor exercise any other right, claim or remedy which it has in respect thereof; or

2.7.4 be entitled to any right of a surety (including any right of contribution from any other surety) discharging, in whole or in part, its liability in respect of the principal debt; or

2.7.5 be entitled to have or exercise any right as a surety (including any right of contribution from any other surety) in competition with a Guaranteed Party; or

2.7.6 claim any set-off or assert any counterclaim against an Obligor or another surety in relation to any liability of the Guarantor to the Obligor or any other surety.

2.8 Until the Guaranteed Obligations have been discharged and satisfied in full, no Guarantor shall, if a Default Event occurs in respect of an Obligor or another surety:

2.8.1 claim or prove in competition with any or all of the Guaranteed Parties in respect of any sum owing to the Guarantor by the Obligor or any other surety; or

2.8.2 at any time when a Guaranteed Party has an outstanding claim or proof, accept any direct or indirect payment or distribution in respect of any sum owing to the Guarantor by the Obligor or any other surety. However, a Guarantor shall, if so directed by the Secretary of State, prove for the whole or any part of any sum due to the Guarantor from an Obligor or any other surety on terms that the benefit of such proof and of all moneys to be received by the Guarantor in

7

respect thereof shall be held on trust for the Guaranteed Parties (or such person or persons as the Secretary of State shall nominate) and applied in discharging the Guarantor’s obligations under this Deed.

3 ADDITIONAL GUARANTORS; RELEASE OF GUARANTORS

Additional Guarantors

3.1 The Secretary of State may require, by notice in writing to the Ultimate Parent Company, that any Material Subsidiary become an Additional Guarantor. If the Secretary of State makes such a request, the Ultimate Parent Company shall, within 15 Business Days of receipt of the notice from the Secretary of State, procure that:

3.1.1 a duly completed and executed Accession Deed is delivered to the Guaranteed Parties; and

3.1.2 the Secretary of State has received all of the documents and other evidence listed in Schedule 3 (Documents for Additional Guarantors) in relation to that Additional Guarantor, each in form and substance reasonably satisfactory to the Secretary of State.

In circumstances in which an assignment is to be effected under any or all of the other Liabilities Documents, the Ultimate Parent Company may also elect, without the consent of the Secretary of State or NLF, to procure that such assignee accedes to be bound by this Deed as an Additional Guarantor provided that such assignee has complied with the requirements of clauses 3.1.1 and 3.1.2.

3.2 The Secretary of State shall notify the Ultimate Parent Company and the Additional Guarantor promptly upon being satisfied that it has received (in form and substance reasonably satisfactory to it) all the documents and other evidence listed in Schedule 3 (Documents for Additional Guarantors).

3.3 The Guarantors and the Licensees shall procure that, immediately upon a person becoming the Ultimate Parent Company of the Group, that person shall become a party to this Deed as a Guarantor and the Guarantors and the Licensees shall procure that:

3.3.1 a duly completed and executed Accession Deed is delivered by that person to the Guaranteed Parties; and

3.3.2 the Secretary of State has received all of the documents and other evidence listed in Schedule 3 (Documents for Additional Guarantors) in relation to that person, each in form and substance reasonably satisfactory to the Secretary of State.

The Secretary of State shall notify the new Ultimate Parent Company promptly upon being satisfied that it has received (in form and substance reasonably satisfactory to it) all the documents and other evidence listed in Schedule 3 (Documents for Additional Guarantors).

8

3.4 Without prejudice to clause 3.1 or clause 3.2, at all times during which either (i) all or any of the New Bonds or the CTA Global Bond (each as defined in the Creditors Restructuring Agreement) are in issue; or (ii) any senior, unsecured debt resulting from a contemporaneous refinancing of the whole or part of the New Bonds or the CTA Global Bond is in issue the following shall apply:

3.4.1 The Ultimate Parent Company shall procure that the gross assets, turnover and profits (before interest and tax expense) of the Guarantors (taken as a whole) will at all times constitute in aggregate at least 90% of the consolidated gross assets, turnover and profits (before interest and tax expense) of the Group, calculated on a rolling four-quarter basis in accordance with UK GAAP (but excluding (a) all assets relating to amounts receivable under the Liabilities Documents, (b) the Eggborough Subsidiaries and (c) British Energy Trading Services Limited (for so long as it is unable to act as a Guarantor as a result of FSA or other legal or regulatory restriction relating to its business)).

3.4.2 In order to comply with clause 3.4.1, the Ultimate Parent Company may elect, without the consent of the Secretary of State or NLF, to procure that any Subsidiary accedes to be bound by this Deed as an Additional Guarantor provided that such accession shall not be effective until the relevant Subsidiary:

(A) delivers a duly completed and executed Accession Deed to the Guaranteed Parties; and

(B) provides to the Secretary of State all of the documents and other evidence listed in Schedule 3 (Documents for Additional Guarantors), each in form and substance reasonably satisfactory to the Secretary of State.

Release of Guarantors

3.5 The Ultimate Parent Company may request that a Guarantor ceases to be a Guarantor by a request made in writing and signed by the Ultimate Parent Company and the Guarantor. If:

3.5.1 the Guarantor is a Material Subsidiary, the Secretary of State may, in its sole and absolute discretion, accept or reject such request and promptly notify the Ultimate Parent Company and the Guarantor of its acceptance or rejection; or

3.5.2 the Guarantor is no longer a Material Subsidiary, the Secretary of State shall, subject to clause 3.4, accept such request and promptly notify the Ultimate Parent Company and the Guarantor of its acceptance, provided that the Secretary of State shall not be obliged to accept such request before it is determined in accordance with clause 3.6 below that the Guarantor is not a Material Subsidiary.

If the Secretary of State accepts a request under clause 3.5.1 or is required to accept a request under clause 3.5.2 the Guaranteed Parties will promptly execute a deed of release in respect of that Guarantor’s obligations under this Deed in form and substance reasonably satisfactory to such Guarantor.

9

3.6 Any determination of whether a member of the Group is or is not a Material Subsidiary shall be made in accordance with UK GAAP. A report of the auditors of the Ultimate Parent Company that, in their opinion, a member of the Group is or is not a Material Subsidiary shall be conclusive unless, within 20 Business Days of receiving a copy of such report, the Secretary of State serves notice on the Ultimate Parent Company that it disputes the determination of the auditors. Following receipt of such notice the Secretary of State and the Ultimate Parent Company shall use reasonable endeavours to settle the dispute within a period of 20 Business Days (or such longer period as the Secretary of State and the Ultimate Parent Company may mutually agree) from the date of receipt of such notice. If the dispute is not resolved within that period, the matter shall be referred to an independent accountant who shall act as an expert and not as an arbitrator and, in relation to such referral, the provisions of clause 42 (Dispute Resolution) of the Nuclear Liabilities Funding Agreement shall apply (to the extent that such provisions relate to determination of a dispute by an Expert) mutatis mutandis to a referral made under this clause 3 (Additional Guarantors; Release of Guarantors).

4 LATE PAYMENT

4.1 Each Guarantor agrees to pay interest on all amounts unpaid under this Deed after their due date for payment. This interest will be computed by reference to successive periods selected by the Secretary of State, which may not exceed 6 months. The first of these periods will start on the due date for payment of the unpaid amount. The rate of interest applicable during each of these periods will be a rate per annum equal to LIBOR plus 2 (two) per cent. This interest will be paid in arrear on the last day of each of these periods.

4.2 If a Guarantor fails to make a payment on the due date it shall reimburse the person entitled to the payment for the losses and expenses (including loss of profit) that person incurs, or will incur, as a result. The computation of these losses and expenses will take into account any amount received under clause 4.1.

5 REPRESENTATIONS AND WARRANTIES

5.1 Each of the Guarantors represents and warrants to the Guaranteed Parties that, as at the date of this Deed, each of the warranties set out in this clause 5.1 is true and accurate in all respects and not misleading:

5.1.1 each Guarantor is a company duly incorporated and validly existing under the laws of England and Wales or the laws of Scotland (as specified in Schedule 1 (Guarantors));

5.1.2 each Guarantor has the requisite capacity, power and authority to enter into and perform this Deed;

5.1.3 this Deed constitutes valid and binding obligations of each Guarantor in accordance with its terms;

5.1.4 the execution and delivery of this Deed, and the performance by each Guarantor of its obligations under this Deed will not:

(A) result in a breach of, or constitute a default under, any instrument by which it is bound;

10

(B) result in a breach of any order, judgement or decree of any court, governmental agency or regulatory body by which it is bound; or

(C) require the consent of any person; and

other than (in the case of paragraphs (A) and (B)) a breach or default that will not result in a Material Adverse Change (as defined in the Creditors Restructuring Agreement) or (in the case of paragraph (C)) a consent the failure to obtain which will not result in a Material Adverse Change; and

5.1.5 except where such event occurs for the purpose of implementing the restructuring of the Group in accordance with or as contemplated by the Creditors Restructuring Agreement, no Default Event has occurred or is continuing in relation to any Guarantor.

5.2 The Guarantors undertake to disclose in writing to the Guaranteed Parties anything which is or may constitute a breach of or be inconsistent with any of the representations and warranties set out in clause 5.1 immediately it comes to the notice of any of them.

6 UNDERTAKINGS

6.1 Except for the purpose of implementing the restructuring of the Group in accordance with or as contemplated by the Creditors Restructuring Agreement, the Guarantors shall not, and shall procure that no other member of the Group shall, without the consent in writing of the Secretary of State, undertake any corporate reconstruction, amalgamation, merger or demerger if to do so would result in, or could reasonably be expected to result in, an increase in Costs of Discharging Liabilities.

6.2 Each Guarantor covenants to the Guaranteed Parties that it shall procure that the Ultimate Parent Company provides to the Guaranteed Parties during the term of this Deed:

6.2.1 audited consolidated financial statements for the Group in accordance with UK GAAP, consistently applied, as soon as such statements are publicly released and in any event within 90 days of the end of each Financial Period;

6.2.2 all other quarterly or semi-annual financial statements of each member of the Group prepared in accordance with the UK GAAP, consistently applied, as soon as such statements are publicly released; and

6.2.3 all reports required to be published by the UKLA by virtue of the admission of any of the equity of the Ultimate Parent Company to the Official List of the UKLA and, if none of its equity is so listed, all such reports as if such equity were so admitted.

11

6.3 Each Guarantor covenants to the Guaranteed Parties that during the term of this Deed:

6.3.1 it shall, and shall procure that each member of the Group which is a Guarantor shall, provide the Guaranteed Parties with the following information:

(A) all notices, statements and circulars (together, “Documents”) despatched by any member of the Group to its shareholders or creditors (or any class thereof), such Documents to be provided at the same time as they are despatched; and

(B) all regulatory news statements;

6.3.2 it shall not, and shall procure that no member of the Group which is a Guarantor shall, directly or indirectly enter into any material transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of assets, property or services) with or for the benefit of any of its Affiliates (excluding BNFL) unless such transaction or series of related transactions is entered into on terms no less favourable to the member of the Group than those terms which would be available in a comparable transaction in arm’s length dealings with an unrelated party, save for:

(A) transactions which comply with Condition 8.4 (Eggborough Transactions) of the terms and conditions of the Bonds (as scheduled to the Trust Deed);

(B) the provision of benefit arrangements for any employee, officer or director, including vacation plans, health and life insurance plans, deferred compensation plans, director’s and officer’s indemnification agreements and retirement or savings plans and similar plans, and any stock option or stock incentive plans (together with the issuance of securities pursuant to, or for the purpose of the funding of, any such agreements or arrangements), entered into in the ordinary course of business and which are customary in industry;

(C) transactions entered into prior to the Issue Date or as part of the Restructuring (including, without limitation, under or pursuant to the Nuclear Liabilities Documentation as in effect on the Restructuring Date);

(D) payment of compensation to and reimbursement of expenses of its employees, officers and directors in the ordinary course of business;

(E) advances to employees which are Permitted Investments;

(F) its Trading Arrangements;

(G) transactions entered into on any arm’s length basis in the ordinary course of business between members of the Group;

12

(H) advances to employees, officers and directors (or guarantees of third party loans to employees, officers and directors) in the ordinary course of business;

(I) transactions with BNFL which comply with Condition 8.6 (Limitations on transactions with BNFL) of the terms and conditions of the Bonds (as scheduled to the Trust Deed);

(J) Permitted Payments; and

(K) any sale of Capital Stock of BE plc, other than Disqualified Capital Stock;

6.3.3 it shall not, and shall procure that no member of the Group shall, except with the prior written consent of the Guaranteed Parties, directly or indirectly create or agree to create or permit to arise or subsist any mortgage, pledge, lien, charge, assignment, hypothecation or other security interest or any other agreement or arrangement having the effect of conferring security (including, without limitation, any sale and leaseback but excluding, without limitation, any rights of set-off or combination of accounts arising under common law, in equity or under statute or regulation) (each a “Security Interest”), other than:

(A) any Security Interest existing on the Issue Date;

(B) any Security Interest required to be granted pursuant to, or as a condition precedent to, the Liabilities Documents, including to secure the payment of the Decommissioning Default Payment (as defined in the Contribution Agreement);

(C) any guarantee, indemnity or credit support in favour of a third party providing agency, brokerage, clearing or settlement services in respect of Trading Arrangements provided such guarantee, indemnity or credit support is for such services to the relevant member of the Group;

(D) any Security Interest under court judgements or court orders to the extent that the same are adequately bonded and appeals have not been exhausted;

(E) any Security Interest arising by reason of taxes, assessments or other governmental charges not yet delinquent or which are being contested in good faith;

(F) deposits to secure public, regulatory or statutory obligations or in lieu of surety bonds incurred in the ordinary course of business;

(G) any lien arising by operation of law;

(H) any rights of set-off with respect to demand or time deposits with financial institutions and banker’s liens and any depositary institution’s security in bank accounts with it in the ordinary course of business except where the relevant member of the Group indicates that such deposit is made by way of collateral;

13

(I) any Security Interest created by a member of the Group to secure Financial Indebtedness owing to another member of the Group;

(J) any Security Interest the principal purpose and effect of which is to allow the setting-off or netting of obligations of a member of the Group with those of a financial institution in the ordinary course of the cash management arrangements of that Group member;

(K) any Security Interest represented by good faith deposits in connection with tenders, leases and contracts (other than contracts for the payment of money) of the relevant member of the Group;

(L) any Security Interest to secure performance bonds, leases (including statutory and common law landlord’s liens), statutory obligations, surety and appeal bonds, letters of credit and other obligations of a like nature and incurred in the ordinary course of business;

(M) any Security Interest provided in connection with environmental licences and any other permits, licences or authorisations, or in compliance with any other regulatory requirements, in any such case in relation to any Permitted Business of the relevant Group member;

(N) any Security Interest over cash paid into an escrow account by any third party pursuant to any deposit or retention of purchase price arrangements entered into pursuant to any disposal or acquisition (permitted by the terms of the Bonds) made by a member of the Group;

(O) any Security Interest created under or in connection with or arising out of the Balancing and Settlement Code, the Connection and Use of System Code, the Grid Code, required under the terms of a Group member’s Electricity Generation Licence, Electricity Supply Licence or Gas Shipper’s Licence or otherwise reasonably required to obtain and maintain access to, or use of, transmission and distribution systems and participation in wholesale electricity markets in England, Wales or Scotland by any Group member provided that any collateral so provided by any Eggborough Subsidiary is provided on terms such that, upon release, such collateral shall not be paid to it but shall instead be returned to another Group member;

(P) any Security Interest given by way of cash collateral or cash deposits in relation to Trading Arrangements or procurement contracts with suppliers, in each case entered into in the ordinary course of that Group member’s business (or any such Security Interest given in respect of letters of credit relating to such obligations);

(Q) any Security Interest securing for the benefit of the vendor of a Renewables Obligation Certificate, emissions permits (in relation to the Eggborough Plant) or other similar or related permits, obligations or entitlements

14

(each, a “Permit”), some or all of the purchase price being payable in respect of such Permit, provided that such Security Interest only extends to such Permit and secures Financial Indebtedness in an amount not in excess of the purchase price for such Permit;

(R) any Security Interest over goods or documents of title arising in the course of letter of credit transactions entered into by a Group member in the ordinary course of business;

(S) any provision for the retention of title to any asset by the vendor or transferor of such asset which asset is acquired by a Group member in a transaction entered into in the ordinary course of business, if it is normal market practice for such retention of title provision to be included for such a transaction, or arising under conditional sale or hiring arrangements in respect of goods supplied in the ordinary course of trading;

(T) any Security Interest on assets of a member of the Group which becomes a member of the Group after the Restructuring Date, to secure obligations of that member of the Group existing at the date on which it becomes a member of the Group (but not any increase in principal amount (other than by capitalisation of interest) or extension of maturity of such obligations) provided that such Security Interest was not created in contemplation of or in connection with such company becoming a member of the Group, that such Security Interest shall not extend to any other assets owned by any member of the Group and that such obligations are repaid in full within 180 days of such company becoming a member of the Group;

(U) any Security Interest over receivables comprising part of the Secured Basket (including any Security Interest over related insurance policies taken out by the seller of the receivables in relation to the debtors under such receivables and any Security Interest over the records and systems necessary for producing invoices relating to such receivables);

(V) any other Security Interest not permitted under paragraphs (A) to (U) above securing obligations (contingent or otherwise) of up to £10,000,000 in aggregate at any one time; and

(W) renewals and/or refinancings referred to under paragraphs (A) to (V) above provided that such renewal or refinancing (as the case may be) of the Security Interest is limited to all or part of the same property or assets (including any improvements, accessions, proceeds or dividends or distributions in respect thereof) or is in respect of property that is subject to a permitted Security Interest under this clause 6.3.3,

15

unless at the same time it grants security equally and rateably to the Guaranteed Parties to secure amounts that are or may become payable under the Liabilities Documents, provided that this clause 6.3.3 shall cease to apply on the later of (a) the date on which the NLF Payment Percentage (as defined in the Contribution Agreement) falls below 10 per cent. and (b) 31 March 2014. Notwithstanding anything to the contrary in this clause 6.3.3, no Group member may create or agree to create or permit to arise or subsist any Security Interest in respect of any of its benefits and rights under the Historic Liabilities Funding Agreement or Nuclear Liabilities Funding Agreement. For the avoidance of doubt, no purpose trust declared, arising or subsisting in respect of moneys received by any member of the Group from the Secretary of State pursuant to the Historic Liabilities Funding Agreement or from the Secretary of State or the NLF pursuant to the Nuclear Liabilities Funding Agreement and which moneys are, in either case, required to be held on trust for the benefit of the Secretary of State or the NLF until they are applied to the purpose for which they were given, shall constitute a Security Interest for the purposes of the foregoing;

6.3.4 it shall, and shall procure that each member of the Group shall, maintain in force all authorisations, consents, approvals and licences that are necessary to ensure the validity and enforceability of their respective obligations under the Liabilities Documents; and

6.3.5 it shall, and shall procure that each member of the Group shall, take all steps reasonably required to be taken by it to ensure the validity and enforceability of any security required to be granted to NLF or the Secretary of State under any provision of the Liabilities Documents.

6.4 Each of the Guarantors undertakes to disclose in writing to the Guaranteed Parties anything which is or may constitute a breach of or be inconsistent with any of the covenants in this clause 6 (Undertakings) immediately it comes to the notice of any of them.

7 NO SET-OFF OR WITHHOLDING

7.1 All payments to be made to a Guaranteed Party by a Guarantor or by a Guaranteed Party to a Guarantor under this Deed shall be made in full, subject to the provisions of clause 8 (Set-off by Guaranteed Party) and except to the extent a deduction or withholding is permitted under clause 7.2. All such payments will be free and clear of any right of set-off and from any restriction, condition or deduction because of any counterclaim.

7.2 All payments to be made to a Guaranteed Party by a Guarantor under this Deed shall be made in full without deduction or withholding of or in respect of any Tax, unless this is required by law. Where such a deduction or withholding is so required, the Guarantor shall be permitted to make such deduction or withholding.

7.3 If a Guarantor becomes or will become required by law to make any deduction or withholding under clause 7.2 or there is or will be any change in the requirement to make any such deduction or withholding, the Guarantor will give notice to the Guaranteed Parties of any such requirement or change in requirement as soon as the Guarantor becomes aware of it.

16

8 SET-OFF BY GUARANTEED PARTY

8.1 Each Guaranteed Party may, without prejudice to any of its or her other rights, set off any matured obligation owed by the Guarantor under this Deed to the Guaranteed Party against any obligation (whether or not matured) owed by the Guaranteed Party to the Guarantors. Each Guaranteed Party shall endeavour to give notice to a Guarantor of any set off on or before the set off is effected but failure by such Guaranteed Party to give notice shall not affect the rights of those parties to set off or invalidate any set off effected by them.

8.2 If the obligations referred to in clause 8.1 are in different currencies, then, for the purpose of any such set-off, the Guaranteed Party may convert any such obligations at the rate of exchange determined by it in its sole and absolute discretion to be prevailing at the date of set-off.

8.3 This clause 8 (Set-off by Guaranteed Party) is intended to give rise to rights in contract only and is not intended to constitute, create or give rise to a security interest of any kind over any asset of the Guarantors. If and to the extent that any right conferred under this clause 8 (Set-off by Guaranteed Party) would, notwithstanding the foregoing sentence, constitute, create or give rise to any security interest, such right shall be of no effect.

9 LIABILITY

9.1 The liabilities of the Guarantors under this Deed are joint and several. If any liability of one or any of the Guarantors is, or becomes, illegal, invalid or unenforceable in any respect, that shall not affect or impair the liabilities of the other Guarantors under this Deed.

9.2 Where any liability of any of the Guarantors which is both joint and several is discharged (in whole or in part), which shall include release, accord and satisfaction or otherwise, the other Guarantors shall continue to be jointly and severally liable in respect of that liability.

9.3 The Secretary of State may release or compromise the liability of any of the Guarantors or grant time or other indulgence to the same without releasing or reducing the liability of any other party.

10 REMEDIES AND WAIVERS

10.1 No delay or omission by any party in exercising any right, power or remedy provided by law or under this Deed or any other documents referred to in it shall affect that right, power or remedy or operate as a waiver of it.

10.2 The single or partial exercise of any right, power or remedy provided by law or under this Deed shall not preclude any other or further exercise of such right, power or remedy or the exercise of any other right, power or remedy.

10.3 The rights, powers and remedies provided in this Deed are cumulative and not exclusive of any rights, powers and remedies provided by law.

17

11 INVALIDITY

If at any time any provision of this Deed is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, that shall not affect or impair:

(A) the legality, validity or enforceability in that jurisdiction of any other provision of this Deed; or

(B) the legality, validity or enforceability under the law of any other jurisdiction of that or any other provision of this Deed.

12 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

12.1 Subject to clause 12.2, the parties to this Deed do not intend that any term of this Deed should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Deed.

12.2 The Guarantors acknowledge and agree that a Guaranteed Party which is not a party to this Deed may enforce any or all of the provisions of this Deed.

13 FURTHER ASSURANCE

Each of the Guarantors shall at its own cost, from time to time on request, do or procure the doing of all acts and/or execute or procure the execution of all documents in a form reasonably satisfactory to the Guaranteed Parties which each such party may reasonably consider necessary for giving full effect to this Deed and securing the full benefit of the rights, powers and remedies conferred upon them in this Deed.

14 ENTIRE AGREEMENT

14.1 This Deed and the other Liabilities Documents constitute the whole and only agreement between the parties relating to the subject matter of this Deed and the other Liabilities Documents.

14.2 Each party acknowledges that in entering into this Deed and the other Liabilities Documents it is not relying upon any pre-contractual statement which is not set out in one or more of the Liabilities Documents.

14.3 Except in the case of fraud, no party shall have any right of action against any other party arising out of or in connection with any pre-contractual statement except to the extent that it is repeated in one or more of the Liabilities Documents.

14.4 For the purposes of this clause 14 (Entire Agreement), “pre-contractual statement” means any draft, agreement, undertaking, representation, warranty, promise, assurance or arrangement of any nature whatsoever, whether or not in writing, relating to the subject matter of one or more of the Liabilities Documents made or given by any person at any time prior to the date of this Deed.

18

15 ASSIGNMENT

Prohibition on Assignment

15.1 Subject to clause 15.2, no party may at any time:

15.1.1 assign all or any part of the benefit of, or its rights or benefits under, this Deed; or

15.1.2 make a declaration of trust in respect of or enter into any arrangement whereby it agrees to hold in trust for any other person all or any part of the benefit of, or its rights or benefits under, this Deed; or

15.1.3 sub-contract or enter into any arrangement whereby another person is to perform any or all of its obligations under this Deed.

Permitted Transfer

15.2 Each Guaranteed Party may at any time assign all or any part of the benefit of this Deed to its assignees and nominees under any of the Liabilities Documents (including, without limitation, any Station Purchaser and the Nirex Purchaser) to the extent that any such assignee or nominee has had rights under the Liabilities Documents vested in it by virtue of a permitted assignment or nomination of such rights.

16 NOTICES

16.1 A notice under this Deed shall only be effective if it is in writing. Telexes and e-mail notices are not permitted but faxes are permitted.

16.2 Notices under this Deed shall be sent to a party at its address or number and for the attention of the individual set out below:

Party	Address	Facsimile No.	Attention
Any Guarantor	c/o The Company Secretary British Energy Group plc Systems House Alba Campus Livingston EH54 7EG	01506 408 824	Company Secretary
The Secretary of State	One Victoria Street London SW1H OET	020 7215 0138	Head of British Energy Team, Energy Group
NLF	78 Hatton Garden London EC1N 8JA	020 7405 6736	Company Secretary

19

provided that a party may change its notice details on giving notice to the other party of the change in accordance with this clause 16 (Notices). That notice shall only be effective on the date falling five clear Business Days after the notification has been received or such later date as may be specified in the notice.

16.3 Any notice given under this Deed shall, in the absence of earlier receipt, be deemed to have been duly given as follows:

16.3.1 if delivered personally, on delivery;

16.3.2 if sent by first class post from the UK to a UK address, two clear Business Days after the date of posting;

16.3.3 if sent by first class airmail from the UK to an address outside the UK, five clear Business Days after the date of posting; and

16.3.4 if sent by facsimile, when clearly received in full.

16.4 Any notice given under this Deed outside Working Hours in the place to which it is addressed shall be deemed not to have been given until the start of the next period of Working Hours in such place.

16.5 The provisions of this clause 16 (Notices) shall not apply in relation to the service of Service Documents.

17 COSTS AND EXPENSES

Except as otherwise stated in this Deed or any other agreement between any of the parties to this Deed, each party shall pay its own costs and expenses in relation to the negotiation, preparation, execution and carrying into effect of this Deed.

18 COUNTERPARTS

18.1 This Deed may be executed in any number of counterparts, and by the parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart.

18.2 Each counterpart shall constitute an original of this Deed, but all the counterparts shall together constitute but one and the same instrument.

19 CHOICE OF GOVERNING LAW

This Deed is to be governed by and construed in accordance with English law.

20 JURISDICTION

20.1 The courts of England are to have jurisdiction to settle any dispute arising out of or in connection with this Deed. Any Proceedings may be brought in the English courts.

20.2 Any Proceedings may also be brought in the courts of Scotland.

20

20.3 Any party may bring Proceedings in any court which has jurisdiction other than by virtue of clause 21 (Agent for Service).

20.4 This clause 20 (Jurisdiction) shall not limit the right of any party to bring Proceedings, to the extent permitted by law, in the courts of more than one jurisdiction at the same time.

20.5 Each party waives (and agrees not to raise) any objection, on the ground of forum non conveniens or on any like ground, to the taking of Proceedings by another party in any court in accordance with this clause. Each party also agrees that a judgement against it in Proceedings brought in any jurisdiction in accordance with this clause 20 (Jurisdiction) shall be conclusive and binding upon it and may be enforced in any other jurisdiction.

20.6 Each party irrevocably submits and agrees to submit to the jurisdiction of the English courts and of any other court in which Proceedings may be brought in accordance with this clause.

21 AGENT FOR SERVICE

21.1 Each person specified in Schedule 1 (Guarantors) as being incorporated in a jurisdiction other than England and Wales and each Additional Guarantor incorporated in a jurisdiction other than England and Wales irrevocably appoints BEG, and NLF irrevocably appoints PKF of 78 Hatton Garden, London EC1N 8JA, in each case to be its agent for the receipt of Service Documents and each of them agrees that any Service Documents may be effectively served on it in connection with Proceedings in England and Wales by service on its agent effected in any manner permitted by the Civil Procedure Rules 1998 (as amended).

21.2 If an agent at any time ceases for any reason to act as such for one or more of the appointing parties that or those appointing parties shall appoint a replacement agent having an address for service in England and Wales and shall notify the other parties of the name and address of the replacement agent. Failing such appointment and notification, the Secretary of State shall be entitled by notice to appoint a replacement agent to act on behalf of the appointing parties. The provisions of this clause 21 (Agent for Service) applying to service on an agent apply equally to service on a replacement agent.

21.3 A copy of any Service Document served on an agent shall be sent by post to the appointing parties. Failure or delay in so doing shall not prejudice the effectiveness of service of the Service Document.

IN WITNESS of which this document has been executed and delivered as a Deed on the date which first appears on page 1 above.

21

Schedule 1

Guarantors

Company	Country of Incorporation	Company Number
British Energy Group plc	Scotland	SC270184
British Energy Holdings plc	Scotland	SC270186
British Energy plc	Scotland	SC162273
British Energy Generation (UK) Limited	Scotland	SC117121
British Energy Generation Limited	England	03076445
British Energy Power and Energy Trading Limited	Scotland	SC200887
British Energy Investment Limited	Scotland	SC173730
District Energy Limited	England	02362017
British Energy International Holdings Limited	Scotland	SC138614
Peel Park Funding Limited	Scotland	BR006311
British Energy Treasury Finance Limited	Scotland	SC251425
British Energy Renewables Limited	Scotland	SC214892
British Energy Direct Limited	England	04935015

22

Schedule 2

Form of Accession Deed

To:	Nuclear Liabilities Fund Limited and
	The Secretary of State
From:	[Additional Guarantor] and [Ultimate Parent Company]
Dated:

Dear Sirs

Guarantee and Indemnity dated 14 January, 2005

(the “Guarantee”)

1. We refer to the Guarantee. This is an Accession Deed. Terms defined in the Guarantee have the same meanings in this Accession Deed unless given a different meaning in this Accession Deed.

2. [Additional Guarantor] agrees to become an Additional Guarantor and to be bound by the terms of the Guarantee as an Additional Guarantor pursuant to clause 3 (Additional Guarantors; Release of Guarantors) of the Guarantee. [Additional Guarantor] is a company duly incorporated under the laws of [name of relevant jurisdiction].

3. [Additional Guarantor] represents and warrants on the terms set out in clause 5 (Representations and Warranties) of the Guarantee.

4. [Additional Guarantor’s] administrative details are as follows:

Address:	Fax No:	Attention:
·	·	·

5. [Additional Guarantor] irrevocably appoints · of · to be its agent for the receipt of Service Documents for the purposes of clause 21 (Agent for Service).

6. This Accession Deed is governed by and shall be construed in accordance with, English law.

7. This Accession Deed is entered into by Deed.

[Appropriate execution clause]

23

Schedule 3

Documents for Additional Guarantors

1. A certified copy of the constitutional documents of the Additional Guarantor.

2. A certified copy of a resolution of the board of directors of the Additional Guarantor:

(a) approving the terms of, and the transactions contemplated by, the Accession Deed and resolving that it execute the Accession Deed; and

(b) authorising a specified person or persons to execute the Accession Deed on its behalf.

3. A copy of any other authorisation or other document, opinion or assurance which the Secretary of State considers to be necessary or desirable in connection with the entry into and performance of the transactions contemplated by the Accession Deed or the validity and enforceability of the Guarantee as against the Additional Guarantor.

4. Security documentation granting valid first ranking fixed and floating security in favour of NLF, in form and substance reasonably comparable to the security granted in favour of the Secretary of State under or in connection with the Credit Facility Agreement (with such amendments as NLF may reasonably require), to secure the Decommissioning Default Payment, together with all consents and approvals for the creation of that security and/or such other security documentation as NLF may reasonably require for the purpose of creating security interests in favour of NLF over any or all of the assets and undertaking of the assignee, on such terms as NLF may reasonably require for the purposes of securing the Decommissioning Default Payment.

24

Schedule 4

Material Subsidiaries

For the purposes of this Deed, a “Material Subsidiary” means:

1. at all times during which either (i) all or any of the New Bonds or the CTA Global Bond (each as defined in the Creditors Restructuring Agreement) are in issue; or (ii) any senior, unsecured debt resulting from a contemporaneous refinancing of the whole or part of the New Bonds or the CTA Global Bond is in issue, each member of the Group whose gross assets, turnover or profits (before interest and taxation) is 5 per cent. or more of the consolidated assets, turnover or profits (before interest and taxation) respectively of the Group (in each case excluding all assets relating to amounts receivable under the Liabilities Documents); and

2. at all times after which paragraph 1 has ceased to apply, each member of the Group:

(A)	(i)	whose profits (before interest and taxation) are 15 per cent. or more of the consolidated profits of the Group (before interest and taxation); or
	(ii)	whose gross assets are 15 per cent. or more of the consolidated gross assets of the Group (in each case excluding all assets relating to amounts receivable under the Liabilities Documents),
	all as shown (in the case of a member) in its most recent annual audited accounts and (in the case of the Group) in the most recent Accounts; or
(B)	which becomes a member of the Group or acquires assets subsequent to the date of the then most recent Accounts and:
	(i)	whose profits (before interest and taxation) would be 15 per cent. or more of the consolidated profits of the Group (before interest and taxation); or
	(ii)	whose gross assets would be 15 per cent. or more of the consolidated gross assets of the Group (in each case excluding all assets relating to amounts receivable under the Liabilities Documents),
	if the Accounts and the annual audited accounts of the Group member were prepared on its becoming a member of the Group or as at the date of acquisition of such assets, as the case may be,
provided that:
(i)	a member of the Group which becomes a Material Subsidiary pursuant to paragraph (B) shall cease to be a Material Subsidiary after the date of publication of the first Accounts prepared after the member becomes a Material Subsidiary, unless it is still a Material Subsidiary pursuant to paragraph (A); and
(ii)	for the purposes of paragraph (B) above, in determining whether a member of the Group is a Material Subsidiary, the latest Accounts and the most recent

25

annual audited accounts of the relevant member shall be adjusted as the auditors of BE plc think fair and appropriate to take account of members or assets acquired or disposed of subsequent to the date of the then most recent Accounts.

3. For the purposes of paragraphs 1 and 2 above:

(A)	the Eggborough Subsidiaries, unless and until either (i) Eggborough Power Limited shall have ceased to own the Eggborough Plant, (ii) Eggborough Power (Holdings) Limited shall have ceased to own the shares in EPL or (iii) the Eggborough Security is released in accordance with its terms (subject to the satisfaction of the foregoing tests); and
(B)	British Energy Trading Services Limited (“BETS”), for so long as it is unable to act as a Guarantor as a result of legal or regulatory restriction relating to its business,

shall not constitute Material Subsidiaries.

4. At any time during which either of the Eggborough Subsidiaries and/or BETS are not Guarantors any calculations of the assets, turnover and profit (before interest and tax expense) of the Group shall exclude the assets, turnover and profit (before interest and tax expense) attributable to those entities.

26

SECRETARY OF STATE	)
The corporate seal of the	)
Secretary of State for	)
Trade and Industry	)
hereunto affixed is	)
authenticated by Ruth	)
Hannant, an official of the	)
Department of Trade and
Industry
Executed as a deed by	)
NUCLEAR GENERATION	)	Director
DECOMMISSIONING	)
FUND LIMITED acting by a	)
director and its secretary or	)	Director/Secretary
two directors
Executed as a deed by
and by
as attorneys for
BRITISH ENERGY GROUP PLC
in the presence of:
Signature of witness:
Name of witness:
Address of witness:
Occupation of witness:

27

Executed as a deed by

and by

as attorneys for

BRITISH ENERGY

HOLDINGS PLC

in the presence of:

Signature of witness:

Name of witness:

Address of witness:

Occupation of witness:

Executed as a deed by

and by

as attorneys for

BRITISH ENERGY PLC

in the presence of:

Signature of witness:

Name of witness:

Address of witness:

Occupation of witness:

28

Executed as a deed by

and by

as attorneys for

BRITISH ENERGY

GENERATION (UK)

LIMITED

in the presence of:

Signature of witness:

Name of witness:

Address of witness:

Occupation of witness:

Executed as a deed by

and by

as attorneys for

BRITISH ENERGY GENERATION LIMITED

in the presence of:

Signature of witness:

Name of witness:

Address of witness:

Occupation of witness:

29

Executed as a deed by

and by

as attorneys for

BRITISH ENERGY

POWER AND ENERGY

TRADING LIMITED

in the presence of:

Signature of witness:

Name of witness:

Address of witness:

Occupation of witness:

Executed as a deed by

and by

as attorneys for

BRITISH ENERGY

INVESTMENT LIMITED

in the presence of:

Signature of witness:

Name of witness:

Address of witness:

Occupation of witness:

30

Executed as a deed by

and by

as attorneys for

DISTRICT ENERGY

LIMITED

in the presence of:

Signature of witness:

Name of witness:

Address of witness:

Occupation of witness:

Executed as a deed by

and by

as attorneys for

BRITISH ENERGY

INTERNATIONAL

HOLDINGS LIMITED

in the presence of:

Signature of witness:

Name of witness:

Address of witness:

Occupation of witness:

31

Executed as a deed by

and by

as attorneys for

PEEL PARK FUNDING

LIMITED

in the presence of:

Signature of witness:

Name of witness:

Address of witness:

Occupation of witness:

Executed as a deed by

and by

as attorneys for

BRITISH ENERGY

TREASURY FINANCE

LIMITED

in the presence of:

Signature of witness:

Name of witness:

Address of witness:

Occupation of witness:

32

Executed as a deed by

and by

as attorneys for

BRITISH ENERGY

RENEWABLES LIMITED

in the presence of:

Signature of witness:

Name of witness:

Address of witness:

Occupation of witness:

Executed as a deed by

and by

as attorneys for

BRITISH ENERGY

DIRECT LIMITED

in the presence of:

Signature of witness:

Name of witness:

Address of witness:

Occupation of witness:

CA032750022

33

EX-4.28

Exhibit 4.28

CONFORMED COPY

AMENDED AND RESTATED CREDIT AGREEMENT

Credit agreement originally dated 13th July, 2000

as amended and restated by an amendment and restatement agreement

dated 30 September, 2004

for

£150,000,000 FACILITY

between

EGGBOROUGH POWER LIMITED

as Borrower

and

BARCLAYS CAPITAL

as Arranger

and

BARCLAYS BANK PLC

as Agent and Security Trustee

ALLEN & OVERY LLP

LONDON

CONTENTS

Clause		Page
1.	Interpretation	1
2.	Facility	16
3.	Purpose	16
4.	Drawdown	16
5.	Repayment	17
6.	Prepayment	17
7.	Interest Periods	19
8.	Interest	20
9.	Options	20
10.	Payments	20
11.	Taxes	21
12.	Illegality	24
13.	Mitigation	25
14.	Representations and Warranties	25
15.	Undertakings	27
16.	Pensions	37
17.	Default	38
18.	Consequences of an Event of Default	43
19.	The Agent and the Arranger	44
20.	Fees	48
21.	Expenses	49
22.	Stamp Duties	49
23.	Evidence and Calculations	49
24.	Amendments and Waivers	50
25.	Changes to the Parties	51
26.	Advisers	53
27.	Disclosure of Information	54
28.	Set-Off	54
29.	Severability	54
30.	Pro Rata Sharing	55
31.	Counterparts	56
32.	Notices	56
33.	Jurisdiction	57
34.	Governing Law	57
Schedule
1.	Banks
2.	Repayment Instalments	58
	Part 1        Loan	59
3.	Form of Novation Certificate	60
4.	Insurance Arrangements	61
5.	Confidentiality Undertaking	84
6.	Operating Report	87

2

THIS AGREEMENT was originally dated 13th July, 2000 and was amended and restated on 24th October, 2000, 12^th December, 2000, 5th February, 2001 and on the Restatement Date (as defined below) and is made

BETWEEN:

(1) EGGBOROUGH POWER LIMITED as borrower (the Borrower);

(2) BARCLAYS CAPITAL (the investment banking division of Barclays Bank PLC) as Arranger (in this capacity the Arranger);

(3) THE FINANCIAL INSTITUTIONS listed in Schedule 1 as Banks (the Banks);

(4) BARCLAYS BANK PLC as Agent (in this capacity the Agent); and

(5) BARCLAYS BANK PLC as Security Trustee (in this capacity the Security Trustee)

IT IS AGREED as follows:

1. INTERPRETATION

1.1 Definitions

In this Agreement:

Account Bank means such bank as the Borrower and the Majority Banks agree shall act as Account Bank and which shall open (or have opened) each of the Accounts on behalf of the Borrower, under the Accounts Agreement.

Accounts means each of the accounts of the Borrower defined as such in the Accounts Agreement.

Accounts Agreement means the accounts agreement dated on or about the date of the Amendment and Restatement Agreement between the Borrower, the Account Bank and the Agent.

Affiliate means a Subsidiary or a Holding Company of a bank or a company or any other Subsidiary of that Holding Company.

Agency includes, in relation to a state or supranational organisation, any agency, authority, central bank, department, government, legislature, ministry, official or public person (whether autonomous or not) of or the government of, that state or supranational organisation.

****************************************************************************************************

****************************************************************************************************

*************************^(****)

****************************************************************************************************

**************************************************

****************************************************************************************************

**************************************************

****************************************************************************************************

****************************************************************************************************

****************************************************************************************************

^****

^(****) indicates material omitted and filed separately with the Commission.

1

Amendment and Restatement Agreement means the agreement dated entered or to be entered into between, amongst others, the Parties and under which this Agreement was amended and restated on the Restatement Date.

Amortisation Schedule has the meaning given to that term in the New Bonds.

Annual Operating Plan has the meaning given to that term in the Capacity and Tolling Agreement.

Approved Fuel has the meaning given to that term in the Capacity and Tolling Agreement.

Asset Option Agreement means the asset option agreement between the Borrower and the Security Trustee dated on or about the date of the Amendment and Restatement Agreement under which the Borrower grants an option to the Security Trustee to acquire the Business and Station Assets (each as defined in that agreement).

Balancing and Settlement Code means the document setting out balancing and settlement arrangements established by NGC under its transmission licence.

Banks’ Insurance Adviser means Marsh UK Limited or such other firm of insurance advisers as may be appointed under Clause 26 (Advisers).

Banks’ Technical Adviser means PB Power Limited or such other independent firm of consultant engineers as may be appointed under Clause 26 (Advisers).

BE means British Energy plc, a company incorporated under the laws of Scotland.

BEC Group means the British Energy Combined Group of the ESPS.

BET means British Energy Power and Energy Trading Limited, a company incorporated under the laws of Scotland.

BET Event means the failure by BET to comply with any of its payment obligations under the Capacity and Tolling Agreement within any applicable grace period permitted thereunder save to the extent such non-compliance is (i) waived by the Borrower (with the consent of the Agent) or (ii) remedied.

Bond Certificate has the meaning given to that term in the Conditions.

Bondholders has the meaning given to that term under the Trust Deed.

Break Option has the meaning given to that term in the Option Agreements.

Break Option Completion Date means 31st March, 2010.

Business Day shall have the meaning given to the term “business day” in the Conditions.

^**** indicates material omitted and filed separately with the Commission.

2

Capacity and Tolling Agreement means the capacity and tolling agreement dated on or about the date of the Amendment and Restatement Agreement between BET and the Borrower.

Capital Investment Works has the meaning given to that term in the Capacity and Tolling Agreement.

Commitment means:

(a) in relation to a Bank which is a Bank on the Restatement Date, the amount in Sterling set opposite its name in Schedule 1 (being the amount of its participation in the Loan) and the amount of any other Bank’s Commitment acquired by it under Clause 25 (Changes to the Parties); and

(b) in relation to a Bank which becomes a Bank after the Restatement Date, the amount of any other Bank’s Commitment acquired by it under Clause 25 (Changes to the Parties),

to the extent not cancelled, transferred or reduced under this Agreement.

Compensation means:

(a) all consideration received by the Borrower in respect of the partial or total nationalisation, expropriation or compulsory purchase of the Plant or any interest in the Plant;

(b) any sum payable to or for the account of the Borrower in respect of the release, inhibition, modification, suspension or extinguishment of any rights, easements or covenants enjoyed by or benefiting the Plant, or the imposition of any restrictions affecting the Plant, or the grant of any easement or rights over or affecting the Plant or any part of them; and

(c) any sum payable to or for the account of the Borrower in respect of the refusal, revocation, suspension or modification of any authorisation or exemption subject to conditions, or any other official order or notice restricting the construction or operation of the Plant (or any part thereof);

but excluding Insurance Proceeds.

Conditions means the terms and conditions of the New Bonds set out in the Trust Deed, as may be amended, modified, varied or supplemented from time to time and Condition means any such term or condition.

Creditor Restructuring Agreement means the creditor restructuring agreement dated as of 30th September, 2003 between, amongst others, the Borrower, BE and BET.

CTA Bonds has the meaning given to that term in the Trust Deed.

CUSC means the Connection and Use of System Code and related bilateral agreements, as modified from time to time, governing the connection to and use of the NGC Transmission System.

Dangerous Substance means any radioactive emissions and any natural or artificial substance (whether in solid or liquid form or in the form of a gas or vapour and whether alone or in combination with any other substance) capable of causing

3

harm to man or any other living organism supported by the environment or damaging the environment or public health or welfare including but not limited to any controlled, special, hazardous, toxic, radioactive or dangerous waste.

Debentures means the Existing Debenture and the New Debenture.

Default means an Event of Default or an event or circumstance which, with the giving of notice, lapse of time, determination of materiality or fulfilment of any other applicable condition under Clause 17 (Default) (or any combination of the foregoing), would constitute an Event of Default.

Distribution means a dividend or other distribution (in cash or in kind) in respect of the share capital of the Borrower.

Documents means the Finance Documents and the Project Contracts.

Eggborough Contracts means:

(a) the first intercompany loan agreement dated on or around the date of the Amendment and Restatement Agreement between EPHL the Issuer;

(b) the Second Intercompany Loan Agreement;

(c) the First Security Assignment;

(d) the Second Security Assignment; and

(e) the Share Subscription Agreement.

Enforcement Option has the meaning given to that term in the Option Agreements.

Enforcement Option Completion Date has the meaning given to that term in the Option Agreements.

Environmental Claim means any claim, notice, prosecution, demand, action, official warning, abatement or other order (conditional or otherwise) relating to any violation of Environmental Law or any Environmental Contamination and any formal written notification or order requiring compliance with the terms of any Environmental Licence or Environmental Law, or in connection with any Environmental Contamination.

Environmental Contamination means each of the following and their consequences:

(a) any release, emission, leakage or spillage of any Dangerous Substance at in, on, under or from the Plant into any part of the environment; or

(b) any accident, fire, explosion or sudden event at the Plant which is directly or indirectly caused by or attributable to any Dangerous Substance; or

(c) any other pollution of the environment.

Environmental Law means any national or European Union law, statute, common law, bye law, regulation or directive code of practice, circular, guidance note and the like concerning the protection of human health, the environment or Dangerous Substances.

4

Environmental Licence means any authorisation, consent, permit, exemption, licence or other approval or agreement required by any Environmental Law.

EPHL means Eggborough Power (Holdings) Limited a company incorporated under the laws of Scotland.

EPHL Assignment means the assignment agreement dated 8th September, 2000 between EPHL and the Security Trustee.

EPHL Security Document means the deed of assignment and mortgage dated on or about the date of the Amendment and Restatement into Agreement between EPHL and the Security Trustee.

ESPS means the Electricity Supply Pension Scheme established by a Resolution and Scheme on 20th January 1983 (as amended from time to time).

Event of Default means an event specified as such in Clause 17.1 (Events of Default).

Existing Debenture means the debenture dated 8th September, 2000 between the Borrower and the Security Trustee.

Facility means a credit facility made available under this Agreement.

Facility Office means the office(s) notified by a Bank to the Agent:

(a) on or before the date it becomes a Bank; or

(b) by not less than five Business Days’ notice,

as the office(s) through which it will perform all or any of its obligations under this Agreement.

Fee Letter means each letter dated on or about the date of this Agreement between certain Finance Parties and the Borrower setting out the amount of various fees referred to in Clause 20 (Fees).

FGD means the process of flue gas desulphurisation.

FGD Contract means the flue gas desulphurisation plan agreement dated 30th July, 2001 between the Borrower and FLS Miljo a/s contractor for the installation of the FGD Units.

FGD Units means the two operational generating units that are being fitted with the wet FGD equipment.

FGD Works has the meaning given to it in the FGD Contract.

Final Repayment Date means 31st March, 2022 or the date the Agent declares all sums due and payable under this Agreement following an Event of Default.

Finance Document means:

(a) this Agreement;

(b) the Amendment and Restatement Agreement;

5

(c) a Security Document;

(d) the Accounts Agreement;

(e) the Intercreditor Agreement;

(f) a Fee Letter;

(g) an Option Agreement,

or any other document designated as such by the Agent and the Borrower.

Finance Party means the Arranger, a Bank, the Security Trustee, the Account Bank or the Agent (and together the Finance Parties).

Financial Year means each financial year of the Borrower ending on 31st March.

Financial Indebtedness means any indebtedness in respect of:

(a) moneys borrowed or debit balances (net of credit balances where a right of set-off in respect of such credit balances exists) at banks and other financial institutions;

(b) any debenture, bond, note, loan stock or other security;

(c) any acceptance or documentary credit;

(d) receivables sold or discounted (otherwise than on a non-recourse basis);

(e) the acquisition cost of any asset to the extent payable before or after the time of acquisition or possession by the party liable where the advance or deferred payment is arranged primarily as a method of raising finance or financing the acquisition of that asset;

(f) any lease entered into primarily as a method of raising finance or financing the acquisition of the asset leased;

(g) any currency swap or interest swap, cap or collar arrangement or any other derivative instrument;

(h) any amount raised under any other transaction having the commercial effect of a borrowing or raising of money; or

(i) any guarantee, indemnity or similar assurance against indebtedness of any person falling within any of (a) to (h) above.

Financing Costs means the aggregate of:

(a) interest, fees, commissions and costs payable by the Borrower under the Finance Documents;

(b) amounts payable by the Borrower under Clause 22 (Stamp Duties); and

(c) any value added or other taxes payable by the Borrower in respect of the above.

Financing Principal means principal amounts outstanding under this Agreement.

6

First Security Assignment means the security assignment date on or about the date of the Amendment and Restatement Agreement between the Issuer and EPHL.

Force Majeure Event in respect of any Project Contract means an event of force majeure (however defined) under such Project Contract.

Gale Common means the ash tipping site located at Gale Common near Eggborough, North Yorkshire.

Gale Common Escrow Agreement means the deed of trust and escrow entered or to be entered into between the Environment Agency and the Borrower relating to the granting of the Gale Common Licence.

Gale Common Licence means a Waste Management licence over Gale Common granted or to be granted by the Environment Agency to the Borrower.

Gale Common Sharing Agreement means the agreement for sharing Gale Common dated 31st March, 1990 between Powergen Plc and National Power plc as novated on 9th May, 2001 to the Borrower and Edison First Power Limited.

Grid Code means the Grid Code drawn up under the transmission licence of NGC.

Group means British Energy Group plc, a company incorporated under the laws of Scotland and its Subsidiaries.

Holding Company in relation to a person, means an entity of which that person is a Subsidiary.

Industry Documents means any and all agreements regulating the generation, transmission, distribution and supply of electricity in England and Wales to which the Borrower is required to be a party, including without limitation, the CUSC, the Grid Code and the Balancing and Settlement Code and any other documents which replace any of them in whole or in part from time to time, together with any other document ancillary thereto, in each case as amended from time to time.

Insurance Arrangements means all Insurances for the Project agreed between the Borrower and the Banks as set out in Schedule 4.

Insurance Proceeds means all proceeds of insurance payable to or received by the Borrower including proceeds of any Insurance in respect of liabilities arising under any of the Project Contracts.

Insurance Proceeds Account has the meaning given to it in the Accounts Agreement.

Insurances means all contracts and policies of insurance and re-insurance of any kind which are taken out by or on behalf of the Borrower in accordance with the Insurance Arrangements or (to the extent of its interest) in which the Borrower has an interest, and such other policy or contract of insurance and re-insurance as the Agent and the Borrower agree shall be an Insurance.

Intellectual Property and Know-how Licence means the intellectual property and know-how licence dated 3rd March, 2000 entered into between RWE NPower plc and the Borrower.

7

Intercompany Loan Agreement means the intercompany loan agreement dated 8 September 2000 between the Borrower and EPHL.

Intercreditor Agreement means the intercreditor agreement originally dated 8th September, 2000 as amended and restated on or about the Restatement Date between the Borrower, BET, EPHL, the Banks and Barclays Bank PLC as Agent and Security Trustee.

Interest Payment Date shall have the meaning given to such term in the New Bonds.

Interest Period means each period of three months ending on an Interest Payment Date.

Issuer means British Energy Holdings plc, a company incorporated under the laws of Scotland.

IT Support Services and Transition Services Agreement means the IT support services and transition services agreement dated 3rd March, 2000 between RWE NPower plc and the Borrower.

Loan means the principal amount outstanding under this Agreement.

Majority Banks means, at any time, Banks whose participations in the Loans then outstanding aggregate more than 66 ²/3 per cent. of the Loans then outstanding.

Make Whole Amount has the meaning given to that term in the Conditions.

Material Adverse Effect means the effect of any event or circumstance which occurs after the Restatement Date and:

(a) does or, in the reasonable opinion of the Agent, is likely to prevent the Borrower from performing or complying with any of its material obligations under the Finance Documents in a timely manner; and

(b) is or, in the reasonable opinion of the Agent, is likely to be materially prejudicial to the interests of the Finance Parties under the Finance Documents (and where, for these purposes, any adjustment to the amount of the Option Price or any fee payable by the Finance Parties under the Option Agreements shall be disregarded).

New Bonds means the £700 million nominal of bonds created by the Issuer pursuant to the Restructuring.

New Debenture means the new debenture dated on or about the date of the Amendment and Restatement Agreement between the Borrower and the Security Trustee.

NGC means The National Grid Transco plc, a company incorporated under the laws of England and Wales, and for the purposes of this Agreement, shall be deemed to be any person replacing The National Grid Transco plc as operator of the national electricity transmission system from time to time.

NGC Transmission System has the meaning given to that term in the Grid Code.

Novation Certificate has the meaning given to it in Clause 25.3 (Procedure for novations).

Obligor means the Borrower and EPHL.

8

OECD Bank means a bank or financial institution or other entity which is incorporated in an OECD Member Country.

OECD Member Country means a country which is for the time being a member of the Organisation for Economic Co-operation and Development.

Operating Account has the meaning given to that term in the Accounts Agreement

Operating Report means the Borrower’s operating report in respect of the Reporting Period ending on the relevant Reporting Date, substantially in the form of Schedule 6.

Operating Year has the meaning given to that term in the Capacity and Tolling Agreement.

Optional Early Redemption has the meaning given to it in the Trust Deed.

Option means an option to acquire the assets of or shares in the Borrower granted to the Security Trustee under either of the Option Agreements.

Option Agreement means:

(a) the Asset Option Agreement; or

(b) the Share Option Agreement.

Option Price has the meaning given to Break Option Price and Enforcement Option Price in each of the Option Agreements.

Party means a party to this Agreement.

Permitted Security Interest means:

(a) any lien arising by operation of law (or by agreement to the same or no greater effect) including, without limitation, any rights of set-off with respect to demand or time deposits with financial institutions and bankers’ liens with respect to property held by financial institutions;

(b) any Security Interest over goods or documents of title arising in the course of letter of credit transactions entered into in the ordinary course of business;

(c) any Security Interest over cash paid into an escrow account party under any deposit or retention of purchase price arrangements entered into under any disposal or acquisition made by the Borrower and any Security Interest created over the proceeds of the purchase price (or part) of an asset disposed of by the Borrower to secure any potential warranty claim arising from the disposal;

(d) any Security Interest over the assets of the Borrower established to hold assets of any management or employee share option, share incentive or like scheme securing any loan made available to the Borrower to finance the acquisition of such assets;

(e) title retention arrangements arising in the ordinary course of trading with suppliers of goods to the Borrower or arising under conditional sale or hiring arrangements in respect of goods supplied to the Borrower in the ordinary course of trading;

9

(f) any Security Interest created under or in connection with or arising out of (i) any of the Industry Documents and which the Borrower is required to provide under the terms of those Industry Documents and/or (ii) the Gale Common Escrow Agreement;

(g) any Security Interest arising under or expressly contemplated in any of the Documents, the Station Contracts, the FGD Contract and/or the Eggborough Contracts;

(h) any Security Interest under or in connection with procurement contracts with suppliers entered into in the ordinary course of business; and

(i) any Security Interests created with the prior written consent of the Majority Banks.

Planned Maintenance has the meaning given to that term in the Capacity and Tolling Agreement.

Plant means the totality of the approximately 2 Gigawatt Coal fired power station located at Eggborough, together with all the land and components at Gale Common and including all cooling water abstraction facilities and pipework located at or adjoining the site.

Project means the operation and maintenance of the Plant as a Reasonable and Prudent Operator.

Project Contracts means each of:

(a) the Capacity and Tolling Agreement;

(b) the Industry Documents;

(c) the licence dated 10th August, 2000 to use an ash pipeline at Whitley Bridge granted to the Borrower by British Waterways Board;

(d) the private railway sidings agreement novated to the Borrower by Railtrack plc and National Power by a novation contract dated 10th February, 2000;

(e) the lease dated 27th May, 2002 of an easement to use two water pipes below the railway at Knottingley between Railtrack plc and the Borrower;

(f) the Gale Common Licence in the name of the Borrower,

and any other material contract designated a Project Contract (in writing) by both the Agent and the Borrower (whose consent shall not be unreasonably withheld).

Project Taxes means all Taxes payable or to be payable by the Borrower.

Proposed Plan has the meaning given to it in Clause 15.3 (Reporting).

Qualifying Bank means:

(a) a person which is:

(i) a UK Lender; or

(ii) a UK Non-Bank Lender,

10

but so that if the Income and Corporation Taxes Act 1988 is amended or repealed, this paragraph (a) and the definitions referred to herein shall be amended in such manner as the Agent, after consultation with the Borrower, shall reasonably determine to be necessary in order to define persons of relevant equivalent category; or

(b) a person which is a bank or financial institution (whether incorporated in the United Kingdom or elsewhere) which, by virtue of the provisions of a double taxation agreement between the United Kingdom and the country of residence of that person is, subject only to a prior direction given to the Borrower by the United Kingdom Inland Revenue pursuant to an application by that person, eligible to have the payments made in respect of interest on the Loan made to it by the Borrower without any deduction or withholding in respect of Taxes.

Reasonable and Prudent Operator has the meaning given to that term in the Capacity and Tolling Agreement.

Redemption Proceeds has the meaning given in Clause 6.1(a) (Prepayment).

Redenomination Date has the meaning given to that term in Condition 17 (Redenomination, Renominalisation and Reconventioning).

Repayment Date means each date specified as such in Schedule 2 each such date being for the payment of a Repayment Instalment.

Repayment Instalment means each instalment for repayment of the Loan referred to in Clause 5 (Repayment).

Reporting Date mean each 31st March and 30th September following the Restatement Date provided that, where any such date is not a Business Day, the Reporting Date shall be on the next occurring Business Day.

Reporting Period means each period of six months ending on a Reporting Date.

Restatement Date has the meaning given to it in the Amendment and Restatement Agreement.

Restructuring has the meaning given to that term in the Creditor Restructuring Agreement.

Restructuring Documents has the meaning given to that term in the Creditor Restructuring Agreement.

Revenue Agreements has the meaning given to that term in the Capacity and Tolling Agreement.

RPI means the United Kingdom General Index of Retail Prices published by the Office of National Statistics (or any other body upon which the duties in connection with such index have devolved).

***********************************************************************************************

*******************************************************^****

^**** indicates material omitted and filed separately with the Commission.

11

***********************************************************************************************

*******************************************************^****

***********************************************************************************************

*******************************************************

Sale of Business Agreement means the sale of business agreement dated 15th November, 1999 between National Power and the Borrower.

Sale Proceeds has the meaning given to such term in Clause 6.1(b) (Prepayment).

Second Intercompany Loan Agreement means the £150,000,000 intercompany loan dated on or about the date of the Amendment and Restatement Agreement between EPHL and the Borrower.

Second Security Assignment means the security assignment dated on or about the date of the Amendment and Restatement Agreement between the Borrower and EPHL.

Security Asset means any asset the subject of any Security Interest under the Security Documents.

Security Documents means:

(a) the Debentures;

(b) the Shares Pledge;

(c) the EPHL Assignment; and

(d) the EPHL Security Document,

and any other document evidencing or creating any Security Interest over any asset of an Obligor to secure any obligations of the Obligors to a Finance Party under the Finance Documents.

Security Interest means any mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any other agreement or arrangement having the effect of conferring security.

Security Period has the meaning given to that term in the Existing Debenture.

Share Option Agreement means the agreement between EPHL and the Security Trustee dated on or about the date of the Amendment and Restatement Agreement under which EPHL grants an option to the Security Trustee to acquire all of the shares of EPHL in the Borrower.

Share Purchase Agreement means the share purchase agreement dated 16th November, 1999 between National Power and EPHL.

Shared Spares Agreements means:

(a) the shared spares agreement dated 10th February, 2000 between RWE NPower plc and the Borrower; and

^**** indicates material omitted and filed separately with the Commission.

12

(b) the strategic spares sharing agreement to be entered into by the Borrower and PowerGen UK PLC.

Shares Pledge means the shares pledge dated 8th September, 2000 between EPHL and the Security Trustee.

Share Subscription Agreement means the share subscription deed dated on or about the date of the Amendment and Restatement Agreement between the Borrower, EPHL, British Energy Group plc, the Issuer and the Security Trustee.

Station Contracts means each of:

(a) the IT Support Services and Transition Services Agreement;

(b) the Production Electricity Supply Agreement;

(c) the Production Connection Agreement;

(d) the Production On-Site Supply Agreement;

(e) the Saint-Gobain Connection Agreement;

(f) the Saint-Gobain Electricity Supply Agreement;

(g) the Shared Spares Agreement;

(h) the Technical Support Agreements; and

(i) the National Power Intellectual Property and Know-how Licence.

Subsidiary means an entity from time to time of which a person has direct or indirect control, or owns directly or indirectly more than fifty per cent (50%) of the share capital or similar right of ownership.

Tax means any present or future tax, levy, import, duty, charge, fee, deduction or withholding in the nature of tax whatever called, wherever imposed, levied, collected, withheld or assessed by a taxing authority pursuant to a regulation having the force of law.

Technical Support Agreements means:

(a) the technical support agreement (core services) dated 17th February, 2003 between the Borrower and Powergen UK plc; and

(b) the technical support agreement (process control and additional services) dated 17th February, 2003 between the Borrower and RWE NPower plc.

Total Commitments means the aggregate for the time being of the Commitments, being £150,000,000 at the Restatement Date.

Transaction has the meaning given to that term in the Capacity and Tolling Agreement.

Treaty Bank means a person within paragraph (b) of the definition of Qualifying Bank.

Trust Deed means the trust deed constituting the New Bonds.

13

UK Lender means a person which is a bank or financial institution which is within the charge to United Kingdom corporation tax in respect of, and beneficially entitled to, a payments of interest on a Loan made by a person that was a bank for the purposes of section 349 of the Income and Corporation Taxes Act 1988 (as currently defined in section 840A of the Income and Corporation Taxes Act 1988) at the time the Loan was advanced.

UK Non-Bank Lender means:

(a) a company resident in the United Kingdom for United Kingdom taxation purposes;

(b) a partnership each member of which is a company resident in the United Kingdom for taxation purposes; or

(c) a company not resident in the United Kingdom for tax purposes which carries on a trade in the United Kingdom through a permanent establishment in the United Kingdom and brings into account interest payments made to it under this Agreement in computing its chargeable profits for the purposes of section 11(2) of the Income and Corporation Taxes Act 1988,

which is beneficially entitled to all payments made to it under this Agreement and which has provided to the Borrower and not retracted confirmation of the above.

Unit means, in respect of the Plant, any one of the generating units.

1.2 Construction

(a) In this Agreement, unless the contrary intention appears, a reference to:

(i) an amendment includes a supplement, novation or re-enactment and amended is to be construed accordingly;

(ii) assets includes properties, revenues and rights of every description;

(iii) an authorisation includes an authorisation, consent, approval, resolution, licence, exemption, filing and registration;

(iv) control means the power to direct the management and policies of an entity, whether through the ownership of voting capital, by contract or otherwise;

(v) indexed means increased annually from the date of this Agreement (or other specified date) in line with RPI;

(vi) a month is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that if there is no numerically corresponding day in the month in which that period ends, that period shall end on the last Business Day in that calendar month;

(vii) know your customer requirements are the identification checks that a Finance Party requests in order to meet its obligations under any applicable law or regulation to identify a person who is (or is to become) its customer

(viii) a regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law but if not, then being of a type with which a person of the class to whom it applies would be accustomed to apply) of any governmental, inter-governmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

14

(ix) a Default being outstanding means that it has not been remedied or waived;

(x) a provision of law is a reference to that provision as amended or re-enacted;

(xi) a Clause or a Schedule is a reference to a clause of or a schedule to this Agreement;

(xii) a person includes its successors and assigns;

(xiii) a Finance Document or another document is a reference to that Finance Document or other document as amended or novated; and

(xiv) a time of day is a reference to London time.

(b) Unless the contrary intention appears, a term used in any Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.

(c) The index to and the headings in this Agreement are for convenience only and are to be ignored in construing this Agreement.

1.3 Contracts (Rights of Third Parties Act) 1999

(a) Unless expressly provided to the contrary in a Finance Document, a person who is not a party to a Finance Document may not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999.

(b) Notwithstanding any term of any Finance Document, the consent of any third party is not required for any variation (including any release or compromise of any liability under) or termination of that Finance Document.

1.4 Bank

If and for so long as there is only one Bank party hereto, references herein to the Banks, the Majority Banks and similar expressions shall be taken as references to such Bank alone and this Agreement shall be read and construed as referring, where relevant, only to such Bank, but the foregoing shall not prevent any assignment, transfer, substitution or other arrangement permitted hereby (after which there may be more than one Bank party hereto). The rights and obligations of a party acquired or assumed in any such case (including the Commitment of a Bank) shall be several.

1.5 Intercreditor Agreement and Share Subscription Agreement

Each Party acknowledges the arrangements which have been entered into pursuant to the Intercreditor Agreement and the Share Subscription Agreement and agree that each Finance Document (including this Agreement) shall be subject to the terms of the Intercreditor Agreement and the Share Subscription Agreement. To the extent that any provision of a Finance Document is inconsistent with the Intercreditor Agreement and/or the Share Subscription Agreement, the provisions of the Intercreditor Agreement and the Share Subscription Agreement shall prevail.

15

1.6 Majority Bank Decisions

References in this Agreement to any determination, instruction or consent of the Banks or Majority Banks shall be construed so as not to include the Issuers or any of its Affiliates to the extent that such person is otherwise a Bank under this Agreement at that time.

2. FACILITY

2.1 Facility

Subject to the terms of this Agreement, the Banks have made available to the Borrower a term loan facility in an aggregate amount equal to the Total Commitments.

2.2 Nature of a Finance Party’s rights and obligations

(a) The obligations of a Finance Party under the Finance Documents are several. Failure of a Finance Party to carry out those obligations does not relieve any other Party of its obligations under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.

(b) The rights of a Finance Party under the Finance Documents are divided rights. A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce those rights.

2.3 Change of currency

If the Issuer designates a Redenomination Date, then, without further action on the part of any person, with effect from the Redenomination Date:

(a) any reference in the Finance Documents to, and any obligations arising under the Finance Documents, in Sterling shall be translated into, or paid in, Euro; and

(b) any redomination from sterling to euro shall be at the rate for conversion of sterling into euro as provided for under Condition 17 (Redenomination, Renominalisation and Reconventioning).

3. PURPOSE

(a) As at the Restatement Date, the Borrower has applied the Loans towards, among other things, payments in accordance with the funds flow statement delivered on or about September, 2000 by the Borrower to the Agent.

(b) Without affecting the obligations of the Borrower in any way, no Finance Party is bound to monitor or verify the application of the Loan.

4. DRAWDOWN

4.1 Drawing of the Loans

As at the Restatement Date, the Total Commitments have been fully advanced as a Loan and no further amounts may be borrowed by the Borrower under this Agreement.

16

5. REPAYMENT

(a) The Borrower must repay the Loan in full by instalments. Each instalment shall have a principal amount as set out in Schedule 2 (as adjusted from time to time following any prepayment under Clause 6 (Prepayment)).

(b) The first Repayment Instalment shall be made on the first Repayment Date, and subsequent Repayment Instalments shall be made on each Repayment Date following the First Repayment Date. The final Repayment Instalment shall be made on the Final Repayment Date.

(c) Where the Borrower and/or any Finance Party would have received a payment under the terms of the CTA Bonds but did not so receive solely as a consequence of an act or omission of any other Finance Party, any failure by the Borrower to make the corresponding payment under this Agreement shall not constitute a Default or a breach of this Agreement.

6. PREPAYMENT

6.1 Prepayment

(a) Immediately upon receipt by the Borrower of the proceeds of any early redemption of principal under all or any of the CTA Bonds or upon receipt by the Borrower of any proceeds of any purchase of all or any of the CTA Bonds under Condition 3.4 (Purchase of Bonds upon Change of Control or a Restructuring Event), 3.5 (Mandatory repurchase offers from excess cash) and Condition 3.6, (Market purchases) (each Redemption Proceeds), the Borrower shall prepay the Loan in an amount equal to such Redemption Proceeds.

(b) If at any time the right of a Bondholder to require the Issuer to purchase all or any of the CTA Bonds in accordance with the Conditions becomes exercisable, then, if requested to do so by the Security Trustee (acting on the instructions of the Majority Banks), the Borrower shall exercise its right to require the Issuer to purchase all or any part of the CTA Bonds in accordance with the Conditions (each purchase to be made free from any Security Interest over the CTA Bonds) and immediately upon receipt by the Borrower of the proceeds of any such purchase by the Issuer (the Sale Proceeds), the Borrower shall prepay the Loan in an amount equal to such Sale Proceeds.

(c) Each of the Finance Parties hereby agrees to release and directs the Security Trustee to release any Security Interest over any CTA Bonds to be redeemed or purchased by the Issuer in accordance with paragraphs (a) and (b) above prior to such redemption or purchase.

(d) All prepayments under this Clause 6.1 shall be applied against the Repayment Instalments in such a manner so as to ensure that, following such prepayment, the repayment profile for the Loan remains consistent with the repayment profile for the New Bonds set out in the then applicable Amortisation Schedule.

6.2 Additional right of prepayment and cancellation

(a) If the Borrower is required to pay to a Bank any additional amounts under Clause 11 (Taxes) and/or Clause 12 (Illegality) then, without prejudice to the obligations of the Borrower under either such Clause, the Borrower may, whilst the circumstances continue:

(i) serve a notice of prepayment and cancellation on that Bank through the Agent;

17

(ii) sell such number of the CTA Bonds as is sufficient to fund a prepayment of such Bank’s outstanding principal under the Loan to the Issuer in accordance with Condition 3.9 (Purchase of CTA Bonds upon prepayment of EPL Credit Agreement for taxes or illegality) on the condition that the Issuer cancel such CTA Bonds upon receipt (such sale to be made free from any Security Interest over such CTA Bonds.

(b) Each of the Finance Parties hereby agrees to release and directs the Security Trustee to release any Security Interest over any CTA Bonds to be sold to the Issuer in accordance with paragraph (a)(ii) above promptly after receiving notification from the Borrower of such sale.

(c) The Borrower shall prepay such Bank’s participation in the Loan in the case of an event referred to in (i) Clause 11 (Taxes), on the next occurring Interest Payment Date; and (ii) Clause 12 (Illegality), in accordance with the provisions of that Clause.

(d) All prepayments made under this Clause 6.2 shall be applied against the Repayment Instalments in such manner so as to ensure that, following such prepayment, the repayment profile for the New Bonds set out in the then applicable Amortisation Schedule.

6.3 Other mandatory prepayments

(a) The Borrower shall promptly, following receipt of any Insurance Proceeds (save for Insurance Proceeds arising through loss of availability of the Plant and consequential loss insurance (the Revenue Insurance Proceeds) and/or Insurance Proceeds arising from third party liability insurance) either:

(i) to the extent that such Insurance Proceeds are less than £10,000,000 apply the same in meeting the liability or loss which gave rise to the claim; or

(ii) to the extent that such Insurance Proceeds are less than £30,000,000 but greater than or equal to £10,000,000, provide a notice to the Agent (the Recovery Notice):

(A) setting forth in reasonable detail the nature of the damage or destruction, the restoration or replacement required and the estimated cost and time to complete such restoration or replacement; and

(B) stating that at that time (I) no Default has occurred and is continuing (other than as a result of the relevant loss), (II) such restoration or replacement is technologically and economically feasible, (III) all insurance proceeds which the Banks’ Insurance Adviser determines would be payable under the Insurances in respect of such loss, together with other resources available to the Borrower, would be sufficient to meet the estimated cost of completing such restoration or replacement and (IV) the Borrower has sufficient resources to pay all projected liabilities under the Finance Documents that become due and payable prior to the completion of such restoration or replacement.

Following receipt of the Recovery Notice, the Majority Banks shall, acting reasonably and with regard to the advice of the Banks’ Technical Adviser, notify the Agent as to whether they consent to the application of such money in meeting the liability or loss which gave rise to the claim and if such consent is granted, the Borrower shall forthwith apply such funds in such manner; or

(iii) to the extent that such Insurance Proceeds are equal to or greater than £30,000,000, provide a Recovery Notice to the Agent and, with the consent of the Majority Banks (such consent not to be unreasonably withheld or delayed), apply the same in meeting the liability or loss which gave rise to the claim,

18

PROVIDED THAT:

(A) the Borrower shall apply such amounts received within twelve months of receipt of the same; and

(B) if any assets are replaced which were charged under any Security Documents, the Banks are granted equivalent Security Interests (to the satisfaction of the Security Trustee) over any such replacement assets or the Security Trustee is satisfied that any such replacement assets will in any event become subject to any existing Security Document providing equivalent security over such replacement asset.

(b) In the event that the Insurance Proceeds (excluding any Revenue Insurance Proceeds or Insurance Proceeds arising from third liability insurance) are not applied in accordance with paragraph (a) above the Borrower shall apply the Insurance Proceeds to prepay the Loan in an amount equal to the amount received.

(c) Any prepayment under paragraph (b) above shall be:

(i) made on the expiry of the next succeeding Interest Period after the date on which the Insurance Proceeds are required to have been applied in accordance with paragraph (b); and

(ii) applied against the Repayment Instalments in inverse order of maturity.

(d) Any Revenue Insurance Proceeds received by the Borrower or the Finance Parties shall be paid into the Insurance Proceeds Account. If a BET Event is not continuing upon receipt into the Insurance Proceeds Account by the Account Bank of any such Revenue Insurance Proceeds (and irrespective of whether a Default has occurred or is continuing), such Revenue Insurance Proceeds shall be paid directly to BET by the Borrower or on its behalf.

6.4 Miscellaneous provisions

(a) Any notice of prepayment under this Agreement is irrevocable. The Agent shall notify the Banks promptly of receipt of any such notice.

(b) All prepayments under this Agreement shall be made together with accrued and unpaid interest on the amount prepaid, together with, in the case of Redemption Proceeds and/or Sales Proceeds, any net premium and/or Make-Whole Amount received by the Borrower on any such Redemption Proceeds and/or Sales Proceeds.

(c) No prepayment is permitted except in accordance with the express terms of this Agreement.

(d) No amount prepaid under this Agreement may subsequently be re-borrowed.

7. INTEREST PERIODS

If an Interest Period would otherwise overrun the Final Repayment Date, it shall be shortened so that it ends on the Final Repayment Date.

^**** indicates material omitted and filed separately with the Commission.

19

8. INTEREST

8.1 Interest rate

***************************************************************************^****

8.2 Due dates

(a) Except as otherwise provided in this Agreement, accrued interest on the Loan is payable by the Borrower on the last day of each Interest Period.

(b) No additional interest shall be payable as a result of the last day of an Interest Period not being a Business Day.

8.3 Delay

No Finance Party shall be entitled to any interest or other payment in respect of any delay in receipt of any payment due to it under the Finance Documents resulting from (A) the due date for a payment not being a Business Day; or (B) any failure of, or delay caused by, any Finance Party in surrendering or endorsing any Bond Certificate which if properly surrendered or endorsed would have resulted in a timely payment being made by the Borrower hereunder.

9. OPTIONS

The Security Trustee will only exercise an Option on the instructions of the Majority Banks and in accordance with the terms of the relevant Option Agreement.

10. PAYMENTS

10.1 Place

Save where expressly set out to the contrary in a Finance Document, all payments by the Borrower or a Bank under the Finance Documents shall be made to the Agent to a Sterling account at such office or bank in London as it may notify to the Borrower or Bank for this purpose.

10.2 Funds

Payments under the Finance Documents to the Agent shall be made for value on the due date.

10.3 Distribution

(a) Each payment received by the Agent under the Finance Documents for another Party shall, subject to paragraph (b) below, be made available by the Agent to that Party by payment (on the date and in the currency and funds of receipt) to its account with such office or bank as it may notify to the Agent for this purpose by not less than five Business Days’ prior notice.

(b) Where a sum is to be paid to the Agent under the Finance Documents for another Party, the Agent is not obliged to pay that sum to that Party until it has established that it has actually received that sum.

^**** indicates material omitted and filed separately with the Commission.

20

10.4 Currency

All amounts payable under the Finance Documents are, except as otherwise provided in the Finance Documents, payable in Sterling.

10.5 Set-off and counterclaim

Except as otherwise provided in any Finance Document, all payments made by the Borrower under the Finance Documents shall be made without set-off or counterclaim.

10.6 Non-Business Days

(a) If a payment under the Finance Documents is due on a day which is not a Business Day, the due date for that payment shall instead be the next Business Day.

(b) Interest on overdue principal and, to the extent permitted by law, on overdue instalments of interest will accrue at the rate of interest specified in Condition 1 (Maturity, Principal and Interest).

10.7 Partial payments

(a) If the Agent receives a payment insufficient to discharge all the amounts then due and payable by the Borrower under the Finance Documents, the Agent shall apply that payment towards the obligations of the Borrower under the Finance Documents in the following order:

(i) first, in or towards payment of any unpaid fees, costs and expenses of the Agent;

(ii) secondly, in or towards payment pro rata of any Financing Costs due but unpaid under this Agreement;

(iii) thirdly, in or towards payment pro rata of any Financing Principal due but unpaid under this Agreement; and

(iv) fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.

(b) The Agent shall, if so directed by all the Banks, vary the order set out in sub-paragraphs (a)(ii) to (iv) above.

(c) Paragraphs (a) and (b) above shall override any appropriation made by the Borrower.

11. TAXES

11.1 Gross-up

(a) All payments by the Borrower under the Finance Documents shall be made without any deduction and free and clear of and without any deduction for or on account of any Taxes, except to the extent that the Borrower is required by law to make payment subject to any Taxes. If any Tax or amounts in respect of Tax is required by law to be deducted, from any amounts payable or paid by the Borrower, or paid or payable by the Agent to a Bank, under the Finance Documents, the Borrower shall pay such additional amounts as may be necessary to ensure that the relevant Bank receives a net amount equal to the full amount which it would have received had payment not been made subject to Tax. The Borrower shall not be obliged to make any increased payment under this Clause 11.1 to the Agent or any Bank:

(i) if the Agent or such Bank is not or ceases to be a Qualifying Bank except in circumstances where it has ceased to be a Qualifying Bank by reason of any change in law or in its application or interpretation, in each case, taking effect after the date of this Agreement;

21

(ii) to the extent that such Taxes would not have been imposed but for the failure of such Banks to comply with a certification, identification or other reporting requirement concerning nationality, residence, tax status or connection with the state or states imposing such Taxes;

(iii) in the case of a Treaty Bank, in respect of any payment falling due before the date the Borrower has received a direction from the UK Inland Revenue that all payments by the Borrower to that Treaty Bank under the Finance Documents may be made without withholding or deduction for or on account of UK income tax, save that this sub-clause (iii) shall not apply if the Borrower has failed to comply with or co-operate (within a reasonable time of being so requested in writing) in completing any procedural formalities necessary for the Borrower to obtain authorisation to make payments to the Treaty Bank without withholding or deduction; or

(iv) in the case of a UK Non-Bank Lender, in respect of any payment in relation to which the Board of the Inland Revenue has given (and not revoked) a direction (a Direction) under section 349C of the Income and Corporation Taxes Act 1988 (as that provision has effect on the date on which the relevant UK Non-Bank Lender became a party to this Agreement) and that UK Non-Bank Lender has received from the Borrower a certified copy of that Direction.

(b) Each of the Agent and each Bank which is a Party to this Agreement on the Restatement Date represents that it is a Qualifying Bank on the Restatement Date. Any person that, after the Restatement Date, becomes the successor Agent or a Bank represents to the Borrower on the date it becomes a Party that, as at such date, it is a Qualifying Bank.

(c) The Agent or any Bank which ceases to be a Qualifying Bank or becomes a Qualifying Bank under a different paragraph of the definition of that term in Clause 1.1 (Definitions) shall promptly inform the Borrower.

(d) Each Bank that is a Qualifying Bank under paragraph (b) of the definition of Qualifying Bank in Clause 1.1 (Definitions) shall take all such steps as the Borrower may reasonably request to ensure that an appropriate direction is received from the UK Inland Revenue Financial Intermediaries and Claims Office to enable payments to be made without withholding.

(e) Any confirmation by a Bank of its status for the purposes of the definition of UK Non-Bank Lender must be given to the Agent on or promptly after the date it becomes a Bank. The Agent must promptly forward any confirmation received by it to the Borrower. A UK Non-Bank Lender must promptly notify the Borrower and the Agent of any change in its status that may affect any confirmation made by it.

11.2 Tax Credits

(a) If the Borrower shall become bound to pay any additional sum as referred to in Clause 11.1 (Gross-up) in respect of any deduction for or on account of any Tax, then, if any Bank or Agent shall be or become entitled to any tax credit, relief or allowance with respect to such additional payment and such Bank or the Agent actually receives a tax benefit from such tax credit, relief or allowance in its country of domicile, residence or incorporation (or in the country in which its Facility Office is located), such Bank or the Agent shall promptly (without prejudice to the right of such Bank to obtain any other reliefs or

22

allowances which may be available to it) reimburse to the Borrower an amount equal to such part of such tax credit, relief or allowance as such Bank or the Agent shall certify to be the proportion of such tax credit or allowance as will leave such Bank or the Agent (after such reimbursement) in no worse position than it would have been in had there been no obligation to make such deduction and such additional payment with respect thereto.

(b) Nothing in paragraph (a) above shall:

(i) require the Agent or any Bank to disclose to the Borrower any details of its tax affairs;

(ii) interfere with the right of the Agent or any Bank to arrange its tax affairs in whatever manner it thinks fit; or

(iii) require the Agent or any Bank to claim relief in respect of any payment under Clause 11.1 (Gross-up) in priority to any other reliefs, claims or credits available to it.

11.3 Tax receipts

All Taxes required by law to be deducted by the Borrower from any amounts paid or payable under the Finance Documents shall be paid by the Borrower when due and the Borrower shall, within 30 days of the payment being made, deliver to the Agent for the relevant Bank copies of any receipts received from the appropriate authority.

11.4 Tax Disputes

(a) In this Clause 11.4, the following terms shall have the following meanings:

(i) Group Relief Dispute means any dispute in relation to the entitlement of the Borrower to claim group relief in accordance with Chapter IV, Part X of the Income and Corporation Taxes Act 1988 to set-off losses of other members of the National Power group against profits of the Borrower in respect of the period 10^th February 2000 to 27^th February 2000;

(ii) Section 179 Dispute means any dispute in relation to the liability of the Borrower to corporation tax under section 179 of the Taxation of Chargeable Gains Act 1992 arising by reference to the entry into the Sale of Business Agreement and the Share Purchase Agreement;

(iii) Tax Deed of Covenant has the meaning given in the EPHL Assignment;

(iv) Tax Disputes means the Group Relief Dispute and the Section 179 Dispute.

(b) In relation to the Tax Disputes:

(i) the Borrower shall comply with all of its obligations in the Sale of Business Agreement, the Tax Deed of Covenant and the Share Purchase Agreement, which relate to the conduct and settlement of the Tax Disputes;

(ii) the Borrower shall, to the extent possible, procure that EPHL shall and shall to the extent possible use reasonable endeavours to procure that National Power shall perform all of their obligations under the Sale of Business Agreement, the Tax Deed of Covenant and the Share Purchase Agreement so as to ensure that the Tax Disputes can be settled and

23

agreed with the relevant taxation authorities as soon as reasonably practicable after the Restatement Date (including, without limitation, the settlement and agreement of all draft accounts and taxation returns of the Borrower relating to the Tax Disputes and all calculations of any liability of the Borrower arising as a result of the Tax Disputes);

(iii) the Borrower shall procure that there are provided to the Agent copies of all notices, returns, documentation or other material information relating to the Tax Disputes and which have been provided by National Power to EPHL or the Borrower in accordance with the terms of the Sale of Business Agreement, the Tax Deed Covenant and the Share Purchase Agreement and the Borrower shall provide, every six months from the Restatement Date, a report in writing to the Agent as to the progress made in the settlement and agreement of the Tax Disputes;

(iv) in the event that the Borrower shall suffer a liability to Tax on settlement and agreement of the Tax Disputes, the Borrower shall procure that EPHL shall make a claim for payment by National Power in respect of such liability in accordance with the terms of the Tax Deed of Covenant and the Borrower will apply any such payment received from EPHL in payment of such liability to the relevant taxation authority.

(c) The Borrower shall supply to the Agent forthwith details in writing of any material dispute (other than the Tax Disputes, to which the provisions of sub-clause 11.4(b) shall apply) with the Inland Revenue, HM Customs & Excise or any other relevant taxation authority, which dispute would, if settled or agreed in favour of the relevant taxation authority, have a Material Adverse Effect and/or would be reasonably likely to result in a failure by the Borrower to comply with its agreement as set out in sub-clause 11.4(e). Where any dispute arises to which the provisions of this sub-clause 11.4(c) apply, the Borrower shall keep the Agent reasonably informed in writing (including as to any significant or material developments) in relation to the progress made in the settlement and agreement of the relevant dispute.

(d) In relation to any period commencing on or after the Restatement Date, the Borrower shall not, except with the prior written consent of the Agent, and save where the same are entered into in the usual course of the trade or business of the Borrower, enter into any transaction and/or make any election, notification or agreement in relation to tax, the taxation treatment or consequences of which would be reasonably likely to have a Material Adverse Effect and/or would be reasonably likely to result in a failure by the Borrower to comply with its agreement as set out in sub-clause 11.1(e).

(e) The Borrower shall, so far as is reasonably practicable, ensure that the tax affairs of the Borrower are conducted in a manner which is consistent with, and otherwise with a view to facilitating, the transactions contemplated by the Asset Option Agreement and the Share Option Agreement insofar as the same relate to value added tax, stamp duty, the apportionment of consideration to the assets of the Borrower and the making of any election or other notification relating to capital allowances, capital gains tax or as otherwise contemplated therein.

12. ILLEGALITY

If it is or becomes unlawful in any relevant jurisdiction for a Bank to give effect to any of its obligations as contemplated by this Agreement or to fund or maintain its participation in the Loan, then:

(a) that Bank may notify the Borrower through the Agent accordingly; and

24

(b) the Borrower shall before the latest date permitted by the relevant law prepay the participations of that Bank in the Loan.

13. MITIGATION

If circumstances arise, in respect of any Finance Party which would, or would upon the giving of notice, result in:

(a) the Borrower being obliged to pay to or for the account of that Finance Party additional amounts under Clause 11.1 (Gross-up); or

(b) the Borrower being obliged to prepay that Finance Party’s participation in the Loan under Clause 12 (Illegality),

then, without in any way limiting, reducing or otherwise qualifying the Borrower’s obligations under Clause 11.1 (Gross-up) or Clause 12 (Illegality), the relevant Finance Party shall, in consultation with the Agent and the Borrower, use reasonable efforts, for a period not exceeding 30 days, to take such steps as may be open to it to remove such circumstances or to mitigate the consequences to the Borrower thereof, including (without limitation) changing its Facility Office to one in another jurisdiction or transferring its rights and obligations under this Agreement to another institution, unless, in any such case, to do so is likely (in the opinion of that Finance Party) to be prejudicial to that Finance Party.

14. REPRESENTATIONS AND WARRANTIES

14.1 Representations and warranties

The Borrower makes the representations and warranties set out in this Clause 14 to each Finance Party:

14.2 Status

It is a limited liability company, duly incorporated and validly existing under English laws.

14.3 Powers and authority

It has the power to enter into and perform, and has taken all necessary action to authorise the entry into, performance and delivery of, the Documents to which it is a party and the transactions contemplated by those Documents.

14.4 Legal validity

Each Document to which it is a party creates the rights and obligations it purports to create and constitutes, or when executed in accordance with its terms will constitute, the Borrower’s legal, valid and binding obligation enforceable in accordance with its terms (subject to the qualifications as to the matters of law only (if any) contained in the legal opinions received by the Agent in connection with the Finance Documents).

14.5 Non-conflict

The entry into and performance by it of, and the transactions contemplated by, the Documents to which it is a party do not:

(a) conflict with any existing law or regulation or judicial or official order to which it is subject; or

25

(b) conflict with the constitutional documents of the Borrower; or

(c) conflict in any material respect with any document which is binding upon the Borrower or any asset of the Borrower.

14.6 Authorisations

All authorisations required in connection with the Obligors’ entry into, performance, validity and enforceability of the Documents and the transactions contemplated by the Documents have been obtained or effected on or before the date they are required and no steps have been taken to revoke or cancel any authorisation obtained or effected.

14.7 Pari passu ranking

Its obligations under the Finance Documents rank and will rank at least pari passu with all its unsecured obligations with the exception of any obligations which are mandatorily preferred by law and not by contract.

14.8 Project Contracts

(a) The copies of the Project Contracts, the Station Contracts, the Second Intercompany Loan Agreement and the Intercompany Loan Agreement which it has delivered to the Agent are true and complete copies of those contracts.

(b) There are no other material agreements to which it is a party on the Restatement Date and which are not Excluded Contracts as defined in the Asset Option Agreement, copies of which have not been delivered to the Agent prior to the date of the Amendment and Restatement Agreement.

14.9 Status of Security

Each Security Document confers the Security Interests it purports to confer over the Security Assets and those Security Interests are not subject to any prior or pari passu Security Interest (other than any Permitted Security Interests).

14.10 Subsidiaries

The Borrower is a Subsidiary of the Issuer.

14.11 Options

No person other than:

(a) the Finance Parties; or

(b) BET pursuant to clauses 9.6 and/or 10.2 of the Capacity and Tolling Agreement,

has any right to call for the issue or transfer of any share capital or loan stock in the Borrower.

14.12 Pensions

(a) Except pursuant to the BEC Group, the Borrower is not under an obligation or commitment (whether or not legally enforceable) to pay, provide or contribute towards, any relevant benefit as defined in section 612 of the Income and Corporation Taxes Act 1988 for or in respect of any past or present employee, officer or director (or any spouse, child or dependant of any past or present employee, officer or director).

26

(b) The BEC Group is, and has been since is commencement, approved by the Board of Inland Revenue for the purposes of section 592 of the Income and Corporation Taxes Act 1988 and there is no ground on which such approval may be withdrawn or cease to apply.

(c) The active members of the BEC Group are contracted-out of the second tier of state pension provision by reference to the BEC Group and have been covered by a contracting-out certificate as of the date when their employment was first treated as contracted-out. There is no ground on which contracted-out status may be withdrawn or cease to apply.

(d) The BEC Group has at all times been operated materially in accordance with, and the BEC Group trustees and all of the employers participating in the BEC Group have observed and performed all their obligations under, the documents governing the BEC Group, the requirements of the Inland Revenue for approval (as defined in this Clause 14.12) and all applicable laws.

(e) Either BE or the Issuer is the Principal Employer of the BEC Group.

(f) Except for BE and/or the Issuer, the Borrower is the sole participating employer in the BEC Group.

14.13 Times for making representations and warranties

The representations and warranties set out in this Clause 14 are made on the Restatement Date.

15. UNDERTAKINGS

15.1 Duration

The undertakings in this Clause 15 remain in force from the Restatement Date for so long as any amount may be outstanding under the Finance Documents (other than the Option Agreements) but provided that the undertakings in Clauses 15.2 (other than sub-clauses 15.2(a) and (b)), 15.3, 15.4(f), 15.8, (insofar as it relates to Documents which are not Finance Documents), 15.13, 15.17, 15.18, 15.19, 15.20, 15.26, 15.28, 15.30 and 15.31 shall only remain in force from the Restatement Date up to (and including) the earlier of (a) the Break Option Completion Date and (b) the Enforcement Option Completion Date.

15.2 Financial information

The Borrower shall supply to the Agent in sufficient copies for all the Banks:

(a) as soon as the same are available (and in any event within 180 days of the end of each of its financial years) its audited accounts for that financial year; and

(b) as soon as the same are available (and in any event within 120 days of the end of the first half-year of each of its financial years) its unaudited accounts for that half-year.

(c) as soon as the same are available, its quarterly management accounts;

(d) as soon as the same are available, the audited accounts of BET for that financial year;

27

(e) as soon as the same are available for each of its financial years the unaudited accounts of BET for the first half-year of such financial year; and

(f) as soon as the same is available, each Annual Operating Plan.

15.3 Reporting

(a) Determination of reports

(i) Not later than 25 days nor earlier than 30 days prior to the determination of the Annual Operating Plan for each year in accordance with the terms of the CTA (the Proposed Plan), the Borrower will forward such Proposed Plan to the Agent and the Banks’ Technical Adviser.

(ii) The Agent may request that the Banks’ Technical Adviser review the Proposed Plan to confirm whether the Borrower would be acting as a Reasonable and Prudent Operator (as of the date of such confirmation and given the circumstances then existing) were it to comply with the Proposed Plan.

(iii) Not later than 30 days after receipt of the Proposed Plan, the Agent shall either:

(A) if the Banks’ Technical Adviser considers that any amendments are required to be made to the Proposed Plan so as to give the confirmation set out in Clause 15.3(a)(ii) notify the Borrower of such amendments; or

(B) notify the Borrower of its acceptance of the Proposed Plan, in which case the Proposed Plan shall be finally determined as the Annual Operating Plan for the relevant year.

(iv) In the event that the Borrower and the Agent are unable to agree to the Banks’ Technical Adviser’s recommendations, within 10 days of receipt of the same by the Borrower, the matter under dispute may, at the request of either the Borrower or the Agent, be referred to an expert appointed by agreement between the Borrower and the Agent (the Operating Expert). Failing any such agreement within 5 days of the first nomination by either the Borrower or the Agent, the Operating Expert shall be one or more persons nominated on the application of either the Agent or the Borrower by the president for the time being of the Institute of Electrical Engineers. The party making such application shall request the relevant person to nominate a person with appropriate expertise and no interest in the outcome (as stated above). The costs of any reference to the Operating Expert shall be borne by the Borrower unless the determination of the Operating Expert follows the Borrower’s proposal, in which such case, the Agent shall be responsible for such costs of reference.

(v) The Borrower and the Agent will each provide the Operating Expert with their own proposal together with whatever supporting evidence they think appropriate.

(vi) The Operating Expert shall not be bound to choose either the proposal made by the Borrower or that made by the Agent but shall be free to make his own determination of the point referred to him. The Operating Expert’s determination shall (save in the case of manifest error) be final and binding on all the parties hereto and shall be used in the Proposed Plan.

(vii) The Operating Expert shall act as an expert in determining the matter referred to him and not as an arbitrator.

28

(viii) Following the notification by the Operating Expert of his determination under paragraph (vii) above, the Proposed Plan shall be finally determined for the relevant period with such amendments as the Expert shall have notified to the Agent and the Borrower.

(b) Operating Report

The Borrower shall supply the Operating Report to the Agent and Banks’ Technical Adviser, within 20 Business Days after the end of each Reporting Period.

15.4 Information – miscellaneous

The Borrower shall supply to the Agent (to the extent not already disclosed):

(a) promptly upon becoming aware of them, details of any material litigation, arbitration or administrative proceedings involving the Borrower which are current, threatened or pending;

(b) promptly, such further information in its possession or control regarding its financial condition or operations as the Agent may reasonably request;

(c) promptly upon becoming aware of them, details of any claim made by the Borrower under any Insurance where such claim is for a sum in excess of £100,000 (before deductibles) or where the amount of such claim when aggregated with all other amounts claimed by the Borrower under any Insurances during the previous six months exceeds £500,000;

(d) promptly upon becoming aware of them, copies of all valid notices of default, termination, or material claims or material demands made against it under a Project Contract, or affecting the Plant and details of any action it proposes to take in relation to the same;

(e) promptly upon becoming aware of them, details of any unplanned shutdown of any Unit in excess of 10 days or any material suspension or material reduction of coal supply;

(f) promptly upon becoming aware of them, details of any event which may constitute a Force Majeure Event under any Project Contract or Station Contract;

(g) promptly upon becoming aware thereof, details of any event which would have a Material Adverse Effect;

(h) promptly upon becoming aware of them, details of any material damage to or destruction of the Plant;

(i) promptly upon becoming aware thereof, details of any non-compliance with any applicable Environmental Law or applicable Environmental Licence of which it is aware and of any Environmental Claim or any suspension, revocation or modification of any Environmental Licence which would, in each case, have a Material Adverse Effect and its proposals for the action to be taken with respect to those matters;

29

(j) promptly upon becoming aware thereof, details of any actual or suspected Environmental Contamination and its proposals for remedying or otherwise addressing that Environmental Contamination;

(k) promptly upon becoming aware thereof, details of any future requirement under any applicable Environmental Law or any applicable Environmental Licence in respect of the Plant which would have a Material Adverse Effect; and

(l) promptly upon becoming aware thereof, details of any mining or other activity which commences or is planned to commence beneath the Plant or any part of it which is likely to cause material disturbance to the operation of the Plant or necessitate any material expenditure in relation to the Plant and set out the actions which it intends to take to mitigate such disturbances or expenditure.

15.5 Access to Plant, records and accounts

(a) The Borrower shall procure that the Agent and the Banks’ Technical Adviser be allowed access (i) quarterly (on the basis of the scope to be agreed by Borrower and the Agent) and also (ii) on or after the occurrence of a Default during normal business hours with reasonable notice (subject to the Borrower’s operating requirements) to inspect the Plant, the technical and statistical data, accounting books, records and other data in the possession or control of the Borrower with respect to the Plant as they may reasonably require for the purposes of performing their respective duties in relation to this Agreement and to take copies of any documents inspected.

(b) The Borrower shall procure that the Agent and the Banks are together allowed access during normal business hours to the Plant at least once a year, upon the giving of four week’s notice by the Agent to the Borrower.

(c) The Borrower shall keep and maintain up to date in accordance with good business practice and all applicable laws all statutory books, books of account, bank statements and other records of the Borrower.

15.6 Notification of Default

The Borrower shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon its occurrence.

15.7 Compliance certificates

The Borrower shall supply to the Agent:

(a) together with the accounts specified in Clause 15.2(a) (Financial information); and

(b) promptly at any other time, if the Agent so reasonably requests,

a certificate signed by two of its senior officers on its behalf certifying that, to the best of its knowledge and belief, no Default is outstanding or, if a Default is outstanding, specifying the Default and the steps, if any, being taken to remedy it.

15.8 Authorisations

(a) The Borrower shall promptly:

(i) obtain, maintain and comply with the terms of; and

30

(ii) supply certified copies to the Agent of,

any material authorisation required under any applicable law or regulation to enable it to perform its obligations under, or for the validity or enforceability of, any Document.

(b) Paragraph (a) above shall not apply to any authorisation which a person other than the Borrower is obliged to obtain under any Project Contract.

15.9 Pari passu ranking

The Borrower shall procure that its obligations under the Finance Documents do and will rank at least pari passu with all its other present and future unsecured obligations, except for obligations mandatorily preferred by law applying to companies generally.

15.10 Negative pledge

(a) The Borrower shall not create or permit to subsist any Security Interest on any of its assets.

(b) Paragraph (a) does not apply to any Permitted Security Interest.

15.11 Borrowings

The Borrower shall not incur any Financial Indebtedness except:

(a) Financial Indebtedness under the Documents and the Station Contracts;

(b) Financial Indebtedness secured by a Permitted Security Interest;

(c) Financial Indebtedness under the Eggborough Contracts and/or the Second Intercompany Loan Agreement, in each case as in effect at the Restructuring Date;

(d) Financial Indebtedness incurred pursuant to Condition 8.2 (Limitation on Restricted Payment), in an amount not exceeding £5,300,000 provided by another member of the Group in order that the Borrower may make interest payments (including any additional amounts payable under Clause 11.1 (Gross-up)) in accordance with the provisions of Condition 8.2 (Limitation on Restricted Payment); and

(e) indebtedness falling within paragraph (f) of the definition of Financial Indebtedness which relates only to equipment leases with an aggregate value not in excess of £10,000,000 (indexed from 8th September, 2000).

15.12 Loans and credit

The Borrower shall not make any loans or provide credit except for:

(a) credit provided under any Project Contract, Station Contract, Eggborough Contract or the Intercompany Loan Agreement;

(b) loans or credit approved in writing by the Agent with the agreement of the Majority Banks (such agreement not to be unreasonably withheld or delayed);

(c) trade credit on customary terms; and

31

(d) loans to employees of the Borrower up to a maximum aggregate amount of £1,000,000.

15.13 Capital expenditure

The Borrower shall comply with its capital expenditure obligations under clause 10 of the Capacity and Tolling Agreement as in effect at the Restructuring Date.

15.14 Disposals

(a) Except with the prior written consent of the Agent (not to be unreasonably withheld or delayed) the Borrower shall not either in a single transaction or in a series of transactions, whether related or not and whether voluntarily or involuntarily, sell, transfer, grant or lease or otherwise dispose of all or any substantial part of its assets.

(b) Paragraph (a) above does not apply to:

(i) disposals made in the ordinary course of business of the disposing entity (including, without limitation, the entering into of a lease with Rocktron Limited and/or any Affiliate thereof relating to an ash processing plant);

(ii) disposals expressly contemplated by or permitted under any Document, Eggborough Contract or Station Contract;

(iii) disposals of assets in exchange for other assets comparable or superior as to type, value and quality;

(iv) Permitted Security Interests;

(v) disposals made pursuant to, or expressly contemplated by, any documents, agreements or other arrangements entered into by the Borrower on or after the Break Option Completion Date in respect of transactions of a similar nature to those specified in or contemplated by the Capacity and Tolling Agreement; or

(vi) post the Break Option Completion Date, disposals by way of upstream of tax losses for no consideration to another member of the Group.

15.15 Mergers and acquisitions

The Borrower shall not enter into any amalgamation, demerger, merger or (other than as contemplated by the Creditor Restructuring Agreement) reconstruction but without prejudice to any ability of any other member of the Group to enter into such a transaction.

15.16 Operation and maintenance

The Borrower shall operate and maintain the Plant in accordance with the standards of a Reasonable and Prudent Operator.

15.17 Approved Fuel

The Borrower shall:

(a) procure that for each semi-annual period in any Operating Year such amount of coal that is Approved Fuel is maintained at the Plant as would be maintained by a Reasonable and Prudent Operator;

32

(b) not less than once every twelve months consult with the Banks’ Technical Adviser and in accordance with its recommended specifications, agree standards for coal that is Approved Fuel in accordance with clause 6.2 of the Capacity and Tolling Agreement; and

(c) not enter into any contract for the sale and purchase of fuel (and shall not take by novation any such contract from BET) having an expiry after the Break Option Completion Date without the prior consent of the Agent (such consent not to be unreasonably withheld or delayed).

In the event that the Borrower and the Banks’ Technical Adviser cannot agree standards for coal in accordance with subparagraph (b) above within 30 Business Days, clause 17 of the Capacity and Tolling Agreement shall apply to such dispute as if the reference to “Parties” therein where a reference to the Borrower and the Banks’ Technical Adviser and save that the cost of the Expert (as defined therein) shall be borne equally by the Finance Parties and the Borrower. At any time while a dispute is continuing, any previous standards for coal agreed between the Borrower and the Banks’ Technical Adviser shall apply.

15.18 Project Contracts

The Borrower shall not, without the prior written consent of the Agent (such consent not to be unreasonably withheld or delayed), agree to:

(a) any material amendment to any Project Contract or the Second Intercompany Loan Agreement;

(b) waive compliance with any material provision of any Project Contract; or

(c) any assignment or transfer of rights and/or obligations under any Project Contract or the Second Intercompany Loan Agreement,

unless:

(i) in the case of any Industry Document, the Borrower is obliged to do so by applicable law or regulation; or

(ii) where (other than in respect of the Capacity and Tolling Agreement) the Borrower in good faith determines that such amendment, waiver, assignment or transfer does not have a Material Adverse Effect.

15.19 Station Contracts

The Borrower shall on the expiry of any Station Contract enter into such other technical or other support arrangements as are necessary for it to operate the Plant in accordance with the standards of a Reasonable and Prudent Operator.

15.20 Material contracts

Except with the prior written consent of the Agent (not to be unreasonably withheld or delayed) the Borrower shall not enter into any material contracts, except (a) the Documents; or (b) contracts entered into in the normal course of business where any amounts payable by the Borrower in respect of such contracts are funded in accordance with the Capacity and Tolling Agreement; (c) the FGD Contract or any other contracts in respect of the Capital Investment Works; (d) any contract the Borrower is required to enter into under applicable law; (e) contracts expressly permitted or contemplated under the

33

Documents, including, without limitation, the Share Subscription Agreement; (f) post the Break Option Completion Date, contracts entered into in the ordinary course of business (including, without limitation, any documents, agreements or other arrangements entered into by the Borrower on or after the Break Option Completion Date in respect of transactions of a similar nature to those specified in, and contemplated by, the Capacity and Tolling Agreement) (g) the Eggborough Contracts or (h) the entering into of a lease with Rocktron Research Limited and Rocktron Limited relating to an ash processing plant.

15.21 No other business

The Borrower shall not engage in any business or activities, either alone or in partnership or joint venture other than those directly associated with the Project and those envisaged by the Documents, the Share Subscription Agreement, the Eggborough Contracts, the FGD Contract and the Station Documents and any other documents, agreements or other arrangements entered into by the Borrower on or after the Break Option Completion Date in respect of transactions of a similar nature to those specified in, and contemplated by, the Capacity and Tolling Agreement.

15.22 Compliance with laws and payment of Taxes

(a) Subject to Clause 15.23 (Environmental Matters), the Borrower shall comply with all laws and regulations applicable to it in all material respects.

(b) The Borrower shall file, or procure the filing of, all tax and informational returns that are required to be filed by it in any relevant jurisdiction, and shall pay or procure payment of all its Taxes when due, except to the extent the Taxes are contested in good faith and by appropriate means, and a reserve reasonably regarded by the Borrower as adequate has been set aside for payment of those Taxes.

(c) The Borrower will remain registered for value added tax, climate change levy, landfill tax and all other taxes in relation to which the Borrower is liable to be registered and will comply in all material respects with all requirements in relation to such registrations.

(d) The Borrower will not assume any liability to pay, reimburse or indemnify any person (including any taxation authority) an amount in respect of any taxation liability, which is the primary liability of any other person.

(e) Except as discussed and agreed in writing with the Agent (such consent not to be unreasonably withheld or delayed), the Borrower will not become involved in any transaction or series of transactions which, or any part of which, would for tax purposes be disregarded by reason of any motive to avoid a possible liability to tax other than any transaction or series of transactions which have been specifically anticipated by the Documents or the Share Subscription Agreement.

(f) The Borrower will retain all books and records of the Borrower and such other information as may be relevant to any taxation liability of the Borrower or any tax and information returns required to be filed by the Borrower in any relevant jurisdiction.

(g) Except with the prior written consent of the Agent (such consent not to be unreasonably withheld or delayed), neither the Borrower nor any relevant associate (as defined for the purposes of paragraph 3(7) of Schedule 10 to the Value Added Tax Act 1994) will elect to waive the exemption for value added tax purposes in relation to any land comprised within the Plant (and the Borrower confirms at the Restatement Date that it is in compliance with this paragraph).

34

15.23 Environmental Matters

(a) The Borrower shall comply in all material respects with:

(i) all applicable Environmental Law; and

(ii) the terms and conditions of all Environmental Licences applicable to it,

(iii) and for this purpose will implement procedures consistent with the standards of a Reasonable and Prudent Operator to monitor compliance and contain liability under Environmental Law. The Borrower may participate in any emissions trading scheme in which a Reasonable and Prudent Operator would participate.

(b) The Borrower shall not make any declaration or other binding written commitment not to operate the Plant (or any one or more generating unit thereof) for more than 20,000 operation hours starting from 1st January, 2008 and ending no later than 31st December, 2015 as described in Article 4(a) of the Large Combustion Plants Directive (being Directive 2001/80/EC of the European Parliament and of the Council of 23rd October, 2001 on the limitation of emissions of certain pollutants into the air from large combustion plants) (and/or any other form of submission and/ or notification as may be required by the relevant authority confirming or implementing the same) other than as submitted to the Environment Agency Site Inspector on 29th June, 2004, without the prior consent of the Majority Banks (such consent not to be unreasonably withheld).

15.24 Share capital

Save as permitted or contemplated under the Documents, the Borrower shall not purchase, cancel or redeem any of its share capital or issue any further voting capital.

15.25 Investments

Save as permitted or contemplated in any Finance Document, the Borrower shall not:

(a) acquire any share or loan capital of any corporate body or other investments;

(b) other than with the prior written consent of the Agent, open or maintain any accounts other than the Accounts or any other account contemplated under the Accounts Agreement and/or under the Gale Common Escrow Agreement; or

(c) have or acquire any Subsidiary whether by formation or otherwise.

15.26 Distributions

(a) The Borrower shall not make or pay any Distribution if a Default has occurred and is continuing.

(b) The Borrower shall not make or pay any payment to BET or BE in respect of:

(i) any Transaction;

(ii) any amount received under a Revenue Agreement; and

35

(iii) Additional Benefits (as defined in the Capacity and Tolling Agreement),

if a BET Event has occurred and is continuing.

15.27 Insurances

The Borrower shall enter into and maintain insurance for the duration of the remainder of the Security Period in accordance with Schedule 4 and with financially sound and reputable insurers.

15.28 Power to remedy

(a) In case of (i) an Event of Default that has occurred and is continuing or a default by the Borrower in complying with Clause 15.16 (Operation and maintenance) that has occurred and is continuing and (ii) the Borrower failing to confirm to the Agent within 10 Business Days of receipt of a demand from the Agent that it is taking steps (and setting out those steps in reasonable detail) to remedy such default, the Borrower shall permit the Agent or its agents and contractors to enter the Plant and to comply with or object to any notice served on the Borrower in respect of the Plant and to effect such repairs or insurance or generally do such things or pay all such costs, charges and expenses as the Agent may reasonably consider necessary or desirable to remedy any Event of Default or to prevent or remedy any breach of Clause 15.16 (Operation and maintenance) or to comply with or object to any notice.

(b) The Borrower will indemnify and keep the Agent indemnified against all losses, costs, charges and expenses reasonably incurred by it in connection with the exercise of the powers contained in this Clause 15.28, save for any losses, costs, charges and expenses arising out of the wilful default or gross negligence of the Agent, its agents or contractors.

15.29 Constitutional Documents

The Borrower will not make any material alteration to its constitutional documents without the prior written consent of the Agent.

15.30 Employees

(a) the Borrower will ensure that suitable, appropriately qualified, experienced and competent personnel are used to staff the Plant; and

(b) the Borrower will ensure that staffing levels are maintained at a level adequate to ensure the efficient and effective operation and maintenance of the Plant, in each case in accordance with the standards of a Reasonable and Prudent Operator; and

(c) other than in the ordinary course of business or with the consent of the Agent, the Borrower will not make, propose or permit any material changes to the terms and conditions of employment of any person employed by the Borrower and/or who provides services to the Plant (where such change is detrimental to the Borrower) or increase the level of remuneration payable to or in respect of such person.

15.31 Mothballing

(a) In this Clause, Mothballing means the preparation of one or more Units at the Plant for long term storage (being a period of 3 months or more) with a view to re-commissioning at some undetermined future date.

36

(b) The Borrower will promptly notify the Agent of any proposal for Mothballing at the Plant and consult in good faith with the Agent in respect of such proposal.

(c) The Borrower will not effect a Mothballing unless to do so would accord with the operation and maintenance of the Plant in accordance with the standards of a Reasonable and Prudent Operator.

15.32 Accounts

The Borrower will ensure that the audited accounts of the Borrower:

(a) are prepared in accordance with accounting principles and practices generally accepted in the United Kingdom consistently applied;

(b) are audited by PricewaterhouseCoopers or such other firm of international auditors reasonably acceptable to the Majority Banks; and

(c) fairly represent the respective financial condition of the Borrower as at the date to which they were drawn up.

15.33 Know your customer requirements

(a) The Borrower must as soon as reasonably practicable on the request of any Finance Party supply to that Finance Party any documentation or other evidence which is reasonably requested by that Finance Party (whether for itself, on behalf of any Finance Party or any prospective new Bank) to enable a Finance Party or prospective new Bank to carry out and be satisfied with the results of all applicable know your customer requirements.

(b) Each Bank must promptly on the request of the Facility Agent supply to the Facility Agent any documentation or other evidence which is reasonably required by the Facility Agent to carry out and be satisfied with the results of all applicable know your customer requirements

16. PENSIONS

The Borrower covenants that it shall:

(a) pay all contributions as and when due in respect of Members and Former Members (as defined in the ESPS) associated with the BEC Group as and when they fall due (including, but without limitation, contributions or payments in respect of ensuring that all lump sum benefits payable in the event of the death of a member in service are fully insured at all times);

(b) comply with all laws, Inland Revenue requirements and governing documents in respect of the BEC Group;

(c) not without the written consent of the Agent (not to be unreasonably withheld or delayed) act or omit to do anything within its power that may:

(i) result in a debt owing by the Borrower under section 75 of the Pensions Act 1995 to the trustees of the BEC Group; or

(ii) prejudice the approval of the BEC Group by the Inland Revenue; and

(d) not, without the written consent of the Agent (not to be unreasonably withheld or delayed) act or omit to do anything within its power that is out of the ordinary

37

course of administration of the BEC Group and that might result in a material increase in the liabilities or a material reduction in the funding level under the BEC Group.

The covenants in this Clause 16 shall only apply until the earlier of (a) the Break Option Date and (b) the Enforcement Option Completion Date.

17. DEFAULT

17.1 Events of Default

(a) Subject to paragraphs (b) and (c) below, each of the events set out below under the headings of Payment Default, Station Default and Residual Default is an Event of Default (whether or not caused by any reason whatsoever outside the control of the Borrower or any other person).

(b) It shall not be an Event of Default if the relevant event or circumstance relates only to a non-payment under the Capacity and Tolling Agreement and, within 14 days of the earlier of the Borrower becoming aware of such default and receipt by the Borrower of written notice from the Agent requiring the failure to be remedied, the Borrower has procured that another member of the Group (not being an Obligor) (the Substitute Group Member) has assumed and is in compliance with all material obligations of BET as party to the Capacity and Tolling Agreement, from which time all references in the Finance Documents to BET shall be replaced with a reference to that Substitute Group Member.

(c) The events and circumstances listed in Clauses 17.8 (Project Contracts) and (to the extent that they relate to Documents which are not Finance Documents) 17.9(Illegality) will cease being Events of Default following the Break Option Completion Date.

A. PAYMENT DEFAULT

The Event of Default in this section A is a Payment Default.

17.2 Non-payment

Subject to Clauses 5(c) (Repayment) and 8.3 (Delay), an Obligor does not pay on the due date any amount payable by it under the Finance Documents to the Finance Parties at the place, and in the currency, in which it is expressed to be payable and such failure to pay continues unremedied for 14 days.

B. STATION DEFAULT

Each of the Events of Default in this section B is a Station Default.

17.3 Non-payment under Capacity and Tolling Agreement

BET fails to pay an amount due to the Borrower under the Capacity and Tolling Agreement and such non-payment continues unremedied (a) in the case of a non-payment in respect of general payroll costs, caused solely by technical or administrative error, for a period of five Business Days, or (b) in any other case, for a period of 14 days following BET becoming aware of the non-payment (except where such failure to pay is (i) in aggregate in respect of amounts due not exceeding £100,000 and where such amounts are paid within 120 days; or (ii) on account of a bona fide dispute in respect of the relevant payment and the Borrower or BET is pursuing such dispute in good faith and by appropriate means).

38

17.4 Breach of Covenants

The Borrower does not comply with the provisions of Clause 15 (Undertakings), Clause 16 (Pensions) or any provision of an Option Agreement and such non-compliance: (i) has a Material Adverse Effect, and (ii) if capable of remedy, is not remedied or cured, within 60 days after the earlier of the Borrower becoming aware of such default and receipt by the Borrower of written notice from the Agent requiring the failure to be remedied.

17.5 Breach of other obligations

An Obligor does not comply with any provision of the Finance Documents (other than (i) those referred to in Clause 17.2 (Non-payment), Clause 17.3 (Non-payment under Capacity and Tolling Agreement) and Clause 17.4 (Breach of Covenants)), and such non-compliance: (i) has a Material Adverse Effect and (ii) if capable of remedy, is not remedied or cured within 120 days after the earlier of an Obligor becoming aware of such default and receipt by an Obligor of written notice from the Agent requiring the failure to be remedied.

17.6 Misrepresentation

A representation, warranty or statement made in any Finance Document by or on behalf of an Obligor is incorrect in any respect when made or deemed to be made, where (i) such misrepresentation has a Material Adverse Effect; and (ii) the circumstance causing such representation, warranty or statement to be incorrect if capable of remedy, is not remedied within 45 days after the earlier of an Obligor becoming aware of such misrepresentation, warranty or statement being incorrect and receipt by an Obligor of written notice requiring the circumstance to be remedied.

17.7 Cross-default

(a) Any Financial Indebtedness of the Borrower is not paid when due and payable (or within any applicable grace period); or

(b) any Financial Indebtedness of the Borrower becomes prematurely due and payable or is placed on demand as a result of an event of default (howsoever described) under the document relating to that Financial Indebtedness; or

(c) any commitment for, or underwriting of, any Financial Indebtedness of the Borrower is cancelled or suspended as a result of an event of default (howsoever described) under the document relating to that Financial Indebtedness; or

(d) in relation to any interest rate, currency swap, forward exchange contract, other hedging arrangements, derivative or similar transaction to which the Borrower is party for the time being the Borrower fails to make a payment of any sum on its due date;

unless the aggregate amount of such Financial Indebtedness referred to in paragraphs (a) to (d) (inclusive) above, does not exceed £5,000,000.

17.8 Project Contracts

(a) Any party to a Project Contract does not comply with any provision of that Project Contract and such non-compliance (i) has a Material Adverse Effect and (ii) if capable of remedy, is not remedied or cured within 60 days of the earlier of the Borrower becoming aware of such default and receipt by the Borrower of written notice from the Agent requiring the failure to be remedied.

39

(b) Any Project Contract terminates or any party to a Project Contract issues a valid notice of termination of that Project Contract in each case otherwise than by reason of full performance of the agreement or expiry of its term where such event has a Material Adverse Effect and, in the case of a Project Contract, other than any Industry Document which is not available for the Borrower to enter into, the Borrower fails within (i) 120 days to supply to the Agent a substitute contract for that Project Contract in form and substance reasonably satisfactory to the Majority Banks and (ii) but only where the Project Contract which has terminated or is the subject of a valid termination notice is the Capacity and Tolling Agreement, the Borrower fails within 14 days of termination to supply to the Agent a substitute contract with, or a guarantee from, another member of the Group in respect of the payment obligations of BET under the Capacity and Tolling Agreement.

17.9 Illegality

(a) It is or becomes unlawful for an Obligor to perform any of its material obligations under the Documents and the same has a Material Adverse Effect and, in the case of a Project Contract (not being the Capacity and Tolling Agreement), the Borrower fails to replace such Project Contract within 120 days of occurrence of such event.

(b) Any Document or any provision of any Document is required by any law or regulation having the force of law to be waived, amended, modified or abandoned and the same has a Material Adverse Effect.

(c) Any authorisation required in relation to the Project is revoked or materially adversely amended and not replaced within 60 days thereof and the same has a Material Adverse Effect.

17.10 Nationalisation

(a) The government of the United Kingdom or any Agency of that government takes, or states officially that it proposes to take, any step with a view to the seizure, expropriation, nationalisation or acquisition (whether compulsory or otherwise, in whole or in part, and whether or not for fair compensation) of the Borrower or any of its material assets other than as a consequence of (i) the exercise of the NLF Conversion Right under (and as defined in) the Contribution Agreement (as defined in the Creditor Restructuring Agreement) or (ii) the enforcement of the security (or any part of it) constituted by the Decommissioning Default Payment Debenture (as defined in the Conditions).

(b) All or a material part of the Plant is requisitioned.

(c) The Borrower receives any Compensation in an aggregate amount exceeding £5,000,000 and does not apply those amounts in prepayment of the Loan.

17.11 Ownership of the Borrower

British Energy Group plc (and/or its Affiliates) together cease to hold legally and beneficially at least 51 per cent. of the voting share capital of the Borrower.

17.12 FGD Works

A Taking Over Certificate (as defined in the FGD Contract) has not been delivered on or before 30th September, 2005 (the FGD Date) unless such failure is caused by the occurrence of either:

(a) a Force Majeure Event under the FGD Contract; and/or

40

(b) a breach by the Contractor of its obligations under the FGD Contract (save where such breach is a direct consequence of the breach by the Borrower of its material obligations under the FGD Contract); and/or

(c) the pursuit of a bona fide dispute under the dispute resolution procedure in the FGD Contract or at law,

in which such case, the FGD Date shall be extended by the aggregate number of days during which any of the events specified in paragraphs (a), (b) or (c) above are continuing (and on a concurrent basis where those events subsist concurrently).

17.13 Insolvency

(a) An Obligor is, or is deemed for the purposes of any applicable law to be, unable to pay its debts as they fall due, or admits in writing inability to pay its debts as they fall due, in each case, pursuant to section 123(1) of the Insolvency Act 1986 only; or

(b) an Obligor suspends making payments on its debts generally (other than to the Finance Parties) or announces an intention to do so, or a moratorium is declared in respect of any of its indebtedness.

17.14 Insolvency proceedings

(a) Any step (including proposal or convening a meeting) is taken with a view to a general moratorium, composition, assignment or arrangement with its creditors generally of an Obligor (other than the Finance Parties); or

(b) a meeting of the shareholders, or directors of an Obligor is convened for the purpose of considering any resolution to petition for, or to file documents with a court for its winding-up or steps are otherwise taken for placing an Obligor into administration pursuant to the Insolvency Act 1986 or any such resolution is passed (other than a voluntary solvent winding-up with the prior written consent of the Majority Banks); or

(c) any person presents a petition, or files documents with a court, for the winding-up of an Obligor or steps are otherwise taken for placing an Obligor into administration pursuant to the Insolvency Act 1986; or

(d) the directors, shareholders or other officers of an Obligor request the appointment of, or give notice of their intention to appoint, a liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator or similar officer; or

(e) an order for the winding-up of an Obligor is made (other than a voluntary solvent winding-up with the prior written consent of the Majority Banks) or an Obligor enters administration pursuant to the Insolvency Act 1986,

in each case, other than a petition or step which (a) relies solely on the basis that an Obligor is unable, or deemed unable, to pay its debts, or has admitted in writing its inability to pay its debts, in each case for the purposes of section 123(2) of the Insolvency Act 1986 only (b) is frivolous, vexatious or an abuse of process of the court or (c) relates to a claim to which the Obligor has a good defence and which is being contested in good faith and by appropriate means by the Obligor and, in each case, is discharged or stayed within 60 days.

41

17.15 Creditors’ process

Any attachment, sequestration, distress or execution affects any material asset of an Obligor and is not discharged within 30 days.

17.16 Analogous proceedings

There occurs in relation to an Obligor any event in any applicable jurisdiction which corresponds with any of those mentioned in Clauses 17.13 (Insolvency) to 17.15 (Creditors’ process) (inclusive).

17.17 Effectiveness of Finance Documents

Any Finance Document (other than a Novation Certificate) is not effective or is alleged by an Obligor to be ineffective for any reason, where such ineffectiveness (i) has a Material Adverse Effect and (ii) if capable of remedy, is not remedied within 45 days after the earlier of an Obligor becoming aware of such ineffectiveness and receipt by the relevant Obligor of a notice requiring it to be remedied.

17.18 Cessation of business

The Borrower ceases, or announces an intention in writing to cease, to carry on all or a substantial part of its business (which, for the avoidance of doubt shall not include (i) a voluntary solvent winding up with the prior written consent of the Majority Banks; (ii) Mothballing in accordance with Clause 15.31 (Mothballing)) and/or (iii) the closure of any unit as a result of it having been opted-out in accordance with the Large Combustion Plants Directive (being Directive 2001/80/EC of the European Parliament and the Council of 23rd October, 2001 on the limitation of emissions of certain pollutants into the air from large combustion plants) and where the Borrower is not in breach of its obligations under Clause 15.23(b) (Environmental matters).

17.19 Pensions

During such time as BE, the Issuer or the Borrower is the Principal Employer of the BEC Group, BE, the Issuer or the Borrower (as the case may be):

(a) fails to operate the BEC Group in accordance with its governing documentation and all laws and all Inland Revenue requirements;

(b) without the written consent of the Agent (not to be unreasonably withheld or delayed):

(i) ceases to be the Principal Employer of the BEC Group (save that it shall not be an Event of Default for the Borrower or the Issuer to be substituted for BE, or for the Borrower to be substituted for the Issuer, as the Principal Employer of the BEC Group); or

(ii) admits any other employer to participation in the BEC Group (save that it shall not be an Event of Default for the Issuer to be admitted to participation in the BEC Group); or

(iii) acts or omits to do anything in its power that may result in a debt owing by the Borrower under section 75 of the Pensions Act 1995 to the trustees of the BEC Group; or prejudice the Inland Revenue approval of the BEC Group; or result in a material increase in the liabilities or a material reduction in the funding level under the BEC Group;

42

(iv) fails to ensure that all lump sum benefits payable in the event of the death of a member in service are fully insured at all times with a reputable and authorised insurer; and

(v) fails to make such arrangements as are necessary to deal with any funding deficit following an actuarial valuation of the BEC Group so that contributions payable in respect of the deficit are spread over a period not exceeding 20 years (or such shorter period as may be certified by the BEC Group actuary as the maximum permitted period),

in each case, such event (i) has a Material Adverse Effect; and (ii) if capable of remedy is not remedied within 60 days after the earlier of the Borrower becoming aware of such default and receipt by the Borrower of written notice from the Agent requiring the default to be remedied.

C. RESIDUAL DEFAULTS

The Event of Default in this section C is a Residual Default

17.20 Event of Default under CTA Bonds

An Event of Default (as defined in the CTA Bonds) occurs under the CTA Bonds and is not remedied or waived by the Bond Trustee within 30 days of its occurrence.

18. CONSEQUENCES OF AN EVENT OF DEFAULT

18.1 Acceleration

On and at any time after the occurrence of an Event of Default which is continuing the Agent may, and shall if so directed by the Majority Banks, by notice to the Borrower demand that all of the Loan, together with accrued interest and all other amounts accrued under the Finance Documents be immediately due and payable, whereupon they shall become immediately due and payable.

18.2 Enforcement

(a) Subject to paragraphs (b), (c) and (d) below, on and at any time after the occurrence of an Event of Default which is continuing, the Security Trustee may either (i) in accordance with the Security Documents, in its absolute discretion enforce all or any part of the security, or (ii) exercise an Enforcement Option (as defined in the Option Agreements).

(b) On any enforcement in accordance with paragraph (a)(ii) above, the Banks will pay the relevant fees payable in the amounts and the manner set out in the Option Agreements.

(c) Once the Enforcement Option has been exercised, the Security Trustee may not enforce any security held by it for the benefit of the Banks unless it is permitted to do so as a result of a failure by the Seller (as defined in the Option Agreements) to transfer the Material Station Assets (as defined in the Option Agreements) under Clause 15 (Failure to transfer) of the Asset Option Agreement.

43

(d) The Security Trustee may not exercise an Enforcement Option at any time after it has taken any steps whatsoever to enforce any Security Interest (not being the Enforcement Option) in accordance with the Security Documents and where a step to enforce shall only occur where a Finance Party takes any steps to take possession of or appoint an insolvency officer in respect of any Security Asset and does not include, without limitation, any steps to protect or preserve a Security Interest or other rights under the Security Documents.

19. THE AGENT AND THE ARRANGER

19.1 Appointment and duties of the Agent

(a) Each Finance Party (other than the Agent) irrevocably appoints the Agent to act as its agent under and in connection with the Finance Documents.

(b) Each Party appointing the Agent irrevocably authorises the Agent on its behalf to:

(i) perform the duties and to exercise the rights, powers and discretions that are specifically delegated to it under or in connection with the Finance Documents, together with any other incidental rights, powers and discretions; and

(ii) execute as agent for that Party each Finance Document to which the Agent is a party.

(c) The Agent has only those duties which are expressly specified in the Finance Documents. Those duties are solely of a mechanical and administrative nature.

19.2 Role of the Arranger

Except as specifically provided in the Finance Documents, the Arranger has no obligations of any kind to any other Party under or in connection with any Finance Document.

19.3 Relationship

The relationship between the Agent and the other Finance Parties is that of agent and principal only. Except as contemplated by the Security Documents, nothing in this Agreement constitutes the Agent as trustee or fiduciary for any other Party or any other person and the Agent need not hold in trust any moneys paid to it for a Party or be liable to account for interest on those moneys.

19.4 Majority Banks’ instructions

(a) The Agent will be fully protected if it acts in accordance with the instructions of the Majority Banks in connection with the exercise of any right, power or discretion or any matter not expressly provided for in the Finance Documents. Any such instructions given by the Majority Banks will be binding on all the Banks. In the absence of such instructions, the Agent may act as it considers to be in the best interests of all the Banks.

(b) The Agent is not authorised to act on behalf of a Bank (without first obtaining that Bank’s consent) in any legal proceedings in relation to any Finance Document.

(c) The Agent may refer any matter in its discretion to the Majority Banks for their decision.

19.5 Delegation

The Agent may act under the Finance Documents through its personnel and agents.

44

19.6 Responsibility for documentation

Neither the Agent nor the Arranger is responsible to any other Party for:

(a) the execution, genuineness, validity, enforceability or sufficiency of any Finance Document or any other document;

(b) the collectability of amounts payable under any Finance Document; or

(c) the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document (including the Information Memorandum).

19.7 Default

(a) The Agent is not obliged to monitor or enquire as to whether or not a Default has occurred. The Agent will not be deemed to have knowledge of the occurrence of a Default. However, if the Agent receives notice from a Party referring to this Agreement, describing the Default and stating that the event is a Default, it shall promptly notify the Banks.

(b) The Agent may require the receipt of security satisfactory to it, whether by way of payment in advance or otherwise, against any liability or loss which it will or may incur in taking any proceedings or action arising out of or in connection with any Finance Document before it commences those proceedings or takes that action.

19.8 Exoneration

(a) Without limiting paragraph (b) below, the Agent will not be liable to any other Party for any action taken or not taken by it under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct.

(b) No Party may take any proceedings against any officer, employee or agent of the Agent in respect of any claim it might have against the Agent, or in respect of any act or omission of any kind (including gross negligence or wilful misconduct) by that officer, employee or agent in relation to any Finance Document.

(c) (i)     Nothing in this Agreement will oblige the Agent to satisfy any know your customer requirement in relation to the identity of any person on behalf of any Finance Party.

(ii) Each Finance Party confirms to the Agent that it is solely responsible for any know your customer requirements it is required to carry out and that it may not rely on any statement in relation to those requirements made by any other person.

Any officer, employee or agent of the Agent may rely on this Clause 19.8 and enforce its terms under the Contracts (Rights of Third Parties) Act 1999.

19.9 Reliance

The Agent may:

(a) rely on any notice or document believed by it to be genuine and correct and to have been signed by, or with the authority of, the proper person;

(b) rely on any statement made by a director or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify; and

45

(c) engage, pay for and rely on legal or other professional advisers selected by it (including those in its employment and those representing a Party other than itself).

19.10 Credit approval and appraisal

Without affecting the responsibility of the Borrower for information supplied by it or on its behalf in connection with any Finance Document, each Bank confirms that it:

(a) has made its own independent investigation and assessment of the structure of the Project, the form and substance of the Documents and the documents listed in the Amendment and Restatement Agreement, the financial condition and affairs of the Borrower, the parties to the Project Contracts and their respective related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Agent or the Arranger in connection with any Finance Document; and

(b) will continue to make its own independent appraisal of the matters referred to in paragraph (a) above while any amount is or may be outstanding under the Finance Documents or any Commitment is in force.

19.11 Information

(a) The Agent shall promptly forward to the person concerned the original or a copy of any document which is delivered to the Agent by a Party for that person.

(b) Except where this Agreement specifically provides otherwise, the Agent is not obliged to review or check the accuracy or completeness of any document it forwards to another Party.

(c) Except as provided above, the Agent has no duty:

(i) either initially or on a continuing basis to provide any Bank with any credit or other information concerning matters referred to in paragraph (a) above whether coming into its possession before, on or after the date of this Agreement; or

(ii) unless specifically requested to do so by a Bank in accordance with a Finance Document to request any certificates or other documents from the Borrower.

19.12 The Agent and the Arranger individually

(a) If it is also a Bank, each of the Agent and the Arranger has the same rights and powers under this Agreement as any other Bank and may exercise those rights and powers as though it were not the Agent or the Arranger.

(b) Each of the Agent and the Arranger may:

(i) carry on any business with the Borrower, any party to the Documents or their respective related entities;

(ii) act as agent or trustee for, or in relation to any financing involving, the Borrower, any party to the Documents or their respective related entities; and

(iii) retain any profits or remuneration in connection with its activities under this Agreement or in relation to any of the foregoing.

46

(c) In acting as the Agent, the agency division of the Agent will be treated as a separate entity from its other divisions and departments. Any information acquired by the Agent which, in its opinion, is acquired by it otherwise than in its capacity as the Agent may be treated as confidential by the Agent and will not be deemed to be information possessed by the Agent in its capacity as such.

(d) The Borrower irrevocably authorises the Agent to disclose any information which, in its opinion, is received by it in its capacity as the Agent to the other Finance Parties.

19.13 Indemnities

(a) Without limiting the liability of the Borrower under the Finance Documents, each Bank shall forthwith on demand indemnify the Agent for that Bank’s proportion of any liability or loss incurred by the Agent in any way relating to or arising out of its acting as the Agent, except to the extent that the liability or loss arises directly from the Agent’s gross negligence or wilful misconduct.

(b) A Bank’s proportion of the liability set out in paragraph (a) above will be the proportion which its participation in the Loans (if any) bears to the Loans on the date of the demand.

(c) The Borrower shall within 14 days of demand reimburse each Bank for any payment made by it under paragraph (a) above.

19.14 Compliance

(a) The Agent may refrain from doing anything which might, in its opinion, constitute a breach of any law or regulation or be otherwise actionable at the suit of any person, and may do anything which, in its opinion, is necessary or desirable to comply with any law or regulation of any jurisdiction.

(b) Without limiting paragraph (a) above, the Agent need not disclose any information relating to the Borrower or any of its related entities if the disclosure might, in the opinion of the Agent, constitute a breach of any law or regulation or any duty of secrecy or confidentiality or be otherwise actionable at the suit of any person.

19.15 Resignation of the Agent

(a) Notwithstanding its irrevocable appointment, the Agent may (after consultation with the Borrower) resign by giving notice to the Banks and the Borrower, in which case the Agent may forthwith appoint one of its Affiliates as successor Agent or, failing that, the Majority Banks may appoint a successor Agent provided that in either case the appointment of any person other than a bank or financial institution shall also require the prior written consent of the Borrower.

(b) If the appointment of a successor Agent is to be made by the Majority Banks but they have not, within 30 days after notice of resignation, appointed a successor Agent which accepts the appointment, the Agent may (after consultation with the Borrower but subject to the requirements as to Borrower consent referred to in Clause 19.15(a)) appoint a successor Agent.

(c) The resignation of the Agent and the appointment of any successor Agent will both become effective only upon the successor Agent notifying all the Parties that it accepts its appointment. On giving the notification, the successor Agent will succeed to the position of the Agent and the term Agent will mean the successor Agent.

47

(d) The retiring Agent shall, at its own cost, make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as the Agent under this Agreement.

(e) Upon its resignation becoming effective, this Clause 19 will continue to benefit the retiring Agent in respect of any action taken or not taken by it under or in connection with the Finance Documents while it was the Agent, and, subject to paragraph (d) above, it shall have no further obligations under any Finance Document provided that the Agent shall pay to the successor Agent any fees received by the Agent in respect of the period from the date of its resignation to the next scheduled payment date of agency fees under Clause 20.2 (Agent’s fee).

(f) The Majority Banks may, by notice to the Agent, require it to resign in accordance with paragraph (a) above. In this event, the Agent shall resign in accordance with paragraph (a) above but it shall not be entitled to appoint one of its Affiliates as successor Agent.

19.16 Banks

(a) The Agent may treat each Bank as a Bank, entitled to payments under this Agreement and as acting through its Facility Office(s) until it has received not less than five Business Days’ prior notice from that Bank to the contrary.

(b) The Agent may at any time, and shall if requested to do so by the Majority Banks, convene a meeting of the Banks.

19.17 Voting arrangements

(a) Where any consent, approval, determination, waiver or other decision is required to be given, made or taken by or with the approval of the Majority Banks, the Agent will by notice to the Banks specify the period of time (not being less than 10 Business Days (save in the case of an emergency) nor more than 15 Business Days) within which replies are required and whether the procedure in sub-paragraph (b) shall apply.

(b) If any Bank does not reply within the period specified by the Agent, the amount of its participation in the Loans shall, unless the Agent has in the notice specified that this sub-paragraph (b) shall not apply, be disregarded, in the denominator for the purpose of determining whether or not the requisite percentage vote has been achieved.

20. FEES

20.1 Restructuring fee

The Borrower shall within 3 Business Days of the Restatement Date pay to the Agent a restructuring fee in the amount agreed in the relevant Fee Letter. This fee shall be distributed by the Agent among the Banks in accordance with the arrangements agreed by the Agent with the Banks prior to the date of the Amendment and Restatement Agreement.

20.2 Agent’s fee

The Borrower shall pay to the Agent for its own account an agency fee in the amount and at the times agreed in the relevant Fee Letter.

48

20.3 Advisers’ fees

The Borrower shall pay the reasonable costs and expenses of the Banks’ Technical Adviser and Banks’ Insurance Adviser and any advisers appointed under Clause 26 (Advisers).

20.4 VAT

Any fee referred to in this Clause 20 is exclusive of any value added tax or any other similar tax which might be chargeable in connection with that fee. If any value added tax or other similar tax is so chargeable, it shall be paid by the Borrower at the later of (i) the same time as it pays the relevant fee and (ii) the production of a valid VAT invoice (or equivalent) in respect of such value added tax (or similar tax).

21. EXPENSES

21.1 Special costs

The Borrower shall within 14 days of demand pay the Agent the amount of all reasonable costs and expenses (including, without limitation, legal fees) but excluding all Taxes (except to the extent specifically provided for in the Finance Documents) supported by invoices in reasonable detail incurred by either of the Agent in connection with:

(a) the negotiation, preparation, printing and execution of any Finance Document (other than a Novation Certificate) executed after the date of the Amendment and Restatement Agreement (other than any document entered into in connection with the Creditor Restructuring Agreement); and

(b) any amendment, waiver, consent or suspension of rights (or any proposal for any of the foregoing) requested by or on behalf of the Borrower and relating to a Finance Document or a document referred to in any Finance Document.

21.2 Enforcement costs

The Borrower shall forthwith on demand pay to each Finance Party the amount of all costs and expenses (including legal fees but excluding all Taxes (except to the extent specifically provided for in the Finance Documents) incurred by it in connection with the enforcement of, or the preservation of any rights under, any Finance Document (other than any amounts payable by any Finance Party under the Option Agreements).

22. STAMP DUTIES

The Borrower shall pay, and forthwith on demand indemnify each Finance Party against any liability it incurs in respect of, any stamp, registration and similar tax which is or becomes payable in connection with the entry into, performance or enforcement of this Agreement, but excluding any such taxes payable by any Finance Party on exercise or completion of an Option.

23. EVIDENCE AND CALCULATIONS

23.1 Accounts

Accounts maintained by a Finance Party in connection with this Agreement are prima facie evidence of the matters to which they relate.

49

23.2 Certificates and determinations

Any certification or determination by a Finance Party of a rate or amount under the Finance Documents is, in the absence of manifest error, conclusive evidence of the matters to which it relates.

23.3 Calculations

Interest shall accrue from day to day and is calculated on the basis of twelve 30 day months and a year of 365 days.

24. AMENDMENTS AND WAIVERS

24.1 Procedure

(a) Subject to Clause 24.2 (Exceptions) any term of the Finance Documents may be amended or waived with the agreement of the Borrower and the Majority Banks. The Agent may effect, on behalf of the Finance Parties, an amendment or waiver to which the Majority Banks have agreed.

(b) The Agent shall promptly notify the other Parties of any amendment or waiver effected under paragraph (a) above, and any such amendment or waiver shall be binding on all the Parties.

24.2 Exceptions

(a) An amendment or waiver which relates to:

(i) the definition of Majority Banks in Clause 1.1 (Definitions);

(ii) an extension of the date for, or a decrease in an amount or a change in the currency of, any payment to that Bank under the Finance Documents;

(iii) an increase in that Bank’s Commitment;

(iv) a term of a Finance Document which expressly requires the consent all the Banks; or

(v) Clause 2.2 (Nature of a Finance Party’s rights and obligations), Clause 25.2 (Transfers by Banks), Clause 30 (Pro Rata Sharing) or this Clause 24 (Amendments and Waivers),

shall require the consent of all the Banks.

(b) An amendment or waiver which relates to the rights and/or obligations of the Agent may not be effected without the agreement of the Agent.

24.3 Waivers and Remedies Cumulative

The rights of each Finance Party under the Finance Documents:

(a) may be exercised as often as necessary;

(b) are cumulative and not exclusive of its rights under the general law; and

(c) may be waived only in writing and specifically.

50

Delay in exercising or non-exercise of any such right is not a waiver of that right.

25. CHANGES TO THE PARTIES

25.1 Transfers by Borrower

The Borrower may not assign, transfer, novate or dispose of any of, or any interest in, its rights and/or obligations under the Finance Documents save that the Borrower may assign and/or transfer any or all its rights under the Asset Option Agreement (a) to EPHL in accordance with the Second Security Assignment and (b) to any purchaser of all or part of such rights pursuant to an enforcement of the Second Security Assignment.

25.2 Transfers by Banks

(a) A Bank (the Existing Bank) may, subject to paragraph (b) below, at any time assign, transfer or novate any part of its Commitment and/or any of its rights and/or obligations under the Finance Documents to either:

(i) another bank or financial institution; or

(ii) to a limited liability company, provided that:

(A) and, for so long as, such company’s entire share capital is owned by banks and financial institutions;

(B) such company has been established for the sole purpose of owning power generation assets in the United Kingdom; and

(C) all other existing Banks also transfer their rights and/or obligations under the Finance Documents and the Share Subscription Agreement to such company,

(the New Bank), in each case which is a Qualifying Bank.

(b) Any assignment, transfer or novation pursuant to Clause 25.2(a) shall:

(i) if of part of a Commitment only, be in a minimum amount of at least £5,000,000; and

(ii) require the prior written consent of the Borrower unless (A) the New Bank is another Bank or an Affiliate of a Bank; or (B) the New Bank is an OECD Bank. However, the prior consent of the Borrower must not be unreasonably withheld or delayed and will be deemed to have been given if, within five days of receipt by the Borrower of an application for consent, it has not been expressly refused.

(c) The Agent is not obliged to execute a Transfer Certificate until it has completed all know your customer requirements to its satisfaction. The Agent must promptly notify the Existing Bank and the New Bank if there are any such requirements.

(d) A transfer of obligations will be effective only if either:

(i) the obligations are novated in accordance with Clause 25.3 (Procedure for novations); or

(ii) the New Bank confirms to the Agent and the Borrower that it undertakes to be bound by the terms of this Agreement as a Bank in form and substance satisfactory to the Agent. On the transfer becoming effective in this manner the Existing Bank shall be relieved of its obligations under this Agreement to the extent that they are transferred to the New Bank.

51

(e) Nothing in this Agreement restricts the ability of a Bank to sub-contract an obligation if that Bank remains liable under this Agreement for that obligation.

(f) On each occasion an Existing Bank assigns, transfers or novates any of its Commitment and/or any of its rights and/or obligations under this Agreement, the New Bank shall, on the date the assignment, transfer and/or novation takes effect, pay to the Agent for its own account a fee of £2,500.

(g) An Existing Bank is not responsible to a New Bank for:

(i) the execution, genuineness, validity, enforceability or sufficiency of any Finance Document or any other document;

(ii) the collectability of amounts payable under any Finance Document; or

(iii) the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document.

(h) Each New Bank confirms to the Existing Bank and the other Finance Parties that it:

(i) has made its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Bank in connection with any Finance Document; and

(ii) will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities while any amount is or may be outstanding under this Agreement or any Commitment is in force.

(i) Nothing in any Finance Document obliges an Existing Bank to:

(i) accept a re-transfer from a New Bank of any of the rights and/or obligations assigned, transferred or novated under this Clause; or

(ii) support any losses incurred by the New Bank by reason of the non-performance by any Obligor of its obligations under the Finance Documents or otherwise.

(j) Any reference in this Agreement to a Bank includes a New Bank but excludes a Bank if no amount is or may be owed to or by it under this Agreement and its Commitment has been cancelled or reduced to nil.

(k) If:

(i) a Bank assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and

(ii) as a result of circumstances existing at the date the assignment, transfer or change occurs, the Borrower would be obliged to make a payment to the New Bank or Bank acting through its new Facility Office under Clause 11.1 (Gross-up),

then the New Bank or Bank acting through its new Facility Office is only entitled to receive payment under that Clause to the same extent as the Existing Bank or Bank acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred.

52

25.3 Procedure for novations

(a) A novation is effected if:

(i) the Existing Bank and the New Bank deliver to the Agent a duly completed certificate, substantially in the form of Schedule 3 (a Novation Certificate); and

(ii) the Agent executes it.

(b) Each Party (other than the Existing Bank and the New Bank) irrevocably authorises the Agent to execute any duly completed Novation Certificate on its behalf.

(c) To the extent that they are expressed to be the subject of the novation in the Novation Certificate:

(i) the Existing Bank and the other Parties (the existing Parties) will be released from their obligations to each other (the discharged obligations);

(ii) the New Bank and the existing Parties will assume obligations towards each other which differ from the discharged obligations only insofar as they are owed to or assumed by the New Bank instead of the Existing Bank;

(iii) the rights of the Existing Bank against the existing Parties and vice versa (the discharged rights) will be cancelled; and

(iv) the New Bank and the existing Parties will acquire rights against each other which differ from the discharged rights only insofar as they are exercisable by or against the New Bank instead of the Existing Bank,

all on the date of execution of the Novation Certificate by the Agent or, if later, the date specified in the Novation Certificate.

25.4 Register

The Agent shall keep a register of all the Parties and shall supply any other Party (at that Party’s expense) with a copy of the register on request.

26. ADVISERS

(a) Subject to paragraph (b) below, the Agent may with the prior approval of the Majority Banks and the Borrower (such approval not to be unreasonably withheld or delayed):

(i) appoint additional consultants or advisers to act on behalf of the Banks in relation to the Project;

(ii) revise the terms of the Banks’ Technical Adviser engagement;

(iii) if the Banks’ Technical Adviser or Banks’ Insurance Adviser resign or their appointments otherwise cease or are terminated, appoint a new Banks’ Technical Adviser or Banks’ Insurance Adviser.

53

(b) If the Majority Banks are unable to agree on the appointment of a new Banks’ Technical Adviser or Banks’ Insurance Adviser within 30 days of notification to them by the Agent of alternative advisers, the Agent may with the prior approval of the Borrower (such approval not to be unreasonably withheld or delayed), appoint a new Banks’ Technical Adviser or Banks’ Insurance Adviser as it thinks fit.

27. DISCLOSURE OF INFORMATION

A Bank may disclose to:

(a) any person to the extent necessary to comply or permit compliance with any law or regulation or other official or regulatory reporting requirement; or

(b) one of its Affiliates or any other person with whom it is proposing to enter, or has entered into, any kind of transfer, participation or other agreement in relation to this Agreement and which has, before receiving any such document or information, entered into a confidentiality undertaking in the form set out in Schedule 11:

(i) a copy of any Document;

(ii) the Information Memorandum; and

(iii) any information which that Bank has acquired under or in connection with any Document.

28. SET-OFF

Subject to clause 13.2 (Waiver of rights by the Account Bank) of the Accounts Agreement and the Intercreditor Agreement, a Finance Party may set off any matured obligation owed by the Borrower under the Finance Documents (other than under the Option Agreements) (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to the Borrower (other than under the Option Agreements), regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

29. SEVERABILITY

If a provision of any Finance Document is or becomes illegal, invalid or unenforceable in any jurisdiction, that shall not affect:

(a) the validity or enforceability in that jurisdiction of any other provision of the Finance Documents; or

(b) the validity or enforceability in other jurisdictions of that or any other provision of the Finance Documents.

54

30. PRO RATA SHARING

30.1 Redistribution

If any amount owing by the Borrower under the Finance Documents to a Finance Party (the recovering Finance Party) is discharged by payment, set-off or any other manner other than through the Agent in accordance with Clause 10 (Payments) (a recovery), then:

(a) the recovering Finance Party shall, within three Business Days, notify details of the recovery to the Agent;

(b) the Agent shall determine whether the recovery is in excess of the amount which the recovering Finance Party would have received had the recovery been received by the Agent and distributed in accordance with Clause 10 (Payments);

(c) subject to Clause 30.3 (Exceptions), the recovering Finance Party shall within three Business Days of demand by the Agent pay to the Agent an amount (the redistribution) equal to the excess;

(d) the Agent shall treat the redistribution as if it were a payment by the Borrower under Clause 10 (Payments) and shall pay the redistribution to the Finance Parties (other than the recovering Finance Party) in accordance with Clause 10.7 (Partial payments); and

(e) after payment of the full redistribution, the recovering Finance Party will be subrogated to the portion of the claims paid under paragraph (d) above and the Borrower will owe the recovering Finance Party a debt which is equal to the redistribution, immediately payable and of the type originally discharged.

30.2 Reversal of redistribution

If under Clause 30.1(Redistribution):

(a) a recovering Finance Party must subsequently return a recovery, or an amount measured by reference to a recovery, to the Borrower; and

(b) the recovering Finance Party has paid a redistribution in relation to that recovery,

each Finance Party shall, within three Business Days of demand by the recovering Finance Party through the Agent, reimburse the recovering Finance Party all or the appropriate portion of the redistribution paid to that Finance Party together with interest on the amount to be returned to the recovering Finance Party for the period whilst it held the re-distribution. Thereupon, the subrogation in Clause 30.1(e) (Redistribution) will operate in reverse to the extent of the reimbursement.

30.3 Exceptions

(a) A recovering Finance Party need not pay a redistribution to the extent that it would not, after the payment, have a valid claim against the Borrower in the amount of the redistribution under Clause 30.1(e) (Redistribution).

(b) A recovering Finance Party is not obliged to share with any other Finance Party any amount which the recovering Finance Party has received or recovered as a result of taking legal proceedings, if the other Finance Party had an opportunity to participate in those legal proceedings but did not do so and did not take separate legal proceedings.

55

31. COUNTERPARTS

Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.

32. NOTICES

32.1 Giving of notices

All notices or other communications under or in connection with the Finance Documents shall be given in writing and, unless otherwise stated may be made by letter or facsimile. Any such notice will be deemed to be given as follows:

(a) if by letter, when delivered personally or on actual receipt; and

(b) if by facsimile, when received in legible form.

However, a notice given in accordance with the above but received on a non-working day or after business hours in the place of receipt will only be deemed to be given on the next working day in that place.

32.2 Addresses for notices

(a) The address and facsimile number of each Party (other than the Borrower and the Agent) for all notices under or in connection with the Finance Documents are:

(i) those notified by that Party for this purpose to the Agent on or before the date it becomes a Party; or

(ii) any other notified by that Party for this purpose to the Agent by not less than five Business Days’ notice.

(b) The address and facsimile number of the Borrower are:

Eggborough Power Limited

Barnett Way

Barnwood

Gloucester

GL4 3RS

Attention:   Corporate Affairs Director and Company Secretary

Facsimile:  01355 594 022

^**** indicates material omitted and filed separately with the Commission.

56

with copies to:

British Energy Group plc

3 Redwood Crescent

Peel Park

East Kilbride

G74 5PR

Attention:	Corporate Affairs Director and Company Secretary
Facsimile:	01355 594 022

or such other as the Borrower may notify to the Agent by not less than five Business Days’ notice.

(c) The address and facsimile number of the Agent, for general matters, are:

Barclays Bank PLC

5 The North Colonnade

Canary Wharf

London E14 4BB

Telephone:	************
Facsimile:	************
Attention:	Head of Agency

or such other as the Agent may notify to the other Parties by not less than 5 Business Days’ notice.

(d) All notices from or to the Borrower shall be sent through the Agent.

(e) The Agent shall, promptly upon request from any Party, give to that Party the address or facsimile number of any other Party applicable at the time for the purposes of this Clause.

33. JURISDICTION

33.1 Submission

For the benefit of each Finance Party, the Borrower agrees that the courts of England have jurisdiction to settle any disputes in connection with any Finance Document and accordingly submits to the jurisdiction of the English courts.

33.2 Non-exclusivity

Nothing in this Clause 33 limits the right of a Finance Party to bring proceedings against the Borrower in connection with any Finance Document:

(a) in any other court of competent jurisdiction; or

(b) concurrently in more than one jurisdiction.

34. GOVERNING LAW

This Agreement is governed by English law.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

^**** indicates material omitted and filed separately with the Commission.

57

Schedule 1

*****^(****)

*****	***********
*************	*********
****************************	*********
******************	*********
******************	*********
**********************	*********
******************************************	*********
**********************	*********
**********************	*********
******************************	*********
*************************************	*********
************************	*********
*******************	*********
***********************	*********
***********************	*********
**********	*********
Total	150,000,000.00

* The above numbers assume that termination sums for the close-out of the swaps are set out below. The above numbers are subject to adjustment if the actual sums on close-out of the swaps on 20^th October, 2004 are different .

Barclays Bank PLC £9,213,909

The Royal Bank of Scotland plc £5,986,757

The Toronto-Dominion Bank £7,383,988

WestLB AG £1,496,689

^(****) indicates material omitted and filed separately with the Commission.

58

Schedule 2

***********************^(****)

******

****

**************	****************** *
*************	*********
*************	*********
*************	*********
*************	*********
*************	**********
*************	**********
*************	**********
*************	*********
*************	*********
*************	*********
*************	**********
*************	*********
************	*********
************	*********
************	*********
*************	*********
*************	*********
*************	*********
	***********

^(****) indicates material omitted and filed separately with the Commission.

59

SCHEDULE 3

FORM OF NOVATION CERTIFICATE

To:	Barclays Bank PLC as Agent
From:	[THE EXISTING BANK] and [THE NEW BANK]	Date: [            ]

£150,000,000 Credit Agreement dated 13 July 2000 (as amended and restated)

We refer to Clause 25.3 (Procedure for novations).

1. We [            ] (the Existing Bank) and [            ] (the New Bank) agree to the Existing Bank and the New Bank novating all the Existing Bank’s rights and obligations referred to in the Schedule in accordance with Clause 25.3 (Procedure for novations).

2. The specified date for the purposes of Clause 25.3(c) is [date of novation].

3. The Facility Office and address for notices of the New Bank for the purposes of Clause 32.2 (Addresses for notices) are set out in the Schedule.

4. This Novation Certificate is governed by English law.

THE SCHEDULE

Commitment/rights and obligations to be novated

[insert relevant details].

[Existing Bank]	[New Bank]
By:	By:
Date:	Date:
[New Bank]
[Facility Office/Address for notices]
Barclays Bank PLC
By:
Date:

60

SCHEDULE 4

INSURANCE ARRANGEMENTS

References in this Schedule 4 to paragraphs and Appendices shall be construed as references to the paragraphs and Appendices of this Schedule 4 unless the context otherwise requires.

1. INSURANCES TO BE EFFECTED

1.1 Operational Insurances

Appendix 1 specifies the insurances which are to be effected by, or procured by, the Borrower for the benefit of the Borrower and, among others, the Finance Parties. Subject to the terms of this Schedule the Borrower shall procure that insurances against the risks and liabilities specified in Appendix 1 are maintained in full force and effect throughout the Security Period and that those insurances are effected against the risks and liabilities and maintained in the amounts specified in Appendix 1 (as varied from time to time by paragraphs 2.2 and 4.3 or agreed or determined under paragraph 9).

1.2 Other Insurances

Without prejudice to the other provisions of this Schedule, the Borrower shall effect and maintain any insurance which it is required to have by any applicable law or by the terms of the Finance Documents or of any other contract relating to the Project to which it is a party and under which it is obliged to purchase and maintain (or procure the purchase and maintenance of) any insurance.

2. ADDITIONAL REQUIREMENTS RELATING TO INSURANCES

2.1 General Requirements

(a) The Borrower shall procure that all insurances described in paragraphs 1.1, 1.2, 1.3, 1.4 and 1.5(e) of Appendix 1 (the Material Insurances) shall:

(i) be purchased by or on behalf of the Borrower and through agents approved in writing by the Agent such approval not to be unreasonably withheld or delayed;

(ii) be placed and maintained with insurers of sound financial standing and international reputation who, at all times, maintain at least a BBB rating with Standard & Poor’s Rating Services or a BBB grade with Bests Inc, or an equivalent rating with any other rating agency approved from time to time by the Agent. The choice of insurers shall be approved in writing (as regards participation, relevant underwriting expertise and size of commitment) prior to inception and at each subsequent renewal by the Agent if cover is not renewed on an expiring basis or insurers no longer meet the criteria (acting reasonably and having regard to premium cost and the availability of cover for the Material Insurances in the worldwide insurance market). The Borrower shall procure that each policy taken out under Appendix 1 of this Schedule (excluding those insurances desribed in paragraphs 1.5.(a), (b), (c), (d) and (f) (the Other Mandatory Insurances)) shall:

61

(A) be in such form and substance, consistent with the obligations of the Borrower under this Schedule, as may be approved from time to time by the Agent (after consulting the Banks’ Insurance Adviser) (such approval not to be unreasonably withheld or delayed) provided that the Borrower shall not be required to obtain the Agent’s prior approval to any mid term policy endorsement which does not reduce any aspect of the cover provided or otherwise prejudice the interests of any insured party;

(B) be the subject of a Notice of Security Interest duly given in the form set out in Appendix 3 (except to the extent that the Agent, after consultation with the Banks’ Insurance Adviser, may otherwise agree) and will have attached to each policy endorsements substantially in the form set out in Appendix 3, except for insurances in relation to bodily injury to employees or arising out of the use of motor vehicles or such other insurances required by relevant law to the extent such endorsements would not be permitted or appropriate;

(C) insure each of (i) the Borrower (ii) the Finance Parties (in every capacity in which they, or any of them, may be acting under the Finance Documents) and (iii) the directors, officers, employees agents and advisers of the Finance Parties in respect of their respective interests in the insured risks;

(D) provide that the relevant insurers shall waive any rights of subrogation howsoever arising which they may have or may acquire against any of the Finance Parties;

(E) be primary without right of contribution from any other insurance which is carried by any of the Finance Parties and shall expressly provide that all of the provisions thereof, except those relating to limits of liability, shall operate in the same manner as if there was a separate policy with, and covering each insured party;

(F) ensure that the Finance Parties shall in no circumstances have any liability for payment of premium or other obligation to the insurers of any insurance unless the Finance Parties assume such liability having enforced their rights under this Agreement; and

(G) have attached the endorsements specified in Appendix 4 to this Schedule.

(b) The Borrower shall procure that in each policy taken out in respect of the Material Insurances, the Borrower is named as a principal insured.

(c) The Borrower shall procure that no Insurance is subject to any coverage exclusion or exception unless it is:

(i) specified within the relevant part of Appendix 1 as a permitted coverage exclusion or exception; or

(ii) a necessary or standard exclusion or exception within the insurance industry for the type or size of risk covered by that Insurance; or

62

(iii) previously approved in writing by the Agent.

(d) The Borrower shall comply with the requirements of paragraph 6 with regard to the inception and renewal of the Material Insurances.

2.2 Adjustment of Certain Sums Insured

Notwithstanding anything else in Appendix 1 or 2, the minimum sums insured shall be annually agreed with the Agent.

2.3 Assignment of Policy Interests

The Borrower shall assign by way of first ranking security all its present and future (i) rights under and in respect of the Material Insurances, and (ii) rights, title and interest in the Insurance Proceeds to the Security Trustee on behalf of the Finance Parties under the Debentures.

3. ADDITIONAL UNDERTAKINGS

3.1 The Borrower undertakes to:

(a) pay or procure the payment on a timely basis of all premiums as required by the terms of the Insurances, to produce promptly to the Agent on request copies of receipts (or other evidence of payment) for all premium payments which the Borrower or any of its agents is able to provide and, in the case of renewals of any Insurances, to produce evidence of such renewal and the terms thereof;

(b) promptly provide to the Agent copies of all slips, cover notes and policies (including endorsements) issued from time to time in relation to the Insurances, and of all changes requested or effected thereto and of all documents disclosed or disclosable to the insurers of the Insurances in respect of the placement and maintenance of the Insurances and relating to claims notified or notifiable to insurers or the insurance brokers; in addition the Borrower will on request promptly deliver to the Agent the originals of all policies (including endorsements) and placing slips;

(c) do nothing and, insofar as is in the reasonable control of the Borrower ensure that no other insured party does anything, whereby any Insurance, or other insurance required to be maintained under any other contract to which it is a party relating to the Project is rendered void or voidable in whole or in part or suspended, impaired or defeated in whole or in part, or any claim becomes uncollectable in full or part;

(d) comply at all times with all laws and regulations applicable to its purchase and maintenance of the Insurances, and procure that all authorisations, consents and approvals required for the purchase and maintenance of the Insurances by the Borrower on the basis provided in this Agreement are obtained and remain valid and applicable;

(e) not purchase or maintain any insurance of any risk which it is required to insure under this Agreement other than as is provided in this Agreement without the prior written agreement of the Agent;

(f) promptly notify the Insurers and the Agent of any increase or material change in any risk insured under the Material Insurances of which the Borrower has, or ought to have, knowledge;

63

(g) maintain or procure the maintenance of records of all incidents involving any loss over £1,000,000 and make those records, or true copies of them, available to the Agent on request;

(h) ensure that full disclosure is made by the Borrower as required by paragraph 3.2;

(i) provide to the Agent copies of every report or survey (or all material results of it) which is commissioned by or on behalf of (i) the Borrower and which is material to the risks insured or (ii) by any insurer relating to the Project.

3.2 Disclosure of Information

(a) Without prejudice to its general duty to disclose to insurers all material information, the Borrower shall ensure that full and accurate disclosure is promptly made to each insurer of the Insurances by or on behalf of the Borrower and shall use its reasonable endeavours to ensure that full and accurate disclosure is made by each other insured party (other than the Finance Parties) of:

(i) all information which the insurer specifically requests to be disclosed; and

(ii) all information which the Borrower’s insurance brokers advise should be disclosed to the insurers or which the Agent, acting reasonably, requires to be disclosed to the insurers.

(b) Without prejudice to the above, all information (including details of any significant problems encountered in relation to the Project) which the Borrower acting in accordance with the industry standards of the insurers issuing the insurances and in good faith reasonably considers to be material to the insurance coverage.

(c) Other insured parties - The Borrower shall use reasonable endeavours to procure that any contractors or consultants engaged in respect of the Plant disclose to the Borrower at not less than monthly intervals all information which may be material in relation to the insurances on which those persons are respectively named as insured until the expiry of those insurances and the Borrower shall forward all information received from those persons relevant to any of the insurances to the relevant insurers at not less than quarterly intervals.

3.3 Brokers’ Letter of Undertaking and responsibilities

(a) The Borrower shall, and shall use reasonable efforts to procure that all insurance brokers through whom any Insurances are effected or maintained shall, maintain intact its or their files (including all documents disclosed and correspondence in connection with the placement of the Insurances and claims thereunder) until the end of the Security Period, and shall give to the Agent all such information relating to the Insurances as the Agent may reasonably request in writing.

(b) The Borrower shall procure that each broker or agent through whom any insurance policy required to be effected or renewed under paragraph 1 of this Schedule delivers to the Agent a letter substantially in the form set out in Appendix 2 or such other form as may be agreed between the Agent and the Borrower as soon as practicable after each such insurance policy is effected or renewed (unless such insurance policy relates to bodily injury to employees or the use of motor vehicles and the relevant endorsements would not be permitted or appropriate).

64

4. CHANGES IN THE INSURANCES

4.1 Additional Insurances

The Borrower agrees that it will purchase and maintain such additional Insurance or such wider or increased levels of cover under existing Insurances as a prudent developer owner or operator of the Project would purchase and maintain, or as the Finance Parties may reasonably require in order to protect their own interests in relation to the Project, if there is (in the reasonable opinion of either the Borrower or the Agent) a material change in the nature of any insurable risk with respect of the Project provided that such additional or wider cover at such time is available in the international insurance or reinsurance market on reasonable commercial terms. In determining whether a prudent developer, owner or manager of the Project would purchase such insurance regard shall be had to the scope of such insurance, and its cost in the context of the finances of the Project.

4.2 Material variations in Cover

(a) If any variation is proposed to be made to the terms of any Material Insurance the Borrower shall give at least 30 days prior written notice thereof to the Agent.

(b) No variation to any Material Insurance shall be effected or agreed by the Borrower until the Agent notifies the Borrower in writing either that the variation is not prejudicial to the Finance Parties or is otherwise acceptable to the Agent. The Agent will not unreasonably withhold or delay its agreement after obtaining any advice that it deems appropriate in considering the Borrower’s request.

For the purpose of this paragraph a variation means:

(a) changes to limits of cover and deductible or self insurance arrangements;

(b) changes to risks insured, to coverage terms, and the inclusion of new exclusions or exceptions;

(c) any reduction in or cancellation, discontinuance, non-renewal or avoidance of any cover provided under any Material Insurance.

4.3 Change in Insurance Market Conditions

Notwithstanding any other provision of this Schedule, the Borrower shall not be in breach of its obligations to purchase and maintain any Insurance to the extent that, and for so long as:

(a) cover required to be maintained is not available to the Borrower in the international insurance market place from reputable underwriters and/or insurance companies on what the Agent accepts in writing to the Borrower to be reasonable commercial terms. In determining whether such cover is available on reasonable commercial terms the Agent shall have on-going regard to the cost and scope of such insurance and the protection of the Finance Parties’ own interests in relation to the Project; or

(b) the Agent agrees in writing to waive such requirement.

For the purpose of sub-paragraph (a) of this paragraph the Borrower shall report at the request of the Agent (but in any event not more often than semi-annually) to the Agent on the steps which it has taken during the preceding semi-annual period to check the availability of the cover and, where it is available on any terms, on what terms. Upon the Agent notifying the

65

Borrower that it is no longer of the opinion (on the basis specified in clause 4.3.(a)) that any insurance (i) is not available (ii) is not available on the terms specified or (iii) that the premium in respect of any insurance is unreasonable, renew or obtain the insurance as soon as reasonably possible.

4.4 Disputes over availability of Cover

Any disagreement between the Borrower and the Agent over the availability of cover in the international insurance market shall be referred on the application of either party for determination to a single firm of insurance brokers with expertise in arranging insurance in the international market of bank financed coal-fired power projects, being a firm of insurance brokers agreed between the parties, or failing such agreement within 10 days of any matter being required to be referred to an expert, to be appointed by the Chairman of Lloyd’s. The appointee shall act as an independent expert and not as an arbitrator. The expert’s decision shall be final and binding on the parties hereto. The expert’s fees and disbursements shall be borne by the Borrower.

5. CLAIMS HANDLING

5.1 The Borrower shall promptly notify to the insurers of the relevant Insurances any potential claim under the Insurances and diligently pursue any valid claim

5.2 Subject to paragraphs 5.3 and 5.5 the Borrower (directly or through its appropriate agent) shall have the sole conduct of its claims under the Insurances arising out of any one loss but shall keep the Agent informed of the notification and progress of any claim relating to a loss in excess of £1,000,000 and the application of the resulting Insurance Proceeds.

5.3 In respect of any loss where the actual or estimated totality of its claims arising is £10,000,000 or more the Borrower shall not negotiate, compromise or settle any claim without the written consent of the Agent, such consent not to be unreasonably withheld or delayed.

5.4 Save as otherwise provided in this paragraph 6 all Insurance Proceeds shall be dealt with as provided for in clauses 21 and 22 of the Schedule of Clauses in Appendix 4.

5.5 If the insurers dispute any claim made under any of the insurances effected or renewed under paragraph 1 of this Schedule, the Borrower shall consult with the Agent and shall take such steps as the Agent may require (acting reasonably after consultation with the Banks’ Insurance Adviser) to preserve or pursue the claim.

6. INFORMATION

6.1 Information

The Borrower shall give to the Agent and the Banks’ Insurance Adviser such information as to the insurances taken out under this Schedule (or as to any matter which may be relevant to such insurances) as the Agent may, from time to time, reasonably request including, without limitation, a copy of and access to the original of any policy effected under this Schedule. The Borrower shall provide to the Agent cover notes for each policy referred to in paragraphs 1.1 and 1.2 on or before the dates referred to in paragraphs 1.1 and 1.2 and a copy of each policy within 60 days of the inception of cover or, if not available, other evidence of cover.

66

7. OMISSION TO COMPLY WITH PROVISIONS OF INSURANCES

Subject to paragraph 4.3 above, if at any time and for any reason any insurance required to be maintained under this Schedule is not in full force and effect then, without prejudice to the rights of the Agent and the Banks under Clause 18.1 (Acceleration) of this Agreement, the Agent shall be entitled thereupon, or at any time whilst the same is continuing, and following consultation with the Borrower (but without any obligation on the Agent to act in accordance with the Borrower’s requests), to procure on behalf of itself and the other Finance Parties such insurance at the expense of the Borrower and, without prejudice to any other obligations of the Borrower under the Finance Documents, require the Borrower to take all such steps to minimise hazard as the Agent may reasonably consider expedient or necessary, after consulting the Banks’ Insurance Adviser.

8. CHANGES IN CIRCUMSTANCES

8.1 Increases in amounts

Without prejudice to the provisions of paragraph 2.2 above and paragraph 9 below, if since the most recent Review Date (as defined in paragraph 9 below) the Agent, after consulting the Banks’ Insurance Adviser, reasonably considers that, as a result of any change in circumstances, any of the amounts and/or deductibles referred to in paragraph 9.1(b) below is/are inadequate or inappropriate, as the case may be, and that it could materially prejudice the interests of the Finance Parties under the Finance Documents to wait until the procedure provided for in paragraph 9 is concluded, the Agent may by written notice to the Borrower require that insurances be effected by the Borrower in the amounts and with the deductibles specified in such notice, which amounts and deductibles will be those determined by the Agent (acting reasonably in consultation with the Banks’ Insurance Adviser).

8.2 Borrower to effect increased insurances

The Borrower shall, as soon as practicable following receipt of a notice from the Agent under paragraph 8.1, procure insurances in accordance with the terms of such notice and in the amounts and with the deductibles specified in such notice (if obtainable in the international insurance market upon reasonable commercial terms), such insurance to be effected as from the date of receipt of such notice. If at any time the Agent reasonably considers, after consulting the Banks’ Insurance Adviser, that the circumstances leading it to give the notice referred to in paragraph 9.1 above no longer apply, it may by written notice to the Borrower allow that insurances be effected in such amounts and/or (if obtainable in the international insurance market) with such deductibles as the Agent may reasonably consider appropriate after consulting with the Banks’ Insurance Adviser.

9. PROCEDURE FOR AGREEING AND DETERMINING INSURANCE

9.1 Reviews of amounts and scope of insurances

The Borrower shall, not later than the date (a Borrower’s Proposal Date) falling 40 Business Days (or such other period as the Agent and the Borrower may agree) prior to the taking-out, renewal or expiry date in respect of each Material Insurance, deliver to the Agent and the Banks’ Insurance Adviser a notice stating the Borrower’s proposals as to:

(a) the changes (if any) since the previous Borrower’s Proposal Date with regard to that Material Insurance in the risks or liabilities to be insured under this Schedule;

67

(b)	(i)	the replacement value as new of all assets required to be insured under that Material Insurance on a replacement as new value basis in such detail as the Agent (after consultation with the Banks’ Insurance Adviser) may reasonably require;
	(ii)	the insured amounts in respect of all other risks required to be insured under that Material Insurance;
	(iii)	the amount of the deductibles applicable to that Material Insurance;
	(iv)	options available in the insurance market;
	(v)	scope of cover; and
	(vi)	any change of insurers or brokers,

in each case, for the period of twelve months (or such other period as may be agreed between the Borrower and the Agent) following the date (the Review Date) falling 40 Business Days (or such other period as the Agent and the Borrower may agree) after the relevant Borrower’s Proposal Date (each such period, an Insurance Period) together with information showing in reasonable detail how the same are calculated and any other information relating thereto reasonably required by the Agent (in consultation with the Banks’ Insurance Adviser).

The Borrower shall for the purpose of submitting a proposal at the Borrowers Proposal Date use reasonable endeavours to obtain from the prospective insurers (i) confirmed terms and conditions in the form of insurance quotations and (ii) written confirmation that the insurers will make available for acceptance at the renewal date of the relevant policy cover on the basis of such insurance quotations and (iii) that the insurers providing such insurance quotations collectively or individually have sufficient underwriting capacity to cover the risk to be insured in accordance with the insurance quotation 100 per cent, and that such quotations shall form the basis of the Borrower’s proposal the Borrower’s Proposal Date.

9.2 Review by Banks’ Insurance Adviser

The Agent shall, upon receipt of any proposal under paragraph 9.1 above, instruct the Banks’ Insurance Adviser to consider the same and to advise the Agent, within 8 Business Days (or such other period as the Agent may agree) after such receipt, whether or not it agrees with such proposals or notices.

9.3 Agreement of proposals

Within 8 Business Days of receiving such advice from the Banks’ Insurance Adviser, the Agent shall inform the Borrower whether or not the relevant proposal is agreed in whole or in part. If any proposal is not so agreed in whole, the Agent (after consulting the Banks’ Insurance Adviser) shall, together with such notice, deliver to the Borrower counter-proposals with regard to any part of the Borrower’s proposal not so agreed and any other matter referred to in paragraph 9.1 above which in the Agent’s opinion (after consulting the Banks’ Insurance Adviser) should have been contained in such Borrower’s proposal. If any proposal or counter-proposal is not so agreed in whole by the Borrower within 6 Business Days of receiving the counter-proposals, the Banks’ Insurance Adviser (acting on behalf of the Finance Parties) and a firm of insurance brokers appointed by the Borrower shall negotiate in good faith with a view to resolving the matter in a manner acceptable to the Agent and the Borrower both acting reasonably.

68

9.4 Determination by the Expert

If the Banks’ Insurance Adviser and such insurance brokers are unable so to resolve the matter within a period of 8 Business Days from the relevant Borrower’s Proposal Date, the dispute shall be resolved in conjunction with clause 4.4 above.

9.5 Failure to notify the Agent

If the Borrower fails to deliver any notice referred to in paragraph 9.1 by the Borrower’s Proposal Date, the Agent (acting reasonably after consulting the Banks’ Insurance Adviser) may specify any change, whether of amount or otherwise, required under paragraph 9.1 above, such change to be included in a notice thereunder with regard to the relevant Insurance Period delivered to the Borrower, and paragraph 10.6 below shall apply (having made all necessary changes) to the matters specified in such notice as if they had been determined by the Agent under paragraph 9.4.

9.6 The Borrower to effect appropriate insurances

Forthwith upon receipt of notice from the Agent of any agreement or determination under paragraph 9.3 or 9.4, the Borrower shall insure against the risks, in the amounts, and with the deductibles so agreed or determined, with effect from the Review Date immediately following the relevant Borrower’s Proposal Date or as soon as practicable and throughout the Insurance Period immediately following that date.

69

APPENDIX 1

MINIMUM INSURANCE REQUIREMENTS

Operational Phase Insurances

1.1 Material Damage All Risks Insurance

Insured Parties:	Eggborough Power Limited British Energy plc The Security Trustee on behalf of the Finance Parties
Loss Payee:	In accordance with paragraph 21 of Appendix 4 (Schedule of Clauses).
Scope of Cover:	All risks of loss or damage from any cause not excluded (including machinery or electrical breakdown of all machinery, plant, computers, ancillary equipment and the like) in relation to the property and interests of every description used for or in connection with the ownership, maintenance and operation of the Plant.
Geographical Scope:	Anywhere on the Site and temporary removals elsewhere.
Principal Extensions:	Replacement/reinstatement basis of claims settlement;
	Architects’ and surveyors’ fees;
	Debris removal costs;
	Cost of labour and computer time expended in reproducing documents or computer records;
	Cost of computer equipment, data carrying media and other reinstatement of data;
	Capital additions;
	Expediting Expenses;
	Including Buy-back terrorism (which may be satisfied by separate cover);
	Temporary removal of stock and equipment (extended to worldwide, as appropriate);
	Additional costs of complying with public authority requirements (including undamaged portion of insured property caused by an insured peril);
	Loss resulting from damage to/destruction of alterations, additions, structures or new buildings while in the course of construction – £10,000,000 per contract;

70

	Clean-up of contaminated land and water on Insured’s premises; and
	Waivers of subrogation against any named insured.
Principal Exclusions:	War and civil war;
	Radioactive contamination;
	Unexplained shortages or mysterious disappearance;
	The cost of making good wear and tear, gradual deterioration, inherent vice or latent defect, flaws, deformation, distortion, cracks or partial fractures, defects in design, materials or workmanship but this shall not exclude subsequent damage resulting from an ensuing cause which is not otherwise excluded;
	Sonic bangs;
	Loss of or damage to vehicles licensed for road use, marine vessels or aircraft; and
	Loss or damage arising out of date recognition, but this shall not exclude subsequent loss or damage.
Commencement Date:	From the Restatement Date.
Period:	At least 12 months and at expiry annually renewable thereafter (or such longer period or shorter period as may be agreed by the Security Trustee). For the first year expiry will be 31st March, 2005.
Limit Insured:	An amount equal to the full replacement value of the Plant from time to time (including demolition cost and any increased cost of construction to comply with governmental regulations and requirements (including Environmental Laws and Environmental Licences) without deduction for degradation). The policy will include an automatic reinstatement of sum insured clause.
Maximum Deductibles	Not more than £500,000 in respect of any one event.
Notice Period of Cancellation	30 days notice to the Insureds.

1.2 Consequential Loss Insurance following a Material Damage Loss or Machinery Breakdown

Insured Parties:	Eggborough Power Limited, British Energy plc, British Energy Power and Energy Trading Limited
	The Security Trustee on behalf of the Finance Parties
Loss Payee:	In accordance with paragraph 21 of Appendix 4 (Schedule of Clauses).

71

Scope of Cover:	Indemnity to cover loss of gross profit (total anticipated revenue less anticipated variable costs) and/or increased expenses (including debt service and fixed costs and other sums payable under the Finance Documents and amounts payable under the Project Contracts) to resume operation of the Project by reason of the total or partial suspension or delay of, or interruption in, the operation of the Project as a result of an insured peril covered under the Material Damage All Risks Insurance referred to in paragraph 1 above or which would have been payable under such policy save for the operation of a policy deductible thereunder.
Sum Insured:	An amount equal to the anticipated gross profit that would have been earned during the indemnity period.
Indemnity Period:	36 months.
Commencement Date:	From the Restatement Date.
Maximum Deductible:	Not to exceed first 45 days of any interruption.
Principal Extensions:	Interruption as a result of failure of the supply of gas, water, electricity, telecommunications system or other public or private utility system failure at the terminal point of the supply feed to the premises;
	Interruption as a result of damage to third party premises where property (including spares) relating to the Plant is stored;
	Interruption as a result of damage to property in the vicinity of the premises such that access is hindered or prevented;
	Interruption as a result of damage to any supplier’s or customer’s premises;
	Professional accountants costs;
	Including Buy-back terrorism (which may be satisfied by separate cover); and
	Waiver of subrogation against any named insured.
Principal Exclusions:	Any restrictions on reconstruction or operation imposed by a public authority;
	Delay due to alterations, additions, improvements or rectification of defects or faults or elimination of any deficiencies carried out after the occurrence of damage;
	Failure by the Insured to commit funds to the repair or replacement of destroyed or damaged items where such funds have been paid by the Insurers to the order of the Insured under a full or partial settlement of a claim under 1 above; and

72

	Fines or damages for breach of contract for late or non-completion or orders or for any penalties of whatever nature unless otherwise agreed.
Notice Period of 30 days to the Insureds Cancellation:

1.3 Third Party Liability Insurance

Insured Parties:	Eggborough Power Limited, British Energy plc and their respective servants, agents, officers, directors, secondees, employees and assigns
	The Security Trustee on behalf of the Finance Parties and its respective servants, agents, officers, directors, secondees, employees and assigns.
Scope of Cover:	Indemnity in respect of legal liability of the Insured to third parties for or arising from:
	Bodily injury, illness, death, false arrest, invasion of right of privacy, libel, slander, trespass or nuisance or interference with any easement of air, light, water or way easement or quasi-easement;
	or loss or damage to property;
	sudden and accidental pollution during the period of insurance and in connection with the Plant subject to 72 hour disclosure provision; and
	arising out of or in connection with the ownership, maintenance, operation or supply of products of the Plant.
Geographical Scope:	World-wide (but for claims brought in the USA, scope of work excludes punitive and exemplary clauses, seepage and pollution, costs inclusive within the Limit of Indemnity).
Limit of Indemnity:	The limit of indemnity shall be £100,000,000 for any one occurrence/unlimited in number of occurrences per annum and £100,000,000 in the aggregate, per annum, in respect of sudden and accidental pollution, seepage, products liability and electro magnetic liability.
Commencement Date:	From the Restatement Date.
Period:	At least 12 months and at expiry annually renewable thereafter (or such longer period or shorter period as may be agreed by the Security Trustee). For the first year expiry will be 31st March, 2005.
Maximum Deductibles:	£200,000 each and every loss.

73

Principal Extensions:	Electro-magnetic Field liability; Contractual liability; Health and Safety Legislation Liability; Cross liabilities clause; and Costs and expenses clause (including expenses, legal fees and defence costs in addition to the Limit of Indemnity).
Principal Exclusions:	Material Damage Property (including Machinery Breakdown) Insurance; Death or bodily injury of employees of the Insured arising in the course of their employment; Liability arising out of professional advice given for a fee; Liquidated damages; Fines and exemplary and punitive damages imposed by regulatory or statutory authorities or courts; and Motor liability.
Notice Period of 30 days to the Insureds Cancellation:

1.4 Construction Material Damage Insurance

In respect of the remedial or other construction works to the Plant, Eggborough Power Limited shall procure or cause to be maintained construction material damage/advance loss of profits and construction related third party liability, and, if applicable, marine cargo and marine delay in start up insurance for the full period of the works. The Security Trustee will be a named insured and all the requirements of clauses 1.1. – 1.3 herein will apply, as well as the Clauses in Appendix 4 herein known as the Finance Parties clauses.

1.5 Other Mandatory Insurance

Further Insurances to be maintained by Eggborough Power Limited / British Energy from the date of this Agreement, as follows:

(a) Employer’s Liability Insurance- in accordance with statutory requirements and normal business practice and in any event for a limit of not less than £10,000,000 any one occurrence. TUPE to be addressed via BE indemnity to EPL.

(b) Motor Vehicle Insurance - in accordance with statutory requirements.

(c) Directors’ and Officers’ Liability Insurance - for a limit of not less than £10,000,000;

(d) Fidelity Guarantee Insurance- in respect of the fraudulent misappropriation of cash/assets of the Borrower, for a minimum limit of £10,000,000;

74

(e) Environmental Liability Insurance - liability arising out of alleged third party bodily injury or loss or damage to property resulting from seepage or pollution from the Plant. £50,000,000 per occurrence and in the aggregate. Maximum deductible £500,000 per occurrence; and

(f) All other insurances required by law or by the Project Contracts.

75

APPENDIX 2

LETTER OF UNDERTAKING

To: Barclays Bank PLC (the Security Trustee)

as agent for the Finance Parties

Dear Sirs

[    ] (the Project)

We have been requested by Eggborough Power Limited (the Borrower), to provide you with certain confirmations relating to the insurances arranged by us in relation to the Project. Accordingly we provide you with the confirmations set out below.

The insurances summarised in [Appendix [        ]] attached to this letter (the Insurances) are, at the date hereof, in full force and effect in respect of the risks and liabilities as set out in the insurance policies evidenced in the policies/cover notes attached as [Appendix [        ]] (the Policies).

We further confirm that all premiums due to date in respect of the Insurances are paid [or not paid as the case may be] and that the Insurances are, to the best of our knowledge and belief, placed with insurers, which as at the time of placement, are reputable and financially sound. We do not, however, make any representations regarding such insurers’ current or future solvency or ability to pay claims.

We have arranged the Insurances on the basis of information and instructions given by the Borrower. We have not made any particular or special enquiries regarding the Insurances beyond those that we normally make in the ordinary course of arranging the insurances on behalf of our insurance broking clients. The confirmations set out in this letter are given by reference to our state of knowledge at the date hereof.

We also confirm that a notice of assignment of insurances (Notice of Assignment), in the form attached to this letter as [Appendix [        ]], has been served on each insurer in respect of each of the Insurances and that we will use our reasonable endeavours to procure that each insurer acknowledges each Notice of Assignment as soon as reasonably practicable after the date of this letter. We confirm that the relevant endorsements to the Policies attached as [Appendix [        ]] (the Endorsements) have been made in respect of the Policies for the periods stipulated therein.

Under instructions received from the Borrower in connection with the Insurances we hereby undertake:

(a) (i)     to notify you as soon as reasonably practicable prior to the expiry of the Insurances if we have not received instructions from the Borrower and/or any insured parties or the agents of any such party to negotiate renewal, and, in the event of our receiving instructions to renew, to advise you as soon as reasonably practicable after receipt of the details thereof; and

(ii) to notify you as soon as reasonably practicable after giving or receiving notice of termination of our appointment as brokers in relation to the Insurances;

(b) to pay into the Insurance Proceeds Account, without any set-off or deduction of any kind, for any reason, all payments received by us from the insurers in relation to the Insurances (including refunds of premium) other than as may be permitted in the relevant loss payable clauses in the Endorsements;

76

(c) to advise you as soon as reasonably practicable after receiving notice of any insurer’s cancellation or suspension of any of the Insurances or receiving notice of any insurer’s intention to cancel or suspend any of the Insurances;

(d) in accordance with our duties to our clients make the Borrower aware of its pre-contractual duties of disclosure to the insurers by advising the Borrower of the type of information which generally needs to be disclosed to the insurers;

(e) subject to the Borrower’s consent, to hold the insurance slips or contracts, the Policies and any renewals thereof or any new or substitute policies to the extent held by us, to the order of the Security Trustee; and

(f) to treat as confidential all information in relation to the Insurances marked as confidential and supplied to us by the Borrower or the Security Trustee and not to disclose such information, without the written consent of the supplier, to any third party other than those persons who, in our reasonable opinion have a need to have access to such information from time to time. Our obligations of confidentiality shall not conflict with our duties owed to the Borrower and shall not apply to disclosure required by an order of a court of competent jurisdiction, or under any applicable law or regulation having the force of law or to information which is in the public domain.

The above undertakings are subject to our continuing appointment as insurance brokers to the Borrower in relation to the Insurances and following termination of such appointment our immediate release from all our obligations set out in this letter.

Nothing in this letter shall prejudice the right that any insurer may have to cancel any of the Insurances following default in excess of 30 days in payment of premiums nor shall the exercise of such right in such circumstances amount to a breach of any obligations accepted by us under the terms of this letter. In accordance with sub-paragraph (c) above we will give you notice as soon as reasonably practicable after receiving notice of any insurers intention to cancel any of the Insurances and where insurers wish to cancel for reasons of non-payment of premium, we will request that insurers give you a reasonable opportunity to pay amounts outstanding before issuing notice of cancellation on behalf of such insurers.

For the avoidance of doubt all undertakings and other confirmations given in this letter relate solely to the Insurances. They do not apply to any other insurances and nothing in this letter should be taken as providing any undertakings or confirmations in relation to any insurance that ought to have been placed or may at some future date be placed by other brokers.

This letter is given by us on the instructions of the Borrower and with the Borrower’s full knowledge and consent as to its terms as evidenced by the Borrowers signature below.

77

This letter shall be governed by and shall be construed in accordance with English Law and any dispute as to its terms shall be submitted to the exclusive jurisdiction of the courts of England and Wales.

Yours faithfully

For and on behalf of [            ]

For and on behalf of [Borrower]

78

APPENDIX 3

FORM OF NOTICE TO INSURERS AND ENDORSEMENT

The Borrower hereby gives notice that by a Debenture dated [    ] the Borrower assigned to Barclays Bank PLC (the Security Trustee) all its rights, title, benefit and interest in and to the insurances constituted by the policy on which this notice is endorsed (the Insurances) and all moneys payable under the Insurances.

The following paragraph is to be included in all Insurances except insurances in respect of any third party liability:

After receipt of this notice all payments under or arising from the Insurances shall be made to the Security Trustee as loss payee to ****************** at Barclays Bank PLC (Sort Code ********) until the Security Trustee gives notice to the contrary whereupon all such payments shall be made in accordance with such notice. Any notice given by the Security Trustee shall for the purposes of the Insurances be final, conclusive and binding as between insurers, the Borrower, the Security Trustee and any other insured party.

The following paragraph to be included in all insurances in respect of any third party liability

Settlement of claims in respect of a third party liability shall be paid to the person(s) entitled thereto except where the company has properly discharged its liability to such person(s) when they shall be paid to the Borrower without deduction.

79

APPENDIX 4

SCHEDULE OF CLAUSES

(applicable to material damage, business interruption,

third party liability and environmental liability insurance)

1. In this endorsement:

Account Bank means Barclays Bank PLC.

Arranger means Barclays Capital.

Bank means

(a) any Bank which is a Party to the Credit Agreement as at the date thereof; and

(b) any bank or financial institution which has become a Party in accordance with Clause 25 (Changes to the Parties) of the Credit Agreement,

which, in each case, has not ceased to be a Party in accordance with the terms of the Credit Agreement.

Business Day means a day (other than a Saturday or Sunday) on which banks are open for general business in London.

Facility Agent means Barclays Bank PLC.

Credit Agreement means the £150,000,000 credit agreement originally dated 13th July, 2000 as amended and restated on 8th September, 2000, 24 October 2000, 12 December 2000, 5 February 2001 and on or about the Restructuring Date between Eggborough Power Limited as a borrower, Barclays Capital as arranger and Barclays Bank PLC as facility agent and security trustee.

Finance Parties means the Facility Agent, the Arranger, the Account Bank, the Security Trustee, any Bank.

Insured means Eggborough Power Limited, British Energy plc and each of the Finance Parties and any other entity or person identified as an insured or assured under the relevant policy.

Insurer means the insurer(s) under this policy of insurance.

Insurance Proceeds Account means the pounds sterling denominated account numbered ************** opened by the Account Bank in the name of Eggborough Power Limited and designated Insurance Proceeds Account as such account may be renewed, redesignated or renumbered from time to time.

Security Trustee means Barclays Bank PLC.

2. It is agreed that the inclusion of one or more Insured in this policy shall not affect the rights of any Insured as respects any claim, demand, law suit or judgement made or brought by or for any other Insured or by or for any employee of an Insured. This policy shall protect each Insured in the same manner as though a separate policy has been issued to each, but the

80

inclusion herein of more than one Insured shall not serve to increase the limit of the Insurers’ liability. The liability of the Insurers under this Policy to any one Insured shall not be conditional upon the due observance and fulfilment by any other insured party of the terms and conditions of this policy or of any duties imposed upon that insured party relating thereto, and shall not be affected by any failure in such observance or fulfilment by any such other insured party.

3. The Finance Parties shall have no duty of disclosure except in relation to information made available to them by any other Insured relating to the Plant.

4. Except in the case of the Other Mandatory Insurances (as defined in Appendix 1 of Schedule 4 to the Credit Agreement), the Insurers shall not seek to avoid any liability under this policy or to invalidate this policy by reason of any action or inaction or for any misrepresentation, nondisclosure, misdescription, act, error, omission, breach or violation of any:

(a) warranty;

(b) declaration; or

(c) condition,

in or relating to this policy by any Insured except in relation to that Insured only (the Vitiating Insured). For the avoidance of doubt all rights under the policy will fall away for any Vitiating Insured.

5. The Insurers hereby agree to waive all rights of subrogation howsoever arising which they may have or acquire against any of the Insureds and their officers, directors, secondees, employees and assigns arising out of any occurrence in respect of which any claim is admitted hereunder; provided however that in the situation in paragraph 4 above, the Insurers retain all rights of subrogation against any Vitiating Insured.

6. The Insurers agree that this insurance shall be primary to and not excess to (except in respect of layers of third party cover effected specifically for the Plant) or contributing with any other insurance maintained by any Insured in relation to policies effected specifically for the Plant.

7. Each Insured shall be entitled to be indemnified in respect of claims made by any other Insured.

8. The Finance Parties and their respective servants, agents, officers, directors, employees, secondees and assigns shall (whether or not they are insured parties under the policy) in no circumstances be liable for the payment of any premium or to perform any other obligation owed to the Insurers but this shall not relieve the Borrower from their obligation to pay any premium due under this policy. The Insurers shall not be entitled to offset any sums payable to the Finance Parties against any premium or other monies owing by the Borrower.

9. The Insurers acknowledge that they have notice by a Notice of Assignment of Insurances that the Borrower assign by way of security to the Security Trustee on behalf of the Finance Parties all existing and future rights in, and to the proceeds of, all material damage, business interruption, public liability and environmental liability insurances relating to the Plant (including all claims of whatsoever nature thereunder and return of premiums in respect of thereof) taken out by them or on their behalf or in which they have an interest to the extent of that interest, except as otherwise agreed by the Security Trustee and that insurance proceeds shall be paid as set out below in paragraph 21. The Insurers confirm that they have not been notified of any other assignment of or security interest in the Borrower’s interest in this insurance.

81

10. Except in the case of Employer’s liability insurance, the Finance Parties are Insureds under this policy and in the case of third party liability insurance, the Finance Parties and their respective servants, agents, officers, directors, employees, secondees and assigns are Insureds under this policy and the Insurers hereby undertake that such parties may not be removed as Insureds under this policy without the prior written consent of the Security Trustee.

11. The Insurers waive all rights of contribution or average against any other insurance effected by the Finance Parties.

12. The sums insured and risks covered under the insurances may not be reduced in any way without the prior written consent of the Security Trustee.

13. The Insurers shall advise the Security Trustee:

(a) at least 30 days written notice (or such lesser period, if any, as may be specified from time to time by Insurers in the case of war risks and kindred perils) before any cancellation is to take effect if any Insurer cancels or gives notice of such cancellation of any insurance relative to the Plant for any reason; and

(b) at least 30 days written notice of any act or omission or of any event of which the Insurer has knowledge and which might invalidate or render unenforceable in whole or in part any of the insurances,

so that there is not, under any circumstances, a break in the period of insurance and the Insurers shall pass outstanding premium notices to the Security Trustee who (without prejudice to paragraph 8 above) may pay the premium, any call or other amount owing in respect of the insurance and such payment shall be accepted by the Insurers in satisfaction and discharge of the Borrower’s or other Insured’s obligation to pay such amount.

14. If this policy is allowed to lapse, is suspended or cancelled for any reason whatsoever, or any change is made in coverage, such change, suspension, cancellation or lapse shall not be effective as to the Finance Parties or any of their respective servants, agents, officers, employees, secondees and assigns, for 30 days after the issue of written notice from the relevant underwriters or Insurers to the Security Trustee of such suspension, cancellation, change or lapse.

15. All notice or other communications under or in connection with this policy will be given in writing and shall be delivered by hand, by mail or by fax. Any such notice will be deemed to be given as follows:

(i) if by hand, at the time of delivery;

(ii) if by mail, at the time of mailing with proof of the same;

if by fax, when received in legible form.

The address and fax number of the Security Trustee for all notices under or in connection with this policy are those notified by the Security Trustee for this purpose to the Banks’ Insurance Adviser Marsh at the relevant time. The initial address and fax number of the Security Trustee are as follows:

The Security Trustee:

Barclays Bank PLC

5 The North Colonnade

Canary Wharf

London

E14 4BB

Telephone:	************
Fax:	************
Attention:	Head of Agency

82

16. This endorsement overrides any conflicting provision in any policy to which it appears.

17. Save as otherwise defined or unless the context otherwise requires terms in the policy to which this endorsement is attached shall have the meanings given to them in the Credit Agreement.

18. In the event the Borrower fails to pay the premiums due hereunder, the Security Trustee shall be entitled to pay the premiums outstanding in order to avoid the cancellation of the insurance policies.

19. The Insurers acknowledge that the consideration being provided by the Finance Parties is their approval to the terms of this policy.

20. Each of the Insurers acknowledge that the Borrower has received financing from the Finance Parties under the Credit Agreement.

FOR MATERIAL DAMAGE AND BUSINESS INTERRUPTION INSURANCE

21. The Insurers undertake that all material damage and business interruption insurance claims monies payable by Insurers to the Insureds as named loss payee in respect of the insurances shall be paid to the Insurance Proceeds Account in the name of the Security Trustee as directed by Security Trustee, unless and until the Insurers receive written notice from the Security Trustee to the contrary. Insurers shall not set off premiums or other amounts payable by the Insureds nor deduct such amount from claims monies. Insurers shall be entitled to treat full payment to the designated loss payee as valid discharge and shall not be obliged to make further payments in respect of the same claim.

FOR LEGAL LIABILITY AND THIRD PARTY LIABILITY INSURANCE

22. The Insurers undertake that in respect of legal liability and third party liability insurances, subject to the provisions of any applicable legislation and notwithstanding the assignments referred to above, all sums in respect of any claim hereunder by an Insured shall be paid directly to the person whose claim(s) constitutes the risk or liability insured against, provided that such person has executed a discharge of all claims made against the Insureds in respect of the risk or liability in relation to which the claim was made, save in cases where (notwithstanding the policy terms to the contrary) Insurers accept liability to indemnify the Insured in respect of the claims or liabilities which the Insured has settled directly with the claimant in accordance with the policy in which case payment under the policy of such sums shall be made in accordance with the instructions of the Security Trustee.

83

SCHEDULE 5

CONFIDENTIALITY UNDERTAKING

[ON LETTERHEAD OF BANK]

STRICTLY PRIVATE & CONFIDENTIAL

To:	[Name and address
	of New Bank]

[Date]

Dear Sirs

£150,000,000 credit agreement dated 13th July, 2000entered into between, inter alia, Eggborough Power Limited as Borrower and Barclays Capital as Arranger, Barclays Bank PLC as Agent and Security Trustee as amended and restated by an amendment and restatement agreement dated 8th September, 2000 and by an amendment and restatement agreement dated September, 2004 (the Credit Agreement)

Capitalised terms defined in the Credit Agreement shall have the same meaning in this letter as in the Credit Agreement.

You have expressed an interest in [becoming a New Bank/other proposed transaction] (the Proposed Transaction) under the terms of the Credit Agreement. This letter sets out the terms on which the Borrower has agreed to supply to you certain information in relation to such proposed transaction.

In this letter:

Borrower means Eggborough Power Limited and, where the context so allows, its holding companies, subsidiary undertakings and associated undertakings, or any of them (the Group).

Information means information of whatever nature relating to the Group supplied to you or your advisers by or on behalf of the Borrower in writing, orally or otherwise and includes any information obtained by you, in writing or orally, through discussions with the management, employees and advisers of the Borrower, together with any reports, analyses, compilations, studies or other documents prepared by you or on your behalf which contain or otherwise reflect such information; but Information shall not include such information which is in or which comes into the public domain other than as a result of:

(a) a breach of the obligations imposed by this letter by you (or by any person to some disclosure of information is made as permitted under this letter); or

(b) a breach by you (or any other such person) of any other duty of confidentiality relating to that information; and

subsidiary undertaking and associated undertaking shall have the meaning ascribed to them in the Companies Act 1985.

84

(a) In consideration of Borrower agreeing to supply to you Information and entering into discussions with you relating to the Proposed Transaction, you acknowledge that the Information is confidential and is received by you under a duty of confidentiality to the Borrower and for the exclusive purpose of the above discussions, and you undertake with the Borrower as follows:

(i) you will keep confidential and not disclose to any person, other than as permitted under sub-paragraph (iv), your interest in, and your discussions and negotiations with, the Group in connection with the Proposed Transaction;

(ii) you will keep all Information confidential and in a secure place and not disclose any Information to any person, other than as permitted under sub-paragraph (iv);

(iii) you will use Information solely for the purpose of evaluating and negotiating the Proposed Transaction and not for any other purpose;

(iv) you will not, without the Borrower’s prior written consent, disclose any Information to any person other than those of your senior executives and those members of your professional advisers who, in each case, need to know the Information for the purpose of evaluating, negotiating or advising (as appropriate) on the Proposed Transaction;

(v) you will procure that each person to whom disclosure of Information is made as permitted under sub-paragraph (iv) is made aware (in advance of disclosure) of the terms of this letter and you will use your best endeavours to procure that each such person adheres to those terms as if that person were a party to this letter; and

(vi) you will promptly notify the Borrower in writing if any Information is required to be disclosed by law or other regulation and co-operate with the Borrower regarding the timing and content of such disclosure or any action which the Borrower may reasonably elect to take to challenge the validity of such requirement;

(b) You further acknowledge and confirm to the Borrower that:

(i) your obligations under this letter shall extend to protect the Borrower’s holding companies, subsidiary undertakings and associated undertakings;

(ii) your obligations under this letter shall be continuing for a period of five years from the date of this letter, in particular they shall survive the termination of any discussions or negotiations between the Borrower and you regarding the Proposed Transaction; and

(iii) any applications for consent from or notifications to the Borrower in relation to this letter should be made in writing and addressed to:

[Name, address and facsimile no.];

(c) The Borrower’s holding companies, subsidiary undertakings and associated undertakings may enforce the terms of this letter against you under the Contracts (Rights of Third Parties) Act 1999.

(d) The consent of the Borrower’s holding companies, subsidiary undertakings and associated undertakings is not necessary for any variation (including any release or compromise in whole or in part of any liability) or termination of this letter.

85

Please indicate your acceptance of the above by signing and returning the enclosed copy of this letter under confidential cover as soon as possible.

Yours faithfully,

Director,

for and on behalf of

86

SCHEDULE 6

OPERATING REPORT

1. For each Unit and for each month of the Reporting Period analysed as to Seasonal Time of Day:-

(a) Declared Capacity.

(b) Availability (MWh).

(c) Unavailability due to Planned Maintenance (½ hours)

(d) Unavailability due to Capital Investment Works (½ hours)

(e) Other unavailability (MWh ) and reasons therefore

2. Extensions of Planned Outages and reasons therefore

3. Reportable Incidents (both Safety and Environmental)

4. Analysis of Capital Investment Work undertaken

5. Environmental Performance:

Cumulative emissions for SOx and NOx for Environmental Agency year to date of report.

87

EX-4.29

Exhibit 4.29

LIMITED LIABILITY PARTNERSHIP

CONFORMED COPY

BRITISH ENERGY POWER AND ENERGY TRADING LIMITED

and

EGGBOROUGH POWER LIMITED

CAPACITY AND TOLLING AGREEMENT

CONTENTS

Clauses		Page
1.	Definitions And Interpretation	1
2.	Condition Precedent And Term	14
3.	Representations And Warranties	15
4.	Agreement For Tolling, Generation And Sale	15
5.	Operation, Maintenance And Outages	17
6.	Fuel Supply Arrangements	24
7.	Metering	26
8.	Payment Of Operating And Maintenance Costs	26
9.	Invoicing Of Operating And Maintenance Costs	26
10.	Capital Investment Works	28
11.	Payment Mechanics	30
12.	Vat	31
13.	Exclusive Remedy	33
14.	Events Of Default	33
15.	Force Majeure	34
16.	Assignment And Transfer	35
17.	Dispute Resolution	35
18.	Confidentiality And Announcements	37
19.	Industry Change And Illegality	38
20.	Miscellaneous Provisions	40
SCHEDULE 1 INITIAL ANNUAL OPERATING PLAN		43
SCHEDULE 2 DETAILS FOR NOTICES		46
SCHEDULE 3 PROFILE NOTICE		47
SCHEDULE 4 STATION TECHNICAL PARAMETERS		48

THIS AGREEMENT is made on 30 September 2004.

BETWEEN:

(1) BRITISH ENERGY POWER AND ENERGY TRADING LIMITED (registered number SC200887) whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR (“BEPET”); and

(2) EGGBOROUGH POWER LIMITED (registered number 3782700) whose registered office is at Barnett Way, Barnwood, Gloucester, Gloucestershire GL4 3RS (“EPL”).

WHEREAS:

(A) EPL owns and operates the Station.

(B) EPL is engaged in the business of generating, and BEPET is engaged in the business of trading in, electrical energy.

(C) As part of the arrangements for the restructuring of British Energy plc and its principal subsidiaries and subject to the provisions of this Agreement:

(1) EPL has agreed to make available to BEPET the BEPET Electricity, to operate the Station in accordance with BEPET’s instructions, to provide reasonable assistance to BEPET in connection with the sale, trade or other disposal by BEPET of electricity generated at the Station, to make available to BEPET any Additional Benefits, to pay or procure the payment of any income or other receivables payable to it under the Revenue Agreements to BEPET and to implement any Cost Saving Measures; and

(2) BEPET has agreed to settle all Operating and Maintenance Costs as and when such Operating and Maintenance Costs become due and payable, to pay all EPL’s Corporation Tax as and when such Corporation Tax becomes due and payable, to make payments to EPL in respect of Capital Investment Works and to make available to EPL Approved Fuel for tolling through the Station.

IT IS AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions

In this Agreement:

“Accounting Date” means, in respect of each Operating Year, the date on which the EPL Annual Accounts for that Operating Year are filed at Companies House.

“Accounts Agreement” has the same meaning as given to it in the Credit Agreement.

- 1 -

“Actual Operating and Maintenance Costs” means, in respect of any Operating Year, the Operating and Maintenance Costs incurred by EPL in that Operating Year as set out in the EPL Annual Accounts for that Operating Year.

“Additional Benefits” means any additional sources of income other than the Revenue Agreements that are or become available to EPL (including emission allowances, levy exemption certificates and/or renewable obligations certificates).

“Affiliate” means, in relation to any person, a subsidiary of that person or a holding company of that person or any other subsidiary of that holding company.

“Agent” has the same meaning as given to it in the Credit Agreement.

“Agreement” means this Agreement including the Recitals and Schedules hereto.

“Ancillary Services” has the same meaning as given to it in the Grid Code.

“Ancillary Services Agreement” means the Master Ancillary Services Agreement dated 28 January 2000 between NGC and EPL, together with any agreement ancillary or supplemental thereto.

“Annual Capital Investment Works Limit” means, in respect of each financial year, the aggregate of the amounts allocated to Capital Investment Works in that financial year and each of the previous financial years (if any), as set out in the Capital Investment Works Schedule.

“Annual Operating Plan” means, in respect of any Operating Year, the plan in accordance with which the Parties are to perform their obligations hereunder pursuant to Clause 5.

“Approved Fuel” means any fuel delivered by BEPET in accordance with this Agreement which has been accepted by EPL in accordance with Clause 6.

“Amendment and Restatement Agreement” has the same meaning as given to it in the Credit Agreement.

“Ash Marketing Agreements” means the ash marketing agreement between EPL and Hargreaves Coal Combustion Products Limited dated 3 February 2004, together with any other agreement for the sale or marketing of ash entered into by EPL from time to time.

“Asset Option Agreement” means the option agreement between the Security Trustee, EPL and BEPET dated on or about the date of this Agreement under which EPL grants an option to the Security Trustee to acquire the Business and the Station Assets (each as defined in that agreement).

“Balancing and Settlement Code” means the document of that name setting out electricity balancing and settlement arrangements established by NGC pursuant to its transmission licence.

“Banks’ Technical Adviser” has the same meaning as given to it in the Credit Agreement.

- 2 -

“BEPET Electricity” has the same meaning as given to it in Clause 5.8.

“BEPET Settled Amount” means on the settlement of a Payment Dispute that relates to any amount or part of any amount used in the calculation of the Monthly Closing Balance in favour of BEPET in accordance with Clause 11.1, the amount of such settlement.

“Break Date” means the earlier of:

(a) 31 March 2010; and

(b) the date on which an Option is completed.

“British Energy plc” means the company of that name with registered number SC162273 and whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR.

“Business Day” means a day other than a Saturday, Sunday or public holiday in England and Wales or Scotland.

“Capital Investment Works” means the capital investment works set out in the Capital Investment Works Schedule.

“Capital Investment Works Allowance” means, in respect of any Unit in any Operating Year, the number of Half Hour Periods set aside in the then prevailing Annual Operating Plan for EPL to carry out capital investment works (including any Capital Investment Works).

“Capital Investment Works Limit” means £68,058,000.

“Capital Investment Works Schedule” means the schedule agreed between EPL and BEPET prior to the Restructuring Date setting out the cost of capital investment works that EPL is required to carry out in the period prior to the Break Date as amended from time to time, provided that:

(a) the Banks’ Technical Adviser has consented to any such amendment (such consent not to be unreasonably withheld or delayed); and

(b) the aggregate cost of the capital investment works set out in the amended Capital Investment Works Schedule does not exceed the Capital Investment Works Limit.

“Change of Law” means the repeal, amendment, making or change in the judicial or administrative interpretation after the date of this Agreement of any applicable national, municipal or state statute, ordinance or other law (including Tax), regulation or by-law of England and Wales or any part thereof or the European Union or the change or introduction of any condition attaching to any Consent or of any Directive of a Competent Authority.

“Commencement Date” means the date on which the Condition Precedent is satisfied.

“Commercial Start Date” means 0000 hours on the Day following the Commencement Date.

- 3 -

“Competent Authority” means the Gas and Electricity Markets Authority, any court of competent jurisdiction and any local, national or supra-national agency, inspectorate, minister, ministry, official or public or statutory person (whether autonomous or not) of, or the government of, the United Kingdom or the European Union.

“Condition Precedent” means the condition set out in Clause 2 which is required to be satisfied in order for this Agreement to become unconditional.

“Consent” means any approval, authorisation, consent, exemption, filing, licence, order, permission, recording or registration necessary for the day-to-day operation of the Station and the performance by either Party of its obligations under this Agreement (and shall include any environmental consent relating to emissions of sulphur at the Station) and references to obtaining Consents shall be construed accordingly.

“Contract Period” means the period starting on the Commercial Start Date and ending at 2400 hours on the Expiry Date.

“Corporation Tax” means United Kingdom corporation tax or any tax of a similar nature replacing such corporation tax.

“Cost Saving Measures” means, without prejudice to EPL’s obligations under the Credit Agreement, any measures available to EPL, acting as a Reasonable and Prudent Operator, that may reduce the Operating and Maintenance Costs or improve EPL’s cashflow during the Contract Period.

“Credit Agreement” means the credit agreement originally dated 13 July 2000 as amended and restated on 8 September 2000, 24 October 2000, 12 December 2000, 5 February 2001 and on or about the date of this Agreement between, inter alios, the Agent, the Security Trustee and EPL.

“Creditor Restructuring Agreement” means the creditor restructuring agreement entered into on or about 30 September 2003 between, inter alios, British Energy plc, EPL and BEPET.

“CUSC” means the Connection and Use of System Code and related bilateral agreements governing the connection to and use of the NGC Transmission System.

“Day” means a calendar day.

“Day-Time” means, in respect of any Day in any Season, any one of the two periods identified as such in the then prevailing Annual Operating Plan.

“Defaulting Party” has the same meaning as given to it in Clause 14.

“Default Rate” means, in relation to any Day, the rate of 1% per annum above LIBOR.

“Deferred Shares” means shares, each of a nominal share value of £1 issued with no voting rights and on the following terms:

(a) on return of capital, a right to the return of the amount paid up only and no right to share in any surplus;

- 4 -

(b) the return of the amount paid up to be deferred until the return on each other share in EPL has been paid in full and has received a £1,000,000 per share liquidation surplus; and

(c) a dividend right of £1 per annum per £1,000,000 of nominal share capital.

“Directive” means any directive, request, requirement, instruction, condition of or limitation in any necessary licence or authorisation, direction or rule of any Competent Authority (but only, if not having the force of law, if compliance with the Directive is a matter which EPL, acting as a Reasonable and Prudent Operator, necessarily complies with).

“ECVAA” has the same meaning as given to it in the Balancing and Settlement Code.

“Electricity Act” means the Electricity Act 1989.

“Electricity Delivery Point” means the electrical boundary as described in clause 6.1(i) of the Master Connection and Use of System Agreement.

“Encumbrance” means a mortgage, charge, pledge, lien, option, restriction, right of first refusal, right of pre-emption, third-party right or interest, other encumbrance or security interest of any kind, or another type of preferential arrangement (including a title transfer or retention arrangement).

“EPHL” means Eggborough Power (Holdings) Limited whose registered number is SC201083 and whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR.

“EPL Annual Accounts” means, in respect of each Operating Year, EPL’s audited financial statements for that Operating Year.

“EPL MVRN” means the Metered Volume Reallocation Notification submitted by BEPET as Metered Volume Reallocation Notification Agent to the ECVAA allocating 100% of the Metered Volume of BEPET Electricity to BEPET’s Production Energy Account.

“EPL Settled Amount” means on the settlement of a Payment Dispute that relates to any amount or part of any amount used in the calculation of the Monthly Closing Balance in favour of EPL in accordance with Clause 11.1, the amount of such settlement.

“Expert” means the person appointed in accordance with Clause 17.

“Expiry Date” means the earlier of the Break Date and the Termination Date.

“Finance Document” has same the meaning as given to it in the Credit Agreement and “Finance Documents” shall be construed accordingly.

“Finance Party” has the same meaning as given to it in the Credit Agreement and “Finance Parties” shall be construed accordingly.

- 5 -

“First Month” means the first Month of the Contract Period.

“Force Majeure” means an event the occurrence of which is beyond the control of the relevant Party acting as a Reasonable and Prudent Operator, and:

(a) in the case of EPL, which has a material effect upon the Station and/or EPL’s ability to comply with its obligations under this Agreement; or

(b) in the case of BEPET, which has a material effect upon BEPET’s ability to comply with its material obligations under this Agreement.

“Forecast Operating and Maintenance Costs” means, in respect of any period, the anticipated Operating and Maintenance Costs for that period which the Parties reasonably estimate will be included in the EPL Annual Accounts for such period, as set out in the then prevailing Station Operating Budget (as amended from time to time in accordance with Clause 5.4).

“Fuel Delivery Point” means, the customary unloading point for rail and/or truck deliveries (as applicable) of fuel at the Station as notified by EPL to BEPET from time to time.

“Gale Common” means the site known as Gale Common upon which ash is deposited from the Station and the Ferrybridge C coal fired station.

“Gale Common Escrow Agreement” means the deed of trust and escrow dated [·] between EPL and the Environment Agency.

“Gale Common Licence” means the waste management licence in respect of Gale Common granted to EPL by the Environment Agency.

“Gale Common Sharing Agreement” means the agreement for the sharing of the Gale Common ash site dated 31 March 1990 between PowerGen plc and National Power plc as novated on 9 May 2001 to EPL and Edison First Power Limited.

“Grid Code” means the code of that name issued by NGC pursuant to the terms of its transmission licence or any substitute code which NGC may issue for the development, maintenance and operation of the NGC Transmission System.

“Group” means British Energy Group plc, a company with registered number SC270184 whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR, and its subsidiaries from time to time.

“Half Hour Period” means a period of 30 minutes ending on the hour or half hour.

“Incomplete Capital Investment Works” means, at any time, all Capital Investment Works that have been started but not completed at such time.

“Industry Documents” means any and all agreements regulating the generation, transmission, distribution and supply of electricity in England and Wales to which EPL is required to be a party, including the CUSC, the Grid Code and the Balancing and Settlement Code in each case as amended or modified or replaced from time to time.

- 6 -

“Insurances” has the same meaning as given to it in the Credit Agreement.

“LIBOR” means, in relation to any amount owed by a Party under this Agreement on which interest for a given period is to accrue, the rate per annum at which Barclays Bank PLC was offering prime banks in the London interbank market deposits in Pounds Sterling for such period as of 11.00 am on the date falling two Business Days prior to such period.

“Master Connection and Use of System Agreement” shall have the meaning given in the Balancing and Settlement Code.

“Maximum Generating Capacity” means, in respect of any Unit, the maximum physical gross/net generating capacity in MW of such Unit, as set out in Schedule 1 or agreed or determined from time to time in accordance with Clause 5.3(h).

“Metered Volume” has the same meaning as given to it in the Balancing and Settlement Code.

“Metered Volume Reallocation Notification” has the same meaning as given to it in the Balancing and Settlement Code.

“Metered Volume Reallocation Notification Agent” has the same meaning as given to it in the Balancing and Settlement Code.

“Month” means a period commencing at 0000 hours on the first Day of a calendar month and ending at 2400 hours on the last Day of that calendar month, provided that:

(a) the First Month shall commence on the Commercial Start Date; and

(b) the last Month shall end at 2400 hours on the Expiry Date.

“Monthly Closing Balance” means for each Month during the Contract Period, the sum of:

(a) except in the case of the First Month, the Monthly Closing Balance for the previous Month;

(b) any amount invoiced by EPL in that Month in accordance with Clause 9.2(a);

(c) the amounts invoiced by EPL in respect of Forecast Operating and Maintenance Costs for that Month in accordance with Clause 9.2; and

(d) any EPL Settled Amount,

less

(a) any amount set out in any credit note issued by EPL in that Month in accordance with Clause 9.2(b);

- 7 -

(b) the aggregate of the Operating and Maintenance Costs that BEPET has settled directly for and on behalf of EPL in that Month in accordance with Clause 8; and

(c) any BEPET Settled Amount.

“MWh” means megawatt hour.

“NGC” means National Grid Transco plc whose registered number is 4031152 and whose registered office is at 1-3 Strand, London, WC2N 5EH and shall, for the purposes of this Agreement, be deemed to include any person replacing National Grid Transco plc as operator of the national electricity transmission system from time to time.

“NGC Transmission System” has the same meaning as given to it in the Grid Code.

“Night-Time” means, in respect of any Day in any Season, the period identified as such in the then prevailing Annual Operating Plan.

“Non-Defaulting Party” means the Party which is not the Defaulting Party.

“Non-Working Day” means, in respect of any Unit in any Season, any Day identified as such in the then prevailing Annual Operating Plan.

“Notification” has the same meaning as given to it in Clause 5.

“Operating Half Hour Periods” means, in respect of any Unit, any Half Hour Period which is not part of the Planned Maintenance Allowance, the Capital Investments Works Allowance and/or the Unplanned Outages Allowance.

“On-Site Supply Agreements” means the agreements in force as at the date of this Agreement between EPL **************************************************^**** relating to the electrical connection and the direct supply of electricity from the Station to their respective facilities as amended or renegotiated from time to time and the guarantee dated 23 October 1998 by ************************ in respect thereof.

“Operating and Maintenance Costs” means in respect of any period, the aggregate of the following costs incurred by EPL during that period to the extent that such costs relate exclusively to the operation and maintenance of the Station and/or Gale Common in accordance with the provisions of this Agreement:

(a) staff costs of EPL employees and employees of the Group based at the Station, including wages and salaries, social security costs, costs of employee and former EPL employee claims relating to industrial disease or personal injury, and other employer pension contributions to the extent such contributions are due and payable by EPL in accordance with the rules of the British Energy Combined Group of the Electricity Supply Pension Scheme (the “Scheme”), provided that for these purposes it shall be assumed that any contributions that become payable under the Scheme to deal with a

^**** indicates material omitted and filed separately with the Commission.

- 8 -

funding deficit following an actuarial valuation are spread over a maximum period of 20 years (or such shorter period as may be certified by the Scheme actuary as the maximum permitted period) but excluding any liabilities incurred by EPL in connection with any litigation, tribunal proceedings or other such proceedings relating to the dismissal or contract termination of any member of staff unless otherwise agreed between EPL and BEPET at the time;

(b) the cost of raw materials and other consumables acquired by EPL with the prior approval of BEPET (other than Approved Fuel);

(c) the costs of handling Approved Fuel and raw materials and other consumables acquired by EPL;

(d) the costs of disposal of waste products produced by the Station, including ash handling, management and other costs associated with Gale Common;

(e) the cost of services acquired by EPL, including those provided by the Group;

(f) any costs relating to the Industry Documents or the Gale Common Escrow Agreement, including the cost of the provision of security to be maintained by EPL under the Industry Documents or the Gale Common Escrow Agreement;

(g) all premiums and excesses incurred under the Insurances;

(h) all Taxes (other than Corporation Tax) to which the Site and/or Gale Common are subject;

(i) any reimbursement in respect of stamp duty or stamp duty land tax that EPL is required to pay to the Buyer (as defined in the Asset Option Agreement) in accordance with Clause 30.1 of the Asset Option Agreement;

(j) overhaul costs to the extent necessary to obtain a statutory certificate for operation;

(k) revenue expenditures (including non-routine revenue expenditures) to maintain and repair existing plant, machinery, equipment and those interconnects owned by EPL;

(l) any fines and reasonable costs and expenses of EPL’s legal advisers;

(m) funding obligations of EPL under the Industry Documents or the Gale Common Escrow Agreement (including the provision of cash collateral);

(n) such other amounts as BEPET and EPL agree in writing as representing Operating and Maintenance Costs;

(o) any fees, costs and/or expenses payable by EPL to the Finance Parties in accordance with the terms and conditions of the Finance Documents; and

(p) any other costs incurred by EPL during the Contract Period to the extent that such costs relate exclusively to the operation and maintenance of the Station and/or Gale Common in accordance with the provisions of this Agreement,

- 9 -

provided that such aggregate costs shall exclude at all times:

(a) any VAT payable on the costs listed in Paragraphs (a) to (n) above except to the extent such VAT is irrecoverable;

(b) any capital investments works (including Capital Investment Works) and any other costs of a capital nature (other than non-routine revenue expenditures);

(c) all depreciation, obsolescence charges and other amounts written off tangible and intangible fixed assets;

(d) any costs related to the Restructuring;

(e) any other non-cash costs; and

(f) save as set out in Paragraph (p) above, any and all amounts due and payable by EPL to the Finance Parties under the Credit Agreement or any other Finance Document.

“Operating Year” means, in the case of the first Operating Year, the period commencing on the Commercial Start Date and ending at 2400 hours on 31 March 2005 and, in the case of each subsequent Operating Year, the period commencing at 0000 hours on 1 April in any calendar year and ending at 2400 hours on 31 March in the following calendar year or, in the case of the last Operating Year, at 2400 hours on the Expiry Date.

“Option” means an option granted under the Asset Option Agreement or the Share Option Agreement.

“Party” means a party to this Agreement.

“Payee” has the same meaning as given to it in Clause 12.

“Payer” has the same meaning as given to it in Clause 12.

“Payment Dispute” has the same meaning as given to it in Clause 11.1.

“Permitted Encumbrance” means any Encumbrance over the Approved Fuel:

(a) arising under the Restructuring Documents; or

(b) arising under, or permitted by, the Finance Documents.

“Planned Maintenance” means, in respect of any Unit in any Operating Year, the maintenance works planned to be undertaken by EPL in accordance with the then prevailing Annual Operating Plan.

“Planned Maintenance Allowance” means, in respect of any Unit in any Operating Year, the number of Half Hour Periods set aside in the then prevailing Annual Operating Plan for EPL to carry out Planned Maintenance.

“Production Energy Account” has the same meaning as given to it in the Balancing and Settlement Code.

- 10 -

“Profile Notice” means a notice of physical plant availability on Half Hour Period by Half Hour Period basis substantially in the form of Schedule 3.

“Reasonable and Prudent Operator” means a person acting in good faith, with the intention of performing its contractual obligations (disregarding the existence of the Share Option Agreement or the Asset Option Agreement) and who in so doing, and in the general conduct of its undertaking, exercises that degree of skill, diligence, prudence and foresight which would reasonably and ordinarily be exercised by a skilled and experienced person complying with applicable law and the Industry Documents engaged in the same type of undertaking in similar conditions and circumstances and taking into account (where applicable) the Station Technical Parameters, the Insurances and any warranties given by third parties in relation to the Station.

“Recipient” has the same meaning as given to it in Clause 12.

“Reimbursed Party” has the same meaning as given to it in Clause 12.

“Relevant Event” has the same meaning as given to it in Clause 19.

“Restatement Date” has the same meaning as given to it in the Amendment and Restatement Agreement.

“Restructuring” has the same meaning as given to it in the Creditor Restructuring Agreement.

“Restructuring Date” has the same meaning as given to it in the Creditor Restructuring Agreement.

“Restructuring Documents” has the same meaning as given to it in the Creditor Restructuring Agreement.

“Revenue Account” has the same meaning as given to it in the Accounts Agreement.

“Revenue Agreements” means the Ancillary Services Agreement, the Gale Common Sharing Agreement, the Ash Marketing Agreements and the On-Site Supply Agreements together with any other agreements entered into by EPL from time to time with the prior written consent of BEPET pursuant to which EPL receives income.

“Season” means, in respect of any Operating Year, any one of the three periods identified as such in the then prevailing Annual Operating Plan.

“Seasonal Availability Profile” means, in respect of any Unit in any Season, the profile showing the number of Operating Half Hour Periods in each of Day-Time and Night-Time on each Working Day and Non-Working Day for such Unit in such Season, as set out in the then prevailing Annual Operating Plan.

“Security Documents” has the same meaning as given to it in the Credit Agreement.

- 11 -

“Security Trustee” means Barclays Bank PLC acting in its capacity as trustee for the Finance Parties.

“Settled Amount” means an EPL Settled Amount and/or a BEPET Settled Amount.

“Settlement Date” means the date on which an EPL Settled Amount or BEPET Settled Amount is finally agreed by the Parties or determined by the Expert in accordance with Clause 11.1.

“Share Option Agreement” means the option agreement between the Security Trustee, EPHL, EPL and BEPET dated on or about the date of this Agreement under which EPHL grants an option to the Security Trustee to acquire the Option Shares (as defined in that agreement).

“Site” means the freehold land on which the Station is located.

“Station” means the coal fired power station located at Eggborough, Yorkshire with a capacity of approximately 2000MW and includes all plant, machinery, equipment and those interconnects owned by EPL.

“Station Operating Budget” means, in respect of any Operating Year, the anticipated Operating and Maintenance Costs for that Operating Year which the Parties reasonably estimate will be included in the EPL Annual Accounts for such Operating Year, as set out in the then prevailing Annual Operating Plan.

“Station Technical Parameters” means the technical operating parameters of the Station set out in Schedule 4 or as may otherwise be agreed from time to time between EPL and BEPET.

“Supplier” has the same meaning as given to it in Clause 12.

“Target Annual Station Availability” means, in respect of any Operating Year, the total anticipated availability of the Station in MWh during such Operating Year as determined in accordance with Clause 5.3 and set out in the then prevailing Annual Operating Plan.

“Target Annual Unit Availability” means, in respect of any Unit in any Operating Year, the total anticipated availability of such Unit in MWh during such Operating Year as determined in accordance with Clause 5.3 and set out in the then prevailing Annual Operating Plan.

“Taxes” shall mean any present or future tax, levy, impost, duty, or deduction of a fiscal nature and whatever called by a Competent Authority and on whomsoever imposed, levied, collected, withheld or assessed in the UK.

“Termination Date” means the date on which this Agreement terminates in accordance with Clause 14.

“Termination Notice” has the same meaning as given to it in Clause 14.

- 12 -

“Trading Charges” has the same meaning as given to it in the Balancing and Settlement Code.

“Transaction” has the same meaning as given to it in Clause 5.

“Unit” means any of the four generating units at the Station.

“Unplanned Outages” means, in respect of any Unit in any Operating Year, the number of Half Hour Periods in which EPL is unable to or is prohibited from exporting any quantity of electricity to the Electricity Delivery Point.

“Unplanned Outages Allowance” means, in respect of any Unit in any Operating Year, the number of Half Hour Periods set aside in the then prevailing Annual Operating Plan for Unplanned Outages.

“VAT” means value added tax as imposed by the Value Added Tax Act 1994 and legislation supplemental thereto, and includes any other tax of a similar fiscal nature imposed instead of, or in addition to, such tax.

“VAT Element” has the meaning given in Clause 12.

“Wilful Default” means an intentional and/or reckless disregard by a Party of an obligation under this Agreement.

“Working Day” means, in respect of any Unit, any Day identified as such in the then prevailing Annual Operating Plan.

1.2 Interpretation

In this Agreement unless expressly stated otherwise:

(a) references to the singular shall include references to the plural and vice versa, words importing one gender include all genders and words denoting natural persons shall include corporations and any other legal entity and vice versa;

(b) a reference to a “Party” or a “person” shall be construed so as to include its successors in title, permitted assignees and permitted transferees;

(c) a “person” means any individual, company, corporation, firm, partnership, joint venture, association, organisation, trust, state or agency of a state (in each case, whether or not having separate legal personality);

(d) “Pounds Sterling” and “£” means the lawful currency at the date of this Agreement of the United Kingdom of Great Britain and Northern Ireland;

(e) references to a time of day shall be construed in accordance with the Interpretation Act 1978;

- 13 -

(f) unless the context otherwise requires, references to a particular Clause, Paragraph or Schedule shall be references to that Clause, Paragraph or Schedule in, or to, this Agreement;

(g) any references to this Agreement or any other agreement or document is a reference to this Agreement or that agreement or document, as the case may be, as amended, modified, suspended, supplemented, assigned or novated from time to time and includes a reference to any agreement or document which amends, modifies, suspends, is supplemental to, assigns, novates, or is entered into, made or given pursuant to or in accordance with any terms of this Agreement or that agreement or document, as the case may be;

(h) any reference, express or implied, to an enactment includes reference to:

(i) that enactment as amended, extended or applied by or under any other enactment (before or after the date of this Agreement);

(ii) any enactment which that enactment re-enacts (with or without modification); and

(iii) any subordinate legislation made (before or after the date of this Agreement) under that enactment, as amended, extended or applied as described in Paragraph (i) above, or under any enactment referred to in Paragraph (ii) above;

(i) references to the word “include” or “including” are to be construed without limitation;

(j) the expressions “holding company” and “subsidiary” shall have the same meanings as given to them by Section 736 of the Companies Act 1985 as amended by Section 144 of the Companies Act 1989;

(k) the headings are inserted for convenience only and are to be ignored for the purposes of construction; and

(l) a person who is not a party to this Agreement may not enforce its terms under the Contracts (Rights of Third Parties) Act 1999.

2. CONDITION PRECEDENT AND TERM

2.1 Condition Precedent

The provisions of this Agreement shall only become effective on the occurrence of the Restatement Date.

2.2 Term

This Agreement shall be effective from (and including) the Commencement Date and shall continue in full force and effect until (and including) the Expiry Date.

- 14 -

3. REPRESENTATIONS AND WARRANTIES

3.1 Mutual Representations and Warranties

Each Party represents and warrants to the other that at the date of this Agreement:

(a) it is duly incorporated and has full power and authority to execute and deliver this Agreement and perform the same;

(b) the entering into, delivery and performance by it of this Agreement is within its powers, has been duly authorised by all necessary action on its part and so far as it is aware does not, and will not, violate any provision of law or any rule, regulation, order, writ, judgment, decree or other determination presently in effect applicable to it or any contract to which it is a party or its governing documents; and

(c) this Agreement constitutes a legal, valid and binding act and obligation of it, enforceable against it in accordance with its terms (subject to applicable laws affecting creditors’ rights generally).

3.2 EPL Representation and Warranty

EPL represents and warrants to BEPET that as at the date of this Agreement it holds all Consents necessary to enable it to observe and perform its obligations under, and in accordance with, this Agreement.

3.3 Repetition of Representations and Warranties

Each of the representations and warranties set out in Clauses 3.1 and 3.2 will be deemed to be repeated on the Commercial Start Date by reference to the then existing circumstances save in so far as the representations and warranties under Clause 3.1 are untrue as a result of a Change of Law.

4. AGREEMENT FOR TOLLING, GENERATION AND SALE

4.1 General

Subject to, and in accordance with, the other provisions of this Agreement, with effect on and from the Commercial Start Date and thereafter during the Contract Period:

(a) EPL shall:

(i) operate and maintain the Station in accordance with the standards of a Reasonable and Prudent Operator;

(ii) make the Station available to BEPET for the generation, transmission and sale of BEPET Electricity;

(iii) use Approved Fuel solely for the purpose of generating electricity at the Station and then transmit the same to the Electricity Delivery Point or otherwise in accordance with the Revenue Agreements;

- 15 -

(iv) subject to and in accordance with the Industry Documents and in so far as it is able to do so as a generator with no trading capability, provide all reasonable assistance to BEPET in connection with the sale, trade or other disposal by BEPET of such electricity as may be generated from time to time at the Station;

(v) subject to and in accordance with the Industry Documents, make available any Additional Benefits to BEPET and, in so far as it is able to do so, provide all reasonable assistance to BEPET in connection with the realisation of any Additional Benefits;

(vi) pay or procure the payment of any income or other receivables received by it under the Revenue Agreements to BEPET; and

(vii) identify and implement any Cost Saving Measures, and

(b) BEPET shall in consideration for the above:

(i) settle all Operating and Maintenance Costs as and when such Operating and Maintenance Costs become due and payable;

(ii) pay all EPL’s Corporation Tax as and when such Corporation Tax becomes due and payable;

(iii) make payments to EPL in respect of Capital Investment Works; and

(iv) make available to EPL Approved Fuel for tolling through the Station.

4.2 Exclusivity

(a) BEPET acknowledges the existence of the Revenue Agreements and the Industry Documents and agrees that its entitlement to sell, trade or dispose of electricity generated at the Station shall at all times be subject thereto.

(b) Other than in accordance with the Revenue Agreements and the Industry Documents, EPL undertakes that it shall not make capacity in the Station available to any person other than BEPET (unless expressly instructed to do so by BEPET).

4.3 Revenue Agreements and Industry Documents

(a) Subject to EPL’s obligations under the Credit Agreement, EPL shall at all times during the Contract Period:

(i) comply with the Revenue Agreements, the Industry Documents and all Consents necessary to enable it to observe and perform its obligations under, and in accordance with, this Agreement;

(ii) if requested by BEPET, enforce its rights under the Revenue Agreements and the Industry Documents in accordance with the terms thereof and (except to the extent the same is caused by any act or omission by BEPET in breach

- 16 -

of its obligations under this Agreement or as required by a Change of Law) not do, or voluntarily omit to do, anything that would cause any such agreements to be amended, terminated or suspended where such amendment, termination or suspension would result in EPL being unable to comply with any obligation to BEPET hereunder, provided always that BEPET shall reimburse EPL’s reasonable costs and expenses incurred pursuant to this Clause 4.3(a)(ii); and

(iii) promptly pay, or procure the payment of, any income or other receivables payable to EPL under or in connection with each of the Revenue Agreements directly to BEPET or into the Revenue Account.

(b) BEPET may negotiate and conclude for its own benefit any amendment to the Revenue Agreements and/or any new Revenue Agreement. EPL shall accept and/or execute any such amendment to a Revenue Agreement and/or new Revenue Agreement.

5. OPERATION, MAINTENANCE AND OUTAGES

5.1 General

Subject to Clauses 5.7 and 5.8(e) EPL, acting as a Reasonable and Prudent Operator, shall or shall procure that a third party shall, throughout the Contract Period:

(a) operate the Station in accordance with:

(i) BEPET’s instructions given pursuant to this Clause 5 and Clause 5.6(b); and

(ii) NGC’s instructions given under the Industry Documents.

(b) maintain the Station in good and sufficient working order and condition in accordance with this Agreement.

5.2 Annual Operating Plan

The Annual Operating Plan shall set out for the relevant Operating Year:

(a) a summary of the anticipated operating regime of the Station (subject to Clause 5.3(c));

(b) the Station Operating Budget;

(c) the Capital Investment Works Allowance, the Planned Maintenance Allowance and the Unplanned Outages Allowance;

(d) the Target Annual Unit Availability and the Target Annual Station Availability;

(e) the Planned Maintenance for such Operating Year and the two (2) subsequent Operating Years;

- 17 -

(f) the timing and duration of Seasons and the designation of Working Days and Non-Working Days in each Season; and

(g) the timing of Planned Maintenance.

5.3 Determination of Annual Operating Plans

(a) The Annual Operating Plan for the first Operating Year following the Restructuring Date will be prepared on or before the Restructuring Date and shall be substantially in the form set out in Schedule 1. In the event that the Commercial Start Date does not occur on the day immediately after the Restructuring Date, the Parties shall agree such amendments to such Annual Operating Plan as may be reasonable to reflect the revised Commercial Start Date. If the Parties are unable to agree such amendments, the matter shall be referred to an Expert in accordance with Clause 17. Subsequent Annual Operating Plans shall be determined in accordance with the remaining provisions of this Clause 5.3.

(b) No later than two (2) Months in advance of the commencement of each Operating Year (except for the first Operating Year), the Parties shall meet in order to agree the Annual Operating Plan for such Operating Year in accordance with this Clause 5.3.

(c) The summary of the anticipated operating regime of the Station shall be agreed between the Parties as an informal indication of their mutual understanding for the relevant Operating Year, provided that if they are unable to agree such summary, then, notwithstanding Clause 5.2(a), it shall be omitted from the Annual Operating Plan.

(d) The Station Operating Budget shall reflect EPL’s anticipated Operating and Maintenance Costs for the relevant Operating Year (and each of the two (2) subsequent Operating Years) which the Parties reasonably estimate will be included in the EPL Annual Accounts for such Operating Year (and each of the two (2) subsequent Operating Years).

(e) If the Parties fail to agree the Station Operating Budget by no later than thirty (30) Days prior to the first Business Day of the relevant Operating Year, they shall refer the matter to an Expert in accordance with Clause 17. Pending such determination, the Station Operating Budget for the previous Operating Year shall be adopted for such Operating Year.

(f) The Capital Investment Works Allowance, the Planned Maintenance Allowance, and the Unplanned Outages Allowance for each Unit in any Operating Year shall, in each case, be the best estimate of the Parties (or, in the absence of agreement, of BEPET acting as a Reasonable and Prudent Operator) of the number of Half Hour Periods attributable to Capital Investment Works, Planned Maintenance and Unplanned Outages, as the case may be, in respect of each Unit in that Operating Year.

- 18 -

(g) The Target Annual Station Availability in respect of any Operating Year shall be the aggregate of the Target Annual Unit Availability of all Units in such Operating Year, determined as follows:

TAUA = MGC x OHHP / 2

Where:

TAUA	=	the Target Annual Unit Availability in MWh of such Unit;
MGC	=	the Maximum Generating Capacity in MW of such Unit; and
OHHP	=	the total number of Operating Half Hour Periods in respect of such Unit in such Operating Year (calculated as the total number of Half Hour Periods in such Operating Year less the aggregate of the Planned Maintenance Allowance, the Capital Investment Works Allowance and the Unplanned Outages Allowance for such Unit in such Operating Year).

(h) For the purposes of Clause 5.3(g), the Maximum Generating Capacity of each Unit shall be as set out in the table in Paragraph 3 of Schedule 1, provided always that if at any time either Party considers the then prevailing Maximum Generating Capacity of any Unit to be inaccurate, such Maximum Generating Capacity shall be tested and agreed between the Parties or, in default of such agreement, determined by the Expert in accordance with Clause 17.

(i) The Planned Maintenance to be undertaken by EPL during the relevant Operating Year (and each of the two (2) subsequent Operating Years) shall be the best estimate of the Parties (or, in the absence of agreement, of BEPET acting as a Reasonable and Prudent Operator) of such works, prepared on an annual rolling basis from the corresponding information set out in the previous Annual Operating Plan.

(j) The timing and duration of Seasons and the designation of Working Days and Non-Working Days shall be the best estimate of the Parties (or, in the absence of agreement, of BEPET acting as a Reasonable and Prudent Operator) prepared on an annual rolling basis from the corresponding information set out in the previous Annual Operating Plan.

(k) BEPET shall no later than thirty (30) Days prior to the first Day of the relevant Operating Year, acting as a Reasonable and Prudent Operator and in the context of BEPET’s overall trading portfolio and the then prevailing wholesale electricity market conditions, determine the timing of the Planned Maintenance.

- 19 -

5.4 Variation of Annual Operating Plan

(a) In the event that either Party considers at any time that a revision to the then prevailing Annual Operating Plan is necessary or desirable, the Parties shall meet to discuss the matter in good faith. Notwithstanding the foregoing, but subject always to Clause 5.4(b), an agreed Annual Operating Plan shall not be varied without the written agreement of both Parties.

(b) BEPET shall, acting in accordance with the standards of a Reasonable and Prudent Operator, be entitled during any Operating Year to vary the timing and/or duration of the Planned Maintenance determined by it in accordance with Clause 5.3(k)). If and to the extent that any such variation results directly in EPL incurring increased (or reduced) Operating and Maintenance Costs, then EPL shall use its reasonable endeavours to minimise such increases (or maximise such reductions) and BEPET shall indemnify EPL for any such increase in Operating and Maintenance Costs.

5.5 Timing of Planned Maintenance

EPL shall, in respect of each Unit in each Operating Year, use reasonable endeavours to ensure that:

(a) the Planned Maintenance is carried out at the times specified by BEPET in accordance with Clause 5.3(k) as may be varied from time to time in accordance with Clause 5.4(b); and

(b) the timing of capital investment works (including Capital Investment Works) on a Unit overlaps as far as possible with Planned Maintenance on such Unit.

5.6 Instructions and Notifications

(a) No later than the Wednesday (or, where such Wednesday is not a Business Day, the last Business Day before such Wednesday) immediately preceding the commencement of each seven (7) day period, EPL shall notify BEPET of its good faith best estimate of the availability of each Unit for each Half Hour Period of such seven (7) day period and of the seven (7) day period following thereafter (and, for the purposes of this Clause 5.6(a), each seven (7) day period shall be deemed to commence on a Saturday).

(b) No later than 1700 hours on the Friday (or, where such Friday is not a Business Day, the last Business Day before such Friday) immediately preceding the commencement of each seven (7) day period, BEPET will instruct EPL in relation to:

(i) the sulphur content and other specifications of coal that is Approved Fuel; and

(ii) the details of any other Approved Fuel,

- 20 -

in each case, to be burned during such seven (7) day period (and, for the purposes of this Clause 5.6(b), each seven (7) day period shall be deemed to commence on a Monday).

(c) No later than 0800 hours on each Day, EPL shall deliver a completed Profile Notice to BEPET in respect of the Day following immediately thereafter. Where a Profile Notice is not received prior to 0800 hours on a Day, in respect of the Day following immediately thereafter, the previous Profile Notice submitted in accordance with this Clause 5.6(c) shall be deemed to have been resubmitted. Where more than one Profile Notice is submitted prior to 0800 hours on a Day, the latest shall be the Profile Notice in respect of the Day following immediately thereafter.

(d) EPL shall be entitled at any time after delivery of a Profile Notice in accordance with Clause 5.6(c) to reduce the availability of any Unit in respect of such Half Hour Period as set out in such Profile Notice and such Profile Notice shall be deemed to have been amended accordingly for the purposes of this Agreement. EPL shall promptly notify BEPET of any such reduction in the availability of any Unit.

(e) EPL acknowledges that the timing for delivery of weekly notifications and daily Profile Notices set out in Clauses 5.6(a) to 5.6(c) inclusive respectively reflect BEPET’s reasonable requirements for good faith best estimates of short-term availability in the context of the Industry Documents prevailing at the date of this Agreement and EPL agrees that such timing shall be varied at any time at BEPET’s reasonable request to accommodate any corresponding changes to the prevailing Industry Documents from time to time. In the event that the Parties are unable to agree such variation, the matter shall be referred to an Expert for determination in accordance with Clause 17.

5.7 Constraints on BEPET

Notwithstanding any other provision of this Agreement, EPL shall not be required to operate the Station in accordance with BEPET’s instructions:

(a) where BEPET has delivered insufficient quantities of Approved Fuel to enable such operation, to the extent of such insufficiency only;

(b) other than in accordance with the Station Technical Parameters, the Industry Documents, the Consents, the standards of a Reasonable and Prudent Operator and the relevant Profile Notice; or

(c) where doing so would result in a breach of a Revenue Agreement.

When determining whether BEPET has delivered insufficient quantities of Approved Fuel in accordance with Paragraph (a) above, Approved Fuel stored at the Station at the relevant time shall be taken into account.

- 21 -

5.8 Electricity Sales

(a) All electricity generated at the Station during the Contract Period (save for electricity supplied by EPL under the Revenue Agreements or under any Industry Document to which EPL is a party) (the “BEPET Electricity”) shall be for the benefit of BEPET and shall be transferred to BEPET under the EPL MVRN.

(b) BEPET may negotiate and conclude for its own benefit and in its own name any sales, trades or other disposals related to BEPET Electricity on such terms and subject to such conditions as BEPET shall determine in its sole and absolute discretion (each sale, trade or other disposal made by BEPET, being a “Transaction”) and such terms and conditions shall be accepted by EPL as necessary.

(c) EPL shall, in so far as it is able to do so as a generator with no trading capability, provide all reasonable assistance to BEPET in connection with each Transaction and shall authorise BEPET to take on EPL’s behalf (and BEPET shall take) any action to implement a Transaction as is required to be done by EPL under the Industry Documents, including making any binding or non-binding bid, nomination, notification, instruction, declaration or order, giving any consent, settling or raising any dispute or doing any other thing reasonably necessary so as to enable EPL to generate in accordance with BEPET’s instructions. In so far as it is able to do so under the Industry Documents, BEPET shall be responsible, as principal or under such authorisation, for providing (or procuring the provision of) all price, volume, final physical and other notifications required to be given under the Industry Documents so as to enable EPL to generate in accordance with BEPET’s instructions.

(d) Subject to, and in accordance with, the Industry Documents, EPL shall promptly pay, or procure the payment of, any income and other receivables paid or payable to it in respect of each Transaction directly to BEPET or into the Revenue Account.

(e) Nothing in this Clause 5.8 shall entitle BEPET to take any action in relation to the operation and/or maintenance of the Station or to create any legally binding arrangements between EPL and third parties (other than as required under the Industry Documents), save for the giving of instructions to EPL in accordance with this Clause 5.8.

5.9 Ancillary Services

(a) BEPET shall be entitled to determine the voluntary Ancillary Services to be offered for each Half Hour Period and to instruct EPL to offer such voluntary Ancillary Services to NGC in accordance with the Ancillary Services Agreement and the Industry Documents. Subject to Clause 5.7, EPL shall comply with such instructions.

(b) Subject to, and in accordance with, the Industry Documents, EPL shall promptly pay, or procure the payment of, any income and other receivables paid or payable to it in respect of the provision of Ancillary Services directly to BEPET or into the Revenue Account.

- 22 -

5.10 Additional Benefits

(a) EPL shall inform BEPET in writing of any Additional Benefits as soon as reasonably practicable after becoming aware of such Additional Benefits.

(b) All Additional Benefits arising during the Contract Period shall be for the benefit of BEPET and EPL shall not enter into any contracts for sale, trade or other disposal of any such Additional Benefits with any third party otherwise than in accordance with Clause 5.10(c).

(c) BEPET shall negotiate and conclude for its own benefit and in its own name (or, to the extent that this is not possible as determined by BEPET in its sole and absolute discretion as a Reasonable and Prudent Operator, EPL’s name) any sales, trades or other disposals related to Additional Benefits during the Contract Period on such terms and subject to such conditions as BEPET shall determine in its sole and absolute discretion (each sale, trade or other disposal made by BEPET or EPL being an “Additional Transaction”) and such terms and conditions shall be accepted and/or executed by EPL as necessary.

(d) EPL shall, in so far as it is able to do so, provide all reasonable assistance to BEPET in connection with each Additional Transaction and authorise BEPET to take on EPL’s behalf (and BEPET shall take) any action to implement an Additional Transaction as is required to be done by EPL under the Industry Documents or otherwise.

(e) Subject to, and in accordance with, the Industry Documents, EPL shall promptly pay, or procure the payment of, any income and other receivables paid or payable to it in respect of each Additional Transaction directly to BEPET or into the Revenue Account.

5.11 Cost Saving Measures

EPL shall:

(a) inform BEPET in writing of any potential Cost Saving Measures as soon as reasonably practicable after becoming aware of such Cost Saving Measures;

(b) acting as a Reasonable and Prudent Operator, take all steps necessary to implement such Cost Saving Measures, provided that no such steps may be taken without the prior written consent of BEPET; and

(c) promptly provide BEPET with a forecast of the extent of such Cost Saving Measures in that Operating Year in order that BEPET may properly consider whether a revision to the then prevailing Annual Operating Plan in accordance with Clause 5.4(a) is necessary or desirable.

- 23 -

5.12 Limitations on EPL

EPL shall not enter into any contracts:

(a) for the sale, trade or other disposal of electricity with any third party (except for the Revenue Agreements and/or as required under the Industry Documents); and

(b) relating to Additional Benefits or Cost Saving Measures unless instructed to do so by BEPET in accordance with Clause 5.10 and/or 5.11, as the case may be.

5.13 Access, Insurance and Information

(a) EPL shall grant to BEPET reasonable access to the Station to:

(i) enable BEPET to exercise its rights and to comply with its obligations under this Agreement; and

(ii) to monitor the compliance by EPL with its obligations under this Agreement.

(b) EPL undertakes to comply with its obligations under the Credit Agreement in respect of the Insurances.

(c) EPL shall provide to BEPET all information which BEPET reasonably requests in relation to the operation, maintenance and performance of the Station, as soon as practicable upon receipt of a request from BEPET to do so.

(d) Without prejudice to Clause 5.13(c), EPL shall provide BEPET with details of:

(i) availability forecasts required by NGC under the Industry Documents from time to time;

(ii) at the end of each week, the despatch levels of the Station during such week and the amount and specification of Approved Fuel (including the amount of Approved Fuel that is coal and the sulphur content of such coal) consumed by the Station during such week; and

(iii) promptly, as to any despatch or other operating instructions received from NGC or as to any trips or other sudden outages affecting the Station.

6. FUEL SUPPLY ARRANGEMENTS

6.1 General

BEPET shall procure that sufficient quantities of Approved Fuel are available at the Station to enable EPL to comply with its obligations under this Agreement and under clause 15.17(a) of the Credit Agreement.

6.2 Specification

(a) The specification of any fuel supplied at the Fuel Delivery Point shall be tested on the day of delivery pursuant to, and in accordance with, the standards agreed between the Parties from time to time (or, in the absence of agreement, as

- 24 -

determined by an Expert in accordance with Clause 17 in the context of the technical capability, and the historical consumption, of the relevant fuel at the Station) and approved by the Banks’ Technical Adviser in accordance with the terms of the Credit Agreement. If, when tested, any such fuel:

(i) conforms to such standards, such fuel shall be Approved Fuel for the purposes of this Agreement; or

(ii) fails to conform to such standards, EPL shall either accept or reject the same, provided that in the event that EPL accepts such non-conforming fuel, such fuel shall be deemed to be Approved Fuel for the purposes of this Agreement.

(b) In the event that EPL rejects any non-conforming fuel and is unable to perform some or all of its obligations under this Agreement as a direct result of such rejection, it shall be relieved of any liability for such non-performance and BEPET undertakes to indemnify EPL for any costs incurred by EPL in connection with such rejection.

6.3 Property and Risk

No property in or risk of loss or damage to any Approved Fuel provided (or any other fuel purportedly provided) in accordance with this Clause 6 shall pass to EPL. Nothing in this Agreement will imply, directly or indirectly, any sale or transfer of title or of interest whatsoever in the Approved Fuel (or such other fuel) provided to EPL at the Fuel Delivery Point.

6.4 Rights and Obligations of EPL in respect of Approved Fuel

(a) EPL shall have such rights and powers in respect of all Approved Fuel as may be required for, and are consistent with, the performance by EPL of its obligations under this Agreement (including such rights and powers in respect of such Approved Fuel as may be required by a Reasonable and Prudent Operator).

(b) EPL shall exercise the duty of care of a Reasonable and Prudent Operator in respect of Approved Fuel.

6.5 Tax

BEPET shall pay, or cause to be paid, all royalties, Taxes, tariffs, duties, imposts and other sums or charges on or arising in respect of the processing, sale to BEPET, transportation or supply of Approved Fuel delivered in accordance with this Clause 6 and shall indemnify, defend and hold harmless EPL from any claims or actions arising therefrom.

- 25 -

7. METERING

7.1 Metering and Meter Reading

Metering shall be carried out in accordance with the Industry Documents. Representatives of both Parties shall conduct joint visual readings of the meters at intervals to be agreed following which the Parties shall promptly prepare joint statements recording such readings for the relevant Month, provided that, if either Party fails to conduct such reading, the readings of the Party which conducts such readings shall be conclusive for the purposes of this Agreement.

7.2 Records

Each Party shall keep complete and accurate records of all meter readings and, in the case of EPL, details of all maintenance carried out upon the meters. Such records may be inspected by the other Party during normal business hours upon reasonable advance written notice. Such records will be maintained for a period of five (5) calendar years after their creation and after such five (5) calendar year period shall not be destroyed:

(a) without giving the other Party thirty (30) Days’ written notice of its intention to destroy such records and, following receipt of a written request from the other Party within such thirty (30) Day period, until such time as a copy of such records has been provided to the other Party (at such other Party’s expense); or

(b) if the records relate to a dispute which is then currently proceeding.

8. PAYMENT OF OPERATING AND MAINTENANCE COSTS

BEPET shall settle all Operating and Maintenance Costs that have been approved by EPL for and on behalf of EPL as and when they become due and payable. In addition, BEPET shall pay to EPL on an annual basis an amount equal to the greater of one hundredth of one per cent. (0.01%) of the Operating and Maintenance Costs arising in the preceding Operating Year and £10,000, such amount to be paid within 30 Business Days of the end of the relevant Operating Year.

9. INVOICING OF OPERATING AND MAINTENANCE COSTS

The payments to be made by BEPET to EPL pursuant to Clause 8 shall be invoiced in accordance with the remaining provisions of this Clause 9.

9.1 Monthly Invoices

On the first day of each Month in each Operating Year, or such other date as the Parties may agree, EPL shall invoice BEPET for the Forecast Operating and Maintenance Costs for that Month.

- 26 -

9.2 Annual Adjustment

No later than 60 Business Days after the Accounting Date in each Operating Year, EPL shall:

(a) if the Actual Operating and Maintenance Costs for that Operating Year exceed the Forecast Operating and Maintenance Costs for that Operating Year, invoice BEPET; or

(b) if the Actual Operating and Maintenance Costs for that Operating Year are less that the Forecast Operating and Maintenance Costs for that Operating Year, issue a credit note to BEPET,

in each case, for an amount equal to the difference between the Actual Operating and Maintenance Costs for that Operating Year and the Forecast Operating and Maintenance Costs for that Operating Year.

9.3 Set-Off

Any Operating and Maintenance Costs paid directly by BEPET in accordance with Clause 8 and the amounts set out in any credit note provided by EPL in accordance with Clause 9.2(b) shall be set off against the amounts invoiced by EPL in accordance with Clauses 9.1 and 9.2(a).

9.4 BEPET Monthly Statement

No later than 20 Business Days after the last day of each Month in each Operating Year, BEPET shall deliver a statement to EPL setting out the Monthly Closing Balance.

9.5 Adjustments

Any Settled Amount shall be included in the calculation of the Monthly Closing Balance for the Month in which the Settlement Date falls.

9.6 Corporation Tax

(a) Subject to Clause 9.6(b), BEPET shall pay all Corporation Tax for and on behalf of EPL in respect of each accounting period ending during the Contract Period (each a “Relevant Period”) as and when such Corporation Tax becomes due and payable.

(b) To the extent any payment of Corporation Tax made by BEPET in accordance with Clause 9.6(a) is found to be in excess of the amount required to be paid by EPL and a refund of such amount is made to EPL, EPL shall forthwith pay the amount of any such refund to BEPET.

(c) In relation to any amount which BEPET would otherwise be liable to pay under Clause 9.6(a), BEPET shall have the option at any time to subscribe, or procure that a company within the Group subscribes, for Deferred Shares in EPL in an equivalent amount, on terms that the subscription monies are to be applied in paying the relevant Corporation Tax liability of EPL, and BEPET and EPL shall co-operate to effect the issue and subscription of the relevant Deferred Shares.

- 27 -

9.7 Tax Computations and Returns

(a) BEPET shall (at its cost) have responsibility for preparing, submitting, negotiating and agreeing with the relevant Competent Authority, all Tax computations and returns of EPL for each Relevant Period.

(b) EPL shall make such claims, surrenders, disclaimers and elections or give such notice or consent or do such other things in relation to Tax as may be directed by BEPET in relation to each Relevant Period.

(c) BEPET and EPL shall procure the provision to each other of such information and assistance which each may reasonably require of the other to prepare, submit and agree all Tax computations of EPL that relate to each Relevant Period and shall deliver to each other copies of all correspondence sent to, or received from, any relevant Competent Authority relating to such Tax computations.

(d) EPL shall take any action BEPET may request to avoid, dispute, resist or compromise (including making and pursuing any appeals or other forms of judicial or administrative recourse available to EPL) any Tax assessment or other claim, demand, determination, notice or other document issued or action taken by or on behalf of a Competent Authority by which EPL is liable or is sought to be made liable to make a payment to the Competent Authority or to another person. BEPET shall indemnify EPL against all losses (including any additional Tax) and all costs and expenses which EPL may incur in connection with the taking of such action.

(e) BEPET shall have the right to conduct any action referred to in Clause 9.7(d).

(f) EPL covenants with BEPET that it will take such action (including signing and authorising computations and returns) as is necessary or desirable to give effect to this Clause 9.7.

(g) The Parties expressly agree that the obligations contained in this Clause 9.7 shall endure beyond the Expiry Date.

10. CAPITAL INVESTMENT WORKS

10.1 Scheduled Capital Investment Works

(a) Subject to Clause 10.1(b), EPL shall carry out the Capital Investment Works.

(b) If at any time, the amount allocated to any Capital Investment Work in a financial year as set out in the Capital Investment Works Schedule, when aggregated with:

(i) the amount previously spent on Capital Investment Works; and

- 28 -

(ii) the amount projected to be spent on all Incomplete Capital Investment Works in that financial year,

in each case, as determined at such time, would result in the Annual Capital Investment Works Limit for such financial year being exceeded, EPL shall not carry out such Capital Investment Work without the prior written consent of BEPET.

(c) Notwithstanding Clause 10.1(b):

(i) EPL may carry out capital investment works other than those set out in the Capital Investment Works Schedule with the prior written consent of BEPET; and

(ii) BEPET may require EPL to carry out capital investment works other than those set out in the Capital Investment Works Schedule.

10.2 Payments Towards Capital Investment Works

(a) EPL shall notify BEPET from time to time of the cost of any capital investment works (including Capital Investment Works) to be undertaken in accordance with Clause 10.1 (each a “Scheduled Capital Investment Work”).

(b) Subject to Clause 10.2(d), BEPET shall make a payment to EPL in an amount equal to the cost (when due and payable) of each Scheduled Capital Investment Work as part of the consideration for the services to be supplied by EPL to BEPET under this Agreement.

(c) EPL acknowledges that the payments it receives from BEPET in respect of Scheduled Capital Investment Works shall meet the cost of such Scheduled Capital Investment Works and agrees that it shall not seek to claim capital allowances in respect of the expenditure incurred on such Scheduled Capital Investment Works.

(d) In relation to any amount which BEPET would otherwise be liable to pay under Clause 10.2(b), BEPET shall have the option at any time to subscribe, or procure that a company within the Group subscribes, for Deferred Shares in EPL in an equivalent amount, on terms that the subscription monies are to be applied in paying the cost of the relevant Scheduled Capital Investment Works.

(e) In the event that BEPET opts to fund any Scheduled Capital Investment Works in accordance with Clause 10.2(d), BEPET and EPL shall co-operate to effect the issue and subscription of the relevant Deferred Shares and EPL shall instead claim capital allowances or such other reliefs as may be available in respect of the expenditure incurred on the Scheduled Capital Investment Works.

- 29 -

11. PAYMENT MECHANICS

11.1 Disputed Payments

If any amount or part of any amount is disputed (a “Payment Dispute”), the Parties shall discuss such Payment Dispute in good faith. If such Payment Dispute has not been resolved within ten (10) Business Days either Party may refer the Payment Dispute to an Expert appointed in accordance with Clause 17. In the event of any such referral the Expert shall be required as a condition of his appointment to use reasonable endeavours to reach his decision within ten (10) Business Days of the matter being referred to him. For the avoidance of doubt, any undisputed part payments shall be paid in any event in accordance with the rest of this Clause 11.

11.2 Cleared Funds

Payments to be made under this Agreement by one Party to the other shall be made in Pounds Sterling not later than three (3) Business Days after the date on which they become due and payable and shall be made in immediately available funds free and clear of all deductions or withholdings of any kind except for those required by law, and if any withholding must be made by law, the paying Party will pay that additional amount so that the Party entitled to receive payment receives a net amount equal to what would have been received had there been no withholding. All payments to be made under this Agreement by one Party to the other shall be credited to the Parties’ respective accounts as set out in Schedule 2 or to such other account(s) at such other bank(s) as the Parties shall notify to each other in writing from time to time.

11.3 Interest

Any amount properly due from one Party to the other pursuant to this Agreement and remaining unpaid after the date when payment was due shall bear interest, such interest to accrue from day to day at a rate equal to one three hundred and sixty fifth (1/365th) of the Default Rate from time to time in force (and be compounded monthly), from (and including) the date when payment was due, to (but excluding) the date the amount due (together with all interest) is actually received by the payee.

11.4 Euros

With effect from the date (if any) that the United Kingdom adopts the Euro as its lawful currency in substitution for Pounds Sterling (the “Euro Effective Date”):

(a) payments falling due under this Agreement on or after the Euro Effective Date shall be made by the payer to the recipient in Euros;

(b) no payments falling due after the Euro Effective Date which would have been payable in Pounds Sterling under this Agreement but for the adoption of the Euro by the United Kingdom as its lawful currency shall be made in Pounds Sterling or national currency units; and

- 30 -

(c) on the Euro Effective Date, all amounts stated in Pounds Sterling shall be converted into Euros at the fixed conversion rate provided for by the Laws of England and Wales and, on and after the Euro Effective Date, all amounts required to be calculated in Pounds Sterling shall be calculated in Euros.

12. VAT

12.1 Definitions

References to any person in connection with VAT shall (where appropriate and unless the context otherwise requires) be construed, at any time where such person is treated as a member of a group for the purposes of sections 43 to 43C of the Value Added Tax Act 1994, to include a reference to the representative member of such group at such time (the term “representative member” to be construed in accordance with the said sections 43 to 43C).

12.2 All Sums Exclusive of VAT

All sums set out in this Agreement or otherwise payable by either Party to the other Party pursuant to this Agreement shall be deemed to be exclusive of any VAT which is chargeable on the supply or supplies for which such sums (or any part thereof) are the whole or part of the consideration for VAT purposes.

12.3 VAT on Supplies

Where, pursuant to the terms of this Agreement, either Party (the “Supplier”) makes a supply to the other Party (the “Recipient”) for VAT purposes and VAT is or becomes chargeable on such supply, the Recipient shall pay to the Supplier (in addition to any other consideration for such supply and at the same time as paying such consideration) a sum equal to the amount of such VAT and the Supplier shall provide the Recipient with a valid tax invoice for VAT purposes promptly against such payment (or otherwise as agreed between the Parties).

12.4 Repayment of Amounts

If:

(a) either Party has paid any amount in respect of VAT pursuant to Clause 12.3 on the basis that the relevant transaction gave rise to a positive rated supply for VAT purposes, and HM Customs & Excise subsequently determine in writing to the party (the “Payee”) to whom such amount in respect of VAT was paid that such transaction did not give rise to a positive rated supply; or

(b) either Party has paid any amount in respect of VAT pursuant to Clause 12.3, and HM Customs & Excise subsequently determine in writing to the Payee that such amount was in excess of the amount of VAT properly chargeable on the relevant supply,

- 31 -

the Payee shall provide the payer with a valid credit note for VAT purposes and repay to the payer an amount equal to the difference between such amount in respect of VAT and the amount of VAT determined by HM Customs & Excise in writing to the Payee to be properly chargeable in respect of the relevant transaction or on the relevant supply provided that, if either:

(a) the Payee is required under paragraph 5(2) of Schedule 11 to the Value Added Tax Act 1994 to account to HM Customs & Excise for any amount expressed as VAT in any VAT invoice issued by the Payee to the payer in respect of such transaction or supply; or

(b) the Payee has already accounted to HM Customs & Excise for VAT in respect of such transaction or supply in an amount equal to such amount in respect of VAT paid by the payer,

the Payee shall only be obliged to repay such difference if and to the extent that it is able to obtain a refund (whether by way of credit or repayment) from HM Customs & Excise in respect of the amount which it is required to account, or the VAT it has accounted, to them as aforesaid, and in such a case, the Payee shall (unless the parties are able to rely on the practice set out in section 18.2.1 of VAT Notice 700 (April 2002 edition)) use its reasonable endeavours to obtain such a refund and shall only be obliged to repay such difference:

(a) on the day on which it submits the VAT return (or other document) to HM Customs & Excise claiming the refund (where the refund is by way of credit only); or

(b) within 3 Business Days after it receives the payment from HM Customs & Excise which discharges the refund (where the refund is by way of repayment only or by way of both credit and repayment).

12.5 Reimbursements and VAT

Where, pursuant to the terms of this Agreement, either Party (the “Reimbursed Party”) is reimbursed or indemnified by the other Party (the “Payer”) any sum in respect of any cost or expense and the cost or expense includes an amount in respect of VAT (the “VAT Element”), the Payer shall in addition pay to the Reimbursed Party in respect of VAT:

(a) to the extent that such cost or expense has been incurred in respect of any supply of goods or services to the Reimbursed Party, including a supply made to such Reimbursed Party (acting as agent) in accordance with section 47 of the Value Added Tax Act 1994, a sum equal to the proportion of the VAT Element (as notified by the Reimbursed Party to the Payer) that such Reimbursed Party is not entitled to recover (by way of credit or repayment) from HM Customs & Excise (such amount so notified to be subject to review by an independent VAT auditor at the request of the Payer); and

(b) to the extent that such reimbursement or indemnity is in respect of a disbursement (within the meaning of VAT Notice 700) made by such Reimbursed Party as agent for the Payer, except where the relevant supply has been made to such

- 32 -

Reimbursed Party (acting as agent) in accordance with section 47 of the Value Added Tax Act 1994, such amount as equals the whole of the VAT Element,

and where a sum equal to the VAT Element has been reimbursed or indemnified to any Reimbursed Party pursuant to sub-clause (b) above, such Reimbursed Party shall use reasonable endeavours to procure the provision of a valid VAT invoice for VAT purposes in respect of the supply to which the relevant amount relates, that is to say a VAT invoice naming the Payer as the recipient of the supply and issued by the person making the supply.

13. EXCLUSIVE REMEDY

13.1 Where, in this Agreement, a specific remedy is expressly provided to apply in any given situation, that remedy shall, unless the contrary is stated, be deemed to be the sole remedy of the relevant Party in that situation, and that Party hereby waives all other remedies whatsoever which it might have in respect thereof.

13.2 No Party shall owe or incur any liability whatsoever to the other Party (whether in contract or in tort, including negligence, or otherwise howsoever and irrespective of negligence and/or breach of duty, statutory or otherwise) for:

(a) loss of profit or revenue, loss of use, loss of contract or other business opportunity, loss of goodwill, loss from failure of or delay in production or increased cost of working; or

(b) any indirect or consequential losses or consequential damages,

sustained as a result of any act or omission (including a party’s contractors, sub-contractors, agents, employees or representatives) under this Agreement.

14. EVENTS OF DEFAULT

14.1 Events Constituting Events of Default

The occurrence of any one or more of the following events and/or circumstances in respect of either Party shall be an event of default and that Party shall be the “Defaulting Party”:

(a) the making of an order of a competent court or the passing of an effective resolution for winding up or dissolution of the Defaulting Party other than for the purpose of a reconstruction or amalgamation previously approved in writing by the other Party, such approval not to be unreasonably withheld or delayed;

(b) the initiation of proceedings under any applicable bankruptcy, reorganisation, composition or insolvency law by (in respect of itself) or against the Defaulting Party, provided that such proceedings have not been discharged or stayed within thirty (30) Business Days, or the appointment of an administrator or a receiver in respect of it or all or any part of the undertaking or any property, assets or revenues of the Defaulting Party;

- 33 -

(c) any steps are taken under Clause 18 of the Credit Agreement (in which case EPL shall be the Defaulting Party);

(d) the default by the Defaulting Party in the punctual payment of any amount properly due and payable by it to the Non-Defaulting Party under this Agreement (which shall not include amounts disputed in accordance with Clause 11) and such amount remains unpaid at the expiry of twenty (20) Business Days following the date upon which it receives written notice from the Non-Defaulting Party that such amount remains unpaid;

(e) a breach by the Defaulting Party of one or more of its obligations under this Agreement which is material in the context of this Agreement overall unless, if that breach continues to be material and is capable of remedy within forty-five (45) Business Days, such breach has been remedied within forty-five (45) Business Days after written notice of that breach has been received by the Defaulting Party; and/or

(f) any representation made or warranty given by the Defaulting Party pursuant to Clause 3 being or proving to have been materially incorrect or materially misleading when made, provided that no event of default will occur if the representation made or warranty given by the Defaulting Party is not materially incorrect or materially misleading when repeated forty-five (45) Business Days after the date on which the Defaulting Party receives written notice from the Non-Defaulting Party that such representation made or warranty given was materially incorrect or materially misleading when made.

14.2 Notice of Event of Default

Each Party undertakes with the other that it will promptly provide written notice to the other (a “Default Notice”) of any occurrence which constitutes (or may constitute) an event of default in respect of it. Upon an event of default referred to in Clause 14.1 occurring in respect of either Party, the Non-Defaulting Party may elect to terminate this Agreement by delivery of a written notice to the Defaulting Party, whereupon this Agreement shall terminate.

14.3 Consequences of Termination

Termination of this Agreement shall not affect any rights, obligations and/or liabilities which have accrued prior to or arise out of such termination. Other than the Parties rights and obligations under Clauses 9.7 and 17, each Party’s further rights and obligations shall cease immediately on termination.

15. FORCE MAJEURE

15.1 General

(a) EPL shall not be in breach of an obligation under this Agreement for so long as, and to the extent that, performance of such obligation is and continues to be prevented by Force Majeure, provided that Force Majeure shall not entitle EPL to withhold any payment which was due and payable prior to the occurrence of the relevant event of Force Majeure.

- 34 -

(b) BEPET shall not be in breach of an obligation under this Agreement for so long as, and to the extent that, performance of such obligation (other than those that relate to payment) is and continues to be prevented by Force Majeure.

15.2 Obligation Diligently to Cure Force Majeure

If either Party claims Force Majeure as a basis for being excused from performance of its obligations under this Agreement, then that Party shall:

(a) provide prompt notice to the other Party of the occurrence of the event or condition giving rise to Force Majeure, giving an estimation of its expected duration and the probable impact on the performance of its obligations hereunder;

(b) expeditiously take action to correct or cure the event or condition giving rise to Force Majeure (to the extent that it is able to do so); and

(c) provide regular notices to the other Party with respect to its actions and plans for actions in accordance with Clause 15.2(a) and (b) above and prompt notice to the other Party of the cessation of the Force Majeure.

15.3 Effect of Force Majeure on BEPET

For so long as and to the extent that EPL is excused from performing its obligations under this Agreement due to an event of Force Majeure, BEPET shall also be excused from performing its obligations under this Agreement, provided always that nothing in this Clause 15.3 shall relieve BEPET of its liability to make payments to EPL during a period of Force Majeure pursuant to Clauses 8 and 9.

16. ASSIGNMENT AND TRANSFER

Neither Party shall be entitled to assign any of its rights or transfer any of its obligations under this Agreement without the prior written consent of the other Party, provided always that:

(a) BEPET may assign any of its rights or transfer any of its obligations under this Agreement to any of its Affiliates with the prior consent of EPL (such consent not to be unreasonably withheld or delayed); and

(b) EPL may assign by way of security and/or charge any of its rights or transfer any of its obligations under this Agreement to the Security Trustee.

17. DISPUTE RESOLUTION

17.1 Disputes Procedure

The Parties shall attempt in good faith to resolve any dispute or difference arising out of or in relation to this Agreement through negotiations between a director of each of the Parties who has been given authority to settle the relevant dispute.

- 35 -

If the dispute cannot be settled amicably within fourteen (14) Days (or such other date as may be provided for by this Agreement in relation to a particular dispute) from the date on which either Party has served written notice on the other of the dispute then any dispute or difference concerning any primarily technical matter arising out of or in the course of this Agreement or which is referred to an Expert under this Agreement shall be referred to an Expert to be appointed in accordance with Clause 17.2 and all other disputes or differences shall be subject to the exclusive jurisdiction of the High Court.

17.2 Expert

(a) Where any matter is referred to an Expert in accordance with this Clause 17, the Expert shall be appointed by the Parties, or in default of agreement upon such appointment within seven (7) Days of a Party notifying the other Party of its decision to refer the matter to an Expert, by the President of the Electricity Arbitration Association.

(b) The Expert shall have power (in relation to changes to this Agreement referred to the Expert in default of agreement between the Parties) to order changes to this Agreement which are binding on the Parties.

17.3 Decisions of Expert

The Expert shall make his decision only in relation to matters expressly referable to him as Expert by the terms of this Agreement and within the field of his competency and shall have no discretion to come to any decision on any other matter except with the prior agreement of both Parties. The Expert shall give his decisions in writing. In the absence of manifest error, the decision of the Expert shall be final, conclusive and binding upon the Parties.

17.4 Miscellaneous

The Expert may appoint advisers having appropriate qualifications and experience whose services are desirable to assist him in considering the matter referred to the Expert. The costs of the Expert and any advisers shall be borne by BEPET. The Parties shall give the Expert all the information and assistance that he may reasonably require. The Expert shall be requested to use all reasonable endeavours to reach his decision within ten (10) Business Days of the matter being referred to him.

17.5 Performance to Continue During Dispute

Performance of this Agreement shall continue notwithstanding any dispute or difference having been referred to an Expert pursuant to this Clause 17 or being litigated and neither Party shall withhold any undisputed payment or undisputed part of any payment.

- 36 -

18. CONFIDENTIALITY AND ANNOUNCEMENTS

18.1 General Restriction

Subject to the exceptions set out in Clause 18.2, neither Party shall, at any time, whether before or after the Expiry Date, without the consent of the other Party, divulge or suffer or permit its officers, employees, agents or contractors to divulge to any person (other than to any of its or their respective officers or employees or Affiliates who require the same to enable them properly to carry out their duties) any of the contents of this Agreement or any commercially confidential information relating to the negotiations concerning the same or any commercially confidential information which may come to a Party’s knowledge in the course of such negotiations or otherwise concerning the operations, contracts, commercial or financial arrangements or affairs of the other Party.

18.2 Exceptions

The restrictions imposed by Clause 18.1 shall not apply to the disclosure of any information:

(a) which can be shown by the Party seeking to rely on this Clause 18.2(a) now or hereafter to have come into the public domain otherwise than as a result of a breach of an undertaking of confidentiality or to be obtainable with no more than reasonable diligence from sources other than the Parties to this Agreement;

(b) which is required by law;

(c) which is required to be disclosed by the regulations of any recognised exchange upon which the share or loan capital of the Party (or any Affiliate thereof) making the disclosure is or is proposed to be from time to time listed or traded;

(d) to a court, arbitrator, administrative tribunal or Expert in the course of proceedings before it to which the disclosing Party (or any of its Affiliates) is a Party;

(e) in accordance with the provisions of the Industry Documents or pursuant to any licence granted under the Electricity Act to the Party (or any of its Affiliates) concerned;

(f) to any consultants, bankers, financiers, insurers, auditors or advisers to the disclosing Party (or any of its Affiliates) provided that they are under an equivalent obligation of confidence to the disclosing Party (or any of its Affiliates); or

(g) to the extent required pursuant to the Restructuring and/or the Finance Documents.

- 37 -

18.3 Public Announcements

No public announcement or statement regarding the signature, performance or termination of this Agreement shall be issued or made unless before then both the Parties have been furnished with a copy of it and have approved it (such approval not to be unreasonably withheld or delayed), provided always that neither Party nor any Affiliate shall be prohibited from issuing or making any such public announcement or statement if it is necessary to do so in order to comply with any applicable law or the regulations of any recognised stock exchange upon which the share or loan capital of such Party or any Affiliate is from time to time listed or traded or to the extent otherwise required pursuant to the Restructuring.

19. INDUSTRY CHANGE AND ILLEGALITY

19.1 General

In the event that:

(a) the arrangements for the sale, purchase or transmission of electricity which are embodied in any of the Industry Documents are modified or suspended or permanently cease to apply prior to the Expiry Date; or

(b) a material provision of this Agreement becomes invalid, illegal or unenforceable,

(in each case, a “Relevant Event”), with the effect that it becomes impossible to give effect to this Agreement, the provisions of this Clause 19 shall apply.

19.2 Negotiation of New Agreement

(a) Promptly upon a Party becoming aware of the occurrence or potential occurrence of a Relevant Event, each Party shall use its reasonable endeavours to negotiate in good faith and settle within thirty (30) Days an agreement which as closely as possible reflects the financial and commercial intent of the Parties under this Agreement, and which (in the case of a Relevant Event described in Clause 19.1(a)) reflects the impact of the Relevant Event.

(b) The term of the new agreement shall:

(i) commence on the date on which a new agreement is settled in accordance with this Clause 19; and

(ii) terminate on the Expiry Date.

(c) Pending execution of the new agreement the Parties shall make such payments to each other as will ensure that each Party receives the net equivalent of the payments which would have been due to it hereunder in respect of each Month had the Relevant Event not occurred and, if the amount of such payments has not been agreed or determined prior to the date of the Relevant Event, the Parties will make such adjustments between themselves as will ensure that the Parties are in the same overall net financial position as they would have been in had the amount of such payments been agreed or determined prior to the Relevant Date.

- 38 -

19.3 Expert Determination

(a) If the Parties fail to agree any matter requiring agreement between them under this Clause 19, either party may refer such matter to an Expert for resolution in accordance with the provisions of Clause 17.

(b) Without prejudice to the other provisions of this Agreement and for the purposes only of an Expert determination under this Clause 19, the Parties hereby acknowledge that their financial and commercial intent under this Agreement is that:

(i) subject to and to the extent of EPL:

(1) not being in Wilful Default, or grossly negligent in the performance, of its obligations under this Agreement;

(2) operating and maintaining the Station as a Reasonable and Prudent Operator;

(3) operating the Station in accordance with BEPET’s instructions (provided always that BEPET provides sufficient quantities of Approved Fuel for EPL to do so), the Station Technical Parameters, the Industry Documents and the Consents;

(4) (subject to the Revenue Agreements) making the Station available to BEPET for the generation, transmission and sale of electricity;

(5) making available any Additional Benefits to BEPET;

(6) paying or procuring the payment of any income or other receivables payable to EPL under the Revenue Agreements; and

(7) implementing any Cost Saving Measures,

   BEPET shall:

(1) settle all Operating and Maintenance Costs as and when such Operating and Maintenance Costs become due and payable;

(2) pay all EPL’s Corporation Tax as and when such Corporation Tax becomes due and payable;

(3) make payments to EPL in respect of Capital Investment Works; and

(4) make available to EPL Approved Fuel for tolling through the Station; and

- 39 -

(ii) (subject to the Revenue Agreements) BEPET will be entitled to sell, trade or dispose of all electricity generated at the Station and to receive either directly or indirectly from EPL all income and other receivables relating to any such sale, trade or disposal.

20. MISCELLANEOUS PROVISIONS

20.1 Further Assurance

Each Party shall, and shall use its reasonable endeavours to procure that any necessary third party shall, promptly at the request and expense of the other Party, execute such documents and do such acts and things as such other Party may reasonably require for the purpose of giving to such other Party the full benefit of all the provisions of this Agreement.

20.2 Waivers of Rights

No delay by, or omission of, either Party in exercising any right, power, privilege or remedy under this Agreement shall operate to impair such right, power, privilege or remedy or be construed as a waiver thereof. Any single or partial exercise of any such right, power, privilege or remedy shall not preclude any other or further exercise thereof or the exercise of any other right, power, privilege or remedy.

20.3 Notices

(a) Save as otherwise expressly provided in this Agreement, any notice or other communication to be given by one Party to the other Party under, or in connection with the matters contemplated by, this Agreement shall be addressed to the recipient and sent to the address or fax number of such other Party as set out in Schedule 2 or such other address or fax number as the other Party may notify by not less than five (5) Business Days’ notice.

(b) Save as otherwise expressly provided in this Agreement, any notice or other communication to be given by one Party to the other Party under, or in connection with the matters contemplated by, this Agreement shall be in writing and shall be given by letter delivered by hand or sent by first class prepaid post (airmail if overseas) or facsimile, and shall be deemed to have been received:

(i) in the case of delivery by hand, when delivered;

(ii) in the case of first class prepaid post, on the second (2nd) Business Day following the Day of posting or, if sent airmail from overseas, on the fifth (5th) Business Day following the Day of posting;

(iii) in the case of facsimile, on acknowledgement by the addressee’s facsimile receiving equipment where such acknowledgement occurs before 1700 hours on a Business Day; or

(iv) in any other case on the Business Day following the Day of acknowledgement by the Party receiving such notice.

- 40 -

(c) Each notice, acknowledgement, certificate or other document to be given by a Party hereunder shall be in the English language.

20.4 Entire Contract

Except as otherwise expressly agreed, this Agreement and the documents referred to in it supersede all previous agreements and understandings between the Parties with respect to the matters contained in this Agreement and expressly exclude any warranty, condition or other undertaking implied at law or by custom and each of the Parties acknowledges and confirms that it does not enter into this Agreement in reliance on any representation, warranty or other undertaking given prior to signing that is not fully reflected in the terms of this Agreement or the documents referred to in it and each Party waives all rights and remedies which, but for this Clause 20.4, might otherwise be available to it is respect of any such representation, warranty or other undertaking and whether negligently or innocently made, provided always that nothing in this Clause 20.4 shall limit or exclude any liability for fraud.

20.5 Variation

Subject to Clause 17, any variation to this Agreement shall only be binding if reduced to writing and signed by duly authorised representatives of both Parties.

20.6 Governing Law and Jurisdiction

(a) This Agreement and any dispute, controversy, proceedings or claim of whatever nature arising out of, or in any way relating to, this Agreement and its formation (a “Dispute”) shall be governed by and construed in accordance with English law.

(b) The courts of England shall have exclusive jurisdiction to hear and determine any Dispute (including a dispute regarding the existence, validity or termination of this Agreement or the consequences of its nullity).

(c) The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes between them and, accordingly, that they will not argue to the contrary.

(d) The Parties agree that the documents which start any proceedings relating to a Dispute (“Proceedings”) and any other documents required to be served in relation to those Proceedings may be served on the Parties in accordance with Clause 20.3. These documents may, however, be served in any other manner allowed by law.

(e) This Clause 20.6 applies to all Proceedings wherever started.

AS WITNESS the hands of the Parties (or their duly authorised representatives) on the date stated at the beginning of this Agreement.

Signed by	)
for and on behalf of	)

- 41 -

EGGBOROUGH POWER	)
LIMITED	)	ROBERT ARMOUR
in the presence of	)
Signed by	)
for and on behalf of	)
BRITISH ENERGY	)
POWER AND ENERGY	)
TRADING LIMITED	)	ROBERT ARMOUR
in the presence of	)

- 42 -

Schedule 1

INITIAL ANNUAL OPERATING PLAN

1. Station Operating Budget

The Station Operating Budget for the first Operating Year comprises the following (at [•] prices).

Item	Annual Operating	Rolling Estimate
Year to 31 March	2005	2006	2007
Salaries
Consumables Costs (Process & Start-Up)
Ash/Waste Disposal
Business Services & Support Costs
Industry Document Costs (Use of System)
Insurance
Rates
Overhaul
Routine Repairs
Legal Costs
Other Costs
TOTAL

- 43 -

2. Planned Maintenance Allowance (P), Capital Investment Works Allowance (C) and Unplanned Outage Allowance (U) (in Half Hour Periods).

Operating Year Ending 31 March

Unit 1

Unit 2

Unit 3

Unit 4

2005 (estimate)

P

C

U

P

C

U

P

C

U

P

C

U

2006 (estimate)

	Planned Maintenance
Unit	Dates	Days
1
2
3
4
TOTAL
	Capital Investment Works
Unit	Dates	Days
1
2
3
4
TOTAL

- 44 -

3. Target Annual Unit Availability and Target Annual Station Availability

Item	Unit 1	Unit 2	Unit 3	Unit 4
Maximum Generating Capacity
Operating Half Hour Periods
Target Annual Unit Availability

The Target Annual Station Availability shall be [•] MWh.

- 45 -

Schedule 2

DETAILS FOR NOTICES

1.	British Energy Power and Energy Trading Limited
1.1	Notices:
	For operational matters:	For all other matters:
	Barnett Way	3 Redwood Crescent
	Barnwood	Peel Park
	Gloucester	East Kilbride, G74 5PR
	Gloucestershire, GL4 3RS
	Telephone:************************	Telephone: 01355 594 020
	Facsimile:********************	Facsimile: 01355 594 022
	Attention: Director of Power an Energy Trading	Attention: Corporate Affairs Director and Company Secretary
		With a copy to: Director of Power and Energy Trading
2.	Eggborough Power Limited
2.1	Notices:
	For operational matters:	For all other matters:
	Eggborough Power Station	Barnett Way
	Eggborough	Barnwood
	Goole, DN14 0BS	Gloucester
		Gloucestershire, GL4 3RS
	Telephone:*********************	Telephone: 01355 594 020
	Facsimile:*********************	Facsimile: 01355 594 022
	Attention: Station Manager	Attention: Corporate Affairs Director and Company Secretary

^**** indicates material omitted and filed separately with the Commission.

- 46 -

Schedule 3

PROFILE NOTICE

1. Date Issued:

2. Availability (MWh):

Date	Half Hour Period Ending	Unit 1	Unit 2	Unit 3	Unit 4
[PN Date]	2130	[            ]	[            ]	[            ]	[            ]
	2200	[            ]	[            ]	[            ]	[            ]
	2230	[            ]	[            ]	[            ]	[            ]
	2300	[            ]	[            ]	[            ]	[            ]
	2330	[            ]	[            ]	[            ]	[            ]
	2400	[            ]	[            ]	[            ]	[            ]
[PN Date + 1]	0030	[            ]	[            ]	[            ]	[            ]
	0100	[            ]	[            ]	[            ]	[            ]
	2330	[            ]	[            ]	[            ]	[            ]
	2400	[            ]	[            ]	[            ]	[            ]
[PN Date + 2]	0030	[            ]	[            ]	[            ]	[            ]
	0100	[            ]	[            ]	[            ]	[            ]
	2330	[            ]	[            ]	[            ]	[            ]
	2400	[            ]	[            ]	[            ]	[            ]

3. Changes to Seasonal Availability Profile:

4. Special Instructions:

- 47 -

Schedule 4

********

**********************************************************************************************************

**********************************************************************************************************

**********************************************************************************************************

**********************************************************************************************************

*****************************************************************************^****

	**********************	******	******	******	******
1.	**********************************************
	********	***	***	***	***
	*******************************	***	***	***	***
2.	*************************************
	****	****	****	****	****
	***	****	****	****	****
3.	******************************************************** ************
	******	***	***	***	***
	******	**	**	**	**

^**** indicates material omitted and filed separately with the Commission.

- 48 -

4.	************************	***************** ***************** ***************** ***********	***************** ***************** ***************** ***********	***************** ***************** ***************** ***********	***************** ***************** ***************** ***********
5.	************************** ******************** *******************	*********** ***************** **********	*********** ***************** **********	*********** ***************** **********	*********** ***************** **********
6.	**************************	***	***	***	***
7.	**************************	***	***	***	***

^**** indicates material omitted and filed separately with the Commission.

- 49 -

EX-4.30

Exhibit 4.30

LIMITED LIABILITY PARTNERSHIP

CONFORMED COPY

EGGBOROUGH POWER LIMITED

AS SELLER

AND

BARCLAYS BANK PLC

AS BUYER

AND

BRITISH ENERGY POWER AND ENERGY TRADING LIMITED

ASSET OPTION AGREEMENT

CONTENTS

Clause		Page
1.	Interpretation	1
2.	Condition Precedent	17
3.	Grant of Call Option to Buy Station	17
4.	Exercise of Break Option	17
5.	Exercise of The Enforcement Option	18
6.	Revocation of Notice	18
7.	Break Option Price	19
8.	Enforcement Option Price	19
9.	Discharge of Finance Party Liabilities	19
10.	Experts	20
11.	Sales	20
12.	Revenue Calculation	20
13.	Evaluation of Break Option	21
14.	Calculation of Reduction Amount	22
15.	Failure to Transfer	23
16.	Break Option Completion	24
17.	Enforcement Option Completion	25
18.	Post Break Option Completion	26
19.	Approved Fuel Contracts	26
20.	Purchase of Approved Fuel	26
21.	Escrow Account	27
22.	Warranties	27
23.	Liabilities and Apportionments	27
24.	Contracts	29
25.	Employees	30
26.	Pensions	30
27.	Environment	31
28.	Environmental Indemnity	32
29.	Permits	32
30.	Tax	33
31.	Release of Group Collateral	34

32.	Payments	34
33.	Conversion to Euros	35
34.	Value Added Tax	35
35.	Invalidity or Illegality	35
36.	Post-Completion Obligations	36
37.	General	36
38.	Entire Agreement	37
39.	Assignment	38
40.	Buyer’s Offer	38
41.	Seller’s Enquiries	38
42.	Seller’s Acceptance	38
43.	Non-Acceptance of Buyer’s Offer	39
44.	Confidentiality	39
45.	Notices	40
46.	Term	41
47.	Governing Law and Jurisdiction	42
48.	Counterparts	42

SCHEDULE 1	FORM OF ASSET OPTION NOTICE	43
SCHEDULE 2	FORM OF ENFORCEMENT OPTION NOTICE	44
SCHEDULE 3	EXCLUDED ASSETS	46
SCHEDULE 4	WARRANTIES	47
SCHEDULE 5	INSTRUCTION LETTER TO ESCROW AGENT	48
SCHEDULE 6	ENFORCEMENT FEE	50
SCHEDULE 7	FORM OF DISPOSAL NOTICE	51
SCHEDULE 8	CONFIDENTIALITY UNDERTAKING	52

THIS AGREEMENT is made on 30 September 2004

BETWEEN:

(1) EGGBOROUGH POWER LIMITED, a company incorporated in England and Wales (registered no. 03782700), whose registered office is at Barnett Way, Barnwood, Gloucester, Gloucestershire GL4 3RS (the “Seller”);

(2) BARCLAYS BANK PLC, a company incorporated in England and Wales (registered no. 01026167), whose registered office is at 54 Lombard Street, London EC3P 3AH as agent and security trustee for the Finance Parties (the “Buyer”); and

(3) BRITISH ENERGY POWER AND ENERGY TRADING LIMITED (registered number SC200887) whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR (“BEPET”).

THE PARTIES AGREE as follows:

1. INTERPRETATION

1.1 In this Agreement:

“Acceptance Period” means, in respect of any proposed Disposal and subject to Clause 41, the period commencing on the date a Disposal Notice is properly served on the Seller in respect of such proposed Disposal and ending at close of business in London (5 p.m.) on the date falling 10 Business Days thereafter.

“Account Bank” has the same meaning as given to it in the Credit Agreement.

“Act” means the Companies Act 1985 as modified or re-enacted from time to time.

“Actual Approved Fuel” means the amount of Approved Fuel stored at the Station on the Option Completion Date as set out in the Fuel Survey.

“Additional Capital Expenditure” means any capital expenditure incurred by the Seller, or on behalf of the Seller by a Seller’s Group Company, other than pursuant to the Capital Investment Works Schedule (as defined in the New CTA) but with the prior approval of the Agent.

“Additional Capital Expenditure Amount” means:

(a) in respect of the Break Option, the amount or amounts (if any) agreed by the Agent and the Seller as representing the benefit to the Finance Parties as at the Break Option Completion Date of any Additional Capital Expenditure paid for by a Seller’s Group Company; and

(b) in respect of the Enforcement Option, the amount or amounts (if any) determined by the Experts as representing the benefit to the Finance Parties as at the Enforcement Option Completion Date of any Additional Capital Expenditure paid for by a Seller’s Group Company.

**** indicates material omitted and filed separately with the Commission.

1

“Adjusted Break Fee” means the Break Fee less the Reduction Amount (if any).

“Agent” has the same meaning as given to it in the Credit Agreement.

“Agreement” means this agreement, together with the Schedules hereto.

“Amendment and Restatement Agreement” has the same meaning as given to it in the Credit Agreement.

“Ancillary Services” has the same meaning as given to it in the New CTA.

“Approved Fuel” has the same meaning as given to it in the New CTA.

“Approved Fuel Contracts” means any contract for the sale and purchase of fuel between BEPET and any third party, provided that:

(a) such contract has been approved by the Agent in accordance with clause 15.17(c) of the Credit Agreement; and

(b) prior to the Option Completion Date, BEPET has notified the Seller in writing that such contract is to be novated in accordance with Clauses 19.1.

“Approved Fuel Price” means:

(a) in respect of the Break Option, an amount equal to the book value of the Actual Approved Fuel as recorded in the accounting records of BEPET in accordance with generally accepted accounting principles in the United Kingdom; and

(b) in respect of the Enforcement Option, an amount equal to the then applicable market value of the Actual Approved Fuel (taking into account the cost of delivering fuel equivalent to the Actual Approved Fuel to the Station), as agreed between the Buyer and the Seller, or, if they cannot agree, as determined by the Fuel Expert.

“Asset Option Notice” means a written notice in the form set out in Schedule 1 from the Buyer to the Seller exercising the Option pursuant to Clause 4.1.2.

“BEH” means British Energy Holdings plc a company of that name with registered number SC270186 whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR.

“Break Fee” means the aggregate of:

(a) one hundred and four million pounds sterling (£104 million); and

(b) an amount equal to the Scheduled CTA Bond Amount (if any).

“Break Option” has the same meaning as given to it in Clause 3.1.1.

“Break Option Completion” means completion of the Break Option in accordance with Clause 16.

**** indicates material omitted and filed separately with the Commission.

2

“Break Option Completion Date” means 31 March 2010.

“Break Option Price” means the aggregate purchase price of the Business and the Station Assets, being the sum of:

(a) the Additional Capital Expenditure Amount; and

(b) the Adjusted Break Fee.

“Break Option Time” means the Option Time in respect of the Break Option.

“British Energy plc” means the company of that name with registered number SC162273 and whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR.

“Business” means the business of generation, transmission and sale of electricity and the provision of Ancillary Services as carried on by the Seller but excluding all Excluded Assets.

“Business Day” means a day other than a Saturday or Sunday or public holiday in England and Wales or Scotland.

“Cap Amount” means the sum of (i) £267,300,000 plus (ii) the EPL Swap Amount less (iii) the Equity Amount.

“Close Period” means the period starting on (and including) the date of this Agreement until the earlier of (but excluding):

(a) an Option Completion Date; and

(b) 31 March 2010.

“Competitor” means any competitor of a Seller’s Group Company, as notified by the Seller (acting reasonably) to the Buyer within 5 Business Days of receipt of an Option Notice.

“Completion” means Break Option Completion or Enforcement Option Completion (as the case may be).

“Confidential Information” means any information relating to a Seller’s Group Company or any third party which is obtained by the Buyer, its directors, officers, employees, legal advisers, accountants, auditors and/or financial advisers, as a result of the negotiation and entering into of the Restructuring Documents whether such information is obtained before or after the date of this Agreement.

“Confidentiality Undertaking” means a confidentiality undertaking substantially in the form set out in Schedule 8.

“Contracts” means all the contracts, undertakings, arrangements and agreements to which the Seller is a party and which relate to the Business and are unperformed (wholly or partly) at the Option Completion Date including any Approved Fuel Contracts but not including the Excluded Contracts and “Contract” means any one of the Contracts.

**** indicates material omitted and filed separately with the Commission.

3

“Core Contracts” means those Contracts which were entered into in the ordinary course of the business and any other Contracts which the Buyer elects to have transferred to it pursuant to the exercise of the Enforcement Option including the Approved Fuel Contracts but excluding the Excluded Contracts and “Core Contract” means any one of the Core Contracts.

“Covenant Expert” has the same meaning as given to it in Clause 14.6.

“Covenants” has the same meaning as given to it in Clause 14.1.1.

“Credit Agreement” means the credit agreement originally dated 13 July 2000 as amended and restated on 8 September 2000, 24 October 2000, 12 December 2000, 5 February 2001 and on or about the date of this Agreement between, inter alios, the Buyer and the Seller.

“Creditor Restructuring Agreement” means the creditor restructuring agreement dated as of 30 September 2003 between, inter alios, British Energy plc and the Seller.

“CTA Bonds” means the £150 million seven (7)% fixed rate bonds issued by BEH on the Restructuring Date as represented by the CTA Global Bond Certificate.

“CTA Global Bond Certificate” means the certificate issued in respect of the CTA Bonds by BEH to the Seller on or about the Restructuring Date.

“Disposal” means an assignment and/or transfer of all (but not part only) of the Buyer’s rights under this Agreement.

“Disposal Agreement” means, in respect of any proposed Disposal, a document:

(a) complete in all material respects, save the dating thereof;

(b) on substantially the same terms as the Third Party Disposal Agreement relating to such proposed Disposal;

(c) stating the Purchase Price; and

(d) which, subject to the acceptance by the Seller in accordance with Clauses 40 to 43 of this Agreement, will constitute a legally binding agreement for the making by the Buyer and acceptance by a Seller’s Group Company, of such Disposal.

“Disposal Notice” means a notice substantially in the form of Schedule 7.

“Disposal Period” means, in respect of any proposed Disposal, the period commencing on the date the Acceptance Period ends and ending at close of business in London (5 p.m.) one calendar month thereafter.

“Dispute” has the same meaning as given to it in Clause 47.2.

**** indicates material omitted and filed separately with the Commission.

4

“Due Date” has the same meaning as given to it in Clause 21.1.

“Employees” means the employees employed in the Business at the Option Completion Date.

“Employment Regulations” means the Transfer of Undertakings (Protection of Employment) Regulations 1981.

“Encumbrance” means a mortgage, charge, pledge, lien, option, restriction, right of first refusal, right of pre-emption, third-party right or interest, other encumbrance or security interest of any kind, or another type of preferential arrangement (including a title transfer or retention arrangement) having similar effect.

“Enforcement Event” means the exercise by Buyer (acting in its capacity as security trustee for the Finance Parties) of any or all of its rights under a Security Document in accordance with clause 18.2(a)(i) of the Credit Agreement.

“Enforcement Fee” means, in respect of the Enforcement Option:

(a) where the Enforcement Option is being exercised as a consequence of a Payment Default or a Station Default, the sum of £1; or

(b) otherwise, the amount applicable to the month in which the Enforcement Option Notice was delivered, as set out in Schedule 6,

together with, in each case, an amount equal to the Scheduled CTA Bond Amount.

“Enforcement Notice Date” means the date on which the Buyer notifies the Seller that it wishes to exercise the Enforcement Option in accordance with clause 18(a)(ii) of the Credit Agreement.

“Enforcement Option” has the same meaning as given to it in Clause 3.1.2.

“Enforcement Option Cap Amount” means the sum of:

(a) the Cap Amount;

(b) and an amount equal to the interest that would have accrued on the Cap Amount up to (and including) the Enforcement Notice Date had the Cap Amount been outstanding from the Restructuring Date and borne interest at 4.75 per cent. per annum (calculated on the basis of a year of 365 days).

“Enforcement Option Claim Amount” means the Proceeds less the Enforcement Fee.

“Enforcement Option Completion” means completion of the Enforcement Option in accordance with Clause 17.

“Enforcement Option Completion Date” means a date falling after the Restructuring Date but no later than 31 August 2009 specified by the Buyer in the Enforcement Option Notice as being the date on which the Enforcement Option is to be completed.

**** indicates material omitted and filed separately with the Commission.

5

“Enforcement Option Notice” means a written notice in the form set out in Schedule 2 from the Buyer to the Seller exercising the Enforcement Option pursuant to Clause 5.1.2.

“Enforcement Option Price” means the sum of:

(a) the Additional Capital Expenditure Amount (if any);

(b) the Enforcement Fee; and

(c) the Redemption Fee (if any).

“Enforcement Option Time” means the Option Time in respect of the Enforcement Option.

“Environment” means:

(a) land, including surface land, sub-surface strata, sea bed and river bed under water (as defined in paragraph (b)) and natural and manmade structures;

(b) water, including coastal and inland waters, surface waters, ground waters and water in drains, sewers and air;

(c) air, including air inside buildings and in other natural and man-made structures above or below ground; and

(d) any and all living organisms or systems supported by those media, including humans.

“Environmental Agreement” means any agreement, lease, licence, covenant, guarantee or indemnity existing and in force at the Option Completion Date under which the Seller has obligations and/or liabilities in respect of Environmental Matters.

“Environmental Law” means all or any international, European, national or local, civil or criminal law, common law, statutes, statutory instruments, regulations, directives, statutory guidance and regulatory codes of practice, orders, decrees, injunctions or judgments which relate to the Environment or Environmental Matters.

“Environmental Liabilities” means all liabilities resulting from or relating to Environmental Losses.

“Environmental Losses” means any and all costs, expenses, liabilities or damages, fines, penalties or losses incurred by any Indemnified Party after the Option Completion Date and resulting from or relating to:

(a) the presence in, on or under any part of any of the Properties of any Hazardous Substances which have been or are in, on or under any part of the Properties at any time or the migration of any Hazardous Substances from any of the Properties to any other property;

**** indicates material omitted and filed separately with the Commission.

6

(b) breach of Environmental Law, any Environmental Permit or Environmental Agreement by any person in relation to any of the Properties;

(c) acquisition of liability under Environmental Law, any Environmental Permit or Environmental Agreement arising from any activities or operations, acts or omissions or circumstances in relation to the Properties; and/or

(d) Environmental Matters in relation to any of the Properties.

“Environmental Matters” means:

(a) pollution or contamination or the threat of pollution or contamination of the Environment;

(b) the generation, manufacture, processing, handling, storage, distribution, use, treatment, removal, transport, disposal, emission, release, spillage, deposit or discharge of Hazardous Substances to the extent that they are regulated by Environmental Law;

(c) the exposure of any person (including employees) to Hazardous Substances; and/or

(d) the creation of any noise, vibration radiation, common law or statutory nuisance or other material adverse impact on the Environment.

“Environmental Permit” means any licence, authorisation, permission, approval, consent, condition, registration, variation, modification, or application issued, granted or required pursuant to laws regulating environmental protection in relation to any of the Properties.

“EPHL” means Eggborough Power (Holdings) Limited a company with registered number SC201083 and whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR.

“EPL Swap Amount” means an amount equal to the sum of all EPL Swap Crystallised Liabilities calculated as being due from EPL (if any) in respect of the termination of all Swap Agreements on the earlier of (i) 20 October 2004 and (ii) the Restatement Date.

“EPL Swap Crystallised Liability” has the same meaning as given to it in Schedule 3 of the Creditor Restructuring Agreement.

“Equity Amount” means:

(a) an amount equal to the middle market quotation for ordinary shares in the Parent on the Enforcement Notice Date as derived from the Daily Official List of the London Stock Exchange,

**** indicates material omitted and filed separately with the Commission.

7

multiplied by:

(b) the number of ordinary shares issued by the Parent to the Finance Parties on the Restructuring Date.

“Escrow Account” means a separately designated interest-bearing account with the Account Bank in the name of the Escrow Agent.

“Escrow Agent” means the person appointed by the Buyer and the Seller pursuant to the Escrow Letter.

“Escrow Letter” means the instruction letter substantially in the form set out in Schedule 5 (or any other agreed form) from the Buyer and the Seller to the Escrow Agent.

“Euro” means the lawful currency of the member states of the European Union that adopt the single currency in accordance with the Treaty establishing the European Community, as amended by the Treaty on European Union.

“Euro Effective Date” has the same meaning as given to it in Clause 33.1.

“Evaluation” has the same meaning as given to it in Clause 13.1.

“Evaluation Report” has the same meaning as given to it in Clause 14.1.

“Event of Default” has the same meaning as given to it in the Credit Agreement.

“Excluded Assets” means the assets set out in Schedule 3.

“Excluded Contracts” means:

(a) the New CTA;

(b) the Second Intercompany Loan Agreement;

(c) the Unapproved Fuel Contracts;

(d) without prejudice to the Seller’s obligations under Clause 16 of the Credit Agreement, any indebtedness, guarantees, indemnities or other contingent obligations owed by EPHL, any other member of the Group or any employee of the Group to the Seller;

(e) any agreement documenting the secondment of any member of the Group to the Seller;

(f) the Industry Documents and the Gale Common Escrow Agreement, together with any rights and/or claims of the Seller against a Seller’s Group Company (other than the Seller) in respect of any credit support or other collateral provided by such Seller’s Group Company for the obligations of the Seller under such Industry Documents and/or the Gale Common Escrow Agreement;

(g) any Contract entered into between the Seller and another member of the Group unless otherwise agreed between the parties; and

**** indicates material omitted and filed separately with the Commission.

8

(h) any other Contracts agreed by the Buyer and the Seller to be Excluded Contracts (both acting reasonably).

“Existing Credit Agreement” means the credit agreement dated 13 July 2000 as amended and restated on 8 September 2000, 24 October 2000, 12 December 2000 and 5 February 2001 between the Seller (as borrower), Barclays Capital (as arranger) and the Buyer (as agent and security trustee).

“Expert” has the same meaning as given to it in Clause 10.

“Finance Documents” has the same meaning as given to it in the Credit Agreement.

“Finance Parties” or “Finance Party” has the meaning given in the Credit Agreement.

“Finance Party Liabilities” means all present and future sums, liabilities and obligations (actual or contingent) payable, owing, due or incurred by the Obligors to any of the Finance Parties under or in connection with the Finance Documents (other than under Clauses 23 to 30 of this Agreement).

“Financial Expert” means a person:

(a) who is independent and who has confirmed in writing that it will (i) have no conflict in acting as an Expert; and (ii) remain neutral and impartial at all times when acting as an Expert under this Agreement;

(b) who is not a Competitor;

(c) who is not an affiliate of either the Seller or the Buyer; and

(d) being a reputable bank, financial institution or international accounting firm having appropriate expertise in the production of financial models for, and the assessment and valuation of cashflows relating to, power stations of a similar type, and operated in a similar manner, as the Station within the United Kingdom.

“Freeholds” means the freehold properties owned by the Seller on the Option Completion Date and “Freehold” means any one of those properties.

“Frustration Event” means:

(a) an Event of Default pursuant to Clause 17.10(a) and (b) of the Credit Agreement; or

(b) the destruction of all or a material part of the Station Assets (taken as a whole); or

(c) where, in respect of any Asset Option Notice, at any time after 31 August 2009 but prior to the Break Option Completion Date, a breach by the Seller of the Covenants has resulted in a reduction in the value of the Station Assets taken as a whole (as compared to the aggregate value of the Station Assets as at 31 August 2009) in excess of

**** indicates material omitted and filed separately with the Commission.

9

£104,000,000 and such event has been notified by the Buyer to the Seller no later than one calendar month prior to the Break Option Completion Date and confirmed by the Experts.

“Fuel Expert” means a person approved by BEPET and the Buyer in writing who has appropriate expertise in the evaluation of fuel stocks at power stations similar in type to the Station.

“Fuel Survey” means a full volumetric and density survey of the Approved Fuel stored at the Station prepared by the Fuel Expert.

“Gale Common” means the Seller’s ash disposal site at Gale Common, South Yorkshire.

“Gale Common Escrow Agreement” has the same meaning as given to it in the New CTA.

“Gale Common Permit” means the waste management licence or permit obtained under the Pollution Prevention and Control Act 1999 for the operations conducted at Gale Common, as amended from time to time.

“Hazardous Substance” means any substance capable (whether alone or in combination with any other) of causing pollution or contamination, harm or damage to property or to the Environment, including for the avoidance of doubt any waste and any radioactive substance.

“Heavy Fuel Oil Agreement” means the agreement to supply heavy fuel oil dated 27 March 2002 between TotalFinaElf UK Limited as supplier and the Seller as buyer.

“Indemnified Party” means the Seller and each of its affiliates, employees, directors, officers, agents and representatives.

“Indemnity Amount” means the Indemnity Proceeds less:

(a) all amounts outstanding under the Finance Documents (other than this Agreement) on the Long-Stop Date; and

(b)

(i) if the Enforcement Option has been exercised, the sum of the Enforcement Fee and the Redemption Fee that would have been payable had the Enforcement Option been completed in accordance with this Agreement; or

(ii) if the Break Option has been exercised, the Adjusted Break Fee that would have been payable had the Break Option been completed in accordance with this Agreement; and

(c) the Additional Capital Expenditure Amount (if any).

**** indicates material omitted and filed separately with the Commission.

10

“Indemnity Proceeds” means on the Sales Proceeds Date, an amount equal to the sum of:

(a) the aggregate value as at the Sales Proceeds Date of all, or any part of, the Business and/or the Station Assets that the Seller continues to own on the Sales Proceeds Date in breach of this Agreement, as determined by the Experts; and

(b) the aggregate revenue received (less operating costs and capital expenditure paid) by the Seller with respect to the Station Assets during the Sales Period, as determined by the Experts in accordance with Clause 12.

“Independent Engineer” has the same meaning as given to it in Clause 13.1.

“Industry Documents” has the same meaning as given to it in the Credit Agreement.

“Leases” means the leases, tenancies and licences of the Seller on the Option Completion Date and “Lease” means any one of those leases, tenancies or licences (other than any such lease, tenancy or licence that is an Excluded Asset).

“LIBOR” means in relation to any amount under this Agreement on which interest for a given period is to accrue, the rate per annum at which Barclays Bank PLC was offering prime banks in the London interbank market deposits in sterling for such period as of 11.00 am on the date falling 2 Business Days prior to the start of such period.

“Long-Stop Date” has the same meaning as given to it in Clause 15.1.

“Majority Banks” has the same meaning given to such term in the Credit Agreement.

“Material Station Asset” means a Station Asset which is not a Non-Material Station Asset.

“Net Sales Proceeds” means:

(a) the aggregate proceeds received or receivable or deemed receivable (whether for cash or consideration in kind, directly or indirectly) by, or on behalf of, the Buyer (or its nominee) and/or any Finance Party in respect of the sale of all, or any part of, the Business and/or the Station Assets at any time during the Sales Period (provided that in the event that all, or any part of, the Business and/or the Station Assets is sold more than once during the Sales Period, only the first such sale (in each case) shall be taken into account for the purposes of this definition),

less:

(b) all reasonable expenses (but excluding any Taxes (other than any stamp tax payable by the Buyer (or its nominee) in connection with the exercise of the Enforcement Option)) incurred by the Buyer (or its nominee) with the prior written consent of the Seller.

**** indicates material omitted and filed separately with the Commission.

11

“New CTA” means the capacity and tolling agreement dated on or about the date of this Agreement between BEPET and the Seller.

“Non-Material Station Assets” means a Station Asset (other than the CTA Bonds) which is not material to the operation of the Plant (as defined in the Credit Agreement) and whose value, when aggregated together with the value of all other Non-Material Station Assets, is equal to or less than £10,000,000.

“Obligors” has the same meaning as given to it in the Credit Agreement.

“Option” means the Break Option or the Enforcement Option (as the case may be).

“Option Completion Date” means the Break Option Completion Date or the Enforcement Option Completion Date (as the case may be).

“Option Notice” means an Asset Option Notice or an Enforcement Option Notice (as the case may be).

“Option Time” means the time at which notice to exercise an Option pursuant to Clause 4.1.2 or 5.1.2 is deemed given to the Seller by virtue of Clause 45.2.

“Parent” means British Energy Group plc a company with registered number SC270184 whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride G74 5PR.

“Payment Default” has the same meaning as given to it in the Credit Agreement.

“Permitted Encumbrance” means any Encumbrance over the Business and/or the Station Assets:

(a) arising under, or permitted by, the Restructuring Documents and the Documents (as defined under the Credit Agreement);

(b) arising as a result of the act or omission of the Buyer or any Finance Party; or

(c) any liens imposed by law (to the extent not extant as the result of any default or omission of the Seller).

“Proceedings” has the meaning as given to it in Clause 47.4.

“Proceeds” means on the Sales Date, an amount equal to, the sum of:

(a) the aggregate Net Sales Proceeds on the Sales Date;

(b) in the event that the Seller continues to own all, or any part of, the Business and/or the Station Assets on the Sales Date as a result of a breach of this Agreement by the Seller, the aggregate value as at the Sales Date of all, or any such part of, the Business and/or the Station Assets, as determined by the Experts;

**** indicates material omitted and filed separately with the Commission.

12

(c) in the event that the Seller transfers all, or any part of, the Business and/or the Station Assets to the Buyer (or its nominee) pursuant to this Agreement, the aggregate value as at the Sales Date of all, or any such part of, the Business and/or the Station Assets that have not been sold during the Sales Period (but disregarding any sale under this Agreement for these purposes), as determined by the Experts; and

(d) the aggregate revenue received (less operating costs and capital expenditure paid) with respect to the Station Assets during the Sales Period, as determined by the Experts in accordance with Clause 12.

“Property” means the Freeholds and the property the subject of the Leases and includes an individual property and part of an individual property (other than any Property that is an Excluded Asset).

“Purchase Price” means the Third Party Purchase Price multiplied buy one hundred and five per cent. (105%).

“Records” means the Seller’s books and records relating exclusively to the Business and the Station Assets.

“Redemption Fee” means, if the Enforcement Option Claim Amount exceeds the Enforcement Option Cap Amount, the difference between such amounts.

“Reduction Amount” has the same meaning as given to it in Clause 14.1.2.

“Relevant Event” has the same meaning as given to it in Clause 35.1.

“Restatement Date” has the same meaning as given to it in the Amendment and Restatement Agreement.

“Restructuring Date” has the same meaning as given to it in the Creditor Restructuring Agreement.

“Restructuring Documents” has the same meaning as given to it in the Creditor Restructuring Agreement.

“Sales Completion Date” means on or after the Option Completion Date, the date on which the Business and all the Material Station Assets are sold (but disregarding any sale under this Agreement).

“Sales Date” means the earlier of the Sales Completion Date and the Sales Proceeds Date.

“Sales Period” means the period commencing on the Option Completion Date and ending on the Sales Date (both inclusive).

“Sales Proceeds Date” means the date falling (12) calendar months after the Option Completion Date.

**** indicates material omitted and filed separately with the Commission.

13

“Scheduled CTA Bond Amount” means the aggregate of:

(a) all repayments of principal under the Credit Agreement which would have been due on a scheduled basis on or after the Option Completion Date but which have instead been received prior to the Option Completion Date; and

(b) any premium received by the Finance Parties in respect of the payments made in paragraph (a) above.

“Second Intercompany Loan Agreement” means the intercompany loan agreement dated on or about the date of this Agreement between EPHL as lender and the Seller as borrower.

“Security” means the security interests from time to time constituted by or pursuant to the Security Documents.

“Security Documents” has the same meaning as given to it in the Credit Agreement.

“Seller’s Group Company” means the Parent or an undertaking which is, on or at any time after the date of this Agreement, a subsidiary undertaking of the Parent.

“Share Option Agreement” means the share option agreement between EPHL, the Buyer, the Seller and BEPET dated on or about the date of this Agreement under which EPHL grants an option to the Buyer to acquire the Option Shares (as defined therein).

“Share Option Notice” has the same meaning as given to “Option Notice” in the Share Option Agreement.

“Share Subscription Agreement” means the share subscription deed dated on or about the date of this Agreement between inter alios, the Seller and the Buyer.

“Station” means the coal fired power station located at Eggborough, Yorkshire with a capacity of approximately 2000MW.

“Station Assets” means all property and assets owned by the Seller at the Option Completion Date (wherever located) but excluding all Excluded Assets.

“Station Default” has the same meaning as given to it in the Credit Agreement.

“Stock” means the stock of the Business that is owned exclusively by the Seller at the Option Completion Date.

“Swap Agreement” has the same meaning as given to in Schedule 3 of the Creditor Restructuring Agreement.

“Tax” means all taxes and all levies, duties, imports, charges and withholdings in the nature of taxation whenever and wherever imposed, including taxes on gross or net income, profits or gains and taxes on receipts, sales, use, occupation, franchise, value added and personal property together with all fines, penalties, charges and interest relating to any of them.

**** indicates material omitted and filed separately with the Commission.

14

“Technical Expert” means a person:

(a) who is independent and who has confirmed in writing that it will (i) have no conflict in acting as an Expert; and (ii) remain neutral and impartial at all times when acting as an Expert under this Agreement;

(b) who is not a Competitor;

(c) who is not an affiliate of either the Seller or the Buyer; and

(d) having appropriate expertise in the technical assessment and valuation of power stations of a type similar to, and operated in a similar manner as, the Station within the United Kingdom.

“Third Party” means any person other than a Seller’s Group Company.

“Third Party Disposal Agreement” means, in respect of any proposed Disposal, a document:

(a) complete in all respects, save the dating thereof;

(b) setting out the terms required by the Buyer for the making of the Disposal to the relevant Third Party; and

(c) in which the Third Party Purchase Price is stated as a fixed and ascertained amount.

“Third Party Purchase Price” means, in respect of any proposed Disposal, the price (if any) for such Disposal agreed between the Buyer and the relevant Third Party.

“Transferee” means the holder of the Business and the Station Assets immediately after the transfer of the Business and the Station Assets in accordance with Clause 17.2.1.

“Unapproved Fuel Contracts” means any contract for the sale and purchase of fuel between the Seller and any third party that has not been approved by the Agent in accordance with clause 15.17(c) of the Credit Agreement.

“VATA” means, in the United Kingdom, the Value Added Tax Act 1994 and, in a jurisdiction outside the United Kingdom, any equivalent legislation.

“Warranty” means a statement contained in Schedule 4 and “Warranties” means all those statements.

1.2 In this Agreement, a reference to:

1.2.1 a “subsidiary undertaking” is to be construed in accordance with section 258 of the Act;

1.2.2 liability under, pursuant to or arising out of (or any analogous expression) any agreement, contract, deed or other instrument includes a reference to contingent liability under, pursuant to or arising out of (or any analogous expression) that agreement, contract, deed or other instrument;

**** indicates material omitted and filed separately with the Commission.

15

1.2.3 a party being liable to another party, or to liability, includes any liability in equity, contract or tort (including negligence) or under the Misrepresentation Act 1967;

1.2.4 a statutory provision includes a reference to such statutory provision as modified or re-enacted or both from time to time before the date of this Agreement and any subordinate legislation made under the statutory provision (as so modified or re-enacted) before the date of this Agreement;

1.2.5 this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented;

1.2.6 a “person” includes a reference to any individual, firm, company, corporation or other body corporate, government, state or agency of a state or any joint venture, association or partnership, works council or employee representative body (whether or not having separate legal personality) and includes a reference to that person’s legal personal representatives, successors and permitted assigns;

1.2.7 a “party” includes a reference to that party’s successors and permitted assigns;

1.2.8 “£” and “pounds sterling” is to the lawful currency of the United Kingdom;

1.2.9 a “clause”, “paragraph”, “sub-paragraph” or “schedule”, unless the context otherwise requires, is a reference to a clause or paragraph or sub-paragraph of, or schedule to, this Agreement;

1.2.10 any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall, in respect of any jurisdiction other than England, be deemed to include what most nearly approximates in that jurisdiction to the English legal term and any reference to any English statute shall be construed so as to include equivalent or analogous laws of any other jurisdiction;

1.2.11 the terms “include”, “includes” and “including” shall be construed without limitation;

1.2.12 a reference to “disposal” is to be construed so as to include a sale, lease or other disposal;

1.2.13 a time of day is a reference to the time in London; and

1.2.14 a document in the “agreed form” is a reference to a document in a form approved and for the purposes of identification signed by or on behalf of each party.

1.3 The headings in this Agreement do not affect its interpretation.

**** indicates material omitted and filed separately with the Commission.

16

2. CONDITION PRECEDENT

The provisions of this Agreement shall only become effective on the occurrence of the Restatement Date.

3. GRANT OF CALL OPTION TO BUY STATION

3.1 In consideration of £2,500,000, satisfied by the Buyer agreeing to the reduction by that amount of the amount owing by the Seller to the Buyer under the Existing Credit Agreement, the Seller irrevocably grants to the Buyer:

3.1.1 an option to buy, and to require the Seller to sell, the Business and the Station Assets on the Break Option Completion Date (the “Break Option”); and

3.1.2 an option to buy, and to require the Seller to sell, the Business and the Station Assets at any time after the Enforcement Notice Date but prior to 31 August 2009 (the “Enforcement Option”),

in each case, in accordance with the terms and conditions of this Agreement.

3.2 The Business and Station Assets shall be sold with full title guarantee (except as specified in Clauses 3.3 and 3.4) and free from any Encumbrance other than a Permitted Encumbrance.

3.3 The Property shall be sold subject to all third party interests. The Stock shall be sold subject to any title transfer and retention arrangements relating to its purchase.

3.4 The Freeholds shall be sold and the Leases assigned on such conditions as shall be agreed between the Buyer and the Seller before the Completion Date.

4. EXERCISE OF BREAK OPTION

4.1 The Break Option may be exercised by the Buyer only:

4.1.1 in whole and not in part; and

4.1.2 by the delivery by the Buyer to the Seller of an Asset Option Notice at any time after the Restructuring Date but no later than 31 August 2009.

4.2 The Buyer may not deliver an Asset Option Notice to the Seller at the same time as, or at any time after:

4.2.1 the delivery by it of an Enforcement Option Notice or a Share Option Notice; or

4.2.2 the occurrence of an Enforcement Event.

4.3 After the Break Option Time, the Buyer may only revoke the Asset Option Notice in accordance with Clause 6.

4.4 It shall be a condition of the exercise of the Break Option that on the Break Option Completion Date, the Buyer (acting in its capacity as security trustee for the Finance Parties) shall fully and irrevocably discharge, or procure the full and irrevocable

**** indicates material omitted and filed separately with the Commission.

17

discharge of, all the Finance Party Liabilities and fully and irrevocably release, or procure the full and irrevocable release of, the Security (other than the fixed security created over any Non-Material Station Assets which have not been transferred on the Break Option Completion Date (which shall be released in accordance with Clause 36.4)).

5. EXERCISE OF THE ENFORCEMENT OPTION

5.1 The Enforcement Option may be exercised by the Buyer only:

5.1.1 in whole and not in part; and

5.1.2 by the delivery by the Buyer to the Seller of an Enforcement Option Notice at any time after the Enforcement Notice Date but prior to 31 August 2009.

5.2 The Buyer may not deliver an Enforcement Option Notice to the Seller at the same time as, or at any time after:

5.2.1 the delivery by it of an Asset Option Notice or a Share Option Notice; or

5.2.2 the occurrence of an Enforcement Event.

5.3 After the Enforcement Option Time, the Buyer may only revoke the Enforcement Option Notice in the circumstances set out in Clause 6.

5.4 It shall be a condition of the exercise of the Enforcement Option that on the Enforcement Option Completion Date, the Buyer (acting in its capacity as security trustee for the Finance Parties) shall fully and irrevocably discharge, or procure the full and irrevocable discharge of, all the Finance Party Liabilities and fully and irrevocably release, or procure the full and irrevocable release of, the Security (other than the fixed security created over any Non-Material Station Assets which have not been transferred on the Break Option Completion Date (which shall be released in accordance with Clause 36.4)).

5.5 If, at any time after an assignment and/or transfer of all of the Buyer’s rights under this Agreement in accordance with Clause 39, the new owner of such rights is not owed directly all of the Finance Party Liabilities, then, immediately upon the occurrence of such assignment or transfer, the rights of the Buyer under this Clause 5 and to the Enforcement Option shall be cancelled in full and shall not be capable of future use or revival.

6. REVOCATION OF NOTICE

6.1 The Buyer may only revoke an Option Notice:

6.1.1 with the prior written consent of the Seller; or

6.1.2 where a Frustration Event has occurred and is continuing and the Buyer (acting on the instructions of the Majority Banks) has voted to enforce the Security Documents in accordance with clause 18.2(a)(i) of the Credit Agreement.

**** indicates material omitted and filed separately with the Commission.

18

7. BREAK OPTION PRICE

7.1 In consideration for the purchase of the Business and the Station Assets pursuant to the exercise of the Break Option, the Buyer shall:

7.1.1 pay to the Seller the Break Option Price, by paying to the Seller:

(a) on the Break Option Completion Date, the Additional Capital Expenditure Amount; and

(b) the Adjusted Break Fee in accordance with Clause 18; and

7.1.2 take the steps set out in Clause 9.

7.2 The amounts payable under Clause 7.1.1 (and forming part of the consideration as referred to in Clause 9.2) shall, subject to Clause 30.3, be apportioned between the Business and the various Station Assets in such manner as the Seller may reasonably direct by written notice to the Buyer.

8. ENFORCEMENT OPTION PRICE

8.1 In consideration for the purchase of the Business and the Station Assets pursuant to the exercise of the Enforcement Option, the Buyer shall:

8.1.1 pay the Enforcement Option Price, by paying to the Seller:

(a) on the Enforcement Option Completion Date, the Additional Capital Expenditure Amount (if any) and the Enforcement Fee; and

(b) within three (3) Business Days of the earlier of (a) the Sales Completion Date; and (b) the Sales Proceeds Date, the Redemption Fee (if any); and

8.1.2 take the steps set out in Clause 9.

8.2 The amounts payable under Clause 8.1.1 (and forming part of the consideration as referred to in Clause 9.2) shall, subject to Clause 30.3, be apportioned between the Business and the various Station Assets in such manner as the Seller may reasonably direct by written notice to the Buyer.

9. DISCHARGE OF FINANCE PARTY LIABILITIES

9.1 The Buyer shall on and as from the Option Completion Date:

9.1.1 fully and irrevocably discharge, or procure the full and irrevocable discharge of, all the Finance Party Liabilities; and

9.1.2 fully and irrevocably release, or procure the full and irrevocable release of, all the Security (other than the fixed security created over any Non-Material Station Assets which have not been transferred on the Option Completion Date (which shall be released in accordance with Clause 36.4)).

**** indicates material omitted and filed separately with the Commission.

19

9.2 Amounts discharged under this Clause 9 shall form part of the consideration for the purchase of the Business and the Station Assets pursuant to the exercise of the Option and shall be apportioned between the Business and the Station Assets in accordance with Clause 7.2 or 8.2 (as the case may be).

10. EXPERTS

10.1 Promptly after the Option Time, the Buyer and Seller shall, in accordance with Clause 10.3, appoint:

10.1.1 a Financial Expert; and

10.1.2 a Technical Expert,

(together, the “Experts” and each, an “Expert”).

10.2 Each Expert shall act as an expert and not as an arbitrator and the law of arbitration shall not apply.

10.3 If within 15 Business Days of the Option Time, the Buyer and the Seller cannot agree on the identity of an Expert, then the identity of such Expert shall be chosen by:

10.3.1 if such dispute relates to the appointment of the Financial Expert, the President for the time being of the Institute of Chartered Accountants of England and Wales; and

10.3.2 if such dispute relates to the appointment of the Technical Expert, the President for the time being of the UK Institute of Civil Engineers.

10.4 Unless otherwise set out in this Agreement, or if the Buyer and Seller otherwise agree, the fees and expenses of the Experts shall be borne equally by the Buyer and the Seller.

10.5 The Expert shall carry out such determinations as are required under this Agreement.

11. SALES

11.1 If, during the Sales Period, all, or any part of, the Business and/or the Station Assets is sold for cash or other consideration, the Buyer shall, or if it is not the Transferee at such time, shall procure that the Transferee shall, use its reasonable endeavours and all appropriate diligence to sell all, or any such part of, the Business and/or the Station Assets at the best obtainable market price and terms and conditions for such sale.

11.2 The Seller shall at all times have the right to identify potential purchasers to the Buyer.

12. REVENUE CALCULATION

12.1 In the event that:

12.1.1 an Enforcement Option is exercised; and/or

**** indicates material omitted and filed separately with the Commission.

20

12.1.2 the Buyer has a liquidated damages claim in accordance with Clause 15.1.2,

the Buyer and the Seller shall, at the expense of the Seller, instruct the Experts to determine, on the Sales Date, the amount of revenue received (less operating costs and capital expenditure paid) with respect to the Station Assets during the Sales Period (the “Revenue Calculation”). Clause 14.6 shall apply to the determinations to be made under this Clause 12 save that references to “Covenant Expert” shall be construed as references to “Experts” and references to “Evaluation Report” shall be construed as references to the “Revenue Calculation” for the purposes of this Clause 12 only.

13. EVALUATION OF BREAK OPTION

13.1 The Seller will permit:

13.1.1 the Buyer;

13.1.2 any prospective purchaser of the Station Assets who has executed a Confidentiality Undertaking; and/or

13.1.3 an independent engineer complying with the requirements set out in the definition of the Technical Expert and appointed by the Buyer, at the sole cost of the Buyer (an “Independent Engineer”),

upon 5 Business Days prior written notice, to have access during business hours on any Business Day falling not more than nineteen months prior to the Break Option Completion Date to:

13.1.4 the Station Assets (other than Records and financial information); and

13.1.5 all historic Records and information (but excluding information relating to the operating regime of the Station Assets or any Record or information containing forecasts and/or projections),

in order to prepare an evaluation of the Business, the Station Assets and/or the Break Option (an “Evaluation”) and to carry out investigations as to the condition of the Properties to ascertain whether, and if so, the extent to which there are any Hazardous Substances at, in, on or under the Properties, provided that:

13.1.6 the process and scope of such access has been agreed by the Buyer and the Seller acting reasonably following good faith consultation; and

13.1.7 such access does not significantly interfere with the commercial operation of the Station by the Seller.

13.2 If the Buyer wishes to disclose the Evaluation to any third party other than a Finance Party, it shall notify the Seller of the identity of such person. No Finance Party (including the Buyer) shall disclose the Evaluation to any third party without the due execution by such third party of a Confidentiality Undertaking.

**** indicates material omitted and filed separately with the Commission.

21

13.3 Access to the Station Assets and/or the Records by an Independent Engineer shall be conditional upon the entry by such person into all such disclaimers or other undertakings as may reasonably be required by the Seller from time to time.

14. CALCULATION OF REDUCTION AMOUNT

14.1 Upon appointment of the Experts pursuant to Clause 10, the Buyer shall request the Technical Expert to prepare an evaluation as to the condition of the Station (the “Evaluation Report”) so as to assess:

14.1.1 the extent to which the Seller has failed to comply with any of the covenants set out in clauses 15.8, 15.10, 15.13, 15.16, 15.17, 15.18, 15.20, 15.23, 15.27, 15.30 and 15.31 of the Credit Agreement (the “Covenants”) as at the Break Option Completion Date; and

14.1.2 together with the Financial Expert, the extent to which this has caused a material reduction in the value of the Station from the value that the Station would have been worth on the Break Option Completion Date had it been operated at all times in accordance with the Covenants (the “Reduction Amount”). The reference terms to be used by the Technical Expert in preparing the Evaluation Report, the preparation and the agreement or determination of any breach of any Covenant and any consequent adjustment to be made to the Break Fee calculation shall be agreed between the Buyer and the Seller no later than three (3) months prior to the Break Option Completion Date.

14.2 The Buyer shall ensure that the Technical Expert shall submit the Evaluation Report to the Buyer and the Seller no later than the Break Option Completion Date.

14.3 Within thirty (30) Business Days of the date of receipt of the Evaluation Report, the Seller shall notify the Buyer whether or not it agrees with the Evaluation Report.

14.4 If the Seller notifies the Buyer of its agreement with the Evaluation Report within the thirty (30) Business Day period referred to in Clause 14.3 or fails to give any notification within that period, the Evaluation Report shall be final and binding on the Buyer and the Seller and the Break Fee shall be adjusted downwards by an amount equal to the Reduction Amount (if any).

14.5 If the Seller notifies the Buyer within the thirty (30) Business Day period referred to in Clause 14.3 that it disagrees with the Evaluation Report, Clause 14.6 applies.

14.6 If, within ten (10) Business Days starting on the Business Day after receipt of the notification referred to in Clause 14.5, the Seller and the Buyer have not agreed the items in dispute in relation to the Evaluation Report, the Buyer or the Seller may refer the matters in dispute to a partner of at least 10 years qualified experience at an independent firm of engineers agreed by the Buyer and the Seller in writing or, failing agreement on the identity of the firm of engineers within fifteen (15) Business Days starting on the Business Day after receipt of the notification referred to in Clause 14.5, an independent firm of engineers appointed (on the application of either the Buyer or the Seller) by the President for the time being of the Institution of Civil Engineers in England and Wales (the “Covenant Expert”).

**** indicates material omitted and filed separately with the Commission.

22

14.7 The Covenant Expert shall act on the following basis:

14.7.1 as an expert and not as an arbitrator;

14.7.2 the Covenant Expert’s terms of reference shall be to determine the matters in dispute in respect of the Evaluation Report, within ten (10) Business Days of his appointment;

14.7.3 the Covenant Expert may engage a Financial Expert to the extent necessary to assist it with all or any part of a dispute that is financial in nature;

14.7.4 the Buyer and the Seller shall each provide the Covenant Expert with all information which the Covenant Expert reasonably requires and the Covenant Expert shall be entitled (to the extent he considers appropriate) to base his determination on such information and on the accounting and other records of the Seller; and

14.7.5 if the Covenant Expert determines that a material adjustment to the Break Fee is required, the Seller shall pay the reasonable costs of the Technical Expert and the Covenant Expert, otherwise the Buyer and the Seller shall each pay one half of the costs.

14.8 The Evaluation Report adjusted in accordance with (as the case may be):

14.8.1 the agreement, if any, between the Seller and the Buyer pursuant to Clause 14.6; or

14.8.2 the decision of the Covenant Expert in accordance with Clause 14.7,

shall be final and binding on the Buyer and the Seller, save in the event of fraud or manifest error and the Break Fee shall be adjusted downwards by an amount equal to the Reduction Amount (if any).

14.9 The Covenant Expert’s determination shall not be subject to the law of arbitration.

15. FAILURE TO TRANSFER

15.1 In the event that the Seller is obliged to transfer title to the Business and the Station Assets in accordance with Clause 16 or 17 (as the case may be) but has failed to do so by the date falling 5 Business Days, or if the Seller is actively assisting the Buyer with such transfer, 30 Business Days after the Option Completion Date (the “Long-Stop Date”) the Buyer shall, other than in circumstances where such failure is directly attributable to the Buyer and/or a Finance Party:

15.1.1 be entitled to exercise its rights under clauses 18.1 and 18.2(a)(i) of the Credit Agreement in respect of all amounts outstanding under the Finance Documents (other than this Agreement) on the Long-Stop Date; and

**** indicates material omitted and filed separately with the Commission.

23

15.1.2 on the Sales Proceeds Date, have a liquidated damages claim for an amount equal to the Indemnity Amount.

15.2 Notwithstanding the failure to transfer the Business and the Station Assets in accordance with Clause 16 or 17 (as the case may be), the Buyer shall comply with its obligations under the Share Subscription Agreement.

15.3 Receipt by the Buyer of all amounts under this Clause 15, shall extinguish fully and irrevocably the Finance Party Liabilities and the Buyer shall deliver to the Seller evidence (in form and substance satisfactory to the Seller) that:

15.3.1 the Finance Party Liabilities have been fully and irrevocably discharged; and

15.3.2 the Security has been fully and irrevocably released.

16. BREAK OPTION COMPLETION

16.1 Break Option Completion shall take place by 3.00 p.m. on the Break Option Completion Date at the Seller’s registered office, or at another place agreed by the Seller and the Buyer.

16.2 At Break Option Completion, the Seller and the Buyer shall sign the Escrow Letter in the agreed form and the Buyer shall deliver the Escrow Letter to the Escrow Agent as soon as practicable at Break Option Completion.

16.3 At Break Option Completion:

16.3.1 the Seller shall, subject to Clause 36.4:

(a) complete the sale of the Freeholds, and complete the assignment of the Leases, in accordance with Clause 3.4;

(b) give the Buyer (or its nominee) possession of those Station Assets which are transferable by delivery;

(c) subject to Clause 24.2, deliver to the Buyer (or its nominee) an executed assignment of, or otherwise vest in the Buyer, those Station Assets which are not transferable by delivery; and

(d) deliver to the Buyer (or its nominee) the Records; and

16.3.2 the Buyer shall:

(a) pay the Additional Capital Expenditure Amount due (if any) in full to the Seller in accordance with Clause 7.1.1(a);

(b) deliver the Break Fee to the Escrow Agent in full and ensure that this amount is immediately deposited into the Escrow Account;

(c) deliver to the Seller written evidence (in form and substance satisfactory to the Seller) that:

(i) the Finance Party Liabilities have been fully and irrevocably discharged; and

**** indicates material omitted and filed separately with the Commission.

24

(ii) the Security has been fully and irrevocably released; and

(d) comply with its obligations under the Share Subscription Agreement.

16.4 The Buyer and the Seller agree that money in the Escrow Account shall only be used in accordance with the provisions set out in Clause 21 and in the Escrow Letter. The Buyer and the Seller shall each ensure that all rights to the Escrow Account remain free from any Encumbrance, set-off or counterclaim except as referred to in Clause 21.

17. ENFORCEMENT OPTION COMPLETION

17.1 Enforcement Option Completion shall take place by 3.00 p.m. on the Enforcement Option Completion Date at the place determined by the Buyer.

17.2 At Enforcement Option Completion:

17.2.1 the Seller shall subject to Clause 36.4:

(a) complete the sale of the Freeholds, and complete the assignment of the Leases, in accordance with Clause 3.4;

(b) give the Buyer (or its nominee) possession of those Station Assets which are transferable by delivery;

(c) subject to Clause 24.2, deliver to the Buyer (or its nominee) an executed assignment of, or otherwise vest in the Buyer, those Station Assets which are not transferable by delivery; and

(d) deliver to the Buyer (or its nominee) the Records; and

17.2.2 the Buyer shall:

(a) pay the Additional Capital Expenditure Amount due (if any) and the Enforcement Fee in full to the Seller in accordance with Clause 8.1.1(a); and

(b) deliver to the Seller written evidence (in form and substance satisfactory to the Seller) that:

(i) the Finance Party Liabilities have been fully and irrevocably discharged; and

(ii) the Security has been fully and irrevocably released; and

(c) comply with its obligations under the Share Subscription Agreement.

**** indicates material omitted and filed separately with the Commission.

25

18. POST BREAK OPTION COMPLETION

18.1 Promptly upon the determination of the Adjusted Break Fee in accordance with this Agreement, all amounts standing to the credit of the Escrow Account shall be disbursed as follows:

18.1.1 the Adjusted Break Fee shall be paid to the Seller, together with the interest that has accrued on the Adjusted Break Fee in the period from the Break Option Completion Date to the date of payment; and

18.1.2 the balance (if any) on the Escrow Account shall be paid to the Buyer.

19. APPROVED FUEL CONTRACTS

19.1 Immediately prior to the Option Completion Date, BEPET’s rights and obligations under any Approved Fuel Contracts shall be novated to the Seller so that:

19.1.1 the Seller shall be:

(a) responsible for performing all the rights and obligations under or arising in respect of such Approved Fuel Contracts;

(b) responsible for all liabilities, claims and demands howsoever and whenever arising under such Approved Fuel Contracts; and

(c) be bound by the terms of such Approved Fuel Contracts in every way as if it had at all times been a party to such Approved Fuel Contracts in place of BEPET,

in each case, on and following the novation; and

19.1.2 the Seller shall release and discharge BEPET from all further performance under such Approved Fuel Contracts and from all liabilities, claims and demands howsoever and whenever arising under such Approved Fuel Contracts.

20. PURCHASE OF APPROVED FUEL

20.1 On the Option Completion Date, the Fuel Expert shall carry out the Fuel Survey. BEPET shall pay the reasonable costs incurred by the Fuel Expert in carrying out the Fuel Survey.

20.2 No later than thirty (30) days after the Option Completion Date:

20.2.1 BEPET shall sell and the Buyer shall buy all the Actual Approved Fuel (including any Actual Approved Fuel that has subsequently been burnt at the Station post the Option Completion Date); and

20.2.2 the Buyer shall pay the Approved Fuel Price to BEPET or as BEPET directs in writing by transfer of funds for same day value to such account as shall have been notified to the Buyer by BEPET at least (3) Business Days before the Option Completion Date.

**** indicates material omitted and filed separately with the Commission.

26

20.3 In the absence of manifest error, the determinations of the Fuel Expert made pursuant to this Clause 20 shall be final, conclusive and binding on BEPET and the Buyer.

21. ESCROW ACCOUNT

21.1 If the Seller or the Buyer is entitled to money from the Escrow Account, the Seller and the Buyer shall promptly (and in any event within seven days of the date on which the entitlement arises) (the “Due Date”) jointly instruct the Escrow Agent in writing to release the money to the Seller and/or the Buyer (as the case may be) together with an amount (less any tax and other amount the Escrow Agent is legally required to deduct from that amount) equal to the interest actually accrued on such sum (accrued daily and compounded monthly) calculated for the period from the Option Completion Date to the date of payment (both dates inclusive).

21.2 Interest accruing from time to time on the balance of money standing to the credit of the Escrow Account shall be added to the money standing to the credit of the Escrow Account and shall form part of it for the purposes of this Clause 21.

21.3 The Seller and the Buyer shall each pay one half of the Escrow Agent’s costs in respect of any work done pursuant to this Clause 21.

21.4 The Buyer and the Seller acknowledge that the Escrow Agent may withdraw from the Escrow Account an amount of tax on the interest earned in respect of money held in the Escrow Account for which it is or may become liable.

21.5 If either the Buyer or the Seller fails to give an instruction pursuant to Clause 21.1 in accordance with the provisions of this Agreement, the party in default shall pay interest on the sum concerned from the Due Date until the date on which its obligation to pay the money is discharged at the rate of LIBOR plus one (1) per cent. per annum.

22. WARRANTIES

22.1 The Seller warrants to the Buyer that each Warranty is true, accurate and not misleading at the date of this Agreement.

22.2 The Seller acknowledges that the Buyer is entering into this Agreement in reliance on each Warranty, which has also been given as a representation and with the intention of inducing the Buyer to enter into this Agreement.

23. LIABILITIES AND APPORTIONMENTS

23.1 Subject to Clauses 24 to 30 (both inclusive) and 23.1.5, the Seller:

23.1.1 remains responsible for all liabilities incurred by it before the Option Completion Date and for all outgoings and expenses owed in connection with the Business and/or the Station Assets before the Option Completion Date whether or not invoiced and whether or not due and payable at that time;

**** indicates material omitted and filed separately with the Commission.

27

23.1.2 remains responsible for all claims by any person outstanding against it as at the Option Completion Date or arising by reason of any act or omission by it before the Option Completion Date;

23.1.3 shall promptly pay those liabilities referred to in Clause 23.1.1 and promptly settle those claims referred to in Clause 23.1.2; and

23.1.4 shall indemnify, and keep indemnified, the Buyer on demand against each loss, liability and/or cost which the Buyer incurs as a result of the Seller’s failure to comply with its obligations under Clauses 23.1.1, 23.1.2 or 23.1.3 and against any other liability arising out of or in connection with the ownership or operation of the Business and/or the Station Assets before the Option Completion Date, including, each loss, liability and/or cost incurred as a result of defending or settling a claim alleging such a liability but excluding:

(a) any liability of the Buyer arising under the express terms of this Agreement; and

(b) any such loss, liability and/or cost which arises as a result of the negligence, wilful default or fraud of any Finance Party (including the Buyer) or its affiliates.

23.1.5 This Clause 23.1 shall not apply to any liability of the Seller in respect of which an adjustment (for whatsoever amount) to the Break Fee shall be made in accordance with Clause 14.

23.2 Subject to Clauses 24 to 30 (both inclusive), the Buyer:

23.2.1 is responsible for all liabilities incurred by it in connection with the Business and/or the Station Assets from the Option Completion Date and for all outgoings and expenses owed in connection with the Business and/or the Station Assets after the Option Completion Date;

23.2.2 shall be responsible for all claims by any person arising by reason of any act or omission by it from the Option Completion Date;

23.2.3 shall promptly pay those liabilities referred to in Clause 23.2.1 and promptly settle those claims referred to in Clause 23.2.2; and

23.2.4 shall indemnify, and keep indemnified, the Seller on demand against each loss, liability and/or cost which the Seller incurs as a result of the Buyer’s failure to comply with its obligations under Clauses 23.2.1, 23.2.2 or 23.2.3 and against any other liability arising out of or in connection with the ownership or operation of the Business and/or the Station Assets after the Option Completion Date, including each loss, liability and/or cost incurred as a result of defending or settling a claim alleging such a liability but excluding any liability of the Seller arising under the express terms of this Agreement. This indemnity shall survive termination of this Agreement.

**** indicates material omitted and filed separately with the Commission.

28

24. CONTRACTS

24.1 Subject to Clause 24.2.3, after the Option Completion Date, the Buyer shall:

24.1.1 perform all the Seller’s obligations to be performed from the Option Completion Date under each Contract (or, in the case of the Enforcement Option only, each Core Contract) (other than payment of the liabilities and settlement of the claims referred to in Clause 23.1) in accordance with the terms of each Contract (or, in the case of the Enforcement Option only, each Core Contract); and

24.1.2 indemnify, and keep indemnified, the Seller on demand against each loss, liability and/or cost which the Seller incurs as a result of the Buyer’s performance, or non-performance, of the Seller’s obligations under each Contract (or, in the case of the Enforcement Option only, each Core Contract) (as referred to in Clause 24.1.1) to the extent that the loss, liability and/or cost is attributable to the Buyer’s act or omission from the Option Completion Date (including each loss, liability and/or cost incurred as a result of defending or settling a claim alleging such liability). This indemnity shall survive termination of this Agreement.

24.2 If a Contract (or, in the case of the Enforcement Option only, each Core Contract) cannot be transferred to the Buyer except by an assignment made with a specified person’s consent or by a novation agreement:

24.2.1 this Agreement does not constitute an assignment or an attempted assignment of that Contract (or, in the case of the Enforcement Option only, each Core Contract) if the assignment or attempted assignment would constitute a breach of that Contract (or, in the case of the Enforcement Option only, each Core Contract);

24.2.2 after the Option Time, the Buyer and the Seller shall each make all reasonable efforts to obtain the person’s consent to the assignment, or achieve the novation, of that Contract (or, in the case of the Enforcement Option only, each Core Contract); and

24.2.3 until the consent is obtained or novation is achieved, the Seller shall at the Buyer’s sole cost and risk do each act and thing reasonably requested of it by the Buyer to enable performance of that Contract (or, in the case of the Enforcement Option only, each Core Contract) and to provide for the Buyer the benefits of that Contract (or, in the case of the Enforcement Option only, each Core Contract) (including enforcement of a right of the Seller against another party to that Contract (or, in the case of the Enforcement Option only, each Core Contract) arising out of its termination by the other party or otherwise).

**** indicates material omitted and filed separately with the Commission.

29

25. EMPLOYEES

25.1 The Buyer and the Seller declare that they each consider the sale and purchase of the Business and the Station Assets under this Agreement shall constitute the transfer of an undertaking for the purposes of the Employment Regulations and accordingly the contracts of employment of the Employees will have effect from the Option Completion Date as if originally made between the Employees and the Buyer.

25.2 From the Option Completion Date, the Buyer shall:

25.2.1 assume all losses, liabilities and/or costs as a result of anything done or omitted to be done by the Buyer relating to the contracts of employment of the Employees or the transfer thereof (whether such losses, liabilities and/or costs arise before or after the Option Completion Date); and

25.2.2 indemnify, and keep indemnified, the Seller on demand against each loss, liability and/or cost which the Seller incurs as a result of the Buyer’s failure to comply with its obligations under Clause 25.2.1, including, each loss, liability and/or cost incurred as a result of defending or settling a claim alleging such a liability. This indemnity shall survive termination of this Agreement.

26. PENSIONS

26.1 The Buyer shall enter into all such documents and do all such other things as may be necessary in order to procure (subject to the consent of any third party that may be required, including the Inland Revenue) that with effect from the Option Completion Date:

26.1.1 the Buyer shall be appointed as the Principal Employer of the British Energy Combined Group (the “BECG”) of the Electricity Supply Pension Scheme (the “ESPS”), in substitution for the Seller’s Group Company that is the Principal Employer of the BECG immediately before the Option Completion Date (the “Existing Principal Employer”);

26.1.2 those Employees who are in contributing service under the BECG immediately before the Option Completion Date shall continue in contributing service under the BECG on the same terms from the Option Completion Date (although this shall not be construed so as to prevent the Buyer from subsequently providing benefits applicable under the BECG for the Employees under a different arrangement);

26.1.3 the Buyer shall be deemed (for the purposes of the rules of the ESPS applicable to the BECG and all related purposes) to have become the employer or last employer of all those members and former members associated with the BECG who are not Employees but whose employer immediately prior to ceasing active membership of the BECG for the last time was the Seller; and

26.1.4 the Existing Principal Employer (and each other Seller’s Group Company that has participated in the BECG before the Option Completion Date) shall be discharged from all functions, duties, obligations and liabilities whatsoever in

**** indicates material omitted and filed separately with the Commission.

30

respect of the Employees and those members who, immediately prior to ceasing active membership of the BECG for the last time were employed by the Seller, under and in relation to the BECG and the Buyer shall undertake full responsibility for all such functions, duties, obligations and liabilities, whether arising before or after the Option Completion Date. The Existing Principal Employer shall remain liable for all other functions, duties, obligations and liabilities arising out of or in connection with any other member of the BECG.

26.2 The Seller shall lend all reasonable assistance as the Buyer may request in relation to the Buyer’s obligations under Clause 26.1. The Buyer and the Seller shall co-operate with a view to ensuring an orderly transfer of the BECG to the Buyer as provided for in Clause 26.1, including in relation to:

26.2.1 changing the Group Trustees and Group Administrator of the BECG; and

26.2.2 making appropriate alternative arrangements for the administration of the BECG, if any Seller’s Group Company is a party to those arrangements immediately before the Option Completion Date.

26.3 From the Option Completion Date, the Buyer shall indemnify, and keep indemnified, the Seller on demand against each loss, liability and/or cost which the Seller incurs, or which is asserted against or demanded from the Seller, under or in relation to the BECG as a result of the Buyer’s failure to comply with its obligations under Clause 26.1 and each loss, liability and/or cost incurred as a result of defending or settling a claim alleging such a liability. This indemnity shall survive termination of this Agreement.

26.4 From the Option Completion Date, the Seller shall indemnify, and keep indemnified, the Buyer on demand against each loss, liability and/or cost which the Buyer incurs, or which is asserted against or demanded from the Buyer, under or in relation to the BECG in respect of those members of the BECG whose employer immediately prior to their last ceasing active membership of the BECG before the Option Completion Date was not the Seller, and each loss, liability and/or cost incurred as a result of defending or settling a claim alleging such a liability. This indemnity shall survive termination of this Agreement.

27. ENVIRONMENT

27.1 Prior to the Option Completion Date, the Seller shall give the Buyer the opportunity described in Clause 27.2.1 and the information described in Clause 27.2.2.

27.2 The instrument affecting or facilitating the transfer of the Properties shall contain the following acknowledgements:

27.2.1 prior to the Option Completion Date, the Seller gave the Buyer sufficient opportunity to carry out its investigations of the condition of the Properties to ascertain whether, and if so, the extent to which there are any Hazardous Substances at, in, on or under the Properties;

**** indicates material omitted and filed separately with the Commission.

31

27.2.2 prior to the Option Completion Date, the Seller provided the Buyer with information that is sufficient for the Buyer to be aware of the presence of Hazardous Substances at, in, on or under the Properties;

27.2.3 from the Option Completion Date, the Buyer shall be responsible for all and any Environmental Liabilities associated with the Properties (whether such Environmental Liabilities arise before or after the Option Completion Date);

27.2.4 both the Seller and the Buyer are large commercial organisations;

27.2.5 the Property is sold in its existing state and condition at the Option Completion Date (including the presence of any Hazardous Substances) and no warranty is given as to such state and condition or its suitability for any purpose and function;

27.2.6 The agreements and acknowledgements in Clauses 27.2.1 to 27.2.5 (both inclusive) above are made in accordance with statutory guidance under Part IIA of the Environmental Protection Act 1990 to exclude the Seller as an appropriate person to bear responsibility for environmental liability in relation to or derived from the Properties; and

27.2.7 The Seller and the Buyer acknowledge and agree that they are both independent entities and have each had the opportunity to take legal and valuation advice in relation to the transaction hereby effected.

28. ENVIRONMENTAL INDEMNITY

28.1 On and after the Option Completion Date, the Buyer shall indemnify the Indemnified Parties on demand in relation to all Environmental Losses (except to the extent that these arise as a consequence of any breach of the Credit Agreement and have not been compensated for by an adjustment to the Break Fee). This indemnity shall survive termination of this Agreement.

29. PERMITS

29.1 After the Option Time, the Buyer and the Seller shall use reasonable endeavours (each at their own cost and expense) to have the Environmental Permits transferred or novated to the Buyer (or its nominee) on the Option Completion Date, provided that the transfer of such Environmental Permits shall not take place until the authorisation issued under Part 1 of the Environmental Protection Act 1990 or the authorisation issued under the Prevention, Pollution and Control Act 1999 in respect of the Station has been transferred to the Buyer (or its nominee).

29.2 After the Option Time, the Seller and the Buyer shall use best endeavours to procure that the Buyer completes the transfer of the Gale Common Permit to the Buyer (or its nominee) on the Option Completion Date if reasonably possible but if not as soon as reasonably practicable thereafter.

**** indicates material omitted and filed separately with the Commission.

32

29.3 If the transfer of the Gale Common Permit to the Buyer (or its nominee) does not take place on the Option Completion Date, until the transfer is achieved the Seller shall at the Buyer’s sole cost and risk delegate so far as it may lawfully do, its duties in relation to Gale Common to the Buyer (or its nominee) and the Buyer shall be responsible for all liabilities, costs and/or expenses in employing the site manager and other personnel during this period.

29.4 The Buyer shall indemnify the Seller and hold the Seller harmless for all liabilities, costs and/or expenses arising in respect of Gale Common or the Gale Common Permit or an Environmental Permits from the Option Completion Date including any costs, liabilities and/or expenses related to carrying out any of its remaining responsibilities and duties at Gale Common. This indemnity shall survive termination of this Agreement.

30. TAX

30.1 The Seller hereby agrees that upon being given evidence reasonably satisfactorily to it that the Buyer has, solely as a result of the grant (but not the actual exercise or completion) of the Option, paid stamp duty in respect of this Agreement or has accounted for stamp duty land tax in respect of the grant of the Option, the Seller will within 10 Business Days reimburse to the Buyer the amount of such stamp duty or (as the case may be) stamp duty land tax. If the Seller so requests, the Buyer will use all reasonable endeavours to assist the Seller to minimise the stamp duty or stamp duty land tax due on the grant of the Option. For the avoidance of doubt, all stamp duty or stamp duty land tax due in respect of the exercise of the Option or Completion shall be paid by the Buyer and will not be reimbursed by the Seller. If the Buyer so requests, the Seller will use all reasonable endeavours to assist the Buyer to minimise the stamp duty or stamp duty land tax due on exercise of the Option.

30.2 Upon exercise of an Option, the Buyer shall, subject to Clause 30.3, at the written request of the Seller in a timely manner join in an election under section 198 Capital Allowances Act 2001 on such terms as the Seller may reasonably require.

30.3 The Seller shall allocate the consideration for the Business and the Station Assets as follows: (a) to inventory and current assets if any - the Seller’s book value; (b) to assets in respect of which expenditure is eligible for capital allowances under Part 2 Capital Allowances Act 2001 - not less than £50,000,000 but provided it is not less than £50,000,000, such amount as shall ensure the Seller neither suffers a balancing charge nor obtains a balancing allowance in respect of the disposal; and (c) to other assets - such amount as the Seller proposes and that ensures the Seller neither makes taxable revenue profit nor incurs an allowable revenue loss in respect of the disposal. The Seller shall ensure any election as referred to in Clause 30.2 or apportionment under Clause 7.2 or 8.2 shall be consistent with this Clause 30.3. The Seller will deliver a draft allocation of consideration for the Business and Station Assets to the Buyer and give the Buyer a reasonable opportunity to review it before delivering a final allocation. The Buyer may make representations to the Seller as to the draft allocation of the consideration and the Seller shall adjust the allocation as required by the Buyer before producing a final allocation provided that such

**** indicates material omitted and filed separately with the Commission.

33

revised allocation can properly be made and does not give rise to any Tax liability for the Seller greater than that (if any) in the Seller’s original allocation.

31. RELEASE OF GROUP COLLATERAL

31.1 From the Option Completion Date, the Buyer shall be responsible for the giving of any cash collateral, financial or other guarantee, indemnity, undertaking or bond (as the case may be) as required under or in respect of:

31.1.1 the Industry Documents;

31.1.2 the Gale Common Permit; and

31.1.3 the Heavy Fuel Oil Agreement

and, the Buyer shall procure that (to the extent within its power to so do) any such cash collateral, financial or other guarantee, indemnity, undertaking or bond (as the case may be) that has been given by a Seller’s Group Company prior to the Option Completion Date shall be unconditionally and irrevocably released if reasonably possible on, or if not, as soon as reasonably possible thereafter, the Option Completion Date.

32. PAYMENTS

32.1 All payments made by the Buyer or the Seller under this Agreement shall be made gross, free of any right of counterclaim or set-off and without deduction or withholding of any kind other than any deduction or withholding required by law.

32.2 If the Buyer or the Seller makes a deduction or withholding required by law from a payment (other than a payment of interest) under this Agreement, the sum due from that party shall be increased to the extent necessary to ensure that, after the making of any deduction or withholding, the party to whom such amount is payable (including an Indemnified Party or Indemnified Parties) receives a sum equal to the sum it would have received had no deduction or withholding been made.

32.3 If a payment under this Agreement will be or has been subject to Tax, the Buyer or the Seller (as the case may be) making such payment shall pay to the party to whom such amount is payable (including an Indemnified Party or Indemnified Parties) the amount (after taking into account Tax payable in respect of the amount) that will ensure that the party to whom such amount is payable (including an Indemnified Party or Indemnified Parties) receives and retains a net sum equal to the sum it would have received had the payment not been subject to Tax.

32.4 Nothing in this Clause 32 shall effect any obligation of the Escrow Agent which shall be governed instead by Clause 32.

**** indicates material omitted and filed separately with the Commission.

34

33. CONVERSION TO EUROS

33.1 With effect from the date (if any) that the United Kingdom adopts the Euro as its lawful currency in substitution for pounds sterling (the “Euro Effective Date”):

33.1.1 payments falling due under this Agreement on or after the Euro Effective Date shall be made by the payer to the recipient in Euros;

33.1.2 no payments falling due after the Euro Effective Date which would have been payable in pounds sterling under this Agreement but for the adoption of the Euro by the United Kingdom as its lawful currency shall be made in pounds sterling or national currency units; and

33.1.3 on the Euro Effective Date, all amounts stated in pounds sterling shall be converted into Euros at the fixed conversion rate provided for by the Laws of England and Wales and, on and after the Euro Effective Date, all amounts required to be calculated in pounds sterling shall be calculated in Euros.

34. VALUE ADDED TAX

34.1 Each party shall make all reasonable efforts to ensure that the transfer of the Business and the Station Assets under this Agreement is treated under the Value Added Tax (Special Provisions) Order 1995 as neither a supply of goods nor a supply of services.

34.2 If notwithstanding Clause 34.1 value added tax is chargeable on the transfer of the Business or any of the Station Assets under this Agreement, the Buyer shall (against delivery of tax invoices in respect of the Business or any of the Station Assets respectively) pay the amount equal to any penalty or interest incurred by the Seller for the late payment of value added tax resulting from any failure or delay by the Buyer in making payment as required by this Clause 34.2.

34.3 At Completion the Seller shall give the Buyer all records referred to in section 49 of the VATA. After Completion the Seller shall not make a request to H.M. Customs & Excise for the records to be taken out of the Buyer’s custody. During the period for which the records are required to be preserved under paragraph 6 of Schedule 11 to the VATA (duty to keep records), the Buyer shall give the Seller reasonable access to the records for the purpose of inspecting, and making copies of, them.

35. INVALIDITY OR ILLEGALITY

35.1 If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction (a “Relevant Event”), that shall not affect or impair:

35.1.1 the legality, validity or enforceability in that jurisdiction of any other provision of this Agreement; or

35.1.2 the legality, validity or enforceability under the law of any other jurisdiction of that or another provision of this Agreement.

**** indicates material omitted and filed separately with the Commission.

35

35.2 Immediately upon a party becoming aware of the occurrence or potential occurrence of a Relevant Event, each party shall use its reasonable endeavours to negotiate in good faith and settle within thirty (30) Business Days an agreement or provision which as closely as possible reflects the financial and commercial intent of the parties under this Agreement or under the relevant provision which is the subject of the Relevant Event.

36. POST-COMPLETION OBLIGATIONS

36.1 For three (3) years starting on the Option Completion Date, the Buyer shall, or if is not the Transferee, shall procure that the Transferee shall, allow the Seller, its employees and agents and any other person authorised by the Seller:

36.1.1 to inspect the Records; and

36.1.2 at the Seller’s cost, to take copies of any of the Records delivered at Completion.

36.2 The Buyer and the Seller shall immediately give to each other all payments, notices, correspondence, information or enquiries in relation to the Business and/or the Station Assets which it receives after the Option Completion Date and which belong to the other.

36.3 If title to any of the Non-Material Station Assets is not effectively vested in the Buyer at the Option Completion Date then the Seller shall, from such date, hold such Non-Material Station Assets on trust for the Buyer until title is effectively vested in the Buyer.

36.4 The Seller shall use its reasonable endeavours to vest title in all Non-Material Station Assets in the Buyer as soon as reasonably practicable after the Option Completion Date. Simultaneously with the vesting of title in any Non-Material Station Assets or if earlier, the date on which the Finance Parties have received all sums due and payable to them under the Finance Documents, the Buyer shall procure that the security over such Non-Material Station Asset is fully and irrevocably released. The Buyer will do all such things as are necessary or that the Seller reasonably requests to procure such release.

37. GENERAL

37.1 A variation of this Agreement is valid only if it is in writing and signed by or on behalf of each party.

37.2 The failure to exercise or delay in exercising a right or remedy provided by this Agreement or by law does not impair or constitute a waiver of the right or remedy or an impairment of or a waiver of other rights or remedies. No single or partial exercise of a right or remedy provided by this Agreement or by law prevents further exercise of the right or remedy or the exercise of another right or remedy.

**** indicates material omitted and filed separately with the Commission.

36

37.3 Each date, time or period referred to in this Agreement is of the essence. If the parties agree in writing to vary a date, time or period, the varied date, time or period is of the essence.

37.4 Except to the extent that they have been performed and except where this Agreement provides otherwise the obligations contained in this Agreement remain in force after the Option Completion Date.

37.5 A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement but this does not affect any right or remedy of a third party which exists or is available apart from that Act.

38. ENTIRE AGREEMENT

38.1 This Agreement and each document referred to in it constitute the entire agreement and supersede any previous agreement between the parties relating to the subject matter of this Agreement.

38.2 The Buyer acknowledges that it has not relied on or been induced to enter into this agreement by any representation, warranty or undertaking (whether contractual or otherwise) given by or on behalf of the Seller, its directors, officers or employees other than those expressly given in this Agreement.

38.3 The Seller is not liable to the Buyer (in equity, contract or tort (including negligence), under the Misrepresentation Act 1967 or in any other way) for a representation, warranty or undertaking that is not set out in this Agreement.

38.4 The Seller acknowledges and represent that it has not relied on or been induced to enter into this agreement by any representation, warranty or undertaking (whether contractual or otherwise) given by or on behalf of the Buyer or any adviser other than those expressly given in this Agreement.

38.5 The Buyer is not liable to the Seller (in equity, contract or tort (including negligence), under the Misrepresentation Act 1967 or in any other way) for a representation, warranty or undertaking that is not set out in this Agreement.

38.6 The Buyer has not entered into this agreement in reliance on any representation, statement, assurance, covenant, undertaking, indemnity, guarantee or commitment of any kind whatsoever and the Buyer will not have any remedy against the Seller in respect of any representation, statement, assurance, covenant, undertaking indemnity, guarantee, or commitment of any kind whatsoever made on or prior to the date of this Agreement.

38.7 Nothing in this Clause 38 shall have the effect of limiting or restricting any liability arising as a result of any fraud, wilful misconduct or wilful concealment or for personal injury or death resulting from negligence.

**** indicates material omitted and filed separately with the Commission.

37

39. ASSIGNMENT

39.1 No Party may (nor purport to) assign or transfer, or declare a trust of the benefit of, or in any other way dispose of any of its rights under this Agreement, in whole or in part, without first having obtained the other parties prior written consent, save that:

39.1.1 the Buyer shall be entitled to make a Disposal to a Third Party in accordance with Clauses 40 to 43; and

39.1.2 The Seller shall be entitled to assign and/or transfer all (but not part only) of its rights under this Agreement to EPHL by way of security for the Second Intercompany Loan Agreement.

39.2 Subject to Clause 39.1.1, during the Close Period the Buyer may not enter into any agreement or other arrangement:

39.2.1 that relates to the exercise of any of its rights under this Agreement; or

39.2.2 to assign or transfer or declare a trust of the benefit of or in any other way dispose of all or any part of the Business and/or the Station Assets after an Option Completion Date.

40. BUYER’S OFFER

40.1 Prior to committing to make a Disposal to a Third Party, the Buyer shall first serve on the Seller:

40.1.1 a Disposal Notice, signed by the Buyer;

40.1.2 a copy of the Third Party Disposal Agreement; and

40.1.3 a Disposal Agreement in duplicate, one copy of which shall be signed by the Buyer,

40.2 The offer constituted by a Disposal Notice served on the Seller shall be irrevocable during the Acceptance Period.

41. SELLER’S ENQUIRIES

After service of any Disposal Notice on the Seller and until the earlier of acceptance by the Seller of the offer constituted by such Disposal Notice or the expiration of the Acceptance Period, the Buyer shall reply promptly and in writing to any reasonable enquiry put to them by the Seller or its advisers relating to the proposed Disposal, the Third Party Disposal Agreement and/or the Disposal Agreement. In the event that the Buyer fails to reply within two (2) Business Days to any such enquiry, the Acceptance Period shall be extended by a period equal to the period commencing on the date such enquiry is made and ending on the date the Buyer replies in writing to such enquiry.

42. SELLER’S ACCEPTANCE

If the Seller wishes to accept the offer constituted by a Disposal Notice, a Seller’s Group Company, shall do so by signing and dating the copy of the Disposal Agreement served with such Disposal Notice and by returning it to the Buyer within the Acceptance Period.

**** indicates material omitted and filed separately with the Commission.

38

43. NON-ACCEPTANCE OF BUYER’S OFFER

43.1 If, within the Acceptance Period, a Seller’s Group Company does not accept the offer constituted by the Disposal Notice served on the Seller, the Buyer may, during the Disposal Period, enter into the Third Party Disposal Agreement, but at not less than the Third Party Purchase Price and otherwise on terms, in all material respects, the same as those contained in the Third Party Disposal Agreement served on the Seller with such Disposal Notice.

43.2 The Buyer agrees with the Seller:

43.2.1 within 5 Business Days of the Buyer entering into the Third Party Disposal Agreement with a Third Party, to provide to the Seller a copy thereof, certified by the Buyer’s Solicitors; and

43.2.2 within 5 Business Days of completion of the transaction contemplated by such Third Party Disposal Agreement, to notify the Seller in writing of such completion.

43.3 If, by the date of expiration of the Disposal Period, the Buyer and the Third Party have not entered into the Third Party Disposal Agreement or, if the Buyer and the Third Party have but the Disposal thereby contemplated has not been completed, the Buyer shall only make such Disposal (and/or any other Disposal) by again first complying with the provisions of Clauses 40 to 43.

44. CONFIDENTIALITY

44.1 Subject to Clause 44.2, the Buyer may not, and the Buyer shall procure that each party to a Third Party Disposal Agreement and/or any Transferee shall not, disclose any Confidential Information.

44.2 The Buyer may, and any party to a Third Party Disposal Agreement and/or any Transferee may:

44.2.1 disclose Confidential Information to any Finance Party, provided that such Finance Party has entered into a confidentiality undertaking in form and substance reasonably satisfactory to the Seller;

44.2.2 disclose any Confidential Information:

(a) if and to the extent required by law or for the purpose of any judicial proceedings;

(b) if and to the extent required by any securities exchange or regulatory or governmental body to which that party is subject or submits, wherever situated, including the Stock Exchange, the Financial Services Authority or the Panel on Takeovers and Mergers, whether or not the requirement for information has the force of law;

**** indicates material omitted and filed separately with the Commission.

39

(c) to any of its directors or employees who needs to know such Confidential Information in order to discharge his duties;

(d) to its professional advisers, auditors and bankers;

(e) if and to the extent that the Buyer can demonstrate that the Confidential Information has come into the public domain through no fault of the Buyer; or

(f) if and to the extent the Seller has given prior written consent; and

44.2.3 disclose any Confidential Information detailed in any Evaluation in accordance with Clause 13.

44.3 The restrictions contained in this Clause 44 shall continue to apply after the termination of the Agreement without limit in time.

45. NOTICES

45.1 A notice or other communication under or in connection with this Agreement (a “Notice”) shall be:

45.1.1 in writing;

45.1.2 in the English language; and

45.1.3 delivered personally or sent by first class post pre-paid recorded delivery (and air mail if overseas) or by fax to the party due to receive the Notice to the address or fax number set out in Clause 45.3 or to another address or fax number specified by that party by not less than five (5) Business Days written notice to the other party received before the Notice was despatched.

45.2 Unless there is evidence that it was received earlier, a Notice is deemed given if:

45.2.1 delivered personally, when left at the address referred to in Clause 45.1.3;

45.2.2 sent by mail, except air mail, two (2) Business Days after posting it;

45.2.3 sent by air mail, six (6) Business Days after posting it; and

45.2.4 sent by fax, when confirmation of its transmission has been recorded by the sender’s fax machine.

**** indicates material omitted and filed separately with the Commission.

40

45.3 The address referred to in Clause 45.1.3 is:

Name of party	Contact Details
The Seller	Eggborough Power Limited Barnett Way Barnwood Gloucester Gloucestershire GL4 3RS Attention: Corporate Affairs Director and Company Secretary Telephone: 01355 594 020 Facsimile: 01355 594 022
The Buyer	5 The North Colonnade Canary Wharf London E14 4BB Attention: ********
BEPET	British Energy Power and Energy Trading Limited 3 Redwood Crescent Peel Park East Kilbride G74 5PR Attention: Corporate Affairs Director and Company Secretary Telephone: 01355 594 020 Facsimile: 01355 594 022

46. TERM

46.1 Unless an Option has been exercised and not revoked hereunder; or (ii) a Clause is expressed to survive termination of this Agreement, all provisions of this Agreement shall terminate on the earliest of the following:

46.1.1 the exercise by the Buyer of an Option (as defined in the Share Option Agreement);

46.1.2 the occurrence of an Enforcement Event;

46.1.3 1 April 2010; and

46.1.4 otherwise with the agreement of all parties hereto.

47. GOVERNING LAW AND JURISDICTION

47.1 This Agreement is governed by English law.

**** indicates material omitted and filed separately with the Commission.

41

47.2 The courts of England have exclusive jurisdiction to settle any dispute arising from or connected with this Agreement (a “Dispute”).

47.3 The parties agree that the courts of England are the most appropriate and convenient courts to settle any Dispute and, accordingly, that they will not argue to the contrary.

47.4 The parties agree that the documents which start any proceedings relating to a Dispute (“Proceedings”) and any other documents required to be served in relation to those Proceedings may be served in accordance with Clause 45. These documents may, however, be served in any other manner allowed by law. This clause applies to all Proceedings wherever started.

48. COUNTERPARTS

This Agreement may be executed in any number of counterparts, each of which when executed and delivered is an original and all of which together evidence the same agreement.

**** indicates material omitted and filed separately with the Commission.

42

Schedule 1

FORM OF ASSET OPTION NOTICE

[BUYER’S LETTERHEAD]

To:	Eggborough Power Limited
	Barnett Way
	Barnwood
	Gloucester
	Gloucestershire
	GL4 3RS
cc.	British Energy Power and Energy Trading Limited
	3 Redwood Crescent
	Peel Park
	East Kilbride
	G74 5PR

Date: [·]

BY HAND

BY REGISTERED/RECORDED DELIVERY POST

ASSET OPTION NOTICE

1. We refer to the Asset Option Agreement dated _ September 2004 between Eggborough Power Limited, Barclays Bank PLC and British Energy Power and Energy Trading Limited (the “Asset Option Agreement”).

2. Terms defined in the Asset Option Agreement shall have the same meanings in this Asset Option Notice unless the context requires otherwise. References to a “Clause” are to a clause of the Asset Option Agreement.

3. The Buyer hereby notifies the Seller pursuant to Clause 4.1.2 that it wishes to exercise the Option granted in Clause 3.1.1.

The Option Completion Date shall be the Break Option Completion Date.

Signed by [·]

Director/Secretary

for and on behalf of

Barclays Bank PLC

acting as agent and security

trustee for the Finance Parties

**** indicates material omitted and filed separately with the Commission.

43

Schedule 2

FORM OF ENFORCEMENT OPTION NOTICE

[BUYER’S LETTERHEAD]

To:	Eggborough Power Limited
	Barnett Way
	Barnwood
	Gloucester
	Gloucestershire
	GL4 3RS
cc.	British Energy Power and Energy Trading Limited,
	3 Redwood Crescent,
	Peel Park,
	East Kilbride,
	G74 5PR

Date: [·]

BY HAND

BY REGISTERED/RECORDED DELIVERY POST

ENFORCEMENT OPTION NOTICE

1. We refer to the Asset Option Agreement dated _ September 2004 between Eggborough Power Limited, Barclays Bank PLC and British Energy Power and Energy Trading Limited (the “Asset Option Agreement”).

2. Terms defined in the Asset Option Agreement shall have the same meanings in this Asset Option Notice unless the context requires otherwise. References to a “Clause” are to a clause of the Asset Option Agreement.

3. The Buyer hereby notifies the Seller pursuant to Clause 5.1.2 that it wishes to exercise the Option granted in Clause 3.1.2.

4. The Buyer hereby notifies the Seller that the Enforcement Option Completion Date shall be [•].

Signed by [·]

Director/Secretary

for and on behalf of

Barclays Bank PLC

acting as agent and security

trustee for the Finance Parties

**** indicates material omitted and filed separately with the Commission.

44

(On duplicate)

Eggborough Power Limited acknowledges receipt of the notice from Barclays Bank PLC of which this is a duplicate, and confirms acceptance of its terms.

Dated: [·]

Signed by [·]

Director/Secretary

**** indicates material omitted and filed separately with the Commission.

45

Schedule 3

EXCLUDED ASSETS

1. Excluded Contracts.

2. In the case of the Enforcement Option only, any Contracts that are not Core Contracts.

3. Any asset or property of the Seller which is not transferable at law.

4. Environmental Permits.

5. Any existing and/or contingent rights and/or claims of the Seller against any other Seller’s Group Company under any financial or other guarantee, indemnity, undertaking or bond or other contingent obligation (other than the CTA Bonds) unless expressly agreed to the contrary in writing by the Seller and the Buyer.

6. Any cash collateral released in accordance with Clause 31.

7. Any Intellectual Property Rights belonging to any Seller’s Group Company (other than the Seller).

8. Any sums and/or rights, title and interest in and to any amounts due from the Finance Parties under the Finance Documents (including any amounts due from the Buyer under this Agreement) or any sums standing to the credit of the Escrow Account.

9. Any revenue due and payable under the Revenue Agreements in respect of the period before the Option Completion Date.

10. Any other asset or property of the Seller designated from time to time as an Excluded Asset by both the Seller and the Buyer (acting reasonably).

**** indicates material omitted and filed separately with the Commission.

46

Schedule 4

WARRANTIES

Incorporation and existence

1. The Seller is a limited company incorporated under English law and has been in continuous existence since incorporation.

Right, power, authority and action

2. The Seller has the right, power and authority, and has taken all action necessary, to execute, deliver and exercise its rights, and perform its obligations, under this Agreement.

3. The Seller has the right, power and authority to conduct its business as conducted at the date of this Agreement.

Binding agreements

4. The Seller’s obligations under this Agreement are enforceable in accordance with their terms.

**** indicates material omitted and filed separately with the Commission.

47

Schedule 5

INSTRUCTION LETTER TO ESCROW AGENT

TO: [insert name and address of Escrow Agent]

Dear Sirs

Escrow account

We are writing to confirm the terms on which money deposited with you today by Barclays Bank PLC (the “Buyer”) (the “Escrow Fund”) is to be held by you on trust for us. These terms are:

1. You shall maintain the Escrow Fund in a separately designated interest-bearing account with [Bank] in your name.

2. Subject to Paragraph 4 below, you shall pay or hold the Escrow Fund (or any part of it) to or for the person or in the manner directed in our joint written instructions.

3. If either of us (the “Payee”):

3.1 notifies you that the other is in breach of its obligation to notify or has not complied with its obligation to instruct you to pay an amount in accordance with the asset option agreement dated _ September 2004 between us and British Energy Power and Energy Trading Limited; and

3.2 produces evidence in writing that the other has accepted that the Payee is entitled to be paid the amount notified or a decision of a Tax Authority or a judgment of a court of competent jurisdiction against which no appeal has been lodged or is capable of being lodged within the statutory time limit to the effect that the Payee is entitled to be paid the amount notified, you shall pay or hold the amount notified to or for the Payee or in the manner directed in the Payee’s written instructions.

4. You may withdraw from the Escrow Fund an amount of tax on the interest earned in respect of the Escrow Fund for which you are or may become liable.

5. We shall each pay one half of your costs in respect of any work done pursuant to the terms of this letter.

**** indicates material omitted and filed separately with the Commission.

48

6. This letter shall be governed by and construed in accordance with English law.

Yours sincerely

Signed by [·]

Director/Secretary

for and on behalf of

Eggborough Power Limited

Signed by [·]

Director/Secretary

for and on behalf of

Barclays Bank PLC

acting as agent and

security trustee for the

Finance Parties

**** indicates material omitted and filed separately with the Commission.

49

Schedule 6

ENFORCEMENT FEE

£(millions)

From:	April-03	April-04	April-05	April-06	April-07	April-08	April-09
To:	March-04	March-05	March-06	March-07	March-08	March-09	August-09
April	—	29	57	76	89	104	104
May	—	32	58	77	91	104	104
June	—	34	60	78	92	104	104
July	—	36	62	79	93	104	104
August	—	39	63	80	95	104	104
September	—	41	65	81	96	104
October	—	43	66	83	97	104
November	5	46	68	84	99	104
December	10	48	70	85	100	104
January	16	50	71	86	101	104
February	21	53	73	87	103	104
March	27	55	75	88	104	104

**** indicates material omitted and filed separately with the Commission.

50

Schedule 7

FORM OF DISPOSAL NOTICE

To:	Eggborough Power Limited	BY HAND
	Barnett Way	or
	Gloucester Gloucestershire	BY REGISTERED/RECORDED DELIVERY POST
	GL4 3RS

1. We refer to the Asset Option Agreement (the “Option Agreement”) dated _ September 2004 between Eggborough Power Limited, British Energy Power and Energy Trading Limited and Barclays Bank PLC.

2. Terms defined in the Option Agreement shall have the same meanings in this Disposal Notice unless the context otherwise requires.

3. We, Barclays Bank PLC Registration No. 01026167, as Buyer offer to make to you the Disposal referred to in the contract (being a Disposal Agreement (as defined in the Option Agreement)) which accompanies this notice in duplicate, one copy of which has been signed by us.

4. If you wish to accept the offer constituted by this notice, a Seller’s group company must do so by signing and dating the copy of the contract which has been signed by us and then returning such copy to us within the Acceptance Period referred to in the Option Agreement.

Dated [·]

Director/Company Secretary for and

on behalf of Barclays Bank PLC

acting as agent and security

trustee for the Finance Parties

**** indicates material omitted and filed separately with the Commission.

51

Schedule 8

CONFIDENTIALITY UNDERTAKING

STRICTLY PRIVATE AND CONFIDENTIAL

To: [·]

Date: [·]

Dear Sirs,

Eggborough Power Limited (registered number 03782700) (“EPL”)

We understand that you wish to access the coal fired power station located at Eggborough (the “Plant”) owned by us for the purposes of performing due diligence on the Plant including (but not limited to) engineering due diligence for the purposes of considering a potential direct or indirect investment (that may include the purchase of an option to buy all or part of EPL or the Plant), operational involvement, other participation or commercial involvement in the Plant (the “Permitted Purpose”).

Unless otherwise defined, terms in this letter have the same meaning as given in the Credit Agreement.

“Act” means the Companies Act 1985.

“Credit Agreement” means the credit agreement originally dated 13 July 2000 as amended and restated on 8 September 2000, 24 October 2000, 12 December 2000, 5 February 2001 and on or about the Restructuring Date between, inter alios, EPL and Barclays Bank PLC as agent and security trustee.

“Information” means information of whatever nature relating to the Group supplied to you or your advisers by or on behalf of EPL or any other member of the Group in writing, orally or otherwise and includes any information obtained by you, in writing or orally, through discussions with the management, employees and advisers of EPL or any other member of the Group, together with any reports, analyses, compilations, studies or other documents prepared by you or on your behalf which contain or otherwise reflect such information, but “Information” shall not include such information which is in or which comes into the public domain other than as a result of:

(a) a breach of the obligations imposed by this letter by you (or by any person to whom disclosure of information is made as permitted under this letter); or

(b) a breach by you (or any other such person) of any other duty of confidentiality relating to that information.

1. In consideration of EPL agreeing to supply you Information, you acknowledge that the Information is confidential and is received by you under a duty of confidentiality to EPL and for the exclusive purpose of the Permitted Purpose, and you undertake with EPL as follows:

1.1 You will keep confidential and not disclose to any person, other than as permitted under Sub-paragraph 1.4, your interest in, and your discussions and negotiations with, the Banks, EPL and any other member of the Group in connection with the Permitted Purpose;

**** indicates material omitted and filed separately with the Commission.

52

1.2 You will keep all Information confidential and in a secure place and not disclose any Information to any person, other than as permitted under Sub-paragraph 1.4;

1.3 You will use Information solely for the Permitted Purpose and not for any other purpose;

1.4 You will not, without the prior written consent of EPL, disclose any Information to any person other than those of your senior executives, the senior executives of your associated undertakings, employees and those members of your professional advisers who, in each case, need to know the Information for the purpose of evaluating or advising (as appropriate) in relation to the Permitted Purpose or (subject to Sub-paragraph 1.6) as required by law or other regulation applicable to you save that, where you have acquired all or part of EPL or the Plant, you shall be entitled to disclose such information as would no longer be proprietary to the Group;

1.5 You will procure that each person to whom disclosure of Information is made as permitted under Sub-paragraph 1.4 is made aware (in advance of disclosure) of the terms of this letter and you will procure that each such person provides a confidentiality undertaking to you on substantially the same terms as this undertaking and also includes an express acknowledgement and confirmation that such person extends the terms of such undertaking for the benefit of each member of the Group; and

1.6 You will promptly notify EPL in writing if any Information is required to be disclosed by law or other regulation or any stock exchange whether in the United Kingdom or elsewhere and cooperate with EPL or its ultimate parent regarding the timing and content of such disclosure or any action which EPL or its ultimate parent may reasonably elect to take to challenge the validity of such requirement.

2. You further acknowledge and confirm to EPL that:

2.1 Your obligations under this letter shall extend to protect each and every member of the Group; and

2.2 Your obligations under this letter shall be continuing for a period of two years from the date of this letter, in particular they shall survive the termination of any discussions or negotiations between you, EPL, and each other member of the Group and the Banks regarding the Plant.

3. EPL and any other member of the Group are permitted to enforce the terms of this letter against you under the Contracts (Rights of Third Parties) Act 1999.

**** indicates material omitted and filed separately with the Commission.

53

4. Please note that, by providing to you Information, EPL and each other member of the Group makes no representation or warranty to you or any other recipient of the Information as to the accuracy or completeness of the Information or to the accuracy or completeness of the copies of the Information.

Please indicate your acceptance of the above by signing and returning the enclosed copy of this letter under confidential cover as soon as possible.

Yours faithfully,

Station Director

for and on behalf of

Eggborough Power Limited

Accepted and agreed:

for and on behalf of [·]

**** indicates material omitted and filed separately with the Commission.

54

Executed by the parties:
Signed by	)
a duly authorised representative of/	)
for and on behalf of	)	ROBERT ARMOUR
EGGBOROUGH POWER LIMITED	)
Signed by	)
a duly authorised representative of/	)
for and on behalf of	)	SIMON DEAVES
BARCLAYS BANK PLC	)
Signed by	)
a duly authorised representative of/	)
for and on behalf of	)
BRITISH ENERGY POWER AND	)	ROBERT ARMOUR
ENERGY TRADING LIMITED	)

**** indicates material omitted and filed separately with the Commission.

55

EX-4.31

Exhibit 4.31

LIMITED LIABILITY PARTNERSHIP

CONFORMED COPY

EGGBOROUGH POWER (HOLDINGS) LIMITED

AS SELLER

AND

BARCLAYS BANK PLC

AS BUYER

AND

EGGBOROUGH POWER LIMITED

AND

BRITISH ENERGY POWER AND ENERGY TRADING LIMITED

SHARE OPTION AGREEMENT

CONTENTS

Clause		Page
1.	Interpretation	1
2.	Condition Precedent	15
3.	Grant of Call Option to Buy Shares	15
4.	Exercise of Break Option	15
5.	Exercise of the Enforcement Option	16
6.	Revocation of Notice	16
7.	Break Option Price	16
8.	Enforcement Option Price	17
9.	Discharge of Finance Party Liabilities	17
10.	Experts	17
11.	Sales	18
12.	Evaluation of Break Option	18
13.	Calculation of Reduction Amount	19
14.	Failure to Transfer	20
15.	Break Option Completion	21
16.	Enforcement Option Completion	22
17.	Post Break Option Completion	23
18.	Approved Fuel Contracts	23
19.	Purchase of Approved Fuel	24
20.	Release of Collateral	24
21.	Escrow Account	25
22.	Pensions	26
23.	Warranties	27
24.	Restrictions	27
25.	Tax and Other Costs and Expenses	27
26.	Payments	29
27.	Conversion to Euros	29
28.	Invalidity or Illegality	29
29.	General	30
30.	Entire Agreement	30
31.	Assignment	31

32.	Seller’s Offer	31
33.	Buyer’s Enquiries	32
34.	Seller’s Acceptance	32
35.	Non-Acceptance of Buyer’s Offer	32
36.	Confidentiality	32
37.	Notices	33
38.	Term	35
39.	Governing Law and Jurisdiction	35
40.	Counterparts	35
SCHEDULE 1 COMPLETION ACCOUNTS		36
SCHEDULE 2 FORM OF SHARE OPTION NOTICE		38
SCHEDULE 3 FORM OF ENFORCEMENT OPTION NOTICE		40
SCHEDULE 4 WARRANTIES		43
SCHEDULE 5 INSTRUCTION LETTER TO ESCROW AGENT		44
SCHEDULE 6 ENFORCEMENT FEE		46
SCHEDULE 7 FORM OF DISPOSAL NOTICE		47
SCHEDULE 8 CONFIDENTIALITY UNDERTAKING		48

THIS AGREEMENT is made on 30 September 2004

BETWEEN:

(1) EGGBOROUGH POWER (HOLDINGS) LIMITED, a company incorporated in Scotland (registered no. SC201083), whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride G74 5PR (the “Seller”);

(2) BARCLAYS BANK PLC, a company incorporated in England and Wales (registered no. 01026167), whose registered office is at 54 Lombard Street, London EC3P 3AH acting as agent and security trustee for the Finance Parties (the “Buyer”);

(3) EGGBOROUGH POWER LIMITED, a company incorporated in England and Wales (registered no. 03782700), whose registered office is at Barnett Way, Barnwood, Gloucester, Gloucestershire GL4 3RS (the “Company”); and

(4) BRITISH ENERGY POWER AND ENERGY TRADING LIMITED (registered number SC200887) whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR (“BEPET”).

THE PARTIES AGREE as follows:

1. INTERPRETATION

1.1 In this Agreement:

“Acceptance Period” means, in respect of any proposed Disposal and subject to Clause 32, the period commencing on the date a Disposal Notice is properly served on the Seller in respect of such proposed Disposal and ending at close of business in London (5 p.m.) on the date falling 10 Business Days thereafter.

“Account Bank” has the same meaning as given to it in the Credit Agreement.

“Accounts” means the Company’s audited accounts (as that term is used in section 226 of the Act) for the financial year ended on the Last Accounting Date.

“Act” means the Companies Act 1985 as modified or re-enacted from time to time.

“Actual Approved Fuel” means the amount of Approved Fuel stored at the Station on the Option Completion Date as set out in the Fuel Survey.

“Additional Capital Expenditure” means any capital expenditure incurred by the Seller, or on behalf of the Seller by a Seller’s Group Company, other than pursuant to the Capital Investment Works Schedule (as defined in the New CTA) but with the prior approval of the Agent.

“Additional Capital Expenditure Amount” means:

(a) in respect of the Break Option, the amount or amounts (if any) agreed by the Agent and the Seller as representing the benefit to the Finance Parties as at the Break Option Completion Date of any Additional Capital Expenditure paid for by a Seller’s Group Company; and

****  indicates material omitted and filed            separately with the Commission - 1 -

(b) in respect of the Enforcement Option, the amount or amounts (if any) determined by the Experts as representing the benefit to the Finance Parties as at the Enforcement Option Completion Date of any Additional Capital Expenditure paid for by a Seller’s Group Company.

“Adjusted Break Fee” means the Break Fee, subject to the following adjustments:

(a) there shall be added such amount (if any) by which the Net Assets as shown in the Statement are greater than zero pounds sterling (£0);

(b) there shall be deducted such amount (if any) by which the Net Assets as shown in the Statement are less than zero pounds sterling (£0); and

(c) the Reduction Amount (if any) shall be deducted.

“Agent” has the same meaning as given to it in the Credit Agreement.

“Agreement” means this agreement, together with the Schedules hereto.

“Amendment and Restatement Agreement” has the same meaning as given to it in the Credit Agreement.

“Ancillary Services” has the same meaning as given to it in the New CTA.

“Approved Fuel” has the same meaning as given to it in the New CTA.

“Approved Fuel Contracts” means any contract for the sale and purchase of fuel between BEPET and any third party, provided that:

(a) such contract has been approved by the Agent in accordance with clause 15.17(c) of the Credit Agreement; and

(b) prior to the Option Completion Date, BEPET has notified the Company in writing that such contract is to be novated in accordance with Clauses 18.1.

“Approved Fuel Price” means:

(a) in respect of the Break Option, an amount equal to the book value of the Actual Approved Fuel as recorded in the accounting records of BEPET in accordance with generally accepted accounting principles in the United Kingdom; and

(b) in respect of the Enforcement Option, an amount equal to the then applicable market value of the Actual Approved Fuel (taking into account the cost of delivering fuel equivalent to the Actual Approved Fuel to the Station), as agreed between the Buyer and the Seller or, if they cannot agree, as determined by the Fuel Expert.

****  indicates material omitted and filed            separately with the Commission - 2 -

“Asset Option Agreement” means the asset option agreement between the Company, the Buyer and BEPET dated on or about the date of this Agreement under which the Company grants an option to the Buyer to acquire the Business and the Station Assets.

“Asset Option Notice” has the same meaning as given to “Option Notice” in the Asset Option Agreement.

“BEH” means British Energy Holdings plc a company with registered number SC270186 whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR.

“Break Fee” means the aggregate of:

(a) one hundred and four million pounds sterling (£104 million); and

(b) an amount equal to the Scheduled CTA Bond Amount (if any).

“Break Option” has the same meaning as given to it in Clause 3.1.1.

“Break Option Completion” means completion of the Break Option in accordance with Clause 15.

“Break Option Completion Date” means 31 March 2010.

“Break Option Price” means the aggregate purchase price of the Option Shares, being the sum of:

(a) the Additional Capital Expenditure Amount; and

(b) the Adjusted Break Fee.

“Break Option Time” means the Option Time in respect of the Break Option.

“British Energy plc” means the company of that name with registered number SC162273 whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR.

“Business” means the business of generation, transmission and sale of electricity and the provision of Ancillary Services as carried on by the Seller.

“Business Day” means a day other than a Saturday or Sunday or public holiday in England and Wales or Scotland.

“Buyer’s Accountants” means Ernst & Young LLP or such other recognised firm of auditors licensed to practice in England and Wales and Scotland as the Buyer may, by notice in writing to the Seller, appoint for the purposes of this Agreement.

“Buyer’s Solicitors” means Allen & Overy LLP, or such other solicitors as the Buyer may, by notice in writing to the Seller, appoint for the purposes of this Agreement.

“Cap Amount” means the sum of (i) £267,300,000 plus (ii) the EPL Swap Amount less (iii) the Equity Amount.

****  indicates material omitted and filed            separately with the Commission - 3 -

“CCL” has the same meaning as given to it in Clause 25.3.

“Close Period” means the period starting on (and including) the date of this Agreement until the earlier of (but excluding):

(a) an Option Completion Date; and

(b) 31 March 2010.

“Collateral Provider” has the same meaning as given to it in Clause 20.1.1.

“Competitor” means any competitor of a Seller’s Group Company, as notified by the Seller (acting reasonably) to the Buyer within 5 Business Days of receipt of an Option Notice.

“Completion” means Break Option Completion or Enforcement Option Completion (as the case may be).

“Completion Accounts” means the profit and loss account of the Company for the period starting on the day after the Last Accounting Date and ending on the Option Completion Date and the balance sheet of the Company as at the Option Completion Date and all attached notes, to be prepared in accordance with Schedule 1.

“Confidential Information” means any information relating to a Seller’s Group Company or any third party which is obtained by the Buyer, its directors, officers, employees, legal advisers, accountants, auditors and/or financial advisers, as a result of the negotiation and entering into of the Restructuring Documents whether such information is obtained before or after the date of this Agreement.

“Confidentiality Undertaking” means the confidentiality undertaking substantially in the form set out in Schedule 8.

“Covenant Expert” has the same meaning as given to it in Clause 13.6.

“Covenants” has the same meaning as given to it in Clause 13.1.1.

“Credit Agreement” means the credit agreement originally dated 13 July 2000 as amended and restated on 8 September 2000, 24 October 2000, 12 December 2000, 5 February 2001 and on or about the date of this Agreement between, inter alios, the Buyer and the Company.

“Creditor Restructuring Agreement” means the creditor restructuring agreement dated as of 30 September 2003 between, inter alios, British Energy plc and the Company.

“CTA Bonds” means the £150 million seven (7)% fixed rate bonds issued by BEH on the Restructuring Date as represented by the CTA Global Bond Certificate.

“CTA Global Bond Certificate” means the certificate issued in respect of the CTA Bonds by BEH to the Company on or about the Restructuring Date.

****  indicates material omitted and filed            separately with the Commission - 4 -

“Disposal” means an assignment and/or transfer of all (but not part only) of the Buyer’s rights under this Agreement.

“Disposal Agreement” means, in respect of any proposed Disposal, a document:

(a) complete in all material respects, save the dating thereof;

(b) on substantially the same terms as the Third Party Disposal Agreement relating to such proposed Disposal;

(c) stating the Purchase Price; and

(d) which, subject to the acceptance by the Seller in accordance with Clauses 32 to 35 of this Agreement, will constitute a legally binding agreement for the making by the Buyer and acceptance by a Seller’s Group Company, of such Disposal.

“Disposal Notice” means a notice substantially in the form of Schedule 7.

“Disposal Period” means, in respect of any proposed Disposal, the period commencing on the date the Acceptance Period ends and ending at close of business in London (5 p.m.) one calendar month thereafter.

“Dispute” has the same meaning as given to it in Clause 39.2.

“Due Date” has the same meaning as given in Clause 21.1.

“Employees” means the employees of the Company as at the Option Completion Date.

“Encumbrance” means a mortgage, charge, pledge, lien, option, restriction, right of first refusal, right of pre-emption, third-party right or interest, other encumbrance or security interest of any kind, or another type of preferential arrangement (including a title transfer or retention arrangement) having similar effect.

“Enforcement Event” means the exercise by the Buyer (acting in its capacity as security trustee for the Finance Parties) of any or all of its rights under any Security Document in accordance with clause 18.2(a)(i) of the Credit Agreement.

“Enforcement Fee” means, in respect of the Enforcement Option:

(a) where the Enforcement Option is being exercised as a consequence of a Payment Default or a Station Default, the sum of £1; or

(b) otherwise, the amount applicable to the month in which the Enforcement Option Notice was delivered, as set out in Schedule 6,

together with, in each case, an amount equal to the Scheduled CTA Bond Amount.

“Enforcement Notice Date” means the date on which the Buyer notifies the Seller that it wishes to exercise the Enforcement Option in accordance with clause 18(a)(ii) of the Credit Agreement.

****  indicates material omitted and filed            separately with the Commission - 5 -

“Enforcement Option” has the same meaning as given to it in Clause 3.1.2.

“Enforcement Option Cap Amount” means the sum of:

(a) the Cap Amount; and

(b) an amount equal to the interest that would have accrued on the Cap Amount up to (and including) the Enforcement Notice Date had the Cap Amount been outstanding from the Restructuring Date and borne interest at the rate of 4.75 per cent. per annum (calculated on the basis of a year of 365 days).

“Enforcement Option Claim Amount” means the Proceeds less the Enforcement Fee.

“Enforcement Option Completion” means completion of the Enforcement Option in accordance with Clause 16.

“Enforcement Option Completion Date” means a date falling after the Restructuring Date but no later than 31 August 2009 specified by the Buyer in the Enforcement Option Notice as being the date on which the Enforcement Option is to be completed.

“Enforcement Option Notice” means a written notice in the form set out in Schedule 3 from the Buyer to the Seller exercising the Enforcement Option pursuant to Clause 5.1.2.

“Enforcement Option Price” means the sum of:

(a) the Additional Capital Expenditure Amount (if any);

(b) the Enforcement Fee; and

(c) the Redemption Fee (if any).

“Enforcement Option Time” means the Option Time in respect of the Enforcement Option.

“EPL Swap Amount” means an amount equal to the sum of all EPL Swap Crystallised Liabilities calculated as being due from EPL (if any) in respect of the termination of all Swap Agreements on the earlier of (i) 20 October 2004 and (ii) the Restatement Date.

“EPL Swap Crystallised Liability” has the same meaning as given to it in Schedule 3 of the Creditor Restructuring Agreement.

“Equity Amount” means:

(a) an amount equal to the middle market quotation for ordinary shares in the Parent on the Enforcement Notice Date as derived from the Daily Official List of the London Stock Exchange,

multiplied by:

(b) the number of ordinary shares issued by the Parent to the Finance Parties on the Restructuring Date.

****  indicates material omitted and filed            separately with the Commission - 6 -

“Escrow Account” means a separately designated interest-bearing account with the Account Bank in the name of the Escrow Agent.

“Escrow Agent” means the person appointed by the Buyer and the Seller pursuant to the Escrow Letter.

“Escrow Letter” means the instruction letter substantially in the form set out in Schedule 5 (or any other agreed form) from the Buyer and the Seller to the Escrow Agent.

“Euro” means the lawful currency of the member states of the European Union that adopt the single currency in accordance with the Treaty establishing the European Community, as amended by the Treaty on European Union.

“Euro Effective Date” has the same meaning as given to it in Clause 27.1.

“Evaluation” has the same meaning as given to it in Clause 12.1.

“Evaluation Report” has the same meaning as given to it in Clause 13.1.

“Event of Default” has the same meaning as given to it in the Credit Agreement.

“Expert” has the same meaning as given to it in Clause 10.

“Finance Documents” has the same meaning as given to it in the Credit Agreement.

“Finance Parties” or “Finance Party” has the same meaning as given to it in the Credit Agreement.

“Finance Party Liabilities” means all present and future sums, liabilities and obligations (actual or contingent) payable, owing, due or incurred by the Obligors to any of the Finance Parties under or in connection with the Finance Documents.

“Financial Expert” means a person:

(a) who is independent and who has confirmed in writing that it will (i) have no conflict in acting as an Expert; and (ii) remain neutral and impartial at all times when acting as an Expert under this Agreement;

(b) who is not a Competitor;

(c) who is not an affiliate of either the Seller or the Buyer; and

(d) being a reputable bank, financial institution or international accounting firm having appropriate expertise in the production of financial models for, and the assessment and valuation of cashflows relating to, power stations of a similar type, and operated in a similar manner, as the Station within the United Kingdom.

****  indicates material omitted and filed            separately with the Commission - 7 -

“First Amount” has the same meaning as given to it in Schedule 3 of the Creditor Restructuring Agreement.

“First Intercompany Loan Agreement” means the intercompany loan agreement dated on or about the date of this Agreement between BEH as lender and EPHL as borrower.

“Frustration Event” means:

(a) an Event of Default pursuant to clause 17.10(a) and (b) of the Credit Agreement; or

(b) the destruction of all or a material part of the Station Assets (taken as a whole); or

(c) where, in respect of any Share Option Notice, at any time after 31 August 2009 but prior to the Break Option Completion Date, a breach by the Seller of the Covenants has resulted in a reduction in the value of the Station Assets taken as a whole (as compared to the aggregate value of the Station Assets as at 31 August 2009) in excess of £104,000,000 and such event has been notified by the Buyer to the Seller no later than one calendar month prior to the Break Option Completion Date and confirmed by the Experts.

“Fuel Expert” means a person approved by BEPET and the Buyer in writing who has appropriate expertise in the evaluation of fuel stocks at power stations similar in type to the Station.

“Fuel Survey” means a full volumetric and density survey of the Approved Fuel stored at the Station prepared by the Fuel Expert.

“Heavy Fuel Oil Agreement” means the agreement to supply heavy fuel oil dated 27 March 2002 between TotalFinaElf UK Limited as supplier and the Company as buyer.

“Indemnified Party” means the Seller and each of its affiliates, employees, directors, officers, agents and representatives.

“Indemnity Amount” means the Indemnity Proceeds less:

(a) all amounts accrued but unpaid under the Finance Documents (other than this Agreement) on the Long-Stop Date; and

(b)

(i) if the Enforcement Option has been exercised, the sum of the Enforcement Fee and the Redemption Fee that would have been payable had the Enforcement Option been completed in accordance with this Agreement; or

****  indicates material omitted and filed            separately with the Commission - 8 -

(ii) if the Break Option has been exercised, the Adjusted Break Fee that would have been payable had the Break Option been completed in accordance with this Agreement; and

(c) the Additional Capital Expenditure Amount (if any).

“Indemnity Proceeds” means on the Sales Proceeds Date, an amount equal to the sum of:

(a) the aggregate value as at the Sales Proceeds Date of all, or any of, the Option Shares that the Seller continues to own on the Sales Proceeds Date in breach of this Agreement, as determined by the Experts; and

(b) any amounts, dividends or other distributions received by the Seller on, and/or in respect of, the Option Shares during the Sales Period.

“Independent Engineer” has the same meaning as given to it in Clause 12.1.

“Industry Documents” has the same meaning as given to it in the Credit Agreement.

“Intra-Group Obligation” has the same meaning as given to it in Clause 20.1.1.

“Last Accounting Date” means the last day of the financial year of the Company immediately preceding the Option Completion Date.

“LIBOR” means in relation to any amount under this Agreement on which interest for a given period is to accrue, the rate per annum at which Barclays Bank PLC was offering prime banks in the London interbank market deposits in sterling for such period as of 11.00 am on the date falling 2 Business Days prior to the start of such period.

“Long-Stop Date” has the same meaning as given to it in Clause 14.1.

“Majority Banks” has the same meaning as given to such term in the Credit Agreement.

“Net Assets” means the Working Capital Assets less the Working Capital Liabilities.

“Net Sales Proceeds” means:

(a) the aggregate proceeds received or receivable or deemed receivable (whether for cash or consideration in kind, directly or indirectly) by, or on behalf of, the Buyer (or its nominee) and/or any Finance Party in respect of the sale of all, or any of, the Option Shares and/or all, or any part of, the Business and/or the Station Assets at any time during the Sales Period (provided that in the event that all, or any of, the Option Shares or all, or any part of, the Business and/or the Station Assets is sold more than once during the Sales Period, only the first such sale (in each case) shall be taken into account for the purposes of this definition),

less:

(b) all reasonable expenses (but excluding any Taxes (other than any stamp tax payable by the Buyer (or its nominee) in connection with the exercise of the Enforcement Option)) incurred by the Buyer (or its nominee) with the prior written consent of the Seller.

****  indicates material omitted and filed            separately with the Commission - 9 -

“New CTA” means the capacity and tolling agreement dated on or about the date of this Agreement between the Company and BEPET.

“Novated Debt” means the First Amount less the Second Amount.

“Obligors” has the same meaning as given to it in the Credit Agreement.

“Option” means the Break Option or the Enforcement Option (as the case may be).

“Option Completion Date” means the Break Option Completion Date or the Enforcement Option Completion Date (as the case may be).

“Option Notice” means a Share Option Notice or an Enforcement Option Notice (as the case may be).

“Option Shares” means all the shares in the capital of the Company registered in the Seller’s name on the Option Completion Date.

“Option Time” means the time at which notice to exercise an Option pursuant to Clause 4.1.2 or 5.1.2 is deemed given to the Seller by virtue of Clause 37.2.

“Parent” means British Energy Group plc a company with registered number SC270184 whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR.

“Payment Default” has the same meaning as given to it in the Credit Agreement.

“Permitted Encumbrance” means any Encumbrance over the Option Shares:

(a) arising under, or permitted by, the Restructuring Documents and the Documents (as defined in the Credit Agreement);

(b) arising as a result of the act or omission of the Buyer or any Finance Party; or

(c) any liens imposed by law (to the extent not extant as the result of any default or omission of the Seller).

“Proceedings” has the same meaning as given to it in Clause 39.4.

“Proceeds” means on the Sales Date, an amount equal to the sum of:

(a) the aggregate Net Sales Proceeds on the Sales Date;

(b) in the event that the Seller continues to own all, or any of, the Option Shares on the Sales Date as a result of a breach of this Agreement by the Seller, the aggregate value as at the Sales Date of such Option Shares, as determined by the Experts;

****  indicates material omitted and filed            separately with the Commission - 10 -

(c) in the event that the Seller transfers all, or any of, the Option Shares to the Buyer (or its nominee) pursuant to this Agreement, the aggregate value as at the Sales Date of any such Option Shares that have not been sold during the Sales Period (but disregarding any sale under this Agreement for these purposes), as determined by the Experts; and

(d) any amounts, dividends or other distributions received on, and/or in respect of, the Option Shares during the Sales Period.

“Purchase Price” means the Third Party Purchase Price multiplied by one hundred and five per cent. (105%).

“Records” means the Seller’s books and records relating exclusively to the Business and the Station Assets.

“Redemption Fee” means, if the Enforcement Option Claim Amount exceeds the Enforcement Option Cap Amount, the difference between such amounts.

“Reduction Amount” has the same meaning as given to it in Clause 13.1.2.

“Relevant Event” has the same meaning as given to it in Clause 28.1.

“Restatement Date” has the same meaning as given to it in the Amendment and Restatement Agreement.

“Restructuring Date” has the same meaning as given to it in the Creditor Restructuring Agreement.

“Restructuring Documents” has the same meaning as given to it in the Creditor Restructuring Agreement.

“Sales Completion Date” means on or after the Option Completion Date, the date on which all the Option Shares are sold (but disregarding any sale under this Agreement).

“Sales Date” means the earlier of the Sales Completion Date and the Sales Proceeds Date.

“Sales Period” means the period commencing on the Option Completion Date and ending on the Sales Date (both inclusive).

“Sales Proceeds Date” means the date falling (12) calendar months after the Option Completion Date.

“Scheduled CTA Bond Amount” means the aggregate of:

(a) all repayments of principal under the Credit Agreement which would have been due on a scheduled basis on or after the Option Completion Date but which have instead been received prior to the Option Completion Date; and

(b) any premium received by the Finance Parties in respect of the payments made in paragraph (a) above.

****  indicates material omitted and filed            separately with the Commission - 11 -

“Second Amount” has the meaning given to such term in Schedule 3 of the Creditor Restructuring Agreement.

“Security” means the security interests from time to time constituted by or pursuant to the Security Documents.

“Security Documents” has the same meaning as given to it in the Credit Agreement.

“Seller’s Accountants” means PricewaterhouseCoopers LLP or such other recognised firm of auditors licensed to practice in England and Wales and Scotland as may be appointed by the Seller from time to time.

“Seller’s Group Company” means the Parent or an undertaking which is, on or at any time after the date of this Agreement, a subsidiary undertaking of the Parent.

“Share Option Notice” means a written notice in the form set out in Schedule 2 from the Buyer to the Seller exercising the Option pursuant to Clause 4.1.2.

“Share Subscription Agreement” means the share subscription deed dated on or about the date of this Agreement between, inter alios, the Company and the Buyer.

“Statement” means a statement of the adjustments to made to the Break Fee pursuant to paragraphs (a) and (b) of the definition of Adjusted Break Fee, to be prepared in accordance with Schedule 1.

“Station” means the coal fired power station located at Eggborough, Yorkshire with a capacity of approximately 2000MW.

“Station Assets” means all property and assets owned by the Company at the Option Completion Date (wherever located).

“Station Default” has the same meaning as given to it in the Credit Agreement.

“Swap Agreement” has the same meaning as given to in Schedule 3 of the Creditor Restructuring Agreement.

“Tax” means all taxes and all levies, duties, imports, charges and withholdings in the nature of taxation whenever and wherever imposed, including taxes on gross or net income, profits or gains and taxes on receipts, sales, use, occupation, franchise, value added and personal property together with all fines, penalties, charges and interest relating to any of them.

“Technical Expert” means a person:

(a) who is independent and who has confirmed in writing that it will (i) have no conflict in acting as an Expert; and (ii) remain neutral and impartial at all times when acting as an Expert under this Agreement;

(b) who is not a Competitor;

(c) who is not an affiliate of either the Seller or the Buyer; and

****  indicates material omitted and filed            separately with the Commission - 12 -

(d) having appropriate expertise in the technical assessment and valuation of power stations of a type similar to, and operated in a similar manner as, the Station within the United Kingdom.

“Third Party” means any person other than a Seller’s Group Company.

“Third Party Disposal Agreement” means, in respect of any proposed Disposal, a document:

(a) complete in all respects, save the dating thereof;

(b) setting out the terms required by the Buyer for the making of the Disposal to the relevant Third Party; and

(c) in which the Third Party Purchase Price is stated as a fixed and ascertained amount.

“Third Party Purchase Price” means, in respect of any proposed Disposal, the price (if any) for such Disposal agreed between the Buyer and the relevant Third Party.

“Transferee” means the holder of the Option Shares immediately after the transfer of the Option Shares in accordance with Clause 16.2.1.

“VAT” has the same meaning as given to it in Clause 25.3.

“Warranty” means a statement contained in Schedule 4 and “Warranties” means all those statements.

“Working Capital Assets” means the sum of the amounts in the Completion Accounts attributed to those items agreed between the Buyer and Seller prior to the Restructuring Date as being “working capital assets”.

“Working Capital Liabilities” means the sum of the amounts in the Completion Accounts attributed to those items agreed between the Buyer and Seller prior to the Restructuring Date as being “working capital liabilities”.

1.2 In this Agreement, a reference to:

1.2.1 a “subsidiary undertaking” is to be construed in accordance with section 258 of the Act;

1.2.2 liability under, pursuant to or arising out of (or any analogous expression) any agreement, contract, deed or other instrument includes a reference to contingent liability under, pursuant to or arising out of (or any analogous expression) that agreement, contract, deed or other instrument;

1.2.3 a party being liable to another party, or to liability, includes any liability in equity, contract or tort (including negligence) or under the Misrepresentation Act 1967;

****  indicates material omitted and filed            separately with the Commission - 13 -

1.2.4 a statutory provision includes a reference to such statutory provision as modified or re-enacted or both from time to time before the date of this Agreement and any subordinate legislation made under the statutory provision (as so modified or re-enacted) before the date of this Agreement;

1.2.5 this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented;

1.2.6 a “person” includes a reference to any individual, firm, company, corporation or other body corporate, government, state or agency of a state or any joint venture, association or partnership, works council or employee representative body (whether or not having separate legal personality) and includes a reference to that person’s legal personal representatives, successors and permitted assigns;

1.2.7 a “party” includes a reference to that party’s successors and permitted assigns;

1.2.8 “£” and “pounds sterling” is to the lawful currency of the United Kingdom;

1.2.9 a “clause”, “paragraph”, “sub-paragraph” or “schedule”, unless the context otherwise requires, is a reference to a clause or paragraph or sub-paragraph of, or schedule to, this Agreement;

1.2.10 any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall, in respect of any jurisdiction other than England, be deemed to include what most nearly approximates in that jurisdiction to the English legal term and any reference to any English statute shall be construed so as to include equivalent or analogous laws of any other jurisdiction;

1.2.11 the terms “include”, “includes” and “including” shall be construed without limitation;

1.2.12 a reference to “disposal” is to be construed so as to include a sale, lease or other disposal;

1.2.13 a time of day is a reference to the time in London; and

1.2.14 a document in the “agreed form” is a reference to a document in a form approved and for the purposes of identification signed by or on behalf of each party.

1.3 The headings in this Agreement do not affect its interpretation.

****  indicates material omitted and filed            separately with the Commission - 14 -

2. CONDITION PRECEDENT

The provisions of this Agreement shall only become effective on the occurrence of the Restatement Date.

3. GRANT OF CALL OPTION TO BUY SHARES

3.1 In consideration of £2,500,000 satisfied by the Buyer agreeing to the reduction by that amount of the amount owing by the Seller to the Buyer under the Novated Debt, the Seller irrevocably grants to the Buyer:

3.1.1 an option to buy, and to require the Seller to sell, all of the Option Shares on the Break Option Completion Date (the “Break Option”); and

3.1.2 an option to buy, and to require the Seller to sell, all of the Option Shares at any time after the Enforcement Notice Date but prior to 31 August 2009 (the “Enforcement Option”),

in each case, in accordance with the terms and conditions of this Agreement.

3.2 The Option Shares shall be sold with full title guarantee free from any Encumbrance other than a Permitted Encumbrance and with all rights attaching to the Option Shares on the Option Completion Date including the right to receive any dividend, distribution or return of capital declared, paid or made in respect of the Option Shares in respect of periods starting on or after the Option Completion Date.

4. EXERCISE OF BREAK OPTION

4.1 The Break Option may be exercised by the Buyer only:

4.1.1 in whole and not in part; and

4.1.2 by the delivery by the Buyer to the Seller of a Share Option Notice at any time after the Restructuring Date but no later than 31 August 2009.

4.2 The Buyer may not deliver a Share Option Notice to the Seller at the same time as, or at any time after:

4.2.1 the delivery by it of an Enforcement Option Notice or an Asset Option Notice; or

4.2.2 the occurrence of an Enforcement Event.

4.3 After the Break Option Time, the Buyer may only revoke the Share Option Notice in accordance with Clause 6.

4.4 It shall be a condition of the exercise of the Break Option that on the Break Option Completion Date, the Buyer (acting in its capacity as security trustee for the Finance Parties) shall fully and irrevocably discharge, or procure the full and irrevocable discharge of, all the Finance Party Liabilities and fully and irrevocably release, or procure the full and irrevocable release of, the Security.

****  indicates material omitted and filed            separately with the Commission - 15 -

5. EXERCISE OF THE ENFORCEMENT OPTION

5.1 The Enforcement Option may be exercised by the Buyer only:

5.1.1 in whole and not in part; and

5.1.2 by the delivery by the Buyer to the Seller of an Enforcement Option Notice at any time after the Enforcement Notice Date but prior to 31 August 2009.

5.2 The Buyer may not deliver an Enforcement Option Notice to the Seller at the same time as, or at any time after:

5.2.1 the delivery by it of a Share Option Notice or an Asset Option Notice; or

5.2.2 the occurrence of an Enforcement Event.

5.3 After the Enforcement Option Time, the Buyer may only revoke the Enforcement Option Notice in the circumstances set out in Clause 6.

5.4 It shall be a condition of the exercise of the Enforcement Option that on the Enforcement Option Completion Date, the Buyer (acting in its capacity as security trustee for the Finance Parties) shall fully and irrevocably discharge, or procure the full and irrevocable discharge of, all the Finance Party Liabilities and fully and irrevocably release, or procure the full and irrevocable release of the Security.

5.5 If, at any time after an assignment and/or transfer of all of the Buyer’s rights under this Agreement in accordance with Clause 31, the new owner of such rights is not owed directly all of the Finance Party Liabilities, then, immediately upon the occurrence of such assignment or transfer, the rights of the Buyer under this Clause 5 and to the Enforcement Option shall be cancelled in full and shall not be capable of future use or revival.

6. REVOCATION OF NOTICE

6.1 The Buyer may only revoke an Option Notice:

6.1.1 with the prior written consent of the Seller; or

6.1.2 where a Frustration Event has occurred and is continuing and the Buyer (acting on the instructions of the Majority Banks) has voted to enforce the Security Documents in accordance with clause 18.2(a)(i) of the Credit Agreement.

7. BREAK OPTION PRICE

7.1 In consideration for the purchase of the Option Shares pursuant to the exercise of the Break Option, the Buyer shall:

7.1.1 pay to the Seller the Break Option Price, by paying to the Seller:

(a) on the Break Option Completion Date, the Additional Capital Expenditure Amount; and

****  indicates material omitted and filed            separately with the Commission - 16 -

(b) the Adjusted Break Fee in accordance with Clause 17; and

7.1.2 take the steps set out in Clause 9.

7.2 The provisions of Schedule 1 shall apply in respect of the preparation, and the agreement or determination of the Completion Accounts and the Statement and any subsequent adjustment to the Break Option Price.

8. ENFORCEMENT OPTION PRICE

8.1 In consideration for the purchase of the Option Shares pursuant to the exercise of the Enforcement Option, the Buyer shall:

8.1.1 pay the Enforcement Option Price, by paying to the Seller:

(a) on the Enforcement Option Completion Date, the Additional Capital Expenditure Amount (if any) and the Enforcement Fee; and

(b) within three (3) Business Days of the earlier of (a) the Sales Completion Date and; (b) the Sales Proceeds Date, the Redemption Fee (if any); and

8.1.2 take the steps set out in Clause 9.

9. DISCHARGE OF FINANCE PARTY LIABILITIES

The Buyer shall on and as from the Option Completion Date:

9.1.1 fully and irrevocably discharge, or procure the full and irrevocable discharge of, all the Finance Party Liabilities; and

9.1.2 fully and irrevocably release, or procure the full and irrevocable release of, all the Security.

10. EXPERTS

10.1 Promptly after the Option Time, the Buyer and Seller shall, in accordance with Clause 10.3, appoint:

10.1.1 a Financial Expert; and

10.1.2 a Technical Expert,

(together, the “Experts” and each, an “Expert”).

10.2 Each Expert shall act as an expert and not as an arbitrator and the law of arbitration shall not apply.

10.3 If within 15 Business Days of the Option Time, the Buyer and the Seller cannot agree on the identity of an Expert, then the identity of such Expert shall be chosen by:

10.3.1 if such dispute relates to the appointment of the Financial Expert, the President for the time being of the Institute of Chartered Accountants of England and Wales; and

****  indicates material omitted and filed            separately with the Commission - 17 -

10.3.2 if such dispute relates to the appointment of the Technical Expert, the President for the time being of the UK Institute of Civil Engineers.

10.4 Unless otherwise set out in this Agreement, or if the Buyer and Seller otherwise agree, the fees and expenses of the Experts shall be borne equally by the Buyer and the Seller.

10.5 Each Expert shall carry out such determinations as are required under this Agreement.

11. SALES

11.1 If, during the Sales Period, all, or any of, the Option Shares and/or all, or any part of, the Business and/or the Station Assets are sold for cash or other consideration, the Buyer shall, or if it is not the Transferee at such time, shall procure that the Transferee shall, use its reasonable endeavours and all appropriate diligence to sell such Option Shares and/or all, or any such part of, the Business and/or the Station Assets at the best obtainable market price and terms and conditions for such sale.

11.2 The Seller shall at all times have the right to identify potential purchasers to the Transferee.

12. EVALUATION OF BREAK OPTION

12.1 The Seller and the Company will permit:

12.1.1 the Buyer;

12.1.2 any prospective purchaser of the Option Shares who has executed a Confidentiality Undertaking; and/or

12.1.3 an independent engineer complying with the requirements set out in the definition of the Technical Expert and appointed by the Buyer, at the sole cost of the Buyer (an “Independent Engineer”),

upon 5 Business Days prior written notice, to have access during business hours on any Business Day falling not more than nineteen months prior to the Break Option Completion Date to:

12.1.4 the Station Assets (other than Records and financial information); and

12.1.5 all historic Records and information of the Company (but excluding information relating to the operating regime of the Station Assets or any Record or information containing forecasts and/or projections),

in order to prepare an evaluation of the Station Assets, the Option Shares, the Company and/or the Break Option (an “Evaluation”), provided that:

12.1.6 the process and scope of such access has been agreed by the Buyer and the Seller acting reasonably following good faith consultation; and

****  indicates material omitted and filed            separately with the Commission - 18 -

12.1.7 such access does not significantly interfere with the commercial operation of the Station by the Company.

12.2 If the Buyer wishes to disclose the Evaluation to any third party other than a Finance Party, it shall notify the Seller of the identity of such person. No Finance Party (including the Buyer) shall disclose the Evaluation to any third party without the due execution by such third party of a Confidentiality Undertaking.

12.3 Access to the Station Assets and/or the Records by an Independent Engineer shall be conditional upon the entry by such person into all such disclaimers or other undertakings as may reasonably be required by the Seller from time to time.

13. CALCULATION OF REDUCTION AMOUNT

13.1 Upon appointment of the Experts pursuant to Clause 10, the Buyer shall request the Technical Expert to prepare an evaluation as to the condition of the Station (the “Evaluation Report”) so as to assess:

13.1.1 the extent to which the Company has failed to comply with any of the covenants set out in clauses 15.8, 15.10, 15.13, 15.16, 15.17, 15.18, 15.20, 15.23, 15.27, 15.30 and 15.31 of the Credit Agreement (the “Covenants”) as at the Break Option Completion Date; and

13.1.2 together with the Financial Expert, the extent to which this has caused a material reduction in the value of the Station from the value that the Station would have been worth on the Break Option Completion Date had it been operated at all times in accordance with the Covenants (the “Reduction Amount”). The reference terms to be used by the Technical Expert in preparing the Evaluation Report, the preparation and the agreement or determination of any breach of any Covenant and any consequent adjustment to be made to the Break Fee calculation shall be agreed between the Buyer and the Seller no later than three (3) months prior to the Break Option Completion Date.

13.2 The Buyer shall ensure that the Technical Expert shall submit the Evaluation Report to the Buyer and the Seller no later than the Break Option Completion Date.

13.3 Within thirty (30) Business Days of the date of receipt of the Evaluation Report, the Seller shall notify the Buyer whether or not it agrees with the Evaluation Report.

13.4 If the Seller notifies the Buyer of its agreement with the Evaluation Report within the thirty (30) Business Day period referred to in Clause 13.3 or fails to give any notification within that period, the Evaluation Report shall be final and binding on the Buyer and the Seller and the Break Fee shall be adjusted downwards by an amount equal to the Reduction Amount (if any).

13.5 If the Seller notifies the Buyer within the thirty (30) Business Day period referred to in Clause 13.3 that it disagrees with the Evaluation Report, Clause 13.6 applies.

****  indicates material omitted and filed            separately with the Commission - 19 -

13.6 If, within ten (10) Business Days starting on the Business Day after receipt of a notification referred to in Clause 13.5, the Seller and the Buyer have not agreed the items in dispute in relation to the Evaluation Report, the Buyer or the Seller may refer the matters in dispute to a partner of at least 10 years qualified experience at an independent firm of engineers agreed by the Buyer and the Seller in writing or, failing agreement on the identity of the firm of engineers within fifteen (15) Business Days starting on the Business Day after receipt of the notification referred to in Clause 13.5, an independent firm of engineers appointed (on the application of either the Buyer or the Seller) by the President for the time being of the Institution of Civil Engineers in England and Wales (the “Covenant Expert”).

13.7 The Covenant Expert shall act on the following basis:

13.7.1 as an expert and not as an arbitrator;

13.7.2 the Covenant Expert’s terms of reference shall be to determine the matters in dispute in respect of the Evaluation Report, within ten (10) Business Days of his appointment;

13.7.3 the Covenant Expert may engage a Financial Expert to the extent necessary to assist it with all or any part of a dispute that is financial in nature;

13.7.4 the Buyer, the Seller and the Company shall each provide the Covenant Expert with all information which the Covenant Expert reasonably requires and the Covenant Expert shall be entitled (to the extent he considers appropriate) to base his determination on such information and on the accounting and other records of the Company; and

13.7.5 if the Covenant Expert determines that a material adjustment of the Break Fee is required, the Seller shall pay the reasonable costs of the Technical Expert and the Covenant Expert, otherwise the Buyer and the Seller shall each pay one half of the costs.

13.8 The Evaluation Report adjusted in accordance with (as the case may be):

13.8.1 the agreement, if any, between the Seller and the Buyer pursuant to Clause 13.6; or

13.8.2 the decision of the Covenant Expert in accordance with this Clause 13.7,

shall be final and binding on the Buyer and the Seller, save in the event of fraud or manifest error and the Break Fee shall be adjusted downwards by an amount equal to the Reduction Amount (if any).

13.9 The Covenant Expert’s determination shall not be subject to the law of arbitration.

14. FAILURE TO TRANSFER

14.1 If the Seller is obliged to transfer title to the Option Shares in accordance with Clause 15 or 16 (as the case may be) but has

****  indicates material omitted and filed            separately with the Commission - 20 -

failed to do so by the date falling 5 Business Days, or if the Seller is actively assisting the Buyer with such transfer, 30 Business Days after the Option Completion Date (the “Long-Stop Date”) the Buyer shall other than in circumstances where such failure is directly attributable to a Finance Party:

14.1.1 be entitled to exercise its rights under clauses 18.1 and 18.2(a)(i) of the Credit Agreement in respect of all amounts accrued but unpaid under the Finance Documents (other than this Agreement) on the Long-Stop Date (unless the Buyer has assigned all of its rights under this Agreement and the new owner of such rights is not owed all of the Finance Party Liabilities); and

14.1.2 on the earlier of the Sales Completion Date and the Sales Proceeds Date, have a liquidated damages claim for an amount equal to the Indemnity Amount.

14.2 Notwithstanding the failure to transfer the Option Shares in accordance with Clause 15 or 16 (as the case may be), the Buyer shall comply with its obligations under the Share Subscription Agreement.

14.3 Receipt by the Buyer of all amounts under this Clause 14, shall extinguish fully and irrevocably the Finance Party Liabilities and the Buyer shall deliver to the Seller evidence (in form and substance satisfactory to the Seller) that:

14.3.1 the Finance Party Liabilities have been fully and irrevocably discharged; and

14.3.2 the Security has been fully and irrevocably released.

15. BREAK OPTION COMPLETION

15.1 Break Option Completion shall take place by 3.00 p.m. on the Break Option Completion Date at the Seller’s registered office, or at another place agreed by the Seller and the Buyer.

15.2 At Break Option Completion the Seller and the Buyer shall sign the Escrow Letter in the agreed form and the Buyer shall deliver the Escrow Letter to the Escrow Agent as soon as practicable at Break Option Completion.

15.3 At Break Option Completion:

15.3.1 the Seller shall:

(a) give to the Buyer a duly completed transfer of the Option Shares in favour of the Buyer (or as it directs) and a share certificate in respect of all the Option Shares or, where appropriate, renounceable documents of title; and

(b) sign all documents and take all other action necessary to enable the Buyer (or its nominee) to become the registered and beneficial owner of the Option Shares including the use of its voting and other rights arising by its holding of shares in the capital of the Company to ensure that the Buyer’s (or its nominee’s) name is entered in the register of members of the Company as the holder of the Option Shares; and

****  indicates material omitted and filed            separately with the Commission - 21 -

15.3.2 the Buyer shall:

(a) pay the Additional Capital Expenditure Amount due (if any) in full to the Seller in accordance with Clause 7.1.1(a);

(b) deliver the Break Fee to the Escrow Agent in full and ensure that this amount is immediately deposited into the Escrow Account;

(c) deliver to the Seller written evidence (in form and substance satisfactory to the Seller) that:

(i) the Finance Party Liabilities have been fully and irrevocably discharged; and

(ii) the Security has been fully and irrevocably released; and

(d) comply with its, and procure that the Company complies with its, obligations under the Share Subscription Agreement.

15.4 The Buyer and the Seller agree that money in the Escrow Account shall only be used in accordance with the provisions set out in Clause 21 and in the Escrow Letter. The Buyer and the Seller shall each ensure that all rights to the Escrow Account remain free from any Encumbrance, set-off or counterclaim except as referred to in Clause 21.

16. ENFORCEMENT OPTION COMPLETION

16.1 Enforcement Option Completion shall take place by 3.00 p.m. on the Enforcement Option Completion Date at the place determined by the Buyer.

16.2 At Enforcement Option Completion:

16.2.1 the Seller shall:

(a) give to the Buyer a duly completed transfer of the Option Shares in favour of the Buyer (or as it directs) and a share certificate in respect of all the Option Shares or, where appropriate, renounceable documents of title; and

(b) sign all documents and take all other action necessary to enable the Buyer (or its nominee) to become the registered and beneficial owner of the Option Shares including the use of its voting and other rights arising by its holding of shares in the capital of the Company to ensure that the Buyer’s (or its nominee) name is entered in the register of members of the Company as the holder of the Option Shares; and

16.2.2 the Buyer shall:

(a) pay the Additional Capital Expenditure Amount due (if any) and the Enforcement Fee in full to the Seller in accordance with Clause 8.1.1(a); and

****  indicates material omitted and filed            separately with the Commission - 22 -

(b) deliver to the Seller written evidence (in form and substance satisfactory to the Seller) that:

(i) the Finance Party Liabilities have been fully and irrevocably discharged; and

(ii) the Security has been fully and irrevocably released; and

(c) comply with its, and procure that the Company complies with its, obligations under the Share Subscription Agreement.

17. POST BREAK OPTION COMPLETION

17.1 Promptly upon the determination of the Adjusted Break Fee in accordance with this Agreement, all amounts standing to the credit of the Escrow Account shall be disbursed as follows:

17.1.1 if the Adjusted Break Fee exceeds the amount standing to the credit of the Escrow Account, the Buyer shall pay to the Seller the amount of the excess, together with an amount equivalent to interest on the amount of the excess at the rate of LIBOR plus one (1) per cent. per annum for the period from the Break Option Completion Date to the date of payment and all amounts standing to the credit of the Escrow Account shall be paid to the Seller; or

17.1.2 if the Adjusted Break Fee payable under Clause 7 is less than the amount standing to the credit of the Escrow Account, such amounts shall be disbursed as follows:

(a) the Adjusted Break Fee shall be paid to the Seller, together with the interest that has accrued on the Adjusted Break Fee in the period from the Break Option Completion Date to the date of payment; and

(b) the balance (if any) on the Escrow Account shall be paid to the Buyer.

18. APPROVED FUEL CONTRACTS

18.1 Immediately prior to the Option Completion Date, BEPET’s rights and obligations under any Approved Fuel Contracts shall be novated to the Company so that:

18.1.1 the Company shall be:

(a) responsible for performing all the rights and obligations under or arising in respect of such Approved Fuel Contracts;

(b) responsible for all liabilities, claims and demands howsoever and whenever arising under such Approved Fuel Contracts; and

(c) be bound by the terms of such Approved Fuel Contracts in every way as if it had at all times been a party to such Approved Fuel Contracts in place of BEPET,

in each case, on and following the novation; and

****  indicates material omitted and filed            separately with the Commission - 23 -

18.1.2 the Company shall release and discharge BEPET from all further performance under such Approved Fuel Contracts and from all liabilities, claims and demands howsoever and whenever arising under such Approved Fuel Contracts.

19. PURCHASE OF APPROVED FUEL

19.1 On the Option Completion Date, the Fuel Expert shall carry out the Fuel Survey. BEPET shall pay the reasonable costs incurred by the Fuel Expert in carrying out the Fuel Survey.

19.2 No later than thirty (30) days after the Option Completion Date:

19.2.1 BEPET shall sell and the Buyer shall buy all the Actual Approved Fuel (including any Actual Approved Fuel that has subsequently been burnt at the Station post the Option Completion Date); and

19.2.2 the Buyer shall pay the Approved Fuel Price to BEPET or as BEPET directs in writing by transfer of funds for same day value to such account as shall have been notified to the Buyer by BEPET at least (3) Business Days before the Option Completion Date.

19.3 In the absence of manifest error, the determinations of the Fuel Expert made pursuant to this Clause 19 shall be final, conclusive and binding on BEPET and the Buyer.

20. RELEASE OF COLLATERAL

20.1 The Company shall, and the Buyer shall take all reasonable steps to procure that the Company shall:

20.1.1 from the Option Completion Date, procure that any cash collateral, financial or other guarantee, indemnity, undertaking or bond (as the case may be) provided by a Seller’s Group Company (other than the Company) (the “Collateral Provider”) for and on behalf of the Company, including under or in respect of the Industry Documents (each an “Intra-Group Obligation”), shall be unconditionally and irrevocably released if reasonably possible on, or if not, as soon as reasonably possible thereafter, the Option Completion Date; and

20.1.2 on each date on which any cash collateral is released in accordance with Clause 20.1.1 above and paid to the Company and provided that such collateral is not accounted for in the Completion Accounts, pay an amount equal to such cash collateral to the relevant Collateral Provider.

20.2 Pending the release of any Collateral Provider from all liability under or in respect of an Intra-Group Obligation, the Buyer shall indemnify each Collateral Provider on demand in respect of all costs, fees or other charges incurred on or after the Option Completion Date by each Collateral Provider under or in respect of such Intra-Group Obligation. This indemnity shall survive termination of this Agreement.

****  indicates material omitted and filed            separately with the Commission - 24 -

20.3 The Company shall, and the Buyer shall procure that the Company shall:

20.3.1 on and from the Option Completion Date, procure that any cash collateral, financial or other guarantee, indemnity, undertaking or bond (as the case may be) provided by the Company prior to the Option Completion Date under or in respect of:

(a) the Industry Documents;

(b) the Gale Common Licence (including under the Gale Common Escrow Agreement); and

(c) the Heavy Fuel Oil Agreement

the Heavy Fuel Oil Agreement

is unconditionally and irrevocably released if reasonably possible on, or if not, as soon as reasonably possible thereafter, the Option Completion Date; and

20.3.2 on each date on which any cash collateral is released in accordance with Clause 20.3.1 above, pay an amount equal to such cash collateral to the Seller.

21. ESCROW ACCOUNT

21.1 If the Seller or the Buyer is entitled to money from the Escrow Account, the Seller and the Buyer shall promptly (and in any event within seven days of the date on which the entitlement arises) (the “Due Date”) jointly instruct the Escrow Agent in writing to release the money to the Seller and/or the Buyer (as the case may be) together with an amount (less any tax and other amount the Escrow Agent is legally required to deduct from that amount) equal to the interest actually accrued on such sum (accrued daily and compounded monthly) calculated for the period from the Option Completion Date to the date of payment (both dates inclusive).

21.2 Interest accruing from time to time on the balance of money standing to the credit of the Escrow Account shall be added to the money standing to the credit of the Escrow Account and shall form part of it for the purposes of this Clause 21.

21.3 The Seller and the Buyer shall each pay one half of the Escrow Agent’s costs in respect of any work done pursuant to this Clause 21.

21.4 The Buyer and the Seller acknowledge that the Escrow Agent may withdraw from the Escrow Account an amount of tax on the interest earned in respect of money held in the Escrow Account for which it is or may become liable.

21.5 If either the Buyer or the Seller fails to give an instruction pursuant to Clause 21.1 in accordance with the provisions of this Agreement, the party in default shall pay interest on the sum concerned from the Due Date until the date on which its obligation to pay the money is discharged at the rate of LIBOR plus one (1) per cent. per annum.

****  indicates material omitted and filed            separately with the Commission - 25 -

22. PENSIONS

22.1 The Buyer shall enter into all such documents and do all such other things as may be necessary in order to procure (subject to the consent of any third party that may be required including the Inland Revenue) that, with effect from the Option Completion Date:

22.1.1 the Buyer shall be appointed as the Principal Employer of the British Energy Combined Group (the “BECG”) of the Electricity Supply Pension Scheme (the “ESPS”), in substitution for the Seller’s Group Company that is the Principal Employer of the BECG immediately before the Option Completion Date (the “Existing Principal Employer”);

22.1.2 those Employees who are in contributing service under the BECG immediately before the Option Completion Date shall continue in contributing service under the BECG on the same terms from the Option Completion Date (although this shall not be construed so as to prevent the Buyer from subsequently providing benefits applicable under the BECG for the Employees under a different arrangement); and

22.1.3 the Existing Principal Employer (and each other Seller’s Group Company that has participated in the BECG before the Option Completion Date) shall be discharged from all functions, duties, obligations and liabilities whatsoever in respect of the Employees and those members who, immediately prior to ceasing active membership of the BECG for the last time were employed by the Company, under and in relation to the BECG and the Buyer shall undertake full responsibility for all such functions, duties, obligations and liabilities, whether arising before or after the Option Completion Date. The Existing Principal Employer shall remain liable for all other functions, duties, obligations and liabilities arising out of or in connection with any other member of the BECG.

22.2 The Seller shall lend all reasonable assistance as the Buyer may request in relation to the Buyer’s obligations under Clause 22.1. The Buyer and the Seller shall co-operate with a view to ensuring an orderly transfer of the BECG to the Buyer as provided for in Clause 22.1, including in relation to:

22.2.1 changing the Group Trustees and the Group Administrator of the BECG; and

22.2.2 making appropriate alternative arrangements for the administration of the BECG, if any Seller’s Group Company is a party to those arrangements immediately before the Option Completion Date.

22.3 From the Option Completion Date, the Buyer shall indemnify, and keep indemnified, the Seller on demand against each loss, liability and/or cost which the Seller incurs, or which is asserted against or demanded from the Seller, under or in relation to the BECG as a result of the Buyer’s failure to comply with its obligations under Clause 22.1 and each loss, liability and/or

****  indicates material omitted and filed            separately with the Commission - 26 -

cost incurred as a result of defending or settling a claim alleging such a liability. This indemnity shall survive termination of this Agreement.

22.4 From the Option Completion Date, the Seller shall indemnify, and keep indemnified, the Buyer on demand against each loss, liability and/or cost which the Buyer incurs, or which is asserted against or demanded from the Buyer, under or in relation to the BECG in respect of those members of the BECG whose employer immediately prior to their last ceasing active membership of the BECG before the Option Completion Date was not the Company, and each loss, liability and/or cost incurred as a result of defending or settling a claim alleging such a liability. This indemnity shall survive termination of this Agreement.

23. WARRANTIES

23.1 The Seller warrants to the Buyer that each Warranty is true, accurate and not misleading at the date of this Agreement.

23.2 The Seller acknowledges that the Buyer is entering into this Agreement in reliance on each Warranty, which has also been given as a representation and with the intention of inducing the Buyer to enter into this Agreement.

24. RESTRICTIONS

24.1 Until the Option Completion Date the Seller may not (without having first obtained the Buyer’s written consent):

24.1.1 sell, transfer or otherwise dispose of any interest in any of the Option Shares or any right attaching to the Option Shares; or

24.1.2 create or allow to be created any Encumbrance over any of the Option Shares other than a Permitted Encumbrance.

25. TAX AND OTHER COSTS AND EXPENSES

25.1 Upon the receipt of any amount under the Tax Deed of Covenant (as defined in the Credit Agreement), the Seller shall forthwith subscribe that amount for Deferred Shares (as defined in the Share Subscription Agreement) in the Company and procure that the Company applies the proceeds of the share subscription in settlement of the Tax liability which gave rise to the payment under the Tax Deed of Covenant.

25.2 The Seller hereby agrees that upon being given evidence reasonably satisfactorily to it that the Buyer has, solely as a result of the grant (but not the actual exercise or completion) of the Option, paid stamp duty in respect of this Agreement or has accounted for stamp duty reserve tax in respect of the grant of the Option, the Seller will within 10 Business Days reimburse to the Buyer the amount of such stamp duty or (as the case may be) stamp duty reserve tax. If the Seller so requests, the Buyer will use all reasonable endeavours to assist the Seller to minimise the stamp duty or stamp duty reserve tax due on the grant of the Option. For the avoidance of doubt, all stamp duty or stamp duty reserve tax due in respect of the exercise of the Option or

****  indicates material omitted and filed            separately with the Commission - 27 -

Completion shall be paid by the Buyer and will not be reimbursed by the Seller. If the Buyer so requests, the Seller will use all reasonable endeavours to assist the Buyer to minimise the stamp duty or stamp duty land tax due on exercise of the Option.

25.3 The Seller and the Buyer shall make all reasonable efforts to ensure the Company ceases from the Option Completion Date, to be treated by HM Customs & Excise as a member of a group with a Seller’s Group Company for the purposes of section 43 to 43C (inclusive) of the Value Added Tax Act 1994 and/or paragraph 6 of SI 2001/7 (Climate Change Levy). Where the Company is in a group for the purposes of Value Added Tax (“VAT”) or Climate Change Levy (“CCL”) (or any substantially similar tax group) with a Seller’s Group Company after the Option Completion Date, such payments shall be made by the Company to, or to the Company by, the representative member of the VAT, CCL or other group to ensure that (ignoring in the case of VAT, supplies between members of that VAT group) the representative member and the Company are put in the position they would have been had the relevant group not been in existence from the Option Completion Date. The Seller and the Buyer shall take such steps as are reasonably within their powers for so long as may be reasonably necessary to give each other all the assistance and co-operation as may be required to enable the representative member of any such VAT or CCL or other group to comply with its obligations as representative member of the relevant group. The Seller shall pay to the Buyer an amount equal to any liability of the Company for VAT and/or CCL debts incurred by the Company in consequence of the joint and several liability of members of VAT or CCL groups where the liability is one the Company would not have incurred had no VAT or CCL group (as the case may be) been in existence between the Company and a Seller’s Group Company.

25.4 The Buyer agrees with the Seller that if Completion takes place, the Buyer will procure that the Company does nothing after Break Option Completion or Enforcement Option Completion (as the case may be) that will give rise to a liability under section 767A or section 767AA Income and Corporation Taxes Act 1988 (or similar legislation enacted after the date hereof but before Completion takes place) for a Seller’s Group Company (or any person which is then or has been in control of a Seller’s Group Company, or is then or has been under the control of a Seller’s Group Company) in respect of or referable to Tax relating to income, profits or gains of the Company arising after Completion except to the extent:

25.4.1 such income, profits or gains have in accordance with generally applicable accounting standards been treated in the Company’s accounts as arising prior to Completion; or

25.4.2 that the liability only arises because of actions taken by a Seller’s Group Company (including the Company) before, or some actions undertaken before by a Seller’s Group Company (including the Company) and some undertaken by the Buyer or the Company after, Completion provided that this exception shall not apply to any actions taken by the Buyer or, after Completion, the Company outside the ordinary course of trading.

****  indicates material omitted and filed            separately with the Commission - 28 -

25.5 If any VAT is due in respect of any supply under this Agreement, the Buyer shall (against delivery of a valid VAT invoice), in addition to all other amounts due and payable by it hereunder, also make payment of such VAT and any amount equal to any penalty or interest incurred by the Seller for the late payment of VAT resulting from any failure or delay by the Buyer in making such payment under this Clause 25.5.

26. PAYMENTS

26.1 All payments made by the Buyer or the Seller under this Agreement shall be made gross, free of any right of counterclaim or set-off and without deduction or withholding of any kind other than any deduction or withholding required by law.

26.2 If the Buyer or the Seller makes a deduction or withholding required by law from a payment (other than a payment of interest) under this Agreement, the sum due from that party shall be increased to the extent necessary to ensure that, after the making of any deduction or withholding, the party to whom such amount is payable (including an Indemnified Party or Indemnified Parties) receives a sum equal to the sum it would have received had no deduction or withholding been made.

26.3 Nothing in this Clause 26 shall effect any obligation of the Escrow Agent which shall be governed instead by Clause 21.

27. CONVERSION TO EUROS

27.1 With effect from the date (if any) that the United Kingdom adopts the Euro as its lawful currency in substitution for pounds sterling (the “Euro Effective Date”):

27.1.1 payments falling due under this Agreement on or after the Euro Effective Date shall be made by the payer to the recipient in Euros;

27.1.2 no payments falling due after the Euro Effective Date which would have been payable in pounds sterling under this Agreement but for the adoption of the Euro by the United Kingdom as its lawful currency shall be made in pounds sterling or national currency units; and

27.1.3 on the Euro Effective Date, all amounts stated in pounds sterling shall be converted into Euros at the fixed conversion rate provided for by the Laws of England and Wales and, on and after the Euro Effective Date, all amounts required to be calculated in pounds sterling shall be calculated in Euros.

28. INVALIDITY OR ILLEGALITY

28.1 If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction (a “Relevant Event”), that shall not affect or impair:

28.1.1 the legality, validity or enforceability in that jurisdiction of any other provision of this Agreement; or

****  indicates material omitted and filed            separately with the Commission - 29 -

28.1.2 the legality, validity or enforceability under the law of any other jurisdiction of that or any other provision of this Agreement.

28.2 Immediately upon a party becoming aware of the occurrence or potential occurrence of a Relevant Event, each party shall use its reasonable endeavours to negotiate in good faith and settle within thirty (30) Business Days an agreement or provision which as closely as possible reflects the financial and commercial intent of the parties under this Agreement or under the relevant provision which is the subject of the Relevant Event.

29. GENERAL

29.1 A variation of this Agreement is valid only if it is in writing and signed by or on behalf of each party.

29.2 The failure to exercise or delay in exercising a right or remedy provided by this Agreement or by law does not impair or constitute a waiver of the right or remedy or an impairment of or a waiver of other rights or remedies. No single or partial exercise of a right or remedy provided by this Agreement or by law prevents further exercise of the right or remedy or the exercise of another right or remedy.

29.3 Each date, time or period referred to in this Agreement is of the essence. If the parties agree in writing to vary a date, time or period, the varied date, time or period is of the essence.

29.4 Except to the extent that they have been performed and except where this Agreement provides otherwise the obligations contained in this Agreement remain in force after the Option Completion Date.

29.5 A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement but this does not affect any right or remedy of a third party which exists or is available apart from that Act.

30. ENTIRE AGREEMENT

30.1 This Agreement and each document referred to in it constitute the entire agreement and supersede any previous agreement between the parties relating to the subject matter of this Agreement.

30.2 The Buyer acknowledges that it has not relied on or been induced to enter into this agreement by any representation, warranty or undertaking (whether contractual or otherwise) given by or on behalf of the Seller, its directors, officers or employees other than those expressly given in this Agreement.

30.3 The Seller is not liable to the Buyer (in equity, contract or tort (including negligence), under the Misrepresentation Act 1967 or in any other way) for a representation, warranty or undertaking that is not set out in this Agreement.

30.4 The Seller acknowledges and represents that it has not relied on or been induced to enter into this Agreement by any representation, warranty or undertaking (whether contractual or otherwise) given by or on behalf of the Buyer or any adviser other than those expressly given in this Agreement.

****  indicates material omitted and filed            separately with the Commission - 30 -

30.5 The Buyer is not liable to the Seller (in equity, contract or tort (including negligence), under the Misrepresentation Act 1967 or in any other way) for a representation, warranty or undertaking that is not set out in this Agreement.

30.6 The Buyer has not entered into this Agreement in reliance on any representation, statement, assurance, covenant, undertaking, indemnity, guarantee or commitment of any kind whatsoever and the Buyer will not have any remedy against the Seller in respect of any representation, statement, assurance, covenant, undertaking indemnity, guarantee, or commitment of any kind whatsoever made on or prior to the date of this Agreement.

30.7 Nothing in this Clause 30 shall have the effect of limiting or restricting any liability arising as a result of any fraud, wilful misconduct or wilful concealment or for personal injury or death resulting from negligence.

31. ASSIGNMENT

31.1 No party may (nor purport to) assign or transfer, or declare a trust of the benefit of, or in any other way dispose of any of its rights under this Agreement, in whole or in part, without first having obtained the other parties prior written consent, save that:

31.1.1 the Buyer shall be entitled to make a Disposal to a Third Party in accordance with Clauses 32 to 35; and

31.1.2 The Seller shall be entitled to assign and/or transfer all (but not part only) of its rights under this Agreement to BEH by way of security for the First Intercompany Loan Agreement.

31.2 Subject to Clause 31.1.1, during the Close Period the Buyer may not enter into any agreement or other arrangement:

31.2.1 that relates to the exercise of any of its rights under this Agreement; or

31.2.2 to assign or transfer or declare a trust of the benefit of or in any other way dispose of all or any of the Option Shares after an Option Completion Date.

32. SELLER’S OFFER

32.1 Prior to committing to make a Disposal to a Third Party, the Buyer shall first serve on the Seller:

32.1.1 a Disposal Notice, signed by the Buyer;

32.1.2 a copy of the Third Party Disposal Agreement; and

32.1.3 a Disposal Agreement in duplicate, one copy of which shall be signed by the Buyer.

****  indicates material omitted and filed            separately with the Commission - 31 -

32.2 The offer constituted by a Disposal Notice served on the Seller shall be irrevocable during the Acceptance Period.

33. BUYER’S ENQUIRIES

After service of any Disposal Notice on the Seller and until the earlier of acceptance by the Seller of the offer constituted by such Disposal Notice or the expiration of the Acceptance Period, the Buyer shall reply promptly and in writing to any reasonable enquiry put to them by the Seller or its advisers relating to the proposed Disposal, the Third Party Disposal Agreement and/or the Disposal Agreement. In the event that the Buyer fails to reply within two (2) Business Days to any such enquiry, the Acceptance Period shall be extended by a period equal to the period commencing on the date such enquiry is made and ending on the date the Buyer replies in writing to such enquiry.

34. SELLER’S ACCEPTANCE

If the Seller wishes to accept the offer constituted by a Disposal Notice, a Seller’s Group Company shall do so by signing and dating the copy of the Disposal Agreement served with such Disposal Notice and by returning it to the Buyer within the Acceptance Period.

35. NON-ACCEPTANCE OF BUYER’S OFFER

35.1 If, within the Acceptance Period, a Seller’s Group Company does not accept the offer constituted by the Disposal Notice served on the Seller, the Buyer may, during the Disposal Period, enter into the Third Party Disposal Agreement but at not less than the Third Party Purchase Price and otherwise on terms, in all material respects, the same as those contained in the Third Party Disposal Agreement served on the Seller with such Disposal Notice.

35.2 The Buyer agrees with the Seller:

35.2.1 within 5 Business Days of the Buyer entering into the Third Party Disposal Agreement with a Third Party, to provide to the Seller a copy thereof, certified by the Buyer’s Solicitors; and

35.2.2 within 5 Business Days of completion of the transaction contemplated by such Third Party Disposal Agreement, to notify the Seller in writing of such completion.

35.3 If, by the date of expiration of the Disposal Period, the Buyer and the Third Party have not entered into the Third Party Disposal Agreement or, if the Buyer and the Third Party have but the Disposal thereby contemplated has not been completed, the Buyer shall only make such Disposal (and/or any other Disposal) by again first complying with the provisions of Clauses 31 to 35.

36. CONFIDENTIALITY

36.1 Subject to Clause 36.2, the Buyer may not, and the Buyer shall procure that each party to a Third Party Disposal Agreement and/or any Transferee shall not, disclose any Confidential Information.

****  indicates material omitted and filed            separately with the Commission - 32 -

36.2 The Buyer may, and any party to a Third Party Disposal Agreement and/or any Transferee may:

36.2.1 disclose Confidential Information to any Finance Party, provided that such Finance Party has first entered into a confidentiality undertaking in form and substance reasonably satisfactory to the Seller;

36.2.2 disclose any Confidential Information:

(a) if and to the extent required by law or for the purpose of any judicial proceedings;

(b) if and to the extent required by any securities exchange or regulatory or governmental body to which that party is subject or submits, wherever situated, including the Stock Exchange, the Financial Services Authority or the Panel on Takeovers and Mergers, whether or not the requirement for information has the force of law;

(c) to any of its directors or employees who needs to know such Confidential Information in order to discharge his duties;

(d) to its professional advisers, auditors and bankers;

(e) if and to the extent that the Buyer can demonstrate that the Confidential Information has come into the public domain through no fault of the Buyer; or

(f) if and to the extent the Seller and the Company has given prior written consent; and

36.2.3 disclose any Confidential Information detailed in any Evaluation in accordance with Clause 12.

36.3 The restrictions contained in this Clause 36 shall continue to apply after the termination of this Agreement without limit in time.

37. NOTICES

37.1 A notice or other communication under or in connection with this Agreement (a “Notice”) shall be:

37.1.1 in writing;

37.1.2 in the English language; and

37.1.3 delivered personally or sent by first class post pre-paid recorded delivery (and air mail if overseas) or by fax to the party due to receive the Notice to the address or fax number set out in Clause 37.3 or to another address or fax number specified by that party by not less than five (5) Business Days written notice to the other party received before the Notice was despatched.

****  indicates material omitted and filed            separately with the Commission - 33 -

37.2 Unless there is evidence that it was received earlier, a Notice is deemed given if:

37.2.1 delivered personally, when left at the address referred to in Clause 37.3;

37.2.2 sent by mail, except air mail, two (2) Business Days after posting it;

37.2.3 sent by air mail, six (6) Business Days after posting it; and

37.2.4 sent by fax, when confirmation of its transmission has been recorded by the sender’s fax machine.

37.3 The address referred to in Clause 37.1.3 is:

Name of party	Address
The Seller	Eggborough Power (Holdings) Limited 3 Redwood Crescent Peel Park East Kilbride G74 5PR Attention: Corporate Affairs Director and Company Secretary Telephone: 01355 594 020 Facsimile: 01355 594 022
The Buyer	5 The North Colonnade Canary Wharf London E14 4BB Attention: ********
The Company	Eggborough Power Limited Barnett Way Barnwood Gloucester Gloucestershire GL4 3RS, Attention: Corporate Affairs Director and Company Secretary Telephone: 01355 594 020 Facsimile: 01355 594 022

****  indicates material omitted and filed            separately with the Commission - 34 -

BEPET British Energy Power and Energy Trading Limited 3 Redwood Crescent Peel Park East Kilbride G74 5PR Attention: Corporate Affairs Director and Company Secretary Telephone: 01355 594 020 Facsimile: 01355 594 022

38. TERM

38.1 Unless an Option has been exercised and not revoked hereunder; or (ii) a Clause is expressed to survive termination of this Agreement, all provisions of this Agreement shall terminate on the earliest of the following:

38.1.1 the exercise by the Buyer of an Option (as defined in the Asset Option Agreement);

38.1.2 the occurrence of an Enforcement Event;

38.1.3 1 April 2010; and

38.1.4 otherwise with the agreement of all parties hereto.

39. GOVERNING LAW AND JURISDICTION

39.1 This Agreement is governed by English law.

39.2 The courts of England have exclusive jurisdiction to settle any dispute arising from or connected with this Agreement (a “Dispute”).

39.3 The parties agree that the courts of England are the most appropriate and convenient courts to settle any Dispute and, accordingly, that they will not argue to the contrary.

39.4 The parties agree that the documents which start any proceedings relating to a Dispute (“Proceedings”) and any other documents required to be served in relation to those Proceedings may be served in accordance with Clause 37. These documents may, however, be served in any other manner allowed by law. This clause applies to all Proceedings wherever started.

40. COUNTERPARTS

This Agreement may be executed in any number of counterparts, each of which when executed and delivered is an original and all of which together evidence the same agreement.

****  indicates material omitted and filed            separately with the Commission - 35 -

SCHEDULE 1

COMPLETION ACCOUNTS

1. PART A

1.1 After the Option Completion Date the Buyer shall ensure that the Buyer’s Accountants prepare:

1.1.1 draft Completion Accounts; and

1.1.2 a draft Statement.

The Seller and the Buyer shall each pay one half of the Buyer’s Accountants’ costs incurred under this Paragraph 1.1.

1.2 Except as agreed between the Buyer and the Seller prior to the Restructuring Date, the draft Completion Accounts shall be prepared on a basis consistent with the balance sheet in the Accounts, using the same accounting principles, policies and practices and, so far as consistent with the foregoing, applicable standards, principles and practices generally accepted in the United Kingdom as if they were statutory accounts required to be prepared under the Act. In preparing the draft Completion Accounts, no account is to be taken of an event taking place after the Option Completion Date or of facts or circumstances only known to the Buyer and/or Seller after the Option Completion Date, otherwise than pursuant to Paragraph 1.3.

1.3 After the Option Completion Date, the Seller shall provide the Buyer and the Buyer’s Accountants with access to those assets, documents and records within its possession or control which they may reasonably require for the purpose of preparing and agreeing the draft Completion Accounts and the draft Statement.

1.4 The Buyer shall ensure that within forty (40) Business Days starting on the Business Day after the Option Completion Date, the Buyer’s Accountants submit to the Seller’s Accountants:

1.4.1 the draft Completion Accounts, their working papers, and a report by the Buyer’s Accountants addressed to the Buyer and the Seller stating whether in their opinion the draft Completion Accounts have been prepared in accordance with Paragraph 1.2; and

1.4.2 the draft Statement.

1.5 Within twenty-five (25) Business Days starting on the Business Day after receipt of the draft Completion Accounts and the draft Statement, the Seller shall notify the Buyer whether or not it agrees with the draft Completion Accounts and the draft Statement. The Buyer shall ensure that the Seller and the Seller’s Accountants are given access to all additional information they may reasonably require to enable the Seller to make its decision.

****  indicates material omitted and filed            separately with the Commission - 36 -

1.6 If the Seller notifies its agreement with the draft Completion Accounts and the draft Statement within the twenty-five (25) Business Day period referred to in Paragraph 1.5 or fails to give any notification within that period, the draft Completion Accounts and the draft Statement shall cease to be drafts and be final and binding on the Buyer and the Seller.

1.7 If the Seller notifies the Buyer within the twenty-five (25) Business Day period referred to in Paragraph 1.5 that it disagrees with the draft Completion Accounts or with the draft Statement, Paragraph 1.8 applies.

1.8 If, within ten (10) Business Days starting on the Business Day after receipt of the notification referred to in Paragraph 1.7, the Seller and the Buyer have not agreed the items in dispute in relation to the draft Completion Accounts or the draft Statement the Buyer or Seller may refer the matters in dispute to a partner of at least 10 years qualified experience at an independent firm of chartered accountants agreed by the Buyer and Seller in writing or, failing agreement on the identity of the firm of chartered accountants within fifteen (15) Business Days starting on the Business Day after receipt of the notification referred to in Paragraph 1.7, to an independent firm of chartered accountants appointed on the application of either the Buyer or Seller by the President for the time being of the Institute of Chartered Accountants in England and Wales (the “Determinator”).

1.9 The Determinator shall act on the following basis:

1.9.1 as an expert and not as an arbitrator;

1.9.2 the Determinator’s terms of reference shall be to determine the matters in dispute in respect of the draft Completion Accounts and draft Statement within twenty (20) Business Days of his appointment;

1.9.3 the Buyer and Seller shall each provide the Determinator with all information relating to the Company which the Determinator reasonably requires and the Determinator shall be entitled (to the extent he considers appropriate) to base his determination on such information and on the accounting and other records of the Company;

1.9.4 the decision of the Determinator shall, in the absence of fraud or manifest error, be final and binding on the Buyer and the Seller; and

1.9.5 the Seller and the Buyer shall each pay one half of the Determinator’s costs or as the Determinator may determine.

1.10 The draft Completion Accounts and the draft Statement adjusted in accordance with the agreement, if any, between the Seller and the Buyer pursuant to Paragraph 1.8 or (as the case may be) the decision of the Determinator in accordance with Paragraph 1.9 shall cease to be drafts and be final and binding on the Buyer and the Seller.

****  indicates material omitted and filed            separately with the Commission - 37 -

SCHEDULE 2

FORM OF SHARE OPTION NOTICE

[BUYER’S LETTERHEAD]

To: Eggborough Power (Holdings) Limited

3 Redwood Crescent

Peel Park

East Kilbride

G74 5PR

cc. British Energy Power and Energy Trading Limited

3 Redwood Crescent

Peel Park

East Kilbride

G74 5PR

Eggborough Power Limited

Barnett Way

Barnwood

Gloucester

Gloucestershire

GL4 3RS

Date: [·]

BY HAND

BY REGISTERED/RECORDED DELIVERY POST

SHARE OPTION NOTICE

1. We refer to the Share Option Agreement dated      September 2004 between Eggborough Power (Holdings) Limited, Barclays Bank PLC, Eggborough Power Limited and British Energy Power and Energy Trading Limited (the “Share Option Agreement”).

2. Terms defined in the Share Option Agreement shall have the same meanings in this Share Option Notice unless the context requires otherwise. References to a “Clause” are to a clause of the Share Option Agreement.

3. The Buyer hereby notifies the Seller pursuant to Clause 4.1.2 that it wishes to exercise the Option granted in Clause 3.1.1.

****  indicates material omitted and filed            separately with the Commission - 38 -

4. The Option Completion Date shall be the Break Option Completion Date.

Signed by [·]

Director/Secretary

for and on behalf of

Barclays Bank PLC

acting as agent and security trustee

for the Finance Parties

****  indicates material omitted and filed            separately with the Commission - 39 -

SCHEDULE 3

FORM OF ENFORCEMENT OPTION NOTICE

[BUYER’S LETTERHEAD]

To: Eggborough Power (Holdings) Limited

3 Redwood Crescent

Peel Park

East Kilbride

G74 5PR

cc. British Energy Power and Energy Trading Limited

3 Redwood Crescent

Peel Park

East Kilbride

G74 5PR

Eggborough Power Limited

Barnett Way

Barnwood

Gloucester

Gloucestershire

GL4 3RS

Date: [·]

BY HAND

BY REGISTERED/RECORDED DELIVERY POST

ENFORCEMENT OPTION NOTICE

1. We refer to the Share Option Agreement dated      September 2004 between Eggborough Power Holdings Limited, Barclays Bank PLC, Eggborough Power Limited and British Energy Power and Energy Trading Limited (the “Share Option Agreement”).

2. Terms defined in the Share Option Agreement shall have the same meanings in this Share Option Notice unless the context requires otherwise. References to a “Clause” are to a clause of the Share Option Agreement.

3. The Buyer hereby notifies the Seller pursuant to Clause 5.1.2 that it wishes to exercise the Option granted in Clause 3.1.2.

****  indicates material omitted and filed            separately with the Commission - 40 -

4. The Buyer hereby notifies the Seller that the Enforcement Option Completion Date shall be [•].

Signed by [·]

Director/Secretary

for and on behalf of

Barclays Bank PLC

acting as agent and security

trustee for the Finance Parties

****  indicates material omitted and filed            separately with the Commission - 41 -

(On duplicate)

Eggborough Power (Holdings) Limited acknowledges receipt of the notice from Barclays Bank PLC of which this is a duplicate, and confirms acceptance of its terms.

Dated: [·]

Signed by [·]

Director/Secretary

****  indicates material omitted and filed            separately with the Commission - 42 -

SCHEDULE 4

WARRANTIES

Incorporation and existence

1. The Seller is a limited company incorporated under Scottish law and has been in continuous existence since incorporation.

Right, power, authority and action

2. The Seller has the right, power and authority, and has taken all action necessary, to execute, deliver and exercise its rights, and perform its obligations, under this Agreement.

3. The Seller has the right, power and authority to conduct its business as conducted at the date of this Agreement.

Binding agreements

4. The Seller’s obligations under this Agreement are enforceable in accordance with their terms.

****  indicates material omitted and filed            separately with the Commission - 43 -

SCHEDULE 5

INSTRUCTION LETTER TO ESCROW AGENT

TO: [insert name and address of Escrow Agent]

Dear Sirs

Escrow Account

We are writing to confirm the terms on which money deposited with you today by Barclays Bank PLC (the “Buyer”) (the “Escrow Fund”) is to be held by you on trust for us. These terms are:

1. You shall maintain the Escrow Fund in a separately designated interest-bearing account with [Bank] in your name.

2. Subject to Paragraph 4 below, you shall pay or hold the Escrow Fund (or any part of it) to or for the person or in the manner directed in our joint written instructions.

3. If either of us (the “Payee”):

3.1 notifies you that the other is in breach of its obligation to notify or has not complied with its obligation to instruct you to pay an amount in accordance with the share option agreement dated      September 2004 between us, Eggborough Power Limited and British Energy Power and Energy Trading Limited; and

3.2 produces evidence in writing that the other has accepted that the Payee is entitled to be paid the amount notified or a decision of a tax authority or a judgment of a court of competent jurisdiction against which no appeal has been lodged or is capable of being lodged within the statutory time limit to the effect that the Payee is entitled to be paid the amount notified, you shall pay or hold the amount notified to or for the Payee or in the manner directed in the Payee’s written instructions.

4. You may withdraw from the Escrow Fund an amount of tax on the interest earned in respect of the Escrow Fund for which you are or may become liable.

5. We shall each pay one half of your costs in respect of any work done pursuant to the terms of this letter.

****  indicates material omitted and filed            separately with the Commission - 44 -

6. This letter shall be governed by and construed in accordance with English law.

Yours sincerely

Signed by [·]

Director/Secretary

for and on behalf of

Eggborough Power (Holdings) Limited

Signed by [·]

Director/Secretary

for and on behalf of

Barclays Bank PLC

acting as agent and

security trustee for the

Finance Parties

****  indicates material omitted and filed            separately with the Commission - 45 -

SCHEDULE 6

ENFORCEMENT FEE

£ (millions)

From:	April-03	April-04	April-05	April-06	April-07	April-08	April-09
To:	March-04	March-05	March-06	March-07	March-08	March-09	August-09
April	—	29	57	76	89	104	104
May	—	32	58	77	91	104	104
June	—	34	60	78	92	104	104
July	—	36	62	79	93	104	104
August	—	39	63	80	95	104	104
September	—	41	65	81	96	104
October	—	43	66	83	97	104
November	5	46	68	84	99	104
December	10	48	70	85	100	104
January	16	50	71	86	101	104
February	21	53	73	87	103	104
March	27	55	75	88	104	104

****  indicates material omitted and filed            separately with the Commission - 46 -

SCHEDULE 7

FORM OF DISPOSAL NOTICE

To: Eggborough Power (Holdings) Limited 3 Redwood Crescent Peel Park East Kilbride G74 5PR BY HAND or BY REGISTERED/RECORDED DELIVERY POST

1. We refer to the Share Option Agreement (the “Option Agreement”) dated      September 2004 between Eggborough Power (Holdings) Limited, Eggborough Power Limited, British Energy Power and Energy Trading Limited and Barclays Bank PLC.

2. Terms defined in the Option Agreement shall have the same meanings in this Disposal Notice unless the context otherwise requires.

3. We, Barclays Bank PLC Registration No. 01026167, as Buyer offer to make to you the Disposal referred to in the contract (being a Disposal Agreement (as defined in the Option Agreement)) which accompanies this notice in duplicate, one copy of which has been signed by us.

4. If you wish to accept the offer constituted by this notice, a Seller’s Group Company must do so by signing and dating the copy of the contract which has been signed by us and then returning such copy to us within the Acceptance Period referred to in the Option Agreement.

Dated [·]

Director/Company Secretary for and

on behalf of Barclays Bank PLC

acting as agent and security

trustee for the Finance Parties

****  indicates material omitted and filed            separately with the Commission - 47 -

SCHEDULE 8

CONFIDENTIALITY UNDERTAKING

STRICTLY PRIVATE AND CONFIDENTIAL

To: [·]

Date:    [·]

Dear Sirs,

Eggborough Power Limited (registered number 03782700) (the “Company”)

We understand that you wish to access the coal fired power station located at Eggborough (the “Plant”) owned by us for the purposes of performing due diligence on the Plant including (but not limited to) engineering due diligence for the purposes of considering a potential direct or indirect investment (that may include the purchase of an option to buy all the issued shares in the Company) (the “Permitted Purpose”).

Unless otherwise defined, terms in this letter have the same meaning as given in the Credit Agreement.

“Act” means the Companies Act 1985.

“Credit Agreement” means the credit agreement originally dated 13 July 2000 as amended and restated on 8 September 2000, 24 October 2000, 12 December 2000, 5 February 2001 and on or about the Restructuring Date between, inter alios, the Company and Barclays Bank PLC as agent and security trustee.

“Information” means information of whatever nature relating to the Group supplied to you or your advisers by or on behalf of the Company or any other member of the Group in writing, orally or otherwise and includes any information obtained by you, in writing or orally, through discussions with the management, employees and advisers of the Company or any other member of the Group, together with any reports, analyses, compilations, studies or other documents prepared by you or on your behalf which contain or otherwise reflect such information, but “Information” shall not include such information which is in or which comes into the public domain other than as a result of:

(a) a breach by you of the obligations imposed by this letter (or by any person to whom disclosure of information is made as permitted under this letter); or

(b) a breach by you (or any other such person) of any other duty of confidentiality relating to that information.

1. In consideration of the Company agreeing to supply you Information, you acknowledge that the Information is confidential and is received by you under a duty of confidentiality to the Company and for the exclusive purpose of the Permitted Purpose, and you undertake with the Company as follows:

1.1 You will keep confidential and not disclose to any person, other than as permitted under Sub-paragraph 1.4, your interest in, and your discussions and negotiations with, the Banks, the Company and any other member of the Group in connection with the Permitted Purpose;

****  indicates material omitted and filed            separately with the Commission - 48 -

1.2 You will keep all Information confidential and in a secure place and not disclose any Information to any person, other than as permitted under Sub-paragraph 1.4;

1.3 You will use Information solely for the Permitted Purpose and not for any other purpose;

1.4 You will not, without the prior written consent of the Company, disclose any Information to any person other than those of your senior executives, the senior executives of your associated undertakings, employees and those members of your professional advisers who, in each case, need to know the Information for the purpose of evaluating or advising (as appropriate) in relation to the Permitted Purpose or (subject to Sub-paragraph 1.6) as required by law or other regulation applicable to you save that, where you have acquired all the issued shares in the Company, you shall be entitled to disclose such information as would no longer be proprietary to the Group;

1.5 You will procure that each person to whom disclosure of Information is made as permitted under Sub-paragraph 1.4 is made aware (in advance of disclosure) of the terms of this letter and you will procure that each such person provides a confidentiality undertaking to you on substantially the same terms as this undertaking and also includes an express acknowledgement and confirmation that such person extends the terms of such undertaking for the benefit of each member of the Group; and

1.6 You will promptly notify the Company and EPHL in writing if any Information is required to be disclosed by law or other regulation or any stock exchange whether in the United Kingdom or elsewhere and cooperate with the Company its ultimate parent regarding the timing and content of such disclosure or any action which the Company or its ultimate parent may reasonably elect to take to challenge the validity of such requirement.

2. You further acknowledge and confirm to the Company that:

2.1 Your obligations under this letter shall extend to protect each and every member of the Group; and

2.2 Your obligations under this letter shall be continuing for a period of two years from the date of this letter, in particular they shall survive the termination of any discussions or negotiations between you, the Company, and each other member of the Group and the Banks regarding the Plant and/or the issued shares in the Company.

3. The Company and any other member of the Group are permitted to enforce the terms of this letter against you under the Contracts (Rights of Third Parties) Act 1999.

****  indicates material omitted and filed            separately with the Commission - 49 -

4. Please note that, by providing to you Information, the Company and each other member of the Group makes no representation or warranty to you or any other recipient of the Information as to the accuracy or completeness of the Information or to the accuracy or completeness of the copies of the Information.

Please indicate your acceptance of the above by signing and returning the enclosed copy of this letter under confidential cover as soon as possible.

Yours faithfully,

Station Director

for and on behalf of

Eggborough Power Limited

[Authorised Signatory]

for and on behalf of

Eggborough Power (Holdings) Limited

Accepted and agreed:

for and on behalf of [·]

****  indicates material omitted and filed            separately with the Commission - 50 -

EXECUTED by the parties:
Signed by	)
a duly authorised representative of/	)
for and on behalf of	)
EGGBOROUGH POWER	)	ROBERT ARMOUR
(HOLDINGS) LIMITED	)
Signed by	)
a duly authorised representative of/	)
for and on behalf of	)	SIMON DEAVES
BARCLAYS BANK PLC	)
Signed by	)
a duly authorised representative of/	)
for and on behalf of	)	ROBERT ARMOUR
EGGBOROUGH POWER LIMITED	)
Signed by	)
a duly authorised representative of/	)
for and on behalf of	)
BRITISH ENERGY POWER AND	)	ROBERT ARMOUR
ENERGY TRADING LIMITED	)

****  indicates material omitted and filed            separately with the Commission - 51 -

EX-4.32

Exhibit 4.32

CONFORMED COPY

DEBENTURE

DATED 30 SEPTEMBER, 2004

Between

EGGBOROUGH POWER LIMITED

BRITISH ENERGY POWER AND ENERGY TRADING LIMITED

EGGBOROUGH POWER (HOLDINGS) LIMITED

and

BARCLAYS BANK PLC

as Security Trustee

THIS DEBENTURE IS ENTERED INTO

SUBJECT TO AND WITH THE BENEFIT OF

THE TERMS OF AN INTERCREDITOR DEED

ORIGINALLY DATED 8^TH SEPTEMBER, 2000

AS AMENDED BY AN

AMENDMENT AND RESTATEMENT DEED DATED 30 SEPTEMBER, 2004

ALLEN & OVERY LLP

LONDON

CONTENTS

Clause		Page
1.	Interpretation	3
2.	Fixed Security	6
3.	Floating Charge	9
4.	Covenants for Title	11
5.	Representations and Warranties	11
6.	General Undertakings	12
7.	Property Undertakings	13
8.	Security Accounts	15
9.	Relevant Agreements	16
10.	CTA Bonds	16
11.	When Security becomes Enforceable	17
12.	Enforcement of Security	17
13.	Receiver	18
14.	Powers of Receiver	19
15.	Application of Proceeds	22
16.	Delegation	22
17.	Further Assurances	22
18.	Power of Attorney	23
19.	Miscellaneous	23
20.	Release	24
21.	Governing Law	25
Schedule
1.	Real Property	26
2.	Relevant Agreements	27
	Form of Letters to the Account Bank	28
	Form of Notice to the Account Bank	28
	Form of Acknowledgement of the Account Bank	30
	Form of Letter from the Security Trustee to the Account Bank	32
3.	Forms of Notice of Assignment	34
	Form of Notice of Assignment to Insurer(s)	34
	Form of Acknowledgement from Insurer	36
	Form of Notice of Assignment in Respect of Relevant Agreements	37
	Form of Acknowledgement of [Relevant Party]	39
4.	Forms of Letters to the Principal Paying Agent	40
	Form of Notice to Principal Paying Agent	40
	Form of Acknowledgement of Principal Paying Agent	41
	Signatories	42

THIS DEBENTURE is dated 30 September, 2004 BETWEEN:

(1) EGGBOROUGH POWER LIMITED (Registered number 03782700) (the Chargor);

(2) BRITISH ENERGY POWER AND ENERGY TRADING LIMITED (Registered number SC200887) (BET);

(3) EGGBOROUGH POWER (HOLDINGS) LIMITED (Registered number SC201083) (EPHL); and

(4) BARCLAYS BANK PLC (the Security Trustee) as agent and trustee for the Finance Parties (as defined in the Credit Agreement referred to below), BET and EPHL.

WHEREAS:

(A) The Chargor enters into this Deed in connection with the Credit Agreement, the Capacity and Tolling Agreement, the Second Intercompany Loan Agreement (each as defined in the Credit Agreement as defined below).

(B) By deed of partial release dated on or about the date of this Deed, the Security Trustee (acting on the instructions of BE) and BE released and discharged the security created by the Chargor under the Existing Debenture in each case for the payment, discharge and performance of the Secured Subordinated Liabilities (as defined in the Existing Debenture).

(C) It is intended that this Deed takes effect as a deed notwithstanding the fact that a party may only execute this Deed under hand.

IT IS AGREED as follows:

1. INTERPRETATION

1.1 Definitions

In this Deed:

Act means the Law of Property Act 1925.

Certificate of Title means any certificate of title in relation to the Mortgaged Property provided by Clifford Chance LLP to the Security Trustee.

Credit Agreement means the credit agreement originally dated 13th July, 2000, as amended and restated on 8th September, 2000, 24th October, 2000, 12th December, 2000, 5th February, 2001 and on or about the date of this Deed, between, among others, the Chargor and the Security Trustee and under which a loan of £150,000,000 is made available to the Chargor.

CTA Bond Account has the meaning given to it in the Accounts Agreement.

CTA Bonds Transfer Form means a transfer form in respect of all the CTA Bonds (executed in blank by or on behalf of the Chargor) in substantially the same form as the transfer attached to the CTA Global Bond Certificate.

3

CTA Payment Liabilities means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of the Chargor to BET under the Capacity and Tolling Agreement together with all costs charges and expenses incurred in connection with the protection, preservation or enforcement of its rights under the Capacity and Tolling Agreement except for any obligation which, if it were so included, would result in this Deed constituting unlawful financial assistance under Sections 151 and 152 of the Companies Act 1985.

Discharge Date has the meaning given to it in the Intercreditor Deed.

Fixtures means all fixtures and fittings (including trade fixtures and fittings) and fixed plant and machinery on the Mortgaged Property.

Intellectual Property Rights means all know-how, patents, trade marks, service marks, designs, business names, topographical or similar rights, copyrights and other intellectual property monopoly rights and any interests (including by way of licence) in any of them (in each case whether registered or not and including all applications for the same).

Liabilities means the Senior Liabilities, the CTA Payment Liabilities and the Subordinated Liabilities.

Mortgaged Property means all freehold or leasehold property the subject of any security created by this Deed.

Premises means all buildings and erections included in the definition of Security Assets.

Principal Paying Agent has the meaning given to it in the Conditions.

Project Account has the meaning given to it in the Accounts Agreement.

Receiver means an administrative receiver, a receiver and manager or a receiver, in each case, appointed under this Deed.

Related Rights means any dividend or interest paid or payable in relation to any Share and any rights, moneys or property accruing or offered at any time in relation to any Shares by way of redemption, substitution, exchange, bonus or preference, under option rights or otherwise.

Relevant Agreements means the agreements listed in Schedule 2.

Saint Gobain UK Parent Guarantee means the guarantee dated 23rd October, 1998 granted by Saint-Gobain UK Limited in favour of the Chargor in respect of Saint-Gobain’s obligations under the Saint-Gobain Connection Agreement.

Second Security Assignment means the security assignment between the Chargor as assignor and EPHL as assignee.

Secured Parties means the Finance Parties, BET and EPHL.

Security Account has the meaning given to it in Clause 8 (Security Accounts).

Security Assets means all assets of the Chargor, the subject of any security created by this Deed. It includes the proceeds of sale of any Security Asset.

4

Security Period means the period beginning on the date of this Deed and ending on the date on which the Security Trustee is satisfied that all the Liabilities have been unconditionally and irrevocably paid and discharged in full.

Senior Liabilities means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of either Obligor to any Finance Party under each Finance Document together with all costs, charges and expenses incurred by any Finance Party in connection with the protection, preservation or enforcement of its respective rights under the Finance Documents or any other document securing any such liability except for any obligation (including, without limitation, any obligation of EPHL under the Share Option Agreement) which, if it were so included, would result in this Deed constituting unlawful financial assistance under Sections 151 and 152 of the Companies Act 1985.

Shares means any stocks, shares, debentures, bonds, warrants, coupons or other securities and investments (other than any deferred shares issued by the Issuer to the Chargor in accordance with the terms of the Share Subscription Agreement) owned (either now or in the future) by the Chargor from time to time.

Subordinated Liabilities means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of the Chargor to EPHL under the Second Intercompany Loan Agreement together with all costs charges and expenses incurred in connection with the protection, preservation or enforcement of its rights under the Second Intercompany Loan Agreement or any other document securing any such liability except for any obligation which, if it were so included, would result in this Deed constituting unlawful financial assistance under Sections 151 and 152 of the Companies Act 1985.

1.2 Construction

(a) Capitalised terms defined in the Credit Agreement or the Accounts Agreement have, unless expressly defined in this Deed, the same meaning in this Deed.

(b) The provisions of Clause 1.2 (Construction) of the Credit Agreement apply to this Deed as though they were set out in full in this Deed except that references to the Credit Agreement are to be construed as references to this Deed.

(c) The terms of the other Finance Documents, the Capacity and Tolling Agreement, the Second Intercompany Loan and of any side letters between any Parties in relation to any Finance Document are incorporated in this Deed to the extent required to ensure that any purported disposition of the Mortgaged Property contained in this Deed is a valid disposition in accordance with Section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989.

(d) If the Security Trustee considers that an amount paid by any Obligor to a Finance Party, BET or EPHL under a Finance Document, the Capacity and Tolling Agreement or the Second Intercompany Loan (as the case may be) is capable of being avoided or otherwise set aside on the liquidation or administration of that Obligor or otherwise, then that amount shall not be considered to have been irrevocably paid for the purposes of this Deed.

(e) For the avoidance of doubt, this Deed (or a provision of it) shall not constitute unlawful financial assistance for the purposes of the proviso to the definition of Senior Liabilities, CTA Payment Liabilities and Subordinated Liabilities in Clause 1.1 to the extent that it constitutes financial assistance within the meaning of the Sections cited in it but the

5

provisions of Section 155-158 of the Companies Act 1985 have been complied with in respect of the giving of such financial assistance.

(f) A person who is not a party to this Deed may not enforce its terms under the Contracts (Rights of Third Parties) Act 1999.

(g) This Deed is subject to the terms and conditions of the Intercreditor Deed and the security constituted by this Deed is, in each case, subject to the security constituted by the Existing Debenture.

(h) This Deed is subject to the terms and conditions of the Share Subscription Agreement and the rights and obligations of EPL, EPHL, the Security Trustee and/or any Receiver under this Deed are subject to the rights and obligations of EPL, EPHL, the Security Trustee and/or any Receiver under the Share Subscription Agreement.

(i) Nothing in this Deed will in any way affect or prejudice the provisions of the Existing Debenture, which shall (subject to the release referred to in Recital (B)) continue in full force and effect. It is intended that the rights of the Security Trustee, the Finance Parties and BET under this Deed shall, so far as it relates to them, be in addition to their rights under the Existing Debenture.

(j) The provisions of this Deed shall only become effective upon the occurrence of the Restatement Date.

1.3 Certificates

A certificate of the Security Trustee setting forth the amount of any Secured Liability due from the Chargor shall be conclusive evidence of such amount against the Chargor in the absence of manifest error.

2. FIXED SECURITY

2.1 Creation of first fixed security

The Chargor, as security for the payment of all the Liabilities, charges in favour of the Security Trustee for the benefit of the Secured Parties:

(a) by way of a first legal mortgage:

(i) all the property specified in Schedule 1; and

(ii) all estates or interests in any freehold or leasehold property (except any Security Assets specified in subparagraph (i)) now belonging to it; and

(b) by way of first fixed charge:

(i) (to the extent that they are not the subject of a mortgage under paragraph (a)) all present and future estates or interests in any freehold or leasehold property belonging to it;

(ii) all plant and machinery now or in the future owned by the Chargor and its interest in any plant or machinery in its possession;

6

(iii) its interest now or in the future in all the Shares and their Related Rights;

(iv) all moneys standing to the credit of any account (including the Project Accounts but excluding the Revenue Account and the Asset Option Account) and, to the extent the Chargor has any interest in any credit balance on the Security Accounts with any person and the debts represented by them and all Authorised Investments made from the Project Accounts, Investment Proceeds and Income (all as defined in the Accounts Agreement) arising in respect of such Authorised Investments and all rights to receive the same;

(v) to the extent not effectively assigned under Clause 2.3(a), all benefits in respect of the Insurances and all claims and returns of premiums in respect of them;

(vi) all of its rights, title and interest in and to the CTA Bonds;

(vii) all of the Chargor’s present and future book and other debts, the proceeds of the same and all other moneys due and owing to the Chargor and the benefit of all claims, rights, securities, receivables and guarantees of any nature enjoyed or held by it in relation to any of them;

(viii) (to the extent that they do not fall within any other subparagraph of this paragraph (b) and are not effectively assigned under Clause 2.3(a)) all of the Chargor’s rights and benefits under the Relevant Agreements, any distributorship or similar agreements entered into by it now, or in the future (including, for the avoidance of doubt, any new agreement which the Chargor may enter into pursuant to the Balancing and Settlement Code) any letters of credit issued in its favour and all bills of exchange and other negotiable instruments held by it;

(ix) any beneficial interest, claim or entitlement of the Chargor in any pension fund;

(x) its present and future goodwill;

(xi) the benefit of all present and future licences, permissions, consents and authorisations (statutory or otherwise) held in connection with its business or the use of any Security Asset specified in any other subparagraph in this Clause and the right to recover and receive all compensation which may be payable to it in respect of them;

(xii) its present and future uncalled capital; and

(xiii) its present and future Intellectual Property Rights.

2.2 Charge over Revenue Account and Asset Option Account

(a) Creation of first fixed security – Revenue Account and Asset Option Account

The Chargor:

(i) as security for the payment of all CTA Payment Liabilities, charges, by way of first fixed charge, in favour of the Security Trustee for the benefit of BET, all moneys standing to the credit of the Revenue Account and the debts

7

represented by them, together with all Authorised Investments made from the Revenue Account, all Investment Proceeds and Income arising in respect of such Authorised Investments and all rights to receive the same; and

(ii) as security for the payment of all Subordinated Liabilities, charges, by way of first fixed charge, in favour of the Security Trustee for the benefit of EPHL, all moneys standing to the credit of the Asset Option Account and the debts represented by them.

(b) Creation of second fixed security – Revenue Account

The Chargor as security for the payment of the Senior Liabilities, charges, by way of second fixed charge, in favour of the Security Trustee for the benefit of the Finance Parties, all moneys standing to the credit of the Revenue Account and the debts represented by them, together with all Authorised Investments made from the Revenue Account, all Investment Proceeds and Income arising in respect of such Authorised Investments and all rights to receive the same.

2.3 Assignments

(a) The Chargor as continuing security for the payment, discharge and performance of the Liabilities, assigns and agrees to assign to the Security Trustee (as agent and trustee) (i) all its right, title and interest (if any) in and to each Relevant Agreement and (ii) all of its present and future rights under and in respect of the Insurances.

(b) The Chargor, shall promptly give notice of each such assignment of its right, title and interest (if any):

(i) under and in respect of the Insurances and in the Insurance Proceeds by sending a notice in the form of Part 1 of Schedule 4 (with such amendments as the parties may agree) duly completed to each insurer of the Insurances; and

(ii) in and to the Relevant Agreements by sending a notice substantially in the form of Part 3 of Schedule 4 (with such amendments as the parties may agree) to each of the other parties to it or if any successor or replacement agreement is entered into after the date of this Deed, promptly after such successor or replacement agreement is entered into,

and the Chargor shall use its reasonable endeavours to procure that within 14 days of the date hereof (or, in the case of paragraphs (i) and (ii), if later, the date of entry into such Insurances or Relevant Agreements), each such other party delivers a letter of undertaking to the Security Trustee in the form of Part 2 of Schedule 4 (in the case of Insurances) or in the form of Part 4 of Schedule 4 (in the case of Relevant Agreements), in each case with such amendments as the Security Trustee may agree.

(c) To the extent that any such right, title and interest described in paragraphs (a) of this Clause 2.3 is not assignable or capable of assignment, the assignment purported to be effected shall operate as:

(i) in the case of the Insurances, an assignment of any and all proceeds of the Insurances received by each Chargor; and

8

(ii) in the case of the Relevant Agreements, an assignment of any and all damages, compensation, remuneration, profit, rent or income which any Chargor may derive from or be awarded or entitled to in respect of such Relevant Agreements,

in each case as continuing security for the payment, discharge and performance of the Liabilities.

2.4 Miscellaneous

(a) A reference in this Deed to a charge or mortgage of any freehold or leasehold property includes:

(i) all buildings and Fixtures on that property;

(ii) the proceeds of sale of any part of that property; and

(iii) the benefit of any covenants for title given or entered into by any predecessor in title of the Chargor in respect of that property or any moneys paid or payable in respect of those covenants.

(b) The fact that no details of properties or agreements are included in the relevant Schedule does not affect the validity or enforceability of any security created by this Deed.

(c) Without prejudice to Clause 2.1(b)(vii) (Creation of first fixed security), Clause 2.2(a) (Creation of first fixed security – Revenue Account and Asset Option Account) and Clause 2.2(b) (Creation of second fixed security – Revenue Account) if, pursuant to Clause 8.3 (Withdrawals), or the terms of the Accounts Agreement, the Chargor is entitled to withdraw the proceeds of any book and other debts standing to the credit of a Security Account and, as a result, those proceeds are in any way released from the fixed charges created pursuant to Clause 2.1(b)(vii) (Creation of first fixed security), Clause 2.2(a) (Creation of first fixed security – Revenue Account and Asset Option Account) and Clause 2.2(b) (Creation of second fixed security – Revenue Account) and stand subject to the floating charges created pursuant to Clause 3.1 (Creation of first floating charge), Clause 3.2 (Creation of first floating charge - Revenue Account), Clause 3.3 (Creation of first floating charge – Asset Option Account) and Clause 3.4 (Creation of second floating charge - Revenue Account and Asset Option Account), the release will in no way derogate from the subsistence and continuance of the fixed charges on all other outstanding book and other debts of the Chargor and the proceeds of those debts.

3. FLOATING CHARGE

3.1 Creation of first floating charge

The Chargor, as security for the payment of all of the Liabilities, charges in favour of the Security Trustee for the benefit of the Secured Parties by way of a first floating charge all its assets (excluding the Revenue Account and the Asset Option Account and the debts represented by them, together with all Authorised Investments made from the Revenue Account, all Investment Proceeds and Income arising in respect of such Authorised Investments and all rights to receive the same) not otherwise effectively mortgaged or charged by way of the first fixed mortgage or charge by Clause 2.1 (Creation of first fixed security).

9

3.2 Creation of first floating charge - Revenue Account

The Chargor as security for the payment of all CTA Payment Liabilities, charges, by way of first floating charge, in favour of the Security Trustee for the benefit of BET, all moneys standing to the credit of the Revenue Account and the debts represented by them, together with all Authorised Investments made from the Revenue Account, all Investment Proceeds and Income arising in respect of such Authorised Investments and all rights to receive the same not otherwise effectively mortgaged or charged by way of the first fixed mortgage or charge by Clause 2.2(a) (Creation of first fixed security – Revenue Account and Asset Option Account).

3.3 Creation of first floating charge – Asset Option Account

The Chargor as security for the payment of all Subordinated Liabilities, charges, by way of first floating charge, in favour of the Security Trustee for the benefit of EPHL, all moneys standing to the credit of the Asset Option Account and the debts represented by them, and all rights to receive the same not otherwise effectively mortgaged or charged by way of the first fixed mortgage or charge by Clause 2.2(a) (Creation of first fixed security – Revenue Account and Asset Option Account).

3.4 Creation of second floating charge - Revenue Account and Asset Option Account

The Chargor as security for the payment of all of the Senior Liabilities, charges, by way of second floating charge, in favour of the Security Trustee for the benefit of the Finance Parties, all the moneys standing to the credit of each of the Revenue Account and the Asset Option Account and the debts represented by them, together with all Authorised Investments made from the Revenue Account, all Investment Proceeds and Income arising in respect of such Authorised Investments and all rights to receive the same not otherwise effectively mortgaged or charged by way of the second fixed mortgage or charge by Clause 2.2(a) (Creation of second fixed security – Revenue Account).

3.5 Conversion

(a) The Security Trustee may, by notice to the Chargor, in accordance with the other Finance Documents, convert each floating charge created by this Deed into a fixed charge as regards all or any of the Chargor’s assets specified in the notice if:

(i) an Event of Default has occurred and is continuing and provided that no Option has been exercised (unless an Option has been exercised and the relevant Obligor has failed to transfer the shares in, or assets of, the Chargor in default of its obligations under that Option); or

(ii) the Security Trustee reasonably considers those assets to be in danger of being seized or sold under any form of distress, attachment, execution or other legal process.

(b) Each floating charge shall, in accordance with the other Finance Documents (in addition to the circumstances in which the same will occur under general law) automatically be converted into a fixed charge over the assets, rights and property of the Chargor in the convening of any meeting of the members of the Chargor to consider a resolution to wind the Chargor up (or not to wind the Chargor up).

10

(c) Each floating charge will automatically convert into a fixed charge over all of the Chargor’s assets if an administrator is appointed or the Security Trustee receives notice of an intention to appoint an administrator.

(d) No floating charge may be converted into a fixed charge solely by reason of:

(i) the obtaining of a moratorium; or

(ii) anything done with a view to obtaining a moratorium,

under the Insolvency Act 2000.

(e) Each floating charge granted in favour of the Security Trustee for the Finance Parties is a qualifying floating charge for the purpose of paragraph 13 of Schedule B1 to the Insolvency Act 1986.

4. COVENANTS FOR TITLE

Each mortgage, charge and assignment created under this Deed is made by the Chargor with full title guarantee in accordance with the Law of Property (Miscellaneous Provisions) Act 1994.

5. REPRESENTATIONS AND WARRANTIES

5.1 Representations and Warranties

The Chargor makes the representations and warranties set out in this Clause 5 to each Finance Party.

5.2 Intellectual Property Rights

(a) The Intellectual Property Rights owned by the Chargor are all of the Intellectual Property Rights required by it in order for it to carry on its business as it is now being conducted and the Chargor does not, in carrying on its business, infringe any Intellectual Property Rights of any third party.

(b) The Intellectual Property Rights owned by the Chargor are free of any Security Interests (save for any permitted Security Interests) and any other rights or interests (including any licences) in favour of third parties.

(c) To its knowledge, no Intellectual Property Right owned by the Chargor is being infringed, nor is there any threatened infringement of any Intellectual Property Right.

5.3 CTA Bonds

The Chargor is the legal and beneficial owner of the CTA Bonds free from any Security Interest (save for any Permitted Security Interest created under the Security Documents or in favour of the Account Bank).

5.4 Times for making representations and warranties

The representations and warranties set out in this Clause 5 are made on the date of this Deed.

11

6. GENERAL UNDERTAKINGS

6.1 Duration

The undertakings in this Clause 6 remain in force throughout the Security Period.

6.2 Book debts and receipts

The Chargor shall:

(a) get in and realise the Chargor’s:

(i) securities to the extent held by way of temporary investment;

(ii) book and other debts and other moneys; and

(iii) royalties, fees and income of like nature in relation to any Intellectual Property Right owned by it,

in the ordinary course of its business and hold the proceeds of the getting in and realisation until payment into a Project Account, the Revenue Account or the Asset Option Account in accordance with the Accounts Agreement or, while an Event of Default is continuing, into a Security Account in accordance with (b) upon trust for the Security Trustee; and

(b) save to the extent that the Security Trustee otherwise agrees, or to the extent paid into the Project Accounts, the Revenue Account or the Asset Option Account in accordance with the Accounts Agreement, while an Event of Default is continuing, pay the proceeds of getting in and realisation into a Security Account.

6.3 Deposit of Shares

The Chargor shall:

(a) deposit with the Security Trustee, or as the Security Trustee may direct, all certificates and other documents of title or evidence of ownership in relation to the Shares and their Related Rights; and

(b) execute and deliver to the Security Trustee all share transfers and other documents which may be requested by the Security Trustee in order to enable the Security Trustee or its nominees to be registered as the owner or otherwise obtain a legal title to the Shares and their Related Rights.

6.4 Deposit of CTA Bonds

The Chargor shall deposit with the Security Trustee, or as the Security Trustee may direct, the CTA Global Bond Certificate together with a CTA Bonds Transfer Form.

6.5 Intellectual Property Rights

The Chargor shall:

(a) make such registrations and pay such fees, registration taxes and similar amounts as are necessary to keep its Intellectual Property Rights in force;

12

(b) if requested to do so by the Security Trustee, make entries in any public register of its Intellectual Property Rights which either record the existence of this Deed or the restrictions on disposal effected by this Deed;

(c) take such steps as are necessary (including the institution of legal proceedings) to prevent third parties infringing those Intellectual Property Rights and (without prejudice to paragraph (a)) take all other steps which are reasonably practicable to maintain and preserve its interests in them; and

(d) not, without the prior consent of the Security Trustee:

(i) sell, transfer, license or otherwise dispose of all or any part of those Intellectual Property Rights; or

(ii) permit any Intellectual Property Right which is registered to be abandoned or cancelled, to lapse or to be liable to any claim of abandonment for non-use or otherwise.

7. PROPERTY UNDERTAKINGS

7.1 Duration

The undertakings in this Clause 7 remain in force throughout the Security Period.

7.2 Repair

The Chargor shall keep:

(a) the Premises in good and substantial repair and condition; and

(b) the Fixtures and all plant, machinery, implements and other effects owned by it and which are in or upon the Premises or elsewhere in a good state of repair and in good working order and condition.

7.3 Insurance

The Chargor shall insure the Premises and all its other assets of an insurable nature in the Premises to the extent required under the Credit Agreement.

7.4 Compliance with leases

The Chargor shall:

(a) perform all material terms on its part contained in any lease or leases comprised within the Mortgaged Property; and

(b) not do (to the extent reasonably possible) permit to be done any act as a result of which any such lease or leases would be reasonably likely to become liable to forfeiture or otherwise be determined.

13

7.5 Acquisitions and legal mortgage

(a) The Chargor shall:

(i) notify the Security Trustee promptly upon the acquisition by the Chargor of any freehold or leasehold property; and

(ii) on demand made to the Chargor by the Security Trustee and at the cost of the Chargor, execute and deliver to the Security Trustee a legal mortgage in favour of the Security Trustee of any freehold or leasehold property which becomes vested in it after the date of this Deed in any form which the Security Trustee may reasonably require.

(b) In the case of any leasehold property in relation to which the consent of the landlord in whom the reversion of that lease is vested is required in order for the Chargor to perform any of its obligation under subparagraph (a)(ii), the Chargor shall not be required to perform that obligation unless and until it has obtained the landlord’s consent (which it shall use its reasonable endeavours to obtain).

7.6 Notices

The Chargor shall, within 14 days after the receipt by the Chargor of any application, requirement, order or notice served or given by any public or local or any other authority with respect to the Security Assets (or any part of them):

(a) give notice to the Security Trustee within seven days after receipt of such application, requirement, order or notice;

(b) deliver a copy to the Security Trustee; and

(c) inform the Security Trustee of the steps taken or proposed to be taken to comply with the relevant requirement.

7.7 Leases

The Chargor shall not, without the prior consent of the Security Trustee, grant or agree to grant (whether in exercise or independently of any statutory power) any lease or tenancy of the Mortgaged Property or any part of it or accept a surrender of any lease or tenancy or (except where necessary for the operation and maintenance of the Plant) confer upon any person any contractual licence or right to occupy the Mortgaged Property.

7.8 H.M. Land Registry

The Chargor shall in respect of any freehold or leasehold property which is acquired after the date of this Deed by the Chargor, the title to which is registered at H.M. Land Registry or the title to which is required to be so registered, give H.M. Land Registry written notice of this Deed and procure that notice of this Deed is duly noted in the Register to each such title.

7.9 Deposit of title deeds

The Chargor shall deposit with the Security Trustee all deeds and documents of title relating to the Mortgaged Property and all Local Land Charges, Land Charges and Land Registry Search Certificates and similar documents received by or on behalf of the Chargor. The Security Trustee is entitled to hold the above deeds and documents during the Security Period.

14

7.10 Power to remedy

In case of default by the Chargor in performing any material term affecting the Mortgaged Property and the Chargor failing to remedy such default upon request by the Security Trustee so to do within the time period stated by the Security Trustee, the Chargor shall permit the Security Trustee or its agents and contractors:

(a) to enter on the Mortgaged Property;

(b) to comply with or object to any notice served on the Chargor in respect of the Mortgaged Property; and

(c) to take any action as the Security Trustee may reasonably consider necessary or desirable to prevent or remedy any breach of any such term or to comply with or object to any such notice.

8. SECURITY ACCOUNTS

8.1 Accounts

(a) The Security Trustee may open a an account (the Security Account) at any time after an Event of Default has occurred and is continuing and the Chargor shall do all such acts and things as the Security Trustee may request in connection with opening the same.

(b) All Security Accounts must be maintained at a branch of the Account Bank.

8.2 Interest

The Security Accounts shall bear interest at the rate reasonably determined by the Security Trustee.

8.3 Withdrawals

(a) Except with the prior consent of the Security Trustee, the Chargor shall not withdraw any moneys standing to the credit of a Security Account.

(b) The Security Trustee (or a Receiver) may (subject to the payment of any claims having priority to this security) withdraw amounts standing to the credit of a Security Account to meet an amount due and payable under the Intercreditor Deed when it is due and payable.

8.4 Notice

(a) The Chargor shall promptly give notice to the Account Bank (and promptly on any change in the identity of the Account Bank, give notice to the new Account Bank) of this Deed in the form of Schedule 3Part 1 and use reasonable endeavours to procure, to the extent that such notice is not acknowledged in the Account Agreement or in any agreement replacing such Accounts Agreement, that the Account Bank acknowledges such notice in accordance with Schedule 3Part 2.

15

(b) As soon as reasonably practicable after receipt by it of such acknowledgement, the Security Trustee will deliver a letter substantially in the form set out in Schedule 3Part 3. The Security Trustee:

(i) may only withdraw the consents in such letter (to the extent they apply to the Project Accounts and the Revenue Account) while an Event of Default is continuing; and

(ii) shall not withdraw the consents in such letter to the extent they apply to the Asset Option Account.

(c) For the avoidance of doubt, the notice under paragraph (a) above will include notice to the Account Bank (or new Account Bank as the case may be) in respect of the security granted in favour of EPHL over the Asset Option Account and BET over the Revenue Account.

9. RELEVANT AGREEMENTS

Prior to the occurrence of an Event of Default, which is continuing:

(a) the Security Trustee shall permit the Chargor to exercise the rights of the Chargor under any Relevant Agreement (including the right to receive money); and

(b) the Chargor shall be entitled to instruct the counterparties to the Relevant Agreements to make payments due under any of them directly:

(i) into a Project Account in accordance with the terms of the Accounts Agreement; or

(ii) to BET in accordance with the terms of the Capacity and Tolling Agreement.

(c) any payments received by the Security Trustee under or in respect of such Relevant Agreements by virtue of this Deed shall be paid by the Security Trustee to the Revenue Account in accordance with the terms of the Accounts Agreement save to the extent required by the terms of the Intercreditor Agreement to be applied against any of the Liabilities or otherwise.

10. CTA BONDS

10.1 CTA Bonds

From the date of this Deed, the Security Trustee may exercise (in the name of the Chargor or otherwise and without any further consent or authority on the part of the Chargor) any and all rights and powers of the Chargor under the CTA Bonds, provided that all payments received by the Security Trustee or the Chargor under or in respect of the CTA Bonds shall be paid by the Security Trustee or the Chargor, as the case may be, into the CTA Bond Account in accordance with the terms of the Accounts Agreement, save to the extent otherwise required by the terms of the Intercreditor Agreement.

10.2 Notice

The Chargor shall promptly give notice to the Principal Paying Agent (and promptly on any change in the identity of the Principal Paying Agent, give notice to the new Principal Paying Agent) of this Deed in the form of Schedule 5 Part 1 and use reasonable endeavours to procure that the Principal Paying Agent acknowledges such notice in accordance with Schedule 5 Part 2.

16

11. WHEN SECURITY BECOMES ENFORCEABLE

The security constituted by this Deed shall become immediately enforceable upon the occurrence and continuance of an Event of Default and the power of sale and other powers conferred by Section 101 of the Act, as varied or amended by this Deed, shall be immediately exercisable upon and at any time after the occurrence and continuance of any Event of Default. After the security constituted by this Deed has become enforceable, the Security Trustee may in its absolute discretion enforce all or any part of the security in any manner it sees fit or as the Majority Banks direct.

12. ENFORCEMENT OF SECURITY

12.1 General

For the purposes of all statutory powers of sale under Sections 101 and 103 of the Act (restricting the power of sale), the Liabilities are deemed to have become due and payable on the date of this Deed and Section 103 of the Act (restricting the power of sale) and Section 93 of the Act (restricting the right of consolidation) do not apply to the security constituted by this Deed. The statutory powers of leasing conferred on the Security Trustee are extended so as to authorise the Security Trustee to lease, make agreements for leases, accept surrenders of leases and grant options as the Security Trustee may think fit and without the need to comply with any provision of section 99 or 100 of the Act.

12.2 Shares

After the security constituted by this Deed has become enforceable, the Security Trustee may exercise (in the name of the Chargor and without any further consent or authority on the part of the Chargor) any voting rights and any powers or rights which may be exercised by the person or persons in whose name any Share and its Related Rights are registered or who is the holder of any of them or otherwise (including all the powers given to trustees by Section 10(3) and (4) of the Trustee Act, 1925 as amended by Section 9 of the Trustee Investment Act, 1961 in respect of securities or property subject to a trust). Until that time, the voting rights, powers and other rights in respect of the Shares shall (if exercisable by the Security Trustee) be exercised in any manner which the Chargor may direct in writing.

12.3 Contingencies

If the Security Trustee enforces the security constituted by this Deed at a time when no amounts are due under the Finance Documents, the Capacity and Tolling Agreement or the Second Intercompany Loan but at a time when amounts may or will become so due, the Security Trustee (or the Receiver) may pay the proceeds of any recoveries effected by it into a Security Account.

12.4 No liability as mortgagee in possession

Neither the Security Trustee nor any Receiver will be liable, by reason of entering into possession of a Security Asset, to account as mortgagee in possession or for any loss on realisation or for any default or omission for which a mortgagee in possession might be liable.

17

12.5 Agent of the Chargor

Each Receiver is deemed to be the agent of the Chargor for all purposes and accordingly is deemed to be in the same position as a Receiver duly appointed by a mortgagee under the Act. The Chargor alone shall be responsible for his contracts, engagements, acts, omissions, defaults and losses and for liabilities incurred by him and the Finance Parties, BET and EPHL shall not incur any liability (either to the Chargor or to any other person) by reason of the Security Trustee making his appointment as a Receiver or for any other reason.

12.6 Privileges

Each Receiver and the Security Trustee is entitled to all the rights, powers, privileges and immunities conferred by the Act on mortgagees and receivers when such receivers have been duly appointed under the Act, except that Section 103 of the Act does not apply.

12.7 Protection of third parties

No person (including a purchaser) dealing with the Security Trustee or a Receiver or its or his agents will be concerned to enquire:

(a) whether the Liabilities have become payable;

(b) whether any power which the Security Trustee or the Receiver is purporting to exercise has become exercisable;

(c) whether any money remains due under the Finance Documents, the Capacity and Tolling Agreement or the Second Intercompany Loan Agreement; or

(d) how any money paid to the Security Trustee or to the Receiver is to be applied.

12.8 Redemption of prior Mortgages

At any time after the security constituted by this Deed has become enforceable, the Security Trustee may do one or more of the following:

(a) redeem any prior Security Interest against any Security Asset (other than any Security Interest created under the Second Security Assignment);

(b) procure the transfer of that Security Interest to itself (other than any Security Interest created under the Second Security Assignment); or

(c) settle and pass the accounts of the prior mortgagee, chargee or encumbrancer (other than the accounts of EPHL); any accounts so settled and passed shall be conclusive and binding on the Chargor.

All principal moneys, interest, costs, charges and expenses of and incidental to any such redemption or transfer shall be paid by the Chargor to the Security Trustee on demand.

13. RECEIVER

13.1 Appointment of Receiver

(a) Except as provided below, at any time after the security constituted by this Deed becomes enforceable or, if the Chargor so requests the Security Trustee in writing, at any time, the Security Trustee may without further notice appoint by deed, under seal or in writing under its hand any one or more persons to be a Receiver of all or any part of the Security Assets,

18

provided that the Security Trustee may not appoint an administrative receiver (as defined in Section 29(2) of the Insolvency Act 1986) over the Security Assets if the Security Trustee is prohibited from so doing by section 72A of the Insolvency Act 1986 and no exception to the prohibition on appointing an administrative receiver applies.

(b) Section 109(1) of the Act shall not apply to this Deed and the Security Trustee may fix the remuneration of any Receiver appointed by it.

(c) The Security Trustee is not entitled to appoint a Receiver solely as a result of the obtaining of a moratorium (or anything done with a view to obtaining a moratorium) under the Insolvency Act 2000 except with the leave of the court.

13.2 Removal

The Security Trustee may by writing under its hand (subject to any requirement for an order of the court in the case of an administrative receiver) remove any Receiver appointed by it and may, whenever it deems it expedient, appoint a new Receiver in the place of any Receiver whose appointment may for any reason have terminated.

13.3 Remuneration

The Security Trustee may fix the remuneration of any Receiver appointed by it and the maximum rate specified in Section 109(b) of the Act shall not apply.

13.4 Relationship with Security Trustee

To the fullest extent permitted by law, any right, power or discretion conferred by this Deed (either expressly or impliedly) upon a Receiver of the Security Assets may after the security created by this Deed becomes enforceable be exercised by the Security Trustee in relation to any Security Asset without first appointing a Receiver or notwithstanding the appointment of a Receiver.

14. POWERS OF RECEIVER

14.1 General

(a) Each Receiver has, and is entitled to exercise, all of the rights, powers and discretions set out below in this Clause 13 in addition to those conferred on it by any law; this includes:

(i) in the case of an administrative receiver, all the rights, powers and discretions conferred on an administrative receiver under the Insolvency Act 1986; or

(ii) otherwise, all the rights, powers and discretions conferred on a receiver (or a receiver and manager) under the Act and the Insolvency Act 1986.

(b) If there is more than one Receiver holding office at the same time, each Receiver may (unless the document appointing him states otherwise) exercise all of the powers conferred on a Receiver under this Deed individually and to the exclusion of any other Receivers.

19

14.2 Possession

A Receiver may take immediate possession of, get in and collect any Security Assets.

14.3 Carry on business

A Receiver may carry on the business of the Chargor as he thinks fit.

14.4 Protection of assets

A Receiver may:

(a) make and effect all repairs and insurances and do all other acts which the Chargor might do in the ordinary conduct of its business as well for the protection as for the improvement of the Security Assets;

(b) commence or complete any building operations on the Mortgaged Property; and

(c) apply for and maintain any planning permission, building regulation approval or any other permission, consent or licence,

in each case as he may think fit.

14.5 Employees

A Receiver may appoint and discharge managers, officers, agents, accountants, servants, workmen and others for the purposes of this Deed upon such terms as to remuneration or otherwise as he may think proper and discharge any such persons appointed by the Chargor.

14.6 Borrow money

A Receiver may raise and borrow money either unsecured or on the security of any Security Asset either in priority to the security constituted by this Deed or otherwise and generally on any terms and for whatever purpose which he thinks fit. No person lending that money is concerned to enquire as to the propriety or purpose of the exercise of that power or to check the application of any money so raised or borrowed.

14.7 Sale of assets

A Receiver may sell, exchange, convert into money and realise any Security Asset by public auction or private contract and generally in any manner and on any terms which he thinks proper. The consideration for any such transaction may consist of cash, debentures or other obligations, shares, stock or other valuable consideration and any such consideration may be payable in a lump sum or by instalments spread over such period as he thinks fit. Fixtures, other than landlords fixtures, may be severed and sold separately from the property containing them without the consent of the Chargor.

14.8 Leases

A Receiver may let any Security Asset for any term and at any rent (with or without a premium) which he thinks proper and may accept a surrender of any lease or tenancy of any Security Asset on any terms which he thinks fit (including the payment of money to a lessee or tenant on a surrender).

20

14.9 Compromise

A Receiver may settle, adjust, refer to arbitration, compromise and arrange any claims, accounts, disputes, questions and demands with or by any person who is or claims to be a creditor of the Chargor or relating in any way to any Security Asset.

14.10 Legal Actions

A Receiver may bring, prosecute, enforce, defend and abandon all actions, suits and proceedings in relation to any Security Asset which may seem to him to be expedient.

14.11 Receipts

A Receiver may give valid receipts for all moneys and execute all assurances and things which may be proper or desirable for realising any Security Asset.

14.12 Subsidiaries

A Receiver may form a Subsidiary of the Chargor and transfer to that Subsidiary any Security Asset.

14.13 Delegation

A Receiver may delegate his powers in accordance with Clause 16 (Delegation).

14.14 Other powers

A Receiver may:

(a) do all other acts and things which he may consider desirable or necessary for realising any Security Asset or incidental or conducive to any of the rights, powers or discretions conferred on a Receiver under or by virtue of this Deed; and

(b) exercise in relation to any Security Asset all the powers, authorities and things which he would be capable of exercising if he were the absolute beneficial owner of the it,

and may use the name of the Chargor for any of the above purposes.

14.15 Limitation on sale of CTA Bonds

(a) Notwithstanding:

(i) any power of sale conferred on the Security Trustee or any Receiver by law or under this Deed; or

(ii) any other provision of this Deed,

neither the Security Trustee nor any Receiver shall sell or otherwise dispose, or enforce all or any of its rights hereunder (including under Clause 17.2) against, all or any of the CTA Bonds prior to the Determination Date.

(b) On and from the Determination Date, the Security Trustee and any Receiver shall not sell or otherwise dispose of the CTA Bonds otherwise than in accordance with the Share Subscription Agreement.

21

15. APPLICATION OF PROCEEDS

15.1 Application of Proceeds

Any moneys received by the Security Trustee or any Receiver after an Enforcement Event shall be applied in the order of priority set out in the Intercreditor Deed (but without prejudice to the right of any Finance Party, BET or EPHL to recover any shortfall from the Chargor)

15.2 Good Discharge

An acknowledgement of receipt signed by the relevant person to whom payments are to be made under Clause 14 shall be a good discharge of the Security Trustee.

16. DELEGATION

The Security Trustee and any Receiver may delegate by power of attorney or in any other manner to any person any right, power or discretion exercisable by them under this Deed. Any such delegation may be made upon the terms (including power to sub-delegate) and subject to any regulations which the Security Trustee or such Receiver (as the case may be) may think fit. Neither the Security Trustee nor any Receiver will be in any way liable or responsible to the Chargor for any loss or liability arising from any act, default, omission or misconduct on the part of any such delegate or sub-delegate unless caused by the gross negligence or wilful default of the Security Trustee or, as the case may be, the Receiver.

17. FURTHER ASSURANCES

17.1 General

Subject always to Clause 14.15, the Chargor shall, at its own expense, take whatever action the Security Trustee or a Receiver may reasonably require for any of the following:

(a) perfecting or protecting the security intended to be created by this Deed over any Security Asset;

(b) facilitating the realisation of any Security Asset or the exercise of any right, power or discretion exercisable, by the Security Trustee or any Receiver or any of its or their delegates or sub-delegates in respect of any Security Asset, after such time as the Security Interest constituted by this Deed shall have become enforceable; or

(c) subject to the terms of this Deed, exercising any and all rights, powers or discretions which may be exercised by the Chargor under the CTA Bonds,

including the execution of any transfer, conveyance, assignment or assurance of any property whether to the Security Trustee or to its nominees, and the giving of any notice, order or direction and the making of any registration, which in any such case, the Security Trustee may think expedient.

17.2 Legal Charge

Subject always to Clause 14.15, without prejudice to the generality of Clause 17.1, the Chargor will promptly at the request of the Security Trustee (acting reasonably) execute a legal mortgage, charge or assignment over all or any of the Security Assets subject to or intended to be subject to any fixed security created in favour of the Security Trustee (as agent and trustee as) in such form as the Security Trustee may require.

22

18. POWER OF ATTORNEY

The Chargor, by way of security, irrevocably and severally appoints the Security Trustee, each Receiver and any of their delegates or sub-delegates to be its attorney to, at any time while an Event of Default has occurred and is continuing, take any action which the Chargor is obliged to take under this Deed, including under Clause 17 (Further Assurances). The Chargor ratifies and confirms whatever any attorney does or purports to do pursuant to its appointment under this Clause.

19. MISCELLANEOUS

19.1 Covenant to pay

The Chargor shall pay or discharge the Senior Liabilities, the CTA Payment Liabilities and the Subordinated Liabilities in the manner provided for in the Finance Documents, the Capacity and Tolling Agreement and the Second Intercompany Loan Agreement.

19.2 Continuing security

The security constituted by this Deed is continuing and will extend to the ultimate balance of all the Senior Liabilities, the CTA Payment Liabilities and Subordinated Liabilities, regardless of any intermediate payment or discharge in whole or in part.

19.3 Additional security

(a) The security constituted by this Deed is in addition to and is not in any way prejudiced by any other security now or subsequently held by any Finance Party for any Senior Liabilities, BET for any CTA Payment Liabilities or EPHL for any Subordinated Liabilities.

(b) No Power and nothing in this Deed or any collateral security merges in, or in any other way prejudicially affects or is prejudicially affected by:

(i) any other Security Interest; or

(ii) any judgment, right or remedy against any person,

which any Finance Party, BET or EPHL or any person claiming on behalf of, or through, any Finance Party, BET or EPHL may have at any time.

Power means a power, right, authority, discretion or remedy which is conferred on the Security Trustee or a Receiver or an attorney:

(a) by this Deed or any collateral security; or

(b) by law in relation to this Deed or any collateral security.

19.4 Tacking

(a) Each Bank shall perform its obligations under the Credit Agreement (including any obligation to make available further advances).

23

(b) BET shall perform its obligations under the Capacity and Tolling Agreement (including any obligation to make available further advances).

(c) EPHL shall perform its obligations under the Second Intercompany Loan Agreement (including any obligation to make available further advances).

19.5 New Accounts

If a Finance Party, BET or EPHL receives, or is deemed to be affected by, notice, whether actual or constructive, of any subsequent charge or other interest affecting any Security Asset, the Finance Party, BET or EPHL, as the case may be, may open a new account with the Chargor. If the Finance Party BET or EPHL, as the case may be, does not open a new account, it shall nevertheless be treated as if it had done so at the time when it received or was deemed to have received notice. As from that time all payments made to the Finance Party, BET or EPHL, as the case may be, will be credited or be treated as having been credited to the new account and will not operate to reduce any amount for which this Deed is security.

19.6 Time deposits

Without prejudice to any right of set-off any Finance Party may have under any other Finance Document or otherwise, if any time deposit matures on any account the Chargor has with any Finance Party at a time within the Security Period when:

(a) this security has become enforceable; and

(b) no amount of the Liabilities is due and payable,

that time deposit shall automatically be renewed for any further maturity which that Finance Party considers appropriate.

19.7 Notice of assignment

This Deed constitutes notice in writing to the Chargor of any charge or assignment of a debt owed by the Chargor to any other member of the Group contained in any other Security Document.

19.8 H.M. Land Registry

The Chargor applies to the Chief Land Registrar for a restriction in the following terms to be entered on the Register of Title relating to any Mortgaged Property registered at H.M. Land Registry and against which this Deed may be noted:

“Except under an order of the Registrar, no disposition or dealing by the proprietor of the land is to registered without the consent of the proprietor for the time being of the Debenture dated September, 2004 between Eggborough Power Limited, Eggborough Power (Holdings) Limited, British Energy Power and Energy Trading Limited and Barclays Bank PLC”.

20. RELEASE

(a) Upon the expiry of the Security Period (but not otherwise), the Finance Parties, BET or EPHL, as the case may be, shall, at the request and cost of the Chargor, take whatever action is necessary to release the Security Assets from the security constituted by this Deed.

24

(b) Subject to the terms of the Intercreditor Agreement and to subparagraph (a) above, the Security Trustee shall not release the security constituted by this Deed in favour of EPHL and BET without the prior written consent of EPHL and BET.

21. GOVERNING LAW

This Deed is governed by English law.

THIS DEED has been entered into as a deed on the date stated at the beginning of this Deed.

25

SCHEDULE 1

REAL PROPERTY

The freehold land and buildings known as Eggborough Power Station, Eggborough, Goole, North Yorkshire, comprised in a transfer dated 20th February, 2000 made between (1) National Power Plc and (2) the Chargor (then known as Boron Limited), the title to which is in course of registration at H M Land Registry with Title Number NYK 233369.

The freehold land comprising Gale Common, North Yorkshire, comprised in a transfer dated 3rd March, 2000 made between (1) National Power Plc and (2) the Chargor (then known as Boron Limited), the title to which is in course of registration at H M Land Registry with Title Numbers NYK 234230 and NYK 67029.

26

SCHEDULE 2

RELEVANT AGREEMENTS

1. the Capacity and Tolling Agreement;

2. the Bilateral Connection and Use of System Agreement dated 13 March 2003 between the Chargor and the National Grid Company plc;

3. the licence dated 10th August, 2000 to use and ash pipeline at Whitby granted to the Obligor by British Waterways Board;

4. the private railways sidings agreement novated to the Chargor by Railtrack plc and National Power by a novation contract dated 10th February, 2000;

5. the lease dated 27th May, 2002 of an easement to use two water pipes below the railway at Knottingly between Railtrack plc and the Chargor;

6. the Station Contracts;

7. the agreement dated 15th November, 1999 between National Power Plc and the Chargor for the sale of the business relating to the Eggborough Power Station by National Power Plc to the Chargor; and

8. the Saint Gobain UK Parent Guarantee,

(in each case including any supplements, amendments or replacements).

27

SCHEDULE 3

FORM OF LETTERS TO THE ACCOUNT BANK

PART 1

FORM OF NOTICE TO THE ACCOUNT BANK

[On the letterhead of the Chargor]

To: [Account Bank]

[DATE]

Dear Sirs,

Debenture (Debenture) dated          September, 2004 between Eggborough Power Limited, Eggborough Power (Holdings) Limited British Energy Power and Energy Trading Limited and Barclays Bank PLC

This letter constitutes notice to you that, by the Debenture (a copy of which is attached), we have charged:

(a) to Barclays Bank PLC (the Security Trustee) for the benefit of the Secured Parties, all moneys standing to the credit of any account maintained by us with you (other than the Revenue Account and the Asset Option Account) and the debts represented by them;

(b) to the Security Trustee for the benefit of BET and (by way of second fixed charge) to the Security Trustee for the benefit of the Finance Parties all moneys standing to the credit of the Revenue Account; and

(c) to the Security Trustee for the benefit of EPHL, all moneys standing to the credit of the Asset Option Account,

(together, the Accounts).

We irrevocably instruct and authorise you to:

1. (a) disclose to the Security Trustee on request to you by the Security Trustee any information relating to any Account maintained with you; and

(b) comply with the terms of any written notice or instructions relating to the Debenture or moneys standing to the credit of any Accounts maintained with you and the debts represented by them, received by you from the Security Trustee,

without any reference to or further authority from us and without any enquiry by you as to the justification for the disclosure or, as the case may be, validity of the notice or instructions;

2. hold all sums from time to time standing to the credit of any Account maintained with you to the order of the Security Trustee; and

3. pay or release all or any part of the moneys standing to the credit of the Accounts maintained with you in accordance with the written instructions of the Security Trustee.

28

We are not permitted to withdraw any amount from any of the Accounts maintained with you without the prior written consent of the Security Trustee.

The instructions in this letter may not be revoked or amended without the prior written consent of the Security Trustee.

This letter is governed by English law.

Please confirm your agreement to the above by sending the attached acknowledgement to the Security Trustee with a copy to ourselves.

Yours faithfully,

(Authorised Signatory)

Eggborough Power Limited

29

PART 2

FORM OF ACKNOWLEDGEMENT OF THE ACCOUNT BANK

[On the letterhead of the Account Bank]

To: Barclays Bank PLC as Security Trustee for the Finance Parties (as defined in the Debenture), Eggborough Power (Holdings) Limited and British Energy Power and Energy Trading Limited

[DATE]

Dear Sirs,

Debenture (Debenture) dated [        ] between Eggborough Power Limited, Eggborough Power (Holdings) Limited, British Energy Power and Energy Trading Limited and Barclays Bank PLC

We confirm receipt from Eggborough Power Limited (the Company) of a notice dated [            ] of certain charges upon the terms of the Debenture over all moneys standing to the credit of any of the Company’s accounts with us (including the Revenue Account and the Asset Option Account) (the Accounts) and the debts represented by them.

We confirm that we:

1. accept the instructions contained in the notice and undertake to comply with the notice;

2. have not received notice of the interest of any third party in any of the Accounts maintained with us (save for those created by or pursuant to a Debenture dated 8^th September, 2000 made by the Chargor in favour of, amongst others, the Security Trustee) and a security assignment dated on or about the date of the Debenture given by the Chargor in favour of Eggborough Power (Holdings) Limited;

3. have neither claimed or exercised nor will claim or exercise any security interest, set-off, counter-claim or other right in respect of any of the Accounts maintained with us, the moneys in those Accounts or the debts represented by them; and

4. shall not permit any amount to be withdrawn from any of the Accounts maintained with us without your prior written consent.

The Accounts maintained with us are:

[Specify accounts and account numbers]

This letter is governed by English law.

Yours faithfully,

(Authorised signatory)

30

[Account Bank]

31

PART 3

FORM OF LETTER FROM THE SECURITY TRUSTEE TO THE ACCOUNT BANK

[On the letterhead of the Security Trustee]

To: [Account Bank]

[DATE]

Dear Sirs,

We refer to:

1. the Debenture dated [            ] (the Debenture) between Eggborough Power Limited (the Company), Eggborough Power (Holdings) Limited, British Energy Power and Energy Trading Limited and Barclays Bank PLC; and

2. the notice to you dated [            ] from the Company concerning the accounts of the Company with you (the Accounts); and

3. the acknowledgement dated [            ] issued by you to [                 ] in response to the notice.

We confirm that we consent to the following transactions in relation to the Accounts:

(a) you may collect and pay to the credit of any Account, the proceeds of credits for the account of the Chargor;

(b) you may make payments to third parties or to other Accounts in the name of the Chargor on the instructions of the Chargor and debit the amounts involved to any Account;

(c) you may debit to any Account (other than the Asset Option Account) amounts due to you (in your capacity as Account Bank) by the Chargor; and

(d) in order to enable you to make available net overdraft facilities on the Accounts only, you may set-off debit balances on any of the Accounts (other than the CTA Bond Account and the Asset Option Account) against credit balances on any of the Accounts (other than the CTA Bond Account and the Asset Option Account);

(e) you may make such withdrawals and transfers on behalf of the Chargor as permitted by the Accounts Agreement.

The consents in this letter will remain in effect until you receive notice from us withdrawing any or all of them. In this event they shall be withdrawn to the extent stated in the notice.

This letter is governed by English law.

Please acknowledge receipt of this letter by signing and returning to us the enclosed copy of this letter.

32

Yours faithfully,

(Authorised signatory)

Barclays Bank PLC

Receipt acknowledged

(Authorised signatory)

[Account Bank]

33

SCHEDULE 4

FORMS OF NOTICE OF ASSIGNMENT

Part 1

FORM OF NOTICE OF ASSIGNMENT TO INSURER(S)

[Note: A separate notice of assignment must be sent to, and acknowledged by, each Insurer where there is more than one.]

To: [Name and address of Insurer] [Date:                  ,    ]

Dear Sirs,

Notice of Assignment and Instructions Re: Insurance Policy [                        ] (the Insurance)

Eggborough Power Limited (the Assignor) HEREBY GIVES NOTICE (this Notice) that by a debenture (the Debenture) originally dated [            ], 2004, between Eggborough Power Limited, Eggborough Power (Holdings) Limited, British Energy Power and Energy Trading Limited and Barclays Bank PLC as security trustee (the Security Trustee), a copy of which is attached hereto, the Assignor has assigned by way of security to the Security Trustee all of the Assignor’s present and future rights under and in respect of the Assigned Insurances and its present and future rights, title and interest in the Insurance Proceeds (but not, for the avoidance of doubt, in the contracts comprising the Assigned Insurances themselves) (the Assigned Property). The assignments under the Debenture extend to (but are not limited to) the Assignor’s rights under the above policy issued by you.

Capitalised terms shall bear the same meaning in this Notice as in the Debenture.

Please note that:

1. only the Security Trustee may agree to waive any right vested in the Assignor under the Insurance;

2. the terms and conditions of the Insurance may not be amended in any manner without the prior agreement of the Security Trustee;

3. you are authorised to disclose to the Security Trustee on request any information relating to the Assigned Property or any claim under it to which the Assignor is entitled as an insured party;

4. the Security Trustee (or any person appointed by the Security Trustee as its agent or delegate) has been irrevocably appointed by the Assignor as its attorney to do all things which the Assignor could do in relation to the Assigned Insurances upon the occurrence and continuance of an Event of Default, and you are requested to follow any instruction properly given to you by such attorney at such time. In the event of a conflict in your instructions, those given by the Security Trustee (or any other attorney appointed by us under the Debenture) shall prevail;

34

5. any notice given by you under or in respect of the Insurance should be sent to the Security Trustee at the address given below (or to such other address as the Security Trustee may notify to you from time to time) with a copy to the Assignor;

6. the Security Trustee has assumed no obligation to you under or in respect of the Insurance and the Assignor continues to be responsible to you for the performance of its obligations under the Insurance; and

7. these instructions may not be varied, except with the written consent of the Security Trustee.

Please acknowledge receipt of this Notice and the Debenture by (i) countersigning and returning to the Security Trustee a copy of this Notice and sending a duplicate of your acknowledgement to us at [Address], (ii) endorsing a copy of this notice of assignment on the above referred to policy issued by you, and (iii) confirming that you have not received notice of any other assignment of any interest in the Insurances (save for those received pursuant to a Debenture dated 8^th September, 2000 made by the Chargor in favour of, amongst others, the Security Trustee).

This Notice is governed by English law.

Eggborough Power Limited

c.c. Barclays Bank PLC

35

PART 2

FORM OF ACKNOWLEDGEMENT FROM INSURER

To: Barclays Bank PLC as Security Trustee for the Finance Parties (as defined in the Debenture dated [ ], 2004 (the Debenture) granted to it by the company named as chargor in the Debenture), Eggborough Power (Holdings) Limited and British Energy Power and Trading Limited.

Dear Sirs,

Re: Insurance Policy No: [            ] (the Policy) and notice of assignment dated [            ] (the Notice)

We acknowledge receipt of the attached Notice and, insofar as may be required, we consent to the assignment to which the Notice refers. We agree to follow the instructions to us contained in that notice and confirm that we have endorsed a copy of the Notice on the Policy.

We confirm that (i) the policy to which this notice refers is in full force and effect, (ii) that we are not aware of breach by the Assignor of the Policy or of any duty owed to us in relation to it, (iii) that we have not received any other notice of assignment relating to the Policy (save for those received pursuant to Debenture dated 8^th September, 2000 made by the Chargor in favour of, amongst others, the Security Trustee) and (iv) we will make payments due under or in respect of the Policy as provided in it.

For and on behalf of [the Insurer] Date:             , [2004]

36

PART 3

FORM OF NOTICE OF ASSIGNMENT IN RESPECT OF RELEVANT AGREEMENTS

To: [Relevant party]

[Date]

Dear Sirs,

We notify you that, by a [first priority] Debenture dated [            ], 2004 (the Debenture), made by, Eggborough Power Limited (the Chargor) in favour of Eggborough Power (Holdings) Limited (EPHL), British Energy Power and Energy Trading Limited (BET) and Barclays Bank PLC as agent and trustee for the Finance Parties referred to in the Debenture, BET and EPHL (the Security Trustee) there has been assigned by the Chargor to the Security Trustee [as first and subsequent priority mortgagee and assignee] all the Chargor’s rights, title and interest in and to [insert details of Relevant Agreement] (the Agreement), and to the extent (if any) not effectively so assigned, there has been granted to the Security Trustee (as agent and trustee) charges over all of the Chargor’s rights and benefits under the Agreement.

On behalf of the Chargor, we irrevocably instruct and authorise you:

1. to disclose to the Security Trustee with a copy to the Chargor and without any further authority from the Chargor and without any enquiry by you as to the justification for such disclosure, such information relating to the Agreement as the Security Trustee may at any time and from time to time reasonably request; and

2. to comply with the terms of any written notice or instructions in any way relating to, or purporting to relate to, the Debenture, the sums payable to the Chargor from time to time under the Agreement or the debts concerning them which you receive at any time from the Security Trustee without any reference to or further authority from the Chargor and without any enquiry by you as to the justification for or validity of such notice or instruction.

Notwithstanding the assignment referred to above or the making of any payment by you to the Security Trustee pursuant to it, the Chargor shall remain liable under the Agreement to perform all the obligations assumed by it under the Agreement and neither the Security Trustee nor any receiver nor any delegate appointed by it shall be at any time under any obligation or liability to you under or in respect of the Agreement.

Please also acknowledge receipt of this letter and confirm that you will comply with the other provisions of this letter by signing the acknowledgement attached to this Notice of Assignment and returning the duplicate copy to [insert name and address of Security Trustee], giving to the Security Trustee for the Finance Parties, BET and EPHL the further undertakings set out in it.

Please note that these instructions are not to be revoked or amended without the prior written consent of the Security Trustee.

This letter shall be governed by and construed in accordance with English law.

37

Yours faithfully,

For and on behalf of

Eggborough Power Limited Enc.

c.c. Barclays Bank PLC

38

PART 4

FORM OF ACKNOWLEDGEMENT OF [RELEVANT PARTY]

To: Barclays Bank PLC as Security Trustee for the Finance Parties (as defined in the Debenture dated [        ], 2004 granted to it by the Chargor (the Debenture)), Eggborough Power Holdings) Limited and and British Energy Power and Trading Limited.

Dear Sirs,

We confirm receipt from Eggborough Power Limited (the Chargor) of a notice dated [                ] (the Notice) of a charge or assignment upon the terms of the Debenture over all of the Chargor’s rights, title and interest in and to [insert details of Relevant Agreement] (the Agreement).

We confirm that:

1. we accept the instructions and authorisations contained in the Notice and we undertake to act in accordance with and comply with the terms of the Notice;

2. we have not received notice of the interest of any third party in or to the Agreement (save for those received pursuant to a Debenture dated 8^th September, 2000 made by the Chargor in favour of, amongst others, the Security Trustee); and

3. we shall not permit any sums to be paid to the Chargor or any other persons under or pursuant to the Agreement without your prior written consent save in accordance with the Notice, and in particular with paragraph (b) of the Notice.

This letter shall be governed by and construed in accordance with English law.

Yours faithfully,

On behalf of

[Relevant party]

c.c. [Eggborough Power Limited]

39

SCHEDULE 5

FORMS OF LETTERS TO THE PRINCIPAL PAYING AGENT

PART 1

FORM OF NOTICE TO PRINCIPAL PAYING AGENT

[On the letterhead of the Chargor]

To:    [Principal Paying Agent]

[DATE]

Dear Sirs,

Debenture (Debenture) dated [            ] between Eggborough Power Limited, Eggborough Power (Holdings) Limited British Energy Power and Energy Trading Limited and Barclays Bank PLC

This letter constitutes notice to you that, by the Debenture (a copy of which is attached), we have charged to Barclays Bank PLC (the Security Trustee) for the benefit of the Secured Parties, by way of first fixed charge, all of our rights, title and interest in and to the CTA Bonds.

We irrevocably instruct and authorise you to:

(a) pay all moneys due to us in relation to the CTA Bonds into the following account:

[Specify details of CTA Bond Account]

(the CTA Bond Account);

(b) disclose to the Security Trustee on request to you by the Security Trustee any information relating to the CTA Bonds; and

(c) comply with the terms of any written notice or instructions relating to the Debenture or the CTA Bonds, received by you from the Security Trustee,

without any reference to or further authority from us and without any enquiry by you as to the justification for the disclosure or, as the case may be, validity of the notice or instructions.

The instructions in this letter may not be revoked or amended without the prior written consent of the Security Trustee.

This letter is governed by English law.

Please confirm your agreement to the above by sending the attached acknowledgement to the Security Trustee with a copy to ourselves.

Yours faithfully,

(Authorised Signatory)

Eggborough Power Limited

40

PART 2

FORM OF ACKNOWLEDGEMENT OF THE PRINCIPAL PAYING AGENT

[On the letterhead of the Account Bank]

To: Barclays Bank PLC as Security Trustee for the Finance Parties (as defined in the Debenture), Eggborough Power (Holdings) Limited and British Energy Power and Energy Trading Limited

[DATE]

Dear Sirs,

Debenture (Debenture) dated [            ] between Eggborough Power Limited, Eggborough Power (Holdings) Limited, British Energy Power and Energy Trading Limited and Barclays Bank PLC

We confirm receipt from Eggborough Power Limited (the Company) of a notice dated [            ] of certain charges upon the terms of the Debenture over the CTA Bonds.

We confirm that we accept the instructions contained in the notice and undertake to comply with the notice.

This letter is governed by English law.

Yours faithfully,

(Authorised signatory)

[Principal Paying Agent]

41

SIGNATORIES

Chargor
EXECUTED as a DEED by	)
EGGBOROUGH POWER LIMITED	)
acting by	)
and	)
Director	Neil O’Hara
Director/Secretary	Robert Armour
BET
EXECUTED as a DEED by	)
BRITISH ENERGY POWER AND	)
ENERGY TRADING LIMITED	)
acting by	)
and	)
Director	Neil O’Hara
Director/Secretary	Robert Armour
EPHL
EXECUTED as a DEED by	)
EGGBOROUGH POWER	)
(HOLDINGS) LIMITED	)
acting by	)
and	)
Director	Neil O’Hara
Director/Secretary	Robert Armour
Signed by:	Simon Deaves
BARCLAYS BANK PLC

42

EX-4.33

Exhibit 4.33

CONFORMED COPY

DEED OF ASSIGNMENT AND MORTGAGE

DATED 30 September, 2004

BETWEEN

EGGBOROUGH POWER (HOLDINGS) LIMITED

- and -

BARCLAYS BANK PLC

as Security Trustee

ALLEN & OVERY LLP

London

CONTENTS

Clause		Page
1.	Interpretation	3
2.	Assignment of Share Purchase Agreement and Tax Deed of Covenant	5
3.	Share mortgage	6
4.	unsecured assets	6
5.	Preservation of Security	6
6.	Representations and Warranties	8
7.	general undertakings	9
8.	Receipts Account	11
9.	When Security becomes Enforceable	12
10.	Enforcement of Security	12
11.	Receiver	13
12.	Powers of Receiver	14
13.	Application of Proceeds	16
14.	Delegation	16
15.	Further Assurances	16
16.	Power of Attorney	16
17.	Waiver, Remedies Cumulative	16
18.	Miscellaneous	17
19.	Severability	18
20.	Counterparts	18
21.	Changes to the Parties	18
22.	Notices	18
23.	Release	19
24.	Governing Law and Jurisdiction	20
Schedule
1.	Notices of Assignment	21
	Part 1        Notice of Assignment – Share Purchase Agreement	21
	Part 2        Notice of Assignment – Tax Deed of Covenant	23
Signatories		24

THIS DEED is dated 30 September, 2004

(1) EGGBOROUGH POWER (HOLDINGS) LIMITED (registered number SC201083) (the Company); and

(2) BARCLAYS BANK PLC (the Security Trustee) as agent and trustee for the Finance Parties.

WHEREAS:

(A) The Company enters into this Deed in connection with the obligations of the Borrower under the Credit Agreement and the Asset Option Agreement and of the Company under the Share Option Agreement, the EPHL Assignment and the Shares Pledge (each as defined in the Credit Agreement defined below).

(B) It is intended that this Deed takes effect as a deed notwithstanding the fact that a party may only execute this document under hand.

IT IS AGREED as follows:

1. INTERPRETATION

1.1 Definitions

In this Deed:

Act means the Law of Property Act 1925.

Assigned Assets means all assets of the Company which are the subject of any security created under Clause 2 (Assignment of Share Purchase Agreement and Tax Deed of Covenant) of this Deed.

Borrower means Eggborough Power Limited.

Credit Agreement means the credit agreement originally dated 13^th July, 2000, as amended and/or restated on 8^th September 2000, 24^th October 2000, 12^th December 2000, 5th February 2001 and on or about the date of this Deed, between, among others, the Borrower and the Agent and under which a loan of £150,000,000 is made available to the Borrower.

Enforcement Event has the meaning given to it in the Intercreditor Agreement.

First Security Assignment means the security assignment between EPHL as assignor and the Issuer as assignee dated on or about the date of this Agreement.

Mortgaged Assets means all assets of the Company which are the subject of any security created under Clause 3 (Share Mortgage) of this Deed.

Notice of Assignment means the notice of assignment substantially in the form set out in Schedule 1.

Receipts Account means an account with that name opened by the Security Trustee with the Account Bank at any time after an Enforcement Event has occurred.

3

Receiver means an administrative receiver, a receiver and manager or a receiver, in each case, appointed under this Deed.

Related Rights means any dividend or interest paid or payable in relation to any Shares and any rights, moneys or property accruing or offered at any time in relation to any Shares by way of redemption, substitution, exchange, bonus or preference, under option rights or otherwise.

Secured Liabilities means:

(a) all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of any of the Obligors to the Finance Parties under the Finance Documents; and

(b) all costs and expenses incurred by the Finance Parties in connection with the enforcement of, or the preservation of, its rights under the Finance Documents against any of the Obligors,

except for any obligation which, if it were so included, would result in this Deed contravening Sections 151 and 152 of the Companies Act 1985.

Security Assets means the Assigned Assets and the Mortgaged Assets.

Security Period means the period beginning on the date of this Deed and ending on the date on which the Security Trustee, acting reasonably, is satisfied that all the Secured Liabilities have been unconditionally and irrevocably paid and discharged in full.

Share Option has the meaning given to it in the EPHL Security Document.

Share Purchase Agreement means the share purchase agreement dated 16th November, 1999, and entered into between National Power plc and the Company.

Shares means:

(a) the 1,000,001 ordinary shares of £1 each in the share capital of the Borrower together with all the shares in the Borrower in which the Company has an interest in the future; and

(b) any other stocks, shares, debentures, bonds or other securities and investments in the Borrower legally or beneficially owned by the Company or in which the Company has an interest.

Tax Deed of Covenant means a tax deed of covenant dated 3rd March 2000 between National Power plc and the Company.

Unsecured Assets has the meaning given to “Assigned Property” in the First Security Assignment.

1.2 Construction

(a) Terms defined in the Credit Agreement or the Accounts Agreement have, unless expressly defined in this Deed, the same meaning in this Deed.

4

(b) The provisions of Clause 1.2 (Construction) of the Credit Agreement apply to this Deed as though they were set out in full in this Deed except that references to the Credit Agreement are to be construed as references to this Deed.

(c) If the Security Trustee considers that an amount paid by an Obligor or to a Finance Party under a Finance Document is capable of being avoided or set aside on the liquidation or administration of that Obligor or otherwise, then that amount will not be considered to have been irrevocably paid for the purpose of this Deed.

(d) A person who is not a party to this Deed may not enforce its terms under the Contracts (Rights of Third Parties) Act 1999.

(e) This Deed is subject to the terms of the Intercreditor Deed and the security constituted by this Deed is in each case subject to the EPHL Assignment and the Shares Pledge.

(f) This Deed is subject to the terms and conditions of the Share Subscription Agreement and the Intercreditor Agreement and the rights and obligations of EPHL, the Security Trustee and/or any Receiver under this Deed are subject to the rights and obligations of EPHL, the Security Trustee and/or any Receiver under the Share Subscription Agreement and the Intercreditor Agreement.

(g) Nothing in this Deed will in any way affect or prejudice the provisions of the EPHL Assignment and the Shares Pledge, which shall continue in full force and effect. It is intended that the rights of the Security Trustee and the Finance Parties under this Deed shall, so far as it relates to them, be in addition to their rights under the EPHL Assignment and the Shares Pledge.

(h) The provisions of this Deed shall only become effective upon the occurrence of the Restatement Date.

2. ASSIGNMENT OF SHARE PURCHASE AGREEMENT AND TAX DEED OF COVENANT

(a) The Company, with full title guarantee and as continuing security for the payment of all the Secured Liabilities by the Borrower, assigns by way of security to the Security Trustee absolutely and, as security for payment of all Secured Liabilities, charges to the Security Trustee by way of first fixed charge:

(i) all of the Company’s rights, title, interest and benefits under the Share Purchase Agreement and the Tax Deed of Covenant; and

(ii) in relation to the above, all of the Company’s book and other debts, the proceeds of the same and all other moneys due and owing to the Company and the benefit of all rights, securities and guarantees of any nature enjoyed or held by it.

(b) The Company shall promptly give notice of the assignment of its rights, title, interest and benefit in and to the Share Purchase Agreement and the Tax Deed of Covenant by sending notices to National Power plc substantially in the form of Schedule 1.

(c) To the extent that any such rights, title, interest and benefit described in paragraph (a) is not assignable or capable of assignment, the purported assignment to be effected shall operate as an assignment of any and all damages, compensation remuneration, profit, rent or income which the Company may derive, be awarded or be entitled to in respect of that assignment.

5

(d) Without prejudice to paragraph (a), if, pursuant to Clause 8 (Receipts Account), the Company is entitled to withdraw the proceeds or part proceeds of any book and other debts standing to the credit of the Receipts Account and, as a result, those proceeds or part proceeds are in any way released from the fixed charge created pursuant to paragraph (a) and stand subject to a floating charge, the release will in no way derogate from the subsistence and continuance of the fixed charge on all other outstanding book and other debts of the Company and the proceeds or remaining proceeds of those debts which are assigned and charged in paragraphs (a) and (c).

(e) Notwithstanding paragraph (a), insofar as a fixed charge over the Assigned Assets set out in subparagraphs (a)(i) and (a)(ii) is expressed to be first ranking, it shall be first ranking subject to any fixed charge with respect to that asset created under the EPHL Assignment.

3. SHARE MORTGAGE

3.1 General

(a) The Company as security for the payment of all the Secured Liabilities and with full title guarantee charges in favour of the Security Trustee:

(i) by way of a first equitable mortgage or a first fixed charge, all the Shares; and

(ii) by way of a first fixed charge, all Related Rights.

(b) Notwithstanding paragraph (a), insofar as an equitable mortgage or a fixed charge over the Mortgaged Assets set out in subparagraph (a) is expressed to be first ranking, it shall be first ranking subject to any equitable or fixed charge with respect to that asset created under the Shares Pledge.

3.2 Distribution

Notwithstanding the creation of an equitable mortgage of the Shares and Related Rights under Clause 3.1 or the creation of a legal mortgage or charge of the Shares and Related Rights under Clause 7.5, the Company shall be entitled to receive and retain any Distributions made to it in accordance with Clause 15.26 (Distributions) of the Credit Agreement.

4. UNSECURED ASSETS

Notwithstanding any other provision of this Deed, this Deed does not create, nor does it purport to create, any Security Interest over the Unsecured Assets.

5. PRESERVATION OF SECURITY

5.1 Continuing security

The security constituted by this Deed is continuing and will extend to the ultimate balance of all the Secured Liabilities regardless of any intermediate payment or discharge in whole or in part.

5.2 Additional security

(a) The security constituted by this Deed is in addition to and is not in any way prejudiced by any other security now or subsequently held by the Security Trustee for any Secured Liability.

6

(b) The Security Interests created by or pursuant to this Deed shall be cumulative, in addition to and independent of every other Security Interest which the Security Trustee or any Finance Party may at any time hold for the Secured Liabilities or any other obligations, or any other rights, power and remedies provided by law. No prior security held by the Security Trustee (whether in its capacity as security trustee or otherwise) or any of the Finance Parties over the whole or any part of the Security Assets shall merge into the security constituted by this Deed

5.3 Waiver of defences

The obligations of the Company under this Deed will not be affected by an act, omission, matter or thing which, but for this provision, would reduce, release or prejudice any of its obligations under this Deed or prejudice or diminish those obligations in whole or in part including (whether or not known to it or the Security Trustee):

(a) any time or waiver granted to, or composition with, the Borrower or other person;

(b) the release of any other person under the terms of any composition or arrangement with any creditor of any member of the Group;

(c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, the Borrower or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

(d) any incapacity or lack of powers, authority or legal personality of or dissolution or change in the members or status of the Borrower or any other person;

(e) any variation (however fundamental) or replacement of a Finance Document or any other document or security so that references to that Finance Document in this Deed shall include each variation or replacement;

(f) any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security, to the intent that the Company’s obligations under this Deed shall remain in full force and be construed accordingly, as if there were no unenforceability, illegality or invalidity; or

(g) any postponement, discharge, reduction, non-provability or other similar circumstance affecting any obligation of the Borrower under a Finance Document resulting from any insolvency, liquidation or dissolution proceedings or from any law, regulation or order so that each such obligation shall for the purposes of the Company’s obligations under this Deed be construed as if there were no such circumstance.

5.4 Immediate recourse

The Company waives any right it may have of first requiring the Security Trustee (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before enforcing this Deed.

5.5 Appropriations

The Security Trustee (or any trustee or agent on its behalf) may at any time during the Security Period:

(a) refrain from applying or enforcing any other moneys, security or rights held or received by the Finance Parties or the Security Trustee (or any other trustee or agent on their behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and the Company shall not be entitled to the benefit of the same; and

7

(b) hold in a suspense account any moneys received on an enforcement of this Deed (with any interest on those moneys.

5.6 Reinstatement

(a) Where any discharge (whether in respect of the obligations of the Borrower, this Deed, any other security or otherwise) is made in whole or in part or any arrangement is made on the faith of any payment, security or other disposition which is avoided or must be restored on insolvency, liquidation or otherwise without limitation, this security and the liability of the Company under this Deed shall continue as if the discharge or arrangement had not occurred.

(b) The Security Trustee may concede or compromise any claim that any payment, security or other disposition is liable to avoidance or restoration.

6. REPRESENTATIONS AND WARRANTIES

6.1 Representations and warranties

The Company makes the representations and warranties set out in this Clause 6 to the Security Trustee.

6.2 Powers and Authority

The Company has the power to enter into and perform, and has taken all necessary action to authorise the entry into, performance and delivery of, this Deed and the transactions contemplated by this Deed.

6.3 Legal Validity

This Deed, constitutes its valid, legally binding and enforceable obligations.

6.4 Authorisations

All authorisations required in connection with the entry into, performance, validity and enforceability of, and the transactions contemplated by, this Deed have been obtained or effected and are in full force and effect.

6.5 Non-conflict

The entry into and performance by it of, and the transactions contemplated by, this Deed do not and will not:

(a) conflict with any existing law or regulation or judicial or official order to which it is subject;

(b) conflict with the constitutional documents of the Company; or

(c) conflict with any document which is binding upon the Company or any asset of the Company.

8

6.6 Security

This Deed creates those Security Interests it purports to create.

6.7 Security Assets

(a) The Company is the legal and beneficial owner of the Security Assets and the Shares are fully paid.

(b) Each of the Security Assets are free from any Security Interest (other than the Permitted Security Interests).

(c) The Shares represent the whole of the issued share capital of the Borrower.

6.8 Share Purchase Agreement

(a) Payments by National Power plc to the Borrower under the Share Purchase Agreement are not subject to rights of set-off or similar rights.

(b) The Share Purchase Agreement is the legal, valid and binding obligation of it and (so far as it is aware) of each other party to it.

(c) The Company is not in default of any of its obligations under the Share Purchase Agreement.

(d) The Company’s entering into this Deed will not constitute a breach of the Share Purchase Agreement.

6.9 Tax Deed of Covenant

(a) Payments by National Power plc to the Borrower under the Tax Deed of Covenant are not subject to rights of set-off or similar rights.

(b) The Tax Deed of Covenant is the legal, valid and binding obligation of it and (so far as it is aware) of each other party to it.

(c) The Company is not in default of any of its obligations under the Tax Deed of Covenant.

(d) The Company’s entering into this Deed will not constitute a breach of the Tax Deed of Covenant.

6.10 Times for making representations and warranties

The representations and warranties set out in this Clause 6 are made on the Restatement Date.

7. GENERAL UNDERTAKINGS

7.1 Duration

The undertakings in this Clause 7 remain in force throughout the Security Period.

7.2 Assigned Assets

(a) The Company shall on the occurrence of an Enforcement Event:

(i) get in and realise the Company’s debts and other moneys receivable by it under the Share Purchase Agreement and the Tax Deed of Covenant and hold the proceeds of such getting in and realisation (until payment into the Receipts Account if required in accordance with sub-paragraph (ii)) upon trust for the Security Trustee; and

9

(ii) save to the extent that the Security Trustee otherwise agrees, pay the proceeds of the getting in and realisation in accordance with sub-paragraph (i) into the Receipts Account.

(b) The Company authorises the Security Trustee to:

(i) complete, execute and serve any demands, notices and certificates as it considers appropriate including, without limitation, all Notices of Assignment, in each case, to the extent required in connection with this Deed; and

(ii) in the case of negotiable instruments referred to in sub-paragraph (b)(i) above, endorse all documents necessary to constitute the Security Trustee the holder of the documents.

7.3 The Share Purchase Agreement and Tax Deed of Covenant

(a) To the date of this Deed the Company shall not amend or waive any provision of or terminate the Share Purchase Agreement or the Tax Deed of Covenant without the prior written consent of the Security Trustee and shall duly and promptly perform its obligations and diligently pursue its rights under the Share Purchase Agreement and the Tax Deed of Covenant.

(b) The Company shall supply the Security Trustee and any Receiver with copies of the Share Purchase Agreement and the Tax Deed of Covenant and to the extent it is in the Company’s power to do so, any information and documentation relating to the Share Purchase Agreement and the Tax Deed of Covenant requested by the Security Trustee or any Receiver.

(c) The Company shall to the extent possible use its reasonable endeavours to procure that National Power plc will perform all its obligations under the Share Purchase Agreement and the Tax Deed of Covenant in accordance with their terms.

(d) The Company shall not take any action which would reasonably be likely to jeopardise the existence, enforceability or collectability of the Security Assets.

(e) The Company has been provided with and acknowledges the agreements of the Borrower contained in Clause 11.4 (Taxes) of the Credit Agreement insofar as they relate to the rights and obligations of the Company under the Tax Deed of Covenant.

(f) The Company agrees that where in Clause 11.4 (Taxes) of the Credit Agreement the Borrower is required to the extent possible, to procure that the Company exercises its rights and fulfils its obligations under the Tax Deed of Covenant in a particular manner, the Company must exercise those rights and fulfil those obligations in that manner.

7.4 Deposit of Shares

To the extent that it has not done so in accordance with the Shares Pledge, the Company shall:

(a) deposit with the Security Trustee, or as the Security Trustee may direct, all certificates and other documents of title or evidence of ownership in relation to the Shares and their Related Rights; and

10

(b) execute and deliver to the Security Trustee all share transfers and other documents which may be requested by the Security Trustee in order to enable the Security Trustee or its nominees to be registered as the owner or otherwise obtain a legal title to the Shares and their Related Rights at any time after a Default has occurred and is continuing.

7.5 Calls and other obligations

(a) To the extent that it has not done so in accordance with the Shares Pledge, the Company shall pay all calls or other payments due and payable in respect of any of the Mortgaged Assets and if the Company fails to do so the Security Trustee may pay the calls or other payments on behalf of the Company. The Company shall promptly on demand reimburse the Security Trustee for any payment made by the Security Trustee pursuant to this paragraph (a).

(b) The Company shall promptly copy to the Security Trustee and comply with all requests for information which is within its knowledge and which are made under section 212 of the Companies Act 1985 or any similar provision contained in any articles of association or other constitutional document relating to any of the Mortgaged Assets and if it fails to do so the Security Trustee may elect to provide such information as it may have on behalf of the Company.

(c) The Company shall comply with all other conditions and obligations assumed by it in respect of any of the Security Assets.

(d) The Security Trustee is not obliged to carry out any obligation of the Company in respect of the Mortgaged Assets or to make any payment, or to make any enquiry as to the nature or sufficiency of any payment received by it or the Company, or to present or file any claim or take any other action to collect or enforce the payment of any amount to which it may be entitled under this Deed.

7.6 Restrictions on dealing

The Company shall not:

(a) create or permit to subsist any Security Interest on any Security Asset other than the Security Interests created by this Deed;

(b) sell, transfer, grant, or lease or otherwise dispose of any Security Asset; or

(c) take or permit the taking of any action which would reasonably be likely to result in the rights attaching to any Mortgaged Assets being altered or further shares in the Borrower being issued (other than the issue of any deferred shares by the Company in accordance with the terms of the Share Subscription Agreement).

8. RECEIPTS ACCOUNT

8.1 Interest

Amounts standing to the credit of the Receipts Account shall bear interest at a rate considered by the Security Trustee, acting reasonably, to be a fair market rate.

11

8.2 Withdrawals

(a) Except with the prior consent of the Security Trustee, the Company shall not withdraw any moneys standing to the credit of the Receipts Account.

(b) The Security Trustee (or a Receiver) may (subject to the payment of any claims having priority to this security) withdraw amounts standing to the credit of the Receipts Account for the application in accordance with the Intercreditor Agreement.

9. WHEN SECURITY BECOMES ENFORCEABLE

The security constituted by this Deed shall become immediately enforceable upon the occurrence and continuance of an Event of Default and the power of sale and other powers conferred by Section 101 of the Act, as varied or amended by this Deed, shall be immediately exercisable upon and at any time after the occurrence and continuance of any Event of Default. After the security constituted by this Deed has become enforceable, the Security Trustee may in its absolute discretion enforce all or any part of the security in any manner it sees fit.

10. ENFORCEMENT OF SECURITY

10.1 General

For the purposes of all powers implied by statute, the Secured Liabilities are deemed to have become due and payable on the date of this Deed and Section 103 of the Act (restricting the power of sale) and Section 93 of the Act (restricting the right of consolidation) do not apply to the security constituted by this Deed.

10.2 Contingencies

If the Security Trustee enforces the security constituted by this Deed at a time when no Secured Liabilities are due but at a time when Secured Liabilities may or will become so due, the Security Trustee (or the Receiver) may pay the proceeds of any recoveries effected by it into a suspense account with the Security Trustee or such other bank as may be designated for this purpose by the Security Trustee.

10.3 Shares

After the security constituted by this Deed has become enforceable, the Security Trustee may exercise (in the name of the Company and without any further consent or authority on the part of the Company) any voting rights and any powers or rights which may be exercised by the person or persons in whose name any Share or its Related Rights are registered or who is the holder of any of them or otherwise (including all the powers given to trustees by Section 10(3) and (4) of the Trustee Act, 1925 as amended by Section 9 of the Trustee Investment Act, 1961 in respect of securities or property subject to a trust).

10.4 No liability as mortgagee in possession

Neither the Security Trustee nor any Receiver will be liable, by reason of entering into possession of a Security Asset, to account as mortgagee in possession or for any loss on realisation or for any default or omission for which a mortgagee in possession might be liable.

12

10.5 Agent of the Company

Each Receiver is deemed to be the agent of the Company for all purposes and accordingly is deemed to be in the same position as a Receiver duly appointed by a mortgagee under the Act. The Company alone shall be responsible for its contracts, engagements, acts, omissions, defaults and losses and for liabilities incurred by him and the Security Trustee shall not incur any liability (either to the Company or to any other person) by reason of the Security Trustee making its appointment as a Receiver or for any other reason.

10.6 Privileges

Each Receiver and the Security Trustee is entitled to all the rights, powers, privileges and immunities conferred by the Act on mortgagees and receivers when such receivers have been duly appointed under the Act, except that Section 103 of the Act does not apply.

10.7 Protection of third parties

No person (including a purchaser) dealing with the Security Trustee or a Receiver or its or his agents will be concerned to enquire:

(a) whether the Secured Liabilities have become payable;

(b) whether any power which the Security Trustee or the Receiver is purporting to exercise has become exercisable;

(c) whether any Secured Liabilities remain due; or

(d) how any money paid to the Security Trustee or to the Receiver is to be applied.

10.8 Redemption of prior Mortgages

At any time after the security constituted by this Deed has become enforceable, the Security Trustee may do one or more of the following:

(a) redeem any prior Security Interest against any Security Asset (other than any Security Interest created under the First Security Assignment);

(b) procure the transfer of that Security Interest to itself (other than any Security Interest created under the First Security Assignment); or

(c) settle and pass the accounts of the prior mortgagee, chargee or encumbrancer (other than any accounts of the Issuer); any accounts so settled and passed shall be conclusive and binding on the Company.

All principal moneys, interest, costs, charges and expenses of and incidental to any such redemption or transfer shall be paid by the Company to the Security Trustee on demand.

11. RECEIVER

11.1 Appointment of Receiver

At any time after the security constituted by this Deed becomes enforceable, or if the Company so requests the Security Trustee in writing, at any time, the Security Trustee may without further notice appoint under seal or in writing under its hand any one or more persons to be a Receiver of all or any part of the Security Assets provided that the Security Trustee

13

may not appoint an administrative receiver (as defined in section 29(2) of the Insolvency Act 1986) over the Security Assets if the Security Trustee is prohibited from doing so by Section 72A of the Insolvency Act 1986 and no exception to the prohibition on appointing an administrative receiver applies.

11.2 Removal

The Security Trustee may by writing under its hand (subject to any requirement for an order of the court in the case of an administrative receiver):

(a) remove any Receiver appointed by it; and

(b) may, whenever it deems it expedient, appoint a new Receiver in the place of any Receiver whose appointment may for any reason have terminated.

11.3 Remuneration

The Security Trustee may fix the remuneration of any Receiver appointed by it and the maximum rate specified in Section 109(6) of the Act shall not apply.

11.4 Relationship with Security Trustee

To the fullest extent permitted by law, any right, power or discretion conferred by this Deed (either expressly or impliedly) upon a Receiver of the Security Assets may after the security created by this Deed becomes enforceable be exercised by the Security Trustee in relation to any Security Asset without first appointing a Receiver or notwithstanding the appointment of a Receiver.

12. POWERS OF RECEIVER

12.1 General

(a) Each Receiver has, and is entitled to exercise, all of the rights, powers and discretions set out below in this Clause 12 in addition to those conferred by any law; this includes:

(i) in the case of an administrative receiver, all the rights, powers and discretions conferred on an administrative receiver under the Insolvency Act 1986; and

(ii) otherwise, all the rights, powers and discretions conferred on a receiver (or a receiver and manager) under the Act and the Insolvency Act 1986.

(b) If there is more than one Receiver holding office at the same time, each Receiver may (unless the document appointing him states otherwise) exercise all of the powers conferred on a Receiver under this Deed individually and to the exclusion of any other Receivers.

(c) Each Receiver has all the rights, power and discretions set out in Schedule 1 to the Insolvency Act, 1986.

12.2 Possession

A Receiver may take immediate possession of, get in and collect any Security Assets.

14

12.3 Carry on business

A Receiver may carry on the business of the Company as it relates to the Security Assets as he thinks fit.

12.4 Employees

A Receiver may appoint and discharge managers, officers, agents, accountants, servants, workmen and others for the purposes of this Deed upon such terms as to remuneration or otherwise as he may think proper and discharge any such persons appointed by the Company.

12.5 Borrow money

A Receiver may raise and borrow money either unsecured or on the security of any Security Asset either in priority to the security constituted by this Deed or otherwise and generally on any terms and for whatever purpose which he thinks fit. No person lending that money is concerned to enquire as to the propriety or purpose of the exercise of that power or to check the application of any money so raised or borrowed.

12.6 Sale of assets

A Receiver may sell, exchange, convert into money and realise any Security Asset by public auction or private contract and generally in any manner and on any terms which he thinks proper. The consideration for any such transaction may consist of cash, debentures or other obligations, shares, stock or other valuable consideration and any such consideration may be payable in a lump sum or by instalments spread over such period as he thinks fit.

12.7 Compromise

A Receiver may settle, adjust, refer to arbitration, compromise and arrange any claims, accounts, disputes, questions and demands with or by any person who is or claims to be a creditor of the Company or relating in any way to any Security Asset.

12.8 Legal actions

A Receiver may bring, prosecute, enforce, defend and abandon all actions, suits and proceedings in relation to any Security Asset which may seem to him to be expedient.

12.9 Receipts

A Receiver may give valid receipts for all moneys and execute all assurances and things which may be proper or desirable for realising any Security Asset.

12.10 Delegation

A Receiver may delegate his powers in accordance with Clause 14 (Delegation).

12.11 Other powers

A Receiver may:

(a) do all other acts and things which he may consider desirable or necessary for realising any Security Asset or incidental or conducive to any of the rights, powers or discretions conferred on a Receiver under or by virtue of this Deed; and

15

(b) exercise in relation to any Security Asset all the powers, authorities and things which he would be capable of exercising if he were the absolute beneficial owner of the same,

and may use the name of the Company for any of the above purposes.

13. APPLICATION OF PROCEEDS

Any moneys received by the Security Trustee after the security constituted by this Deed has become enforceable shall be applied in accordance with the Intercreditor Agreement.

14. DELEGATION

The Security Trustee and any Receiver may delegate by power of attorney or in any other manner to any person any right, power or discretion exercisable by them under this Deed. Any such delegation may be made upon the terms (including power to sub-delegate) and subject to any regulations which the Security Trustee or such Receiver (as the case may be) may think fit. Neither the Security Trustee nor any Receiver will be in any way liable or responsible to the Company for any loss or liability arising from any act, default, omission or misconduct on the part of any such delegate or sub-delegate unless caused by the Security Trustee or, as the case may be, the Receiver.

15. FURTHER ASSURANCES

The Company shall, at its own expense, take whatever action the Security Trustee or a Receiver may reasonably require for:

(a) perfecting or protecting the security intended to be created by this Deed; and/or

(b) facilitating the realisation of any Security Asset or the exercise of any right, power or discretion exercisable by the Security Trustee or any Receiver or any of its or their delegates or sub-delegates in respect of any Security Asset after such time as the security constituted by this Deed shall have become enforceable,

including the execution of any transfer, conveyance, assignment or assurance of any property whether to the Security Trustee or to its nominees, and the giving of any notice, order or direction and the making of any registration, which in any such case, the Security Trustee may think expedient.

16. POWER OF ATTORNEY

The Company, by way of security, irrevocably and severally appoints the Security Trustee, each Receiver and any of their delegates or sub-delegates to be its attorney to take any action which the Company is obliged to take under this Deed, including under Clause 16 (Further Assurances). The Company ratifies and confirms whatever any attorney does or purports to do pursuant to its appointment under this Clause.

17. WAIVER, REMEDIES CUMULATIVE

The rights of the Security Trustee under this Deed:

(a) may be exercised as often as necessary;

(b) are cumulative and not exclusive of its rights under the general law; and

16

(c) may be waived only in writing and specifically.

Delay in exercising or non-exercise of any right is not a waiver of that right.

18. MISCELLANEOUS

18.1 Covenant to pay

The Company shall pay or discharge the Secured Liabilities in the manner provided for in the Finance Documents.

18.2 Tacking

The Security Trustee agrees on behalf of the Finance Parties that each Finance Party shall perform its obligations under the Finance Documents (including any obligation to make available further advances).

18.3 No liability on Security Trustee

The Security Trustee is not liable for any loss of any kind (including any loss arising from changes in exchange rates) which may occur as a result of the exercise or purported exercise of, or any delay or neglect to exercise, any of its rights under this Deed, unless such loss arises as a result of the gross negligence, wilful default upon its part.

18.4 New Accounts

If the Security Trustee receives, or is deemed to be affected by, notice, whether actual or constructive, of any subsequent charge or other interest affecting any Security Asset, the Security Trustee may open a new account with the Company. If the Security Trustee does not open a new account, it shall nevertheless be treated as if it had done so at the time when it received or was deemed to have received notice. As from that time all payments made to the Security Trustee will be credited or be treated as having been credited to the new account and will not operate to reduce any amount for which this Deed is security.

18.5 Time Deposits

Without prejudice to any right of set-off any Finance Party may have under any other Finance Document or otherwise, if any time deposit matures on any account the Company has with any Finance Party at a time within the Security Period when:

(a) this security has become enforceable; and

(b) no amount of the Secured Liabilities is due and payable,

that time deposit shall automatically be renewed for any further maturity which that Finance Party considers appropriate.

18.6 Certificates

A certificate or determination by the Security Trustee of a rate or amount under the Finance Documents is, in the absence of manifest error, conclusive evidence of the matter to which it relates.

17

18.7 Stamp duties

The Company will pay and promptly on demand indemnify the Security Trustee against any liability it incurs in respect of any stamp, registration and similar tax which is or becomes payable in connection with the entry into, performance or enforcement of this Deed to the extent that the Security Trustee has not been so reimbursed under the Credit Agreement.

19. SEVERABILITY

If any provision of this Deed is or becomes illegal, invalid or unenforceable in any jurisdiction, that shall not affect:

(a) the legality, validity or enforceability in that jurisdiction of any other provision of this Deed; or

(b) the legality, validity or enforceability in other jurisdictions of that or any other provisions of this Deed.

20. COUNTERPARTS

This Deed may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Deed.

21. CHANGES TO THE PARTIES

21.1 Transfer by the Company

The Company may not assign, transfer, novate or dispose of its rights or obligations under this Deed.

21.2 Transfers by the Security Trustee

The Security Trustee may assign, transfer, novate or dispose of all or any part of its rights or obligations under this Deed to a successor Security Trustee appointed in accordance with clause 12.11 of the Intercreditor Agreement or to any other person after the Security Interests created under this Deed have become enforceable.

22. NOTICES

22.1 Giving of notices

All notices or other communications under or in connection with this Deed shall be given in writing and, unless otherwise stated, may be made by facsimile. Any such notice will be deemed to be given as follows:

(a) if by letter, when delivered; and

(b) if by facsimile, when received in legible form.

However, a notice given in accordance with the above but received on a non-working day or after business hours in the place of receipt will only be deemed to be given on the next working day in that place.

18

22.2 Addresses for notices

(a) The address and facsimile number of the Company are:

Eggborough Power (Holdings) Limited

10 Lochside Place

Edinburgh

Lothian E12 9DF

Facsimile No: **** *** **** (Attention: Company Secretary); and

                **** *** **** (Attention: Group Treasurer),

or such other as the Company may notify to the Security Trustee by not less than five Business Days’ notice.

(b) The address and facsimile number of the Security Trustee are:

Barclays Bank PLC

5 The North Colonnade

Canary Wharf

London E14 4BB

Facsimile No: 020 7773 1840,

or such other as the Security Trustee may notify to the Company by not less than five Business Days’ notice.

23. RELEASE

Upon the expiry of the Security Period (but not otherwise), the Security Trustee shall:

(a) at the request and cost of the Company, take whatever action is necessary to re-assign to the Company absolutely the Assigned Assets not applied by the Security Trustee towards payment of the Secured Liabilities; and

(b) notify in writing the Borrower of the termination of this Deed and the re-assignment absolutely to the Company of the Security Assets.

23.2 Shares

Subject to Clause 24.3 (Option Agreements) below, upon the expiry of the Security Period (but not otherwise) the Security Trustee shall, at the request and the cost of the Company, take whatever action is necessary to release the Mortgaged Assets from the security constituted by this Deed.

23.3 Option Agreements

Nothing in this Deed shall prevent the Security Trustee from irrevocably:

(a) re-assigning the Assigned Assets to the Company; and

(b) releasing the Mortgaged Assets from the security constituted by this Deed;

in accordance with the terms of the Finance Documents and the Option Agreements.

**** indicates material omitted and filed separately with the Commission.

19

24. GOVERNING LAW AND JURISDICTION

24.1 Governing Law

This Deed is governed by English law.

24.2 Jurisdiction

(a) For the benefit of the Security Trustee, the Company agrees that the High Courts of Justice in London, and all appellate courts therefrom have jurisdiction to settle any disputes which may arise out of or in connection with this Deed and that any suit, action or proceedings in connection with this Deed may be brought in the High Courts of Justice in London and all appellate courts therefrom and accordingly submits to the jurisdiction of the High Courts of Justice in London and all appellate courts therefrom.

(b) The Company irrevocably and unconditionally agrees that nothing in this Deed shall affect the right to serve process in any manner permitted by law.

THIS DEED has been entered into as a deed on the date stated at the beginning of this Deed.

20

SCHEDULE 1

NOTICES OF ASSIGNMENT

PART 1

NOTICE OF ASSIGNMENT – SHARE PURCHASE AGREEMENT

TO:	Innogy plc
FROM:	Barclays Bank plc.
		DATED:	, 2004

Dear Sirs,

Share Purchase Agreement dated 16th November, 1999 between yourselves and Eggborough

Power (Holdings) Limited (the Company)

(the Agreement)

This letter constitutes notice to you that the Company has assigned to us all its rights and benefits under the Agreement. Notwithstanding the assignment, the Company remains liable to perform all its obligations under the Agreement, if any, and we shall have no liability in respect of those obligations.

Subject to the terms of the notice of assignment to you dated [            ], 2000, please pay all moneys payable by you to the Company under the Agreement to the account number: [            ], sort code: [            ], reference: [            ], attention: [            ], with [            ] or such other account number or bank as we may otherwise instruct you in writing.

Please acknowledge receipt of this Notice of Assignment by signing the duplicate of this Notice of Assignment and returning the same to us for the attention of [            ].

Yours faithfully

For and on behalf of

Barclays Bank plc

21

[on copy]

We acknowledge receipt of the Notice of Assignment from Barclays Bank plc on             , 2004.

We confirm that we have not received any prior notice of assignment in relation to the same other than the notice of assignment from Barclays Bank plc dated [            ], 2000 (the Original Notice) and, subject to the Original Notice, agree to pay any monies payable by us to the Company under the Agreement to the above account and bank or as you shall otherwise instruct us in writing.

for and on behalf of

Innogy plc

22

PART 2

NOTICE OF ASSIGNMENT – TAX DEED OF COVENANT

TO:	Innogy plc
FROM:	Barclays Bank plc
		DATED:	, 2004

Dear Sirs,

Tax Deed of Covenant dated 3rd March, 2000 between yourselves and Eggborough Power

(Holdings) Limited (the Company)

(the Deed)

This letter constitutes notice to you that the Company has assigned to us all its rights and benefits under the Deed. Notwithstanding the assignment, the Company remains liable to perform all its obligations under the Deed, if any, and we shall have no liability in respect of those obligations.

Subject to the terms of the notice of assignment to you dated [            ], 2000, please pay all moneys payable by you to the Company under the Deed to the account number: [            ], sort code: [            ], reference: [            ], attention: [            ], with [            ] or such other account number or bank as we may otherwise instruct you in writing.

Please acknowledge receipt of this Notice of Assignment by signing the duplicate of this Notice of Assignment and returning the same to us for the attention of [            ].

Yours faithfully

For and on behalf of

Barclays Bank plc

[on copy]

We acknowledge receipt of the Notice of Assignment from Barclays Bank plc on [    ], 2004.

We confirm that we have not received any prior notice of assignment in relation to the same other than the notice of assignment from Barclays Bank plc dated [            ], 2000 (the Original Notice) and, subject to the Original Notice, agree to pay any monies payable by us to the Company under the Deed to the above account and bank or as you shall otherwise instruct us in writing.

for and on behalf of

Innogy plc

23

SIGNATORIES

EPHL
EXECUTED as a DEED by	)
EGGBOROUGH POWER	)
(HOLDINGS) LIMITED	)
acting by	)
and	)
Director	Robert Armour
Secretary	Jean MacDonald

BARCLAYS BANK PLC
as Security Trustee for
the Finance Parties
By:	Simon Deaves

24

EX-4.34

Exhibit 4.34

CONFORMED COPY

AMENDED AND RESTATED INTERCREDITOR DEED

Originally dated 8^th September, 2000 and as amended by an amendment and restatement deed dated

5^th February, 2001 and as further amended by an amendment and restatement deed dated

30 September, 2004

BETWEEN

EGGBOROUGH POWER LIMITED

as Borrower

and

BRITISH ENERGY POWER AND ENERGY TRADING LIMITED

and

EGGBOROUGH POWER (HOLDINGS) LIMITED

and

BARCLAYS BANK PLC

as Security Trustee and Agent for the Finance Parties and in its

personal capacity

and

CERTAIN FINANCIAL INSTITUTIONS

ALLEN & OVERY LLP

LONDON

CONTENTS

Clause		Page
1.	Interpretation	1
2.	Ranking	6
3.	Permitted payments	7
4.	Subordination	8
5.	Turnover of non-permitted recoveries	9
6.	Protection of subordination	9
7.	Representations	10
8.	Enforcement	11
9.	Proceeds of enforcement of Security	14
10.	release of security	16
11.	The Security Trustee	16
12.	Security	21
13.	Co-operation between Secured creditors	24
14.	Calculation and evidence	25
15.	Amendments and waivers	25
16.	Changes to the Parties	25
17.	Sharing	25
18.	Severability	26
19.	Counterparts	26
20.	Notices	26
21.	Governing Law	28
22.	Enforcement	28
Schedule
1.	Form of Accession Agreement	29
2.	Finance Parties	30
Signatories		31

THIS AMENDED AND RESTATED INTERCREDITOR DEED was originally dated 8th September, 2000 was amended and restated on 5th February, 2001 and further amended and restated on the Restatement Date (as defined in the Credit Agreement).

BETWEEN:

(1) EGGBOROUGH POWER LIMITED (the Borrower);

(2) BRITISH ENERGY POWER AND ENERGY TRADING LIMITED (BET);

(3) EGGBOROUGH POWER (HOLDINGS) LIMITED (EPHL);

(4) BARCLAYS BANK PLC (the Security Trustee) as Security Trustee and as Agent for the Finance Parties (as defined in the Credit Agreement defined below); and

(5) THE FINANCIAL INSTITUTIONS listed in Schedule 2 (the Finance Parties).

BACKGROUND:

(A) The Borrower enters into this Deed in connection with the Credit Agreement.

(B) Under the Asset Option Agreement, the Security Trustee (on behalf of the Finance Parties) may make certain payments to the Borrower which shall be paid into the Asset Option Account. Promptly upon receipt of any payment into the Asset Option Account, the Borrower will use such amount to make a prepayment to EPHL in accordance with the Accounts Agreement and the Second Intercompany Loan Agreement.

(C) Pursuant to the Second Security Assignment, the Borrower has assigned its rights under the Asset Option Agreement and this Deed to EPHL.

(D) Under the Accounts Agreement, the Borrower may pay certain moneys into the Revenue Account for the benefit of BET.

(E) The Borrower has or will open each Account (as defined in the Accounts Agreement). Pursuant to the Security Documents, (as defined in the Credit Agreement), the Borrower has granted security in favour of the Security Trustee (on behalf of the Finance Parties), EPHL and BET.

(F) It is intended that this document takes effect as a deed notwithstanding the fact that a party may only execute this document under hand.

IT IS AGREED as follows:

1. INTERPRETATION

1.1 Definitions

In this Deed:

Accession Deed means a deed by which a person becomes a party to this Deed, substantially in the form of Schedule 2 (Form of Accession Deed).

Ascertained Security Value means, following an Enforcement Event:

(a) if an Enforcement Sale occurs on or prior to the Calculation Date, the net amount recovered from each and every sale of shares in, and/or assets of, the Borrower during the Enforcement Sale Period, as determined in accordance with Clause 9.2(a);

1

(b) if an Enforcement Sale does not occur on or prior to the Calculation Date, the value of the Plant as determined in accordance with Clause 9.2(b).

Asset Option Account has the meaning given to it in the Accounts Agreement.

Asset Option Payments means each and every sum payable or owing from time to time by the Buyer or any Finance Party to the Borrower under or in connection with the Asset Option Agreement.

Asset Option Security means each and every Security Interest conferred by the Security Documents over the Asset Option Payments and the Asset Option Account (including all rights and claims to which the Borrower is now or may hereafter become entitled in relation to all moneys now or at any time hereafter standing to the credit of the Asset Option Account).

Buyer has the meaning given to it in the Asset Option Agreement.

Calculation Date means the date falling twelve (12) calendar months after an Enforcement Event.

Competitor means any competitor of the Group as notified by any member of the Group to the Parties no later than 10 Business Days prior to the appointment of an Expert in accordance with Clause 9.1.

Credit Agreement means the credit agreement originally dated 13th July, 2000, as amended and restated on 8th September, 2000, 24th October, 2000, 12th December, 2000, 5th February, 2001 and on or about the date of this Deed, between, among others, the Borrower and the Security Trustee and under which a loan of £150,000,000 is made available to the Borrower.

CTA Bonds means the £150,000,000 7% fixed rate guaranteed bonds due 2005-2022 issued by the Issuer to EPHL on or about the date of this Deed as represented by the CTA Global Bond Certificate.

CTA Bond Account has the meaning given to it in the Accounts Agreement.

CTA Global Bond Certificate means the certificate issued in respect of the CTA Bonds by the Issuer to EPHL on or about the date of this Deed.

CTA Bond Outstandings means, at any time, the Principal Amount Outstanding of the CTA Bonds at such time.

CTA Bond Payments means each and every sum payable or owing from time to time by the Issuer to the Borrower under or in connection with the CTA Bonds.

CTA Bond Security means each and every Security Interest conferred by the Security Documents over the CTA Bond Payments and the CTA Bond Account (including all rights and claims to which the Borrower is now or may hereafter become entitled in relation to all moneys now or at any time hereafter standing to the credit of the CTA Bond Account).

2

Debt means the Senior Debt, the New CTA Debt or the Subordinated Debt.

Determination Date means the earlier of:

(a) the date on which the net amount recovered from the sale of all the shares in, or all the assets of, the Borrower is determined in accordance with Clause 9.2(a); and

(b) the date on which the value of the Plant is determined by the Experts in accordance with Clause 9.2(b).

Discharge Date means the date on which all the Debt has been unconditionally and irrevocably paid and discharged in full.

Enforcement Date means the date on which an Enforcement Event occurs.

Enforcement Event means on or at any time after the occurrence of an Event of Default which is continuing, the exercise by the Security Trustee of any or all of its rights under a Security Document in accordance with clause 18.2 (a)(i) of the Credit Agreement.

Enforcement Sale means, following an Enforcement Event, the sale of all the shares in, or all the assets of, the Borrower (whether by a single sale, or a series of sales).

Enforcement Sale Date means the date on which an Enforcement Sale occurs.

Enforcement Sale Period means the period commencing on the Enforcement Date and ending on the Enforcement Sale Date (both inclusive).

EPL means the Borrower.

EPHL Percentage means (the Ascertained Security Value/the CTA Bond Outstandings) x one hundred (100), as calculated on the Determination Date, provided that if the Ascertained Security Value is equal to or greater than the CTA Bond Outstandings on the Determination Date, the EPHL Percentage shall equal one hundred (100).

Experts means the Financial Expert and the Technical Expert.

Finance Parties Percentage means (the Residual Amount/the CTA Bond Outstandings) x one hundred (100), as calculated on the Determination Date, provided that if the Ascertained Security Value is equal to or greater than the CTA Bond Outstandings on the Determination Date, the Finance Parties Percentage shall equal zero (0).

Financial Expert means a person chosen by the President for the time being of the Institute of Chartered Accountants of England and Wales:

(a) who is independent and who has confirmed in writing that it will (i) have no conflict in acting as an Expert; and (ii) remain neutral and impartial at all times when acting as an Expert;

(b) who is not a Competitor;

(c) who is not a Finance Party or an affiliate of a Finance Party; and

(d) being a reputable bank, financial institution or international accounting firm having an appropriate expertise in the production of financial models for, and the assessment and valuation of cashflows relating to, power stations of a similar type, and operated in a similar manner, as the Plant within the United Kingdom.

3

General Security means each and every Security Interest conferred by the Security Documents other than the Asset Option Security, CTA Bond Security and the Revenue Security.

Insolvency Event means the occurrence of any of the events or circumstances set out in one or more of clause 17.13 (Insolvency), clause 17.14 (Insolvency proceedings), clause 17.15 (Creditors’ process) or clause 17.16 (Analogous proceedings) of the Credit Agreement.

Junior Debt means the Subordinated Debt and, if a BET Event has occurred and is continuing, the New CTA Debt.

Liability means any present or future liability (actual or contingent), together with:

(a) any permitted novation, deferral or extension of that liability;

(b) any further advance which may be made under any agreement expressed to be supplemental to any document in respect of that liability, together with all related interest, fees and costs;

(c) any claim for damages or restitution in the event of rescission of that liability or otherwise;

(d) any claim flowing from any recovery by a payment or discharge in respect of that liability on grounds of preference or otherwise; and

(e) any amount (such as post-insolvency interest) which would be included in any of the above but for its discharge, non-provability, unenforceability or non-allowability in any insolvency or other proceedings.

New Bonds Terms and Conditions means the terms and conditions of the £700,000,000 7% fixed rate guaranteed bonds due 2005-2022 issued on or about the date of this Deed by the Issuer.

New CTA Debt means all Liabilities payable or owing from time to time by the Borrower to BET under or in connection with the Capacity and Tolling Agreement.

Party means a party to this Deed.

Principal Amount Outstanding has the meaning given to it in the New Bonds Terms and Conditions.

Receiver means an administrative receiver, a receiver and manager or a receiver, in each case appointed under a Security Document.

Residual Amount means the CTA Bond Outstandings less the Ascertained Security Value, as calculated on the Determination Date.

Revenue Account has the meaning given to it in the Accounts Agreement.

Revenue Agreement Payments means each and every sum payable or owing from time to time to the Borrower under or in connection with the Revenue Agreements.

4

Revenue Security means each and every Security Interest conferred by the Security Documents over the Revenue Agreement Payments and the Revenue Account (including all rights and claims to which the Borrower is now or may hereafter become entitled in relation to all moneys now or at any time hereafter standing to the credit of the Revenue Account).

Second Intercompany Loan Agreement means the intercompany loan agreement entered into on or about the date of this Deed between EPHL as lender and EPL as borrower.

Second Security Assignment means the security assignment between EPL as assignor and EPHL as assignee.

Secured Creditor means a Finance Party, BET or EPHL.

Security means each and every Security Interest conferred by the Security Documents.

Senior Debt means all Liabilities payable or owing by any Obligor to a Finance Party under or in connection with the Finance Documents.

Senior Discharge Date means the date on which all the Senior Debt has been unconditionally paid and discharged in full.

Subordinated Debt means all Liabilities payable or owing by the Borrower to EPHL under or in connection with the Second Intercompany Loan Agreement.

Technical Expert means a person chosen by the President for the time being of the UK Institute of Civil Engineers:

(a) who is independent and who has confirmed in writing that it will (i) have no conflict in acting as an Expert; and (ii) remain neutral and impartial at all times when acting as an Expert;

(b) who is not a Competitor;

(c) who is not a Finance Party or an affiliate of a Finance Party; and

(d) having appropriate expertise in the technical assessment and valuation of power stations of a similar type, and operated in a similar manner, as the Plant within the United Kingdom.

Unsecured Assets has the meaning given to it in the EPHL Security Document.

1.2 Construction

(a) A capitalised term defined in the Credit Agreement has, unless expressly defined in this Deed, the same meaning in this Deed.

(b) The provisions of clause 1.2 (Construction) of the Credit Agreement apply to this Deed as though they were set out in full in this Deed except that references to the Credit Agreement are to be construed as references to this Deed.

(c) Notwithstanding paragraph (b) above, references to the Capacity and Tolling Agreement and the Eggborough Contracts, means those agreements as at the Restructuring Date unless any subsequent amendments to those agreements have been agreed to by the Agent.

5

(d) Each undertaking of the Borrower, BET or EPHL under this Deed remains in force until the Discharge Date.

(e) Each undertaking of the Finance Parties under this Deed remains in force until the Senior Discharge Date.

(f) If the Security Trustee considers that an amount paid to a Secured Creditor under a Finance Document is capable of being avoided or otherwise set aside on the liquidation or administration of the payer or otherwise, then that amount will not be considered to have been irrevocably paid for the purposes of this Deed.

2. RANKING

2.1 Ranking of Debt

The Parties agree that:

(a) (Subordinated Debt)

the Senior Debt and the Subordinated Debt shall rank in the following order:

First	the Senior Debt; and
Second	the Subordinated Debt;

provided that EPHL’s right to prepayment of the Subordinated Debt out of any Asset Option Payments and/or amounts standing to the credit of the Asset Option Account shall rank ahead of the Senior Debt.

(b) (New CTA Debt)

(i) at any time while no BET Event is continuing, the Senior Debt and the New CTA Debt shall rank equally.

(ii) at any time while a BET Event is continuing, the Senior Debt and the New CTA Debt shall rank in the following order:

First	the Senior Debt; and
Second	the New CTA Debt.

2.2 General

(a) The ranking in Clauses 2.1 applies notwithstanding:

(i) the order of registration, notice or execution of any document;

(ii) any provision to the contrary in the Second Security Assignment or any Security Document (including without limitation Clause 14.1 of the Existing Debenture);

(iii) when any Debt is incurred;

(iv) whether or when a creditor is obliged to advance any Debt; or

6

(v) any fluctuation in the outstanding amount of, or any intermediate discharge of, any Debt.

(b) Notwithstanding the provisions of Clause 2.1, on enforcement of the Security Documents and/or the Second Security Assignment, the proceeds of such enforcement shall be applied in accordance with Clause 10 (Proceeds of Enforcement of Security).

2.3 BET and EPHL

EPHL (in respect of paragraph (a) below) and each of the Borrower and BET (in respect of paragraph (b) below) represents and warrants to the Security Trustee on the date of this Deed that :

(a) it is the sole beneficial owner of the Subordinated Debt owed to it free from any Security Interest, option and subordination in favour of any person (other than any Security Interest in favour of the Issuer created under the First Security Assignment); and

(b) BET is the sole legal and beneficial owner of the New CTA Debt owed to it free from any Security Interest, option and subordination in favour of any person (other than any Permitted Security Interest in favour of the Finance Parties created under the Security Documents).

3. PERMITTED PAYMENTS

3.1 Subordinated Debt

Prior to the Senior Discharge Date, the Borrower may only make payments in respect of the Subordinated Debt if:

(a) at any time, the payment is made by a withdrawal or payment from the Asset Option Account in accordance with the Accounts Agreement;

(b) at any time, the payment is made out of the proceeds of enforcement of the Second Security Assignment; or

(c) on or after an Enforcement Event, the payment is made in accordance with Clause 10.1 (Order of Application).

3.2 New CTA Debt

Prior to the Senior Discharge Date, the Borrower may only make payments in respect of the New CTA Debt if:

(a) at any time while no BET Event is continuing, the payment is made by a withdrawal or payment from the Revenue Account in accordance with the Accounts Agreement, or by a direction in respect of a Revenue Agreement under the Capacity and Tolling Agreement and made in accordance with the Existing Debenture and the New Debenture;

(b) at any time while a BET Event is continuing, the payment is made with the prior consent of the Security Trustee; or

7

(c) on or after an Enforcement Event, the payment is made in accordance with Clause 10.1 (Order of Application).

3.3 Senior Debt

(a) Prior to the Senior Discharge Date, the Borrower may only make payments in respect of the Senior Debt if:

(i) prior to an Enforcement Event, the payments are made in accordance with the Finance Documents and, if the payment is made by a withdrawal or payment out of the Revenue Account, a BET Event is continuing; or

(ii) on or after an Enforcement Event, the payment is made in accordance with Clause 9.1 (Order of Application),

(b) The Borrower shall not make any withdrawal or payment in respect of the Senior Debt out of the Asset Option Account or out of the proceeds of enforcement of the Second Security Assignment at any time unless otherwise permitted by this Agreement.

4. SUBORDINATION

4.1 Subordination events

Notwithstanding anything to the contrary in this Deed, each of the Borrower, BET and EPHL agrees that the subordination of the ranking of the rights of payment of the Finance Parties created by this Deed in favour of EPHL and BETdoes not affect nor limit, in any way, the rights of the Finance Parties against any other asset or Liability of the Borrower under or concerning a Finance Document.

4.2 Consequences of an Insolvency Event

(a) If an Insolvency Event occurs and is continuing, the Security Trustee may:

(i) claim, enforce and prove for any New CTA Debt owed by the Borrower;

(ii) exercise all powers of convening meetings, voting and representation in respect of the New CTA Debt;

(iii) file claims and proofs, give receipts and take any proceedings as the Security Trustee considers reasonably necessary to recover that New CTA Debt;

(iv) do anything which the Security Trustee may reasonably consider necessary to recover that New CTA Debt; and

(v) receive all distributions on that New CTA Debt for application against the New CTA Debt in the manner provided for in this Deed.

(b) If and to the extent that the Security Trustee is not entitled to do anything mentioned in subparagraph (a) or does not wish to do so, the Borrower, BET, and each Finance Party must do so in good time and as requested by the Security Trustee.

(c) Each of the Borrower and BET irrevocably authorises the Security Trustee to take any action referred to in subparagraphs (a) and (b) above in respect of any New CTA Debt owed by the Borrower to BET on or after an Insolvency Event.

8

4.3 Further assurance

Each of the Borrower and BET must, at its own expense, take whatever action the Security Trustee may require to give effect to this Clause.

5. TURNOVER OF NON-PERMITTED RECOVERIES

5.1 Non-permitted payments

(a) If a Secured Creditor receives:

(i) a payment (including by way of set-off) or distribution in cash or in kind, of, or on account of, any of the Debt from the Borrower or any other source other than allowed under this Deed; or

(ii) the proceeds of any enforcement of any Security Interest or any guarantee or other assurance against financial loss for any Debt other than as allowed under this Deed,

that Secured Creditor shall immediately pay an amount equal to that receipt or recovery to the Security Trustee for application against the Debt in the order provided for in the Deed.

5.2 Non-permitted discharge

If, for any reason any of the Debt is discharged in any manner other than as allowed under this Deed, then the Secured Creditor whose Debt has been so discharged must immediately pay an amount equal to the amount discharged to the Security Trustee for application against the Debt in the order provided for under this Deed.

6. PROTECTION OF SUBORDINATION

6.1 Continuing subordination

The subordination provisions in this Deed constitute a continuing subordination and will benefit the ultimate balance of all of the Senior Debt, the Subordinated Debt and the New CTA Debt, regardless of any intermediate payment or discharge in whole or in part.

6.2 Waiver of defences

The subordination in this Deed and the obligations of each Secured Creditor under this Deed will not be affected by any act, omission, matter or thing which, but for this provision, would reduce, release or prejudice the subordination or any of those obligations. This includes:

(a) any time or waiver granted to, or composition with any person;

(b) any release of any person under the terms of any composition or arrangement;

(c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any person;

(d) any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

9

(e) any incapacity as lack of power, authority or legal personality of or dissolution or change in the members or statute of any person;

(f) any amendment (however fundamental) of a Finance Document, the Second Intercompany Loan Agreement, the Second Security Assignment, the Capacity and Tolling Agreement or any other document or security; or

(g) any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document, the Second Intercompany Loan Agreement, the Second Security Assignment, the Capacity and Tolling Agreement or any other document or security.

6.3 Non-competition

(a) Following the occurrence of an Insolvency Event or an Enforcement Event in the period commencing on the date of this Deed and ending on the earlier of (i) the Senior Discharge Date; and (ii) a date specified by the Security Trustee, and provided that a BET Event is continuing, BET will not under any circumstance:

(i) be subrogated to any rights, security or moneys held, received or receivable by any Finance Party (or an agent or any trustee or other agent on its behalf) or be entitled to any right of contribution or indemnity in respect of any payment made or moneys received on account of its liability in relation to the New CTA Debt; or

(ii) claim, rank, prove or vote as a creditor of any person or estate in competition with any Finance Party (or an agent or any trustee or other agent on its behalf) in relation to the New CTA Debt.

(b) BET agrees that it shall not receive, claim or have the benefit of any payment, distribution or security from or on account of any person in respect of the New CTA Debt following an Insolvency Event while a BET Event is continuing, until the earlier of (i) the Senior Discharge Date; or (ii) a date specified by the Security Trustee.

(c) Unless the Security Trustee otherwise directs, BET shall hold in trust for and promptly pay or transfer to the Security Trustee any payment or distribution or benefit of security received by it contrary to this Clause 6.3 or as directed by the Security Trustee.

(d) Each of the Borrower, and BET agrees that subparagraphs (a) and (b) are not intended to limit, in any way, the rights of a Finance Party concerning any other asset or Liability of the Borrower under or concerning a Finance Document.

7. REPRESENTATIONS

7.1 Representations

The representations set out in this Clause are made by BET and EPHL to the Security Trustee on behalf of each Finance Party.

7.2 Status

It is a limited liability company, duly incorporated and validly existing under the laws of its jurisdiction of incorporation.

10

7.3 Powers and authorities

It has the power to enter into and perform, and has taken all necessary action to authorise the entry into and performance of, this Deed and the transactions contemplated by this Deed.

7.4 Legal validity

This Deed constitutes its legally valid, binding and enforceable obligation (subject to the qualifications as to the matters of law only (if any) contained in the legal opinions received by the Agent in connections with the Finance Documents).

7.5 Non-conflict

The entry into and performance by it of, and the transactions contemplated by, this Deed do not and will not:

(a) conflict with any existing law or regulation applicable to it;

(b) conflict with its constitutional documents; or

(c) conflict in any material respect with any document which is binding upon it or any of its assets.

7.6 Authorisations

All authorisations required by it in connection with the entry into, performance, validity and enforceability of, and the transactions contemplated by, this Deed have been obtained or effected (as appropriate) and are in full force and effect.

7.7 Times for making representations

The representations set out in this Clause are made by BET and EPHL on the Restatement Date.

8. ENFORCEMENT

8.1 Restrictions on BET enforcement

Prior to the Senior Discharge Date, BET shall not without the prior consent of the Security Trustee:

(a) enforce any of the New CTA Debt by execution or otherwise;

(b) crystallise, or require the Security Trustee to crystallise, any floating charge in a Debenture; or

(c) enforce, or require the Security Trustee to enforce, any Security.

11

8.2 Restrictions on BET and EPHL enforcement

(a) Prior to the Senior Discharge Date, neither BET nor EPHL shall, without the prior consent of the Security Trustee:

(i) initiate or support or take any step with a view to:

(A) any insolvency, liquidation, reorganisation, administration or dissolution proceedings;

(B) any voluntary arrangement or assignment for the benefit of creditors; or

(C) any similar proceedings,

in each case, involving any Obligor whether by petition, convening a meeting, voting for a resolution or otherwise;

(ii) bring or support any legal proceedings against any Obligor (or any of its Subsidiaries);

(iii) exercise any right to require any insurance proceeds to be applied in reinstatement of any asset subject to any Security Interest; or

(iv) otherwise exercise any remedy for the recovery of any New CTA Debt or Subordinated Debt.

(b) All Parties acknowledge that, upon the Subordinated Debt becoming due and payable or at any time after the occurrence of the Senior Discharge Date, EPHL has the right to require repayment of the Subordinated Debt and, following non payment of the Subordinated Debt so demanded, may enforce the security conferred by the Second Security Assignment for application in or towards payment of the Subordinated Debt.

9. ASCERTAINED SECURITY VALUE

9.1 Appointment of Experts

(a) Following an Enforcement Event, in the event that:

(i) all the shares in, or all the assets of, the Borrower are sold prior the Calculation Date and the consideration for such sale has not been received wholly in cash, the Borrower and the Security Trustee shall procure the appointment of a Financial Expert (unless a Financial Expert has already been appointed in accordance with subparagraph (a)(ii) below); or

(ii) all the shares in, or all the assets of, the Borrower have not been sold one calendar month prior to the Calculation Date, the Borrower and the Security Trustee shall procure the appointment of:

(A) a Financial Expert; and

(B) a Technical Expert.

(b) Each Expert shall act as an expert and not as an arbitrator and the law of arbitration shall not apply.

(c) The reasonable fees and expenses of the Experts shall be borne by the Borrower.

(d) Each Expert shall carry out such determinations as are required under Clause 9.2.

12

9.2 Calculation of Ascertained Security Value

(a) In the event that an Enforcement Sale occurs on or prior to the Calculation Date, the net amount recovered shall be:

(i) if the consideration for each and every sale of shares in, and/or assets of, the Borrower in the Enforcement Sale Period has been received wholly in cash:

(A) the aggregate amount of such cash consideration,

less:

(B) all costs and expenses that the Finance Parties and any Receiver incurred in effecting each and every sale of shares in, and/or assets of, the Borrower in the Enforcement Sale Period, to the extent payable to the Finance Parties or any such Receiver in accordance with the terms of the Finance Documents only,

as determined within 15 Business Days of the Enforcement Sale Date; or

(ii) otherwise, the aggregate of the net amounts recovered from each and every sale of shares in, and/or assets of, the Borrower in the Enforcement Sale Period, as determined by the Financial Expert within 15 Business Days of the Enforcement Sale Date.

(b) In the event that an Enforcement Sale does not occur on or prior to the Calculation Date, the Experts shall determine the value of the Plant as at the Calculation Date.

(c) When making a determination in accordance with subparagraph (b) above, the Experts shall disregard the sale of any shares in, or assets of, the Borrower during the Enforcement Sale Period.

(d) In the event that the Security Trustee or any Receiver failed to:

(i) comply with its duties under law in respect of the sale of any shares in, and/or assets of, the Borrower; or

(ii) disregard the existence of the CTA Bonds when complying with such duties,

then, notwithstanding any other provision of this Deed, the Ascertained Security Value shall be calculated in accordance with subparagraph (b) above.

(e) The Borrower and each Finance Party shall provide the Experts with all information they may reasonably require in order to make the determinations described in this Clause 9.2.

(f) In the absence of manifest error, the decisions of the Expert of the Experts (as the case may be) under this Clause 9.2 shall be final, conclusive and binding on the Parties.

13

10. PROCEEDS OF ENFORCEMENT OF SECURITY

10.1 CTA Bond Payments

Subject to the rights of any creditor with prior security or any preferential claim, the proceeds of enforcement of the CTA Bond Security shall be paid to the Security Trustee and applied in the following order:

(a) first, in or towards payment of any unpaid fees, costs and expenses of the Security Trustee and/or any receiver, attorney or agent appointed under the Security Documents to the extent such fees, costs and/or expenses relate to the enforcement of the CTA Bond Security;

(b) second:

(i) up to (and including) the Determination Date, to the escrow account in the name of the Bond Trustee pending application in accordance with subparagraph (ii) below ; and

(ii) from (but excluding) the Determination Date, in payment to the Finance Parties for application in or towards the Senior Debt pari passu amongst themselves and EPHL in or towards payment of the Subordinated Debt, in the following proportions:

(A) the Finance Parties shall receive an amount of any such proceeds equal to such proceeds multiplied by the Finance Parties Percentage; and

(B) EPHL shall receive an amount of any such proceeds equal to such proceeds multiplied by the EPHL Percentage.

10.2 Asset Option Payments

(a) Subject to the rights of any prior security or any preferential claim (other than the security and claims of any of the Finance Parties under the Finance Documents), the proceeds of enforcement of the security conferred by the Second Security Assignment shall be paid to EPHL for application in or towards payment of the Subordinated Debt.

(b) Subject to the rights of any prior security or any preferential claim, the proceeds of enforcement of the Asset Option Security shall be applied in the following order:

(i) first, in or towards payment of any unpaid fees, costs and expenses of the Security Trustee and/or any receiver, attorney or agent appointed under the Security Documents to the extent such fees, costs and/or expenses relate to the enforcement of the Asset Option Security;

(ii) second, to EPHL for application in or towards payment of the Subordinated Debt; and

(iii) third, the payment of the surplus (if any) to the relevant Obligor or other person entitled to it.

14

10.3 Revenue Agreement Payments

Subject to the rights of any prior security or any preferential claim, the proceeds of enforcement of the Revenue Security shall be paid to the Security Trustee and applied in the following order:

(a) first, in or towards payment of any unpaid fees, costs and expenses of the Security Trustee and/or any receiver, attorney or agent appointed under the Security Documents to the extent such fees, costs and/or expenses relate to the enforcement of the Revenue Security;

(b) second:

(i) at any time while no BET Event is continuing:

(A) first, in payment to BET for application in or towards payment of the New CTA Debt; and

(B) second, in payment to the Finance Parties for application in or towards payment of the Senior Debt pari passu amongst themselves; or

(ii) at any time while a BET Event is continuing:

(A) first, in payment to the Finance Parties for application in or towards payment of the Senior Debt pari passu amongst themselves; and

(B) second, to BET for application towards payment of the New CTA Debt.

(c) third, the payment of the surplus (if any) to the relevant Obligor or other person entitled to it.

10.4 General Security

Subject to the rights of any prior security or any preferential claims, the proceeds of enforcement of the General Security shall be paid to the Security Trustee and applied in the following order:

(a) first, in or towards payment of any unpaid fees, costs and expenses of the Security Trustee and any receiver, attorney or agent appointed under the Security Documents to the extent such fees, costs and/or expenses relate to the enforcement of the General Security;

(b) second, in or towards payment (to the extent they are, under the Finance Documents, payable) of any costs and expenses of any Finance Party;

(c) third, in payment to the Finance Parties for application in or towards payment of the Senior Debt pari passu amongst themselves;

(d) fourth, in payment to BET for application in or towards payment of the New CTA Debt;

15

(e) fifth, in payment to EPHL for application in or towards payment of the Subordinated Debt; and

(f) sixth, the payment of the surplus (if any) to the relevant Obligor or other person entitled to it.

10.5 Good discharge

An acknowledgement of receipt signed by the relevant person to whom payments are to be applied under this Clause will discharge the Security Trustee.

10.6 Non-cash Distributions

If the Security Trustee or any Secured Creditor receives any distribution otherwise than in cash in respect of the Debt from any Obligor or from any other source, none of those debts will be deemed reduced by that distribution until and except to the extent that the realisation proceeds are applied towards them in accordance with this Deed.

10.7 Currencies

(a) All moneys received or held by the Security Trustee under this Deed at any time on or after a Enforcement Event in a currency other than a currency in which the relevant debt is denominated may be sold for any one or more of the currencies in which the debt is denominated as the Security Trustee considers necessary or desirable.

(b) The Company must indemnify the Security Trustee against any loss or liability incurred in relation to any sale.

(c) The Security Trustee has no liability to any Party in respect of any loss resulting from any fluctuation in exchange rates after any such sale.

11. RELEASE OF SECURITY

(a) With effect from the date of this Deed, the Security Trustee and the Finance Parties hereby irrevocably and unconditionally release any Security Interest conferred by the EPHL Assignment over the Unsecured Assets.

(b) Notwithstanding any other provision of the Finance Documents, the Security Trustee shall not release any Asset Option Security, CTA Bond Security or Revenue Security in favour of EPHL and BET without the prior written consent of EPHL and BET.

12. THE SECURITY TRUSTEE

12.1 Appointment and duties of the Security Trustee

(a) Each Secured Creditor (other than the Security Trustee) appoints the Security Trustee to act as its agent in respect of the Security.

(b) Each Secured Creditor (other than the Security Trustee) irrevocably authorises the Security Trustee to:

(i) perform the duties and to exercise the rights, powers and discretions that are specifically given to it under the Security Documents, together with any other incidental rights, powers and discretions; and

16

(ii) execute each Security Document expressed to be executed by the Security Trustee.

(c) The Security Trustee has only those duties which are expressly specified in this Deed and the Security Documents. Those duties are solely of a mechanical and administrative nature.

12.2 Individual position of the Security Trustee

(a) If it is also a Secured Creditor, the Security Trustee has the same rights and powers under the Security Documents as any other Secured Creditor and may exercise those rights and powers as though it were not the Security Trustee.

(b) The Security Trustee may:

(i) carry on any business with any Obligor or its related entities (including acting as an agent or a trustee for any other financing); and

(ii) retain any profits or remuneration it receives under the Security Documents or in relation to any other business it carries on with any Obligor or its related entities.

12.3 Reliance

The Security Trustee may:

(a) rely on any notice or document believed by it to be genuine and correct and to have been signed by, or with the authority of, the proper person;

(b) rely on any statement made by any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify, including any certificate of an agent as to the nature and amount of any sums owing to the Secured Creditors for which it acts as agent;

(c) engage, pay for and rely on professional advisers selected by it (including those representing a Secured Creditor other than the Security Trustee); and

(d) act under the Security Documents through its personnel and agents.

12.4 Secured Creditors’ instructions

(a) The Security Trustee shall exercise any right, power or discretion vested in it as trustee in accordance with any instructions:

(i) prior to the Senior Discharge Date, given to it by the Agent (acting on the instructions of the Majority Banks) (or, in the absence of such instructions, in the best interests of the Finance Parties);

(ii) notwithstanding subparagraph (i):

(A) to the extent any matter relates to the Subordinated Debt, given to it by EPHL (or in the absence of such instructions, in the best interests of EPHL); and

(B) to the extent any matter relates to the New CTA Debt and provided no BET Event is continuing, given to it by BET (or in the absence of such instructions, in the best interests of BET); and

17

(iii) post the Senior Discharge Date, any instructions given to it by BET and/or EPHL (or, in the absence of such instructions, in the best interests of BET and/or EPHL).

(b) Each Secured Creditor other than the Security Trustee agrees that the Security Trustee is fully protected if it acts in accordance with subparagraph (a) when exercising any right, power or discretion or any matter not expressly provided for in the Security Documents.

(c) Except as otherwise provided for in this Deed, the Security Trustee is not authorised to act on behalf of a Secured Creditor (without first obtaining that Secured Creditor’s consent) in any legal or arbitration proceedings in connection with any Security Document.

(d) The Security Trustee may require the receipt of security satisfactory to it, whether by way of payment in advance or otherwise, against any liability or loss which it may incur in complying with the instructions of a Secured Creditor.

12.5 Responsibility

(a) The Security Trustee is not responsible to any Secured Creditor for the adequacy, accuracy or completeness of:

(i) any Security Document or any other document; or

(ii) any statement or information (whether written or oral) made in or supplied in connection with any Security Document.

(b) Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Security Document, each Secured Creditor confirms that it:

(i) has made, and will continue to make, its own independent appraisal of all risks arising under or in connection with the Security Documents (including the financial condition and affairs of each Obligor and its related entities and the nature and extent of any recourse against any Party or its assets); and

(ii) has not relied exclusively on any information provided to it by the Security Trustee in connection with any Security Document.

12.6 Exclusion of liability

(a) The Security Trustee is not liable to any Secured Creditor for any action taken or not taken by it in connection with any Security Document, unless directly caused by its gross negligence or wilful misconduct, or fraud.

(b) No Party may take any proceedings against any officer, employee or agent of the Security Trustee in respect of any claim it might have against the Security Trustee or in respect of any act or omission of any kind by that officer, employee or agent in connection with any Security Document. Any officer, employee or agent of the Security Trustee may rely on this subparagraph.

12.7 Default

The Security Trustee is not obliged to monitor or enquire whether a Default has occurred. The Security Trustee is not deemed to have knowledge of the occurrence of a Default.

18

12.8 Information

(a) The Security Trustee must promptly forward to the person concerned the original or a copy of any document which is delivered to the Security Trustee by a Party for that person.

(b) Except where a Security Document specifically provides otherwise, the Security Trustee is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.

(c) Except as provided above, the Security Trustee has no duty either initially or on a continuing basis to provide any Secured Creditor with any credit or other information concerning the risks arising under or in connection with the Security Documents whether coming into its possession before, on or after the date of this Deed. This includes any information relating to the financial condition or affairs of any Obligor or its related entities or the nature or extent of recourse against any Party or its assets.

(d) Unless specifically requested to do so by a Secured Creditor in accordance with a Security Document, the Security Trustee has no duty to request any certificate or other document from any other Party.

(e) In acting as the Security Trustee, the agency division of the Security Trustee is treated as a separate entity from its other divisions and departments. Any information acquired by the Security Trustee which, in its opinion, is acquired by it otherwise than in its capacity as the Security Trustee may be treated as confidential by the Security Trustee and will not be treated as information possessed by the Security Trustee in its capacity as such.

(f) Each Party irrevocably authorises the Security Trustee to disclose to the Secured Creditors any information which, in its opinion, is received by it in its capacity as the Security Trustee.

12.9 Indemnities

(a) Without limiting the liability of any Obligor under the Finance Documents:

(i) prior to the Senior Discharge Date, each Finance Party must indemnify the Security Trustee for that Finance Party’s share of any loss or liability incurred by the Security Trustee in acting as the Security Trustee except to the extent that such loss or liability directly relates to the administration, monitoring, preservation or otherwise of the Asset Option Security or the Revenue Account Security, in which case EPHL and BET respectively must indemnify the Security Trustee for that loss or liability, and

(ii) post the Senior Discharge Date, EPHL and BET must indemnify the Security Trustee for their respective shares of any loss or liability incurred by the Security Trustee in acting as the Security Trustee,

except, in each case, to the extent that the loss or liability is directly caused by the Security Trustee’s gross negligence or wilful misconduct or fraud.

(b) A Secured Party’s share of any loss or liability under subparagraph (a)(i) will be the proportion which the aggregate amount of Debt owing to it bears to all the Debt then owing at the time the loss or liability event occurs as calculated by the Security Trustee. If the Debt is denominated in more than one currency, the Security Trustee may use whatever rate of exchange it considers appropriate for this purpose.

19

(c) The Security Trustee may deduct from any amount received by it for a Secured Creditor against any amount due to the Security Trustee from that Secured Creditor under this Deed or a Security Document but unpaid.

12.10 Compliance

The Security Trustee may refrain from doing anything (including the disclosure of any information) which might, in its opinion, constitute a breach of any law or regulation or be otherwise actionable at the suit of any person, and may do anything which, in its opinion, is necessary or desirable to comply with any law or regulation.

12.11 Resignation of the Security Trustee

(a) The Security Trustee may resign and appoint any of its Affiliates as successor Security Trustee by giving notice to the Parties.

(b) Alternatively, the Security Trustee may resign by giving written notice to the Parties, in which case the Agent (acting on the instructions of the Majority Banks) may appoint a successor Security Trustee, or after the Senior Discharge Date EPHL and/or BET may appoint a successor Security Trustee.

(c) If no successor Security Trustee has been appointed under subparagraph (b) within 30 days after notice of resignation was given, the Security Trustee may appoint a successor Security Trustee. Following the Senior Discharge Date, the Security Trustee may require that any member of the British Energy Group or person nominated by EPHL and/or BET become the successor Security Trustee.

(d) The person(s) appointing a successor Security Trustee must consult with the Borrower prior to the appointment. Any successor Security Trustee must have an office in the United Kingdom.

(e) The resignation of the Security Trustee and the appointment of any successor Security Trustee will both become effective only when the successor Security Trustee:

(i) notifies all the Parties in writing that it accepts its appointment;

(ii) executes and delivers to the old Security Trustee an Accession Agreement; and

(iii) accedes to each of the Finance Documents to which the retiring Security Trustee was a party and the Share Subscription Agreement.

(f) In this event, the successor Security Trustee will succeed to the position of the Security Trustee and the term Security Trustee will mean the successor Security Trustee.

(g) The retiring Security Trustee must, at its own cost, make available to the successor Security Trustee such documents and records and provide such assistance as the successor Security Trustee may reasonably request for the purposes of performing its functions as the Security Trustee under the Finance Documents and to ensure that the Security Documents constitute perfected and enforceable security in its favour.

(h) Each Party must take whatever action the successor Security Trustee may reasonably request for the purposes of performing its functions as the Security Trustee under the Finance Documents or to ensure that the Security Documents constitute perfected and enforceable security in its favour.

20

(i) Upon its resignation becoming effective, this Clause will continue to benefit the retiring Security Trustee in respect of any action taken or not taken by it in connection with the Security Documents while it was the Security Trustee, and, subject to subparagraph (f), it will have no further obligations under any Finance Document.

(j) The Agent (acting on the instructions of the Majority Banks) may, by notice to the Security Trustee, require it to resign under subparagraph (b), or after the Senior Discharge Date EPHL and BET may jointly require it to resign under subparagraph (b)

(k) If a replacement Security Trustee has not been appointed within 60 days of the Security Trustee giving notice of resignation under subparagraph (a) and the Discharge Date has occurred, then:

(i) the Security Trustee is entitled to release any Security; and

(ii) notwithstanding any other term of this subparagraph, the resignation of the Security Trustee will take effect on the date notified by the Security Trustee for this purpose to the other Secured Creditors whether or not a replacement has been appointed.

12.12 Relationship with Secured Creditors

(a) The Security Trustee may treat each Secured Creditor as a Secured Creditor, entitled to payments under this Deed and the Security Documents and as acting through its Facility Office(s) or its registered office until it has received not less than five Business Days’ prior notice from that Secured Creditor to the contrary.

(b) The Security Trustee may at any time, and must if requested to do so by the Agent (acting on the instructions of the Majority Banks), convene a meeting of the Secured Creditors or the Finance Parties.

(c) The Security Trustee must keep a register of all the Parties and supply any other Party with a copy of the register on request. The register will include each Finance Party’s Facility Office(s) and each Party’s contact details for the purposes of this Deed and the Security Documents.

12.13 Security Trustee‘s management time

If the Security Trustee requires (acting reasonably), any amount payable to the Security Trustee by any Party under any indemnity or in respect of any costs or expenses incurred by the Security Trustee under this Deed or any Security Document after the date of this Deed may include the cost of using its management time or other resources and will be calculated on the basis of such reasonable daily or hourly rates as the Security Trustee may notify to the relevant Party. This is in addition to any amount in respect of fees or expenses paid or payable to the Security Trustee under any other term of this Deed or any Security Document.

13. SECURITY

13.1 Security Trustee as trustee

(a) Except as provided below, the Security Trustee holds:

(i) on trust for the Secured Creditors:

(A) each Security Interest created by the Security Documents; and

21

(B) all other assets paid to, held by or received or recovered by it under or in connection with this Deed and the Security Documents; and

(ii) the covenants given by each Secured Creditor under this Deed on trust for each other Secured Creditor.

13.2 Responsibility

The Security Trustee is not responsible to any Secured Creditor for any failure in perfecting or protecting any Security, unless directly caused by its gross negligence or wilful misconduct or fraud. This includes any failure to:

(a) make any necessary registration, recording or filing of or otherwise protect the relevant Security under any law in any jurisdiction;

(b) give notice to any person of the execution of any Security Document; or

(c) obtain any authorisation for the creation of any Security.

13.3 Title

The Security Trustee may accept without enquiry the title (if any) which an Obligor may have to any asset over which any Security is intended to be created by a Security Document.

13.4 Possession of documents

Unless the Security Trustee agrees otherwise, the Security Trustee is not obliged to hold any share certificate or title deed, any Security Document or other document in connection with any asset over which security is intended to be created by any Security Document in its own possession. The Security Trustee may allow an Obligor to retain any such documents in its possession if it considers it is appropriate to do so.

13.5 Investments

Except as otherwise provided in any Security Document, all moneys which are received by the Security Trustee under that Security Document may be invested in the name of or under the control of the Security Trustee in any investments which may be selected by the Security Trustee. Additionally, those moneys may be placed on deposit in the name of or under the control of the Security Trustee at such bank or institution (including itself) and upon such terms as it may think fit.

13.6 Co-Security Trustees

(a) The Security Trustee may appoint any person established or resident in any jurisdiction (whether a trust corporation or not) to act either as a separate Security Trustee or a co-Security Trustee jointly with the Security Trustee, if the Security Trustee considers that without the appointment:

(i) it might not be able to conform to any legal requirement, restriction or condition in any jurisdiction in which any particular act is to be performed;

(ii) it might not be able to obtain a judgement in any jurisdiction or the enforcement in any jurisdiction of either a judgement already obtained or any term of a Finance Document; or

22

(iii) the interests of the Finance Parties under the Finance Documents could be materially and adversely affected.

(b) Any appointment will only become effective when the separate Security Trustee or co-Security Trustee becomes bound by the terms of this Deed as if it were the Security Trustee by executing and delivering to the Security Trustee an Accession Agreement and notifies all the Parties in writing that it accepts its appointment.

(c) Each separate Security Trustee or co-Security Trustee will have the rights and obligations conferred or imposed by its instrument of appointment, but:

(i) its rights must not exceed those conferred on the Security Trustee by this Deed; and

(ii) the appointment must be subject to the terms of this Deed.

(d) The Security Trustee has the power to remove any separate Security Trustee or co-Security Trustee.

(e) Any reasonable remuneration which the Security Trustee may pay to a separate Security Trustee or co-Security Trustee, together with any costs and expenses incurred by it in performing its function as a separate Security Trustee or co-Security Trustee, will for the purposes of this Deed be treated as costs and expenses incurred by the Security Trustee.

13.7 Authority

Each Secured Creditor:

(a) confirms its approval of each Security Document; and

(b) authorises the Security Trustee (by itself or by any person(s) as it may nominate) to execute and enforce the Security Documents as trustee, agent or in any other role and (whether or not expressly in that Secured Creditor’s name) on its behalf in accordance with this Deed.

13.8 Co-operation

Each Party agrees to use reasonable endeavours to ensure that any Security is held by the Security Trustee (to the extent legally possible) for the joint benefit of the Secured Creditors in accordance with the priority arrangements set out in this Deed.

13.9 Enforcement instructions

(a) The Security Trustee may refrain from enforcing the Security unless instructed otherwise by:

(i) prior to the Senior Discharge Date, the Agent (acting on the instructions of the Majority Banks); and

(ii) post the Senior Discharge Date, EPHL and/or BET.

(b) Prior to the Senior Discharge Date, the Agent (acting on the instructions of the Majority Banks) may give or refrain from giving instructions to the Security Trustee to enforce or refrain from enforcing the Security provided that neither the Agent nor any other Finance Party may give the Security Trustee instructions to enforce the Security following the exercise of an Option other than where the enforcement of the Security is as a consequence of either (i)

23

EPHL failing to transfer the shares in the Borrower in default of its obligations under the Share Option Agreement or (ii) the Borrower failing to transfer its assets in default of its obligations under the Asset Option Agreement.

(c) The Security Trustee must, subject to the terms of a Security Document and as provided below, enforce the Security in accordance with Clause 12.4 (Secured Creditors’ Instructions).

(d) Unless it is expressly provided to the contrary in this Deed, any instructions validly given to the Security Trustee by the Agent (acting on the instructions of the Majority Banks) will, prior to the Discharge Date, override any conflicting instructions given by or on behalf of BET or EPHL other than any instructions which BET or EPHL are entitled by the express terms of this Deed to give.

(e) The Security Trustee will be fully protected if it complies with any instructions of the Secured Creditors.

(f) The Security Trustee, subject to any contrary instructions of the Secured Creditors and without prejudice to the duties of the Security Trustee and the Secured Creditors arising by operation of law, may cease any such enforcement at any time.

(g) Prior to the Senior Discharge Date, neither the Security Trustee nor any Finance Party is responsible to BET or EPHL for any failure to enforce.

(h) Prior to the Senior Discharge Date, neither the Security Trustee nor any Finance Party is responsible to the Borrower for any failure to enforce or to maximise the proceeds of any enforcement.

13.10 Perpetuity Period

The perpetuity period for the trusts in this Deed is 80 years.

13.11 Conflict with Security Documents

If there is any conflict between the provisions of this Deed and any Finance Document, this Deed will prevail.

14. CO-OPERATION BETWEEN SECURED CREDITORS

14.1 Defaults

The Security Trustee must promptly notify each Finance Party of the occurrence of any Event of Default under the Credit Agreement or a Security Document of which it has received notice from a Party specifying the event and identifying it as an Event of Default.

14.2 Amount of Debt

The Security Trustee must on request notify each other Party of details of the amount of the Debt as appropriate.

14.3 Memorandum

If requested to do so by the Security Trustee, each Secured Creditor (or the relevant Agent on its behalf) must endorse a memorandum of this Deed on each Finance Document specified by the Security Trustee.

24

15. CALCULATION AND EVIDENCE

Any certification or determination by the Security Trustee of a rate or amount under this Deed will be, in the absence of manifest error, conclusive evidence of the matters to which it relates.

16. AMENDMENTS AND WAIVERS

16.1 Amendments

No Party may amend or waive any term of the Second Intercompany Loan Agreement or the Capacity and Tolling Agreement except as expressly allowed under the Credit Agreement.

16.2 Waivers and remedies cumulative

(a) The rights of each Party under this Deed:

(i) may be exercised as often as necessary;

(ii) are cumulative and not exclusive of its rights under the general law; and

(iii) may be waived only in writing and specifically.

(b) Delay in exercising or non-exercise of any right is not a waiver of that right.

17. CHANGES TO THE PARTIES

17.1 The Borrower, BET and EPHL

None of the Borrower, BET or EPHL may assign or transfer any of their rights and/or obligations under this Deed without the prior consent of the Security Trustee.

17.2 The Finance Parties

(a) Any Finance Party may assign or otherwise dispose of all or any of its rights under the Credit Agreement in accordance with its terms provided that any assignee or transferee at or before the time of transfer agrees to be bound by this Deed as a Finance Party by executing and delivering an Accession Agreement to the Security Trustee.

(b) References to the Security Trustee in this Deed include any successor Security Trustee.

18. SHARING

(a) The Security Trustee must treat any proceeds that it receives pursuant to Clause 5 as if it had been paid by an Obligor and distribute it amongst the Secured Creditors in accordance with this Deed.

(b) When the Security Trustee makes a distribution under subparagraph (a), the Secured Creditor who made such payment to the Security Trustee (the Recovering Creditor) will be subrogated to the rights of the Secured Creditors which have shared in that redistribution.

(c) If and to the extent that the Recovering Creditor is not able to rely on any rights of subrogation under subparagraph (b), the relevant Obligor will owe the Recovering Creditor a debt which is equal to the redistribution, immediately payable and of the type originally discharged.

25

(d) If:

(i) a Recovering Creditor must subsequently return a recovery, or an amount measured by reference to such a recovery, to the relevant Obligor; and

(ii) the Recovering Creditor has paid to the Security Trustee a redistribution in relation to that recovery,

each Secured Creditor which has received a part of a redistribution that relates to such recovery must reimburse the Recovering Creditor all or the appropriate portion of the redistribution paid to that Secured Creditor, together with interest for the period while it held such redistribution. In this event, the subrogation in subparagraph (b) will operate in reverse to the extent of the reimbursement.

19. SEVERABILITY

If a term of this Deed is or becomes illegal, invalid or unenforceable in any jurisdiction, that will not affect:

(a) the legality, validity or enforceability in that jurisdiction of any other term of this Deed; or

(b) the legality, validity or enforceability in any other jurisdiction of that or any other term of this Deed.

20. COUNTERPARTS

This Deed may be executed in any number of counterparts. This has the same effect as if the signatures on the counterparts were on a single copy of this Deed.

21. NOTICES

21.1 Contact details

(a) The contact details of the Borrower for all notices in connection with this Deed are:

Eggborough Power Limited

Barnett Way

Barnwood

Gloucester

GL4 3RS

Attention: Corporate Affairs Director and Company Secretary

Telephone:	01355 594 020
Facsimile:	01355 594 022

(b) The contact details of EPHL for all notices in connection with this Deed are:

Eggborough Power (Holdings) Limited

3 Redwood Crescent

Peel Park

East Kilbridge

G74 5PR

26

Attention:	Corporate Affairs Director and Company Secretary
Telephone:	01355 594 020
Facsimile:	01355 594 022

(c) The contact details of BET for all notices in connection with this Deed are:

British Energy Power and Energy Trading Limited

3 Redwood Crescent

Peel Park

East Kilbridge

G74 5PR

Attention:	Corporate Affairs Director and Company Secretary
Telephone:	01355 594 020
Facsimile:	01355 594 022

(d) The address and facsimile number of the Security Trustee, for general matters, are:

Barclays Bank PLC

5 The North Colonnade

Canary Wharf

London E14 4BB

Telephone:	********
Facsimile:	********
Attention:	Head of Agency

The address and facsimile number of the Security Trustee in respect of interest rollovers and other administrative financial matters, are:

Barclays Bank PLC

5 The North Colonnade

Canary Wharf

London E14 4BB

Telephone:	********
Facsimile:	********
Attention:	Head of Agency.

(e) Any Party may change its contact details by giving five Business Days’ notice to the Security Trustee or (in the case of the Security Trustee) to the other Parties.

(f) Where a Party nominates a particular department or officer to receive a notice, a notice will not be effective if it fails to specify that department or officer.

21.2 Effectiveness

All notices or other communications under or in connection with this Deed shall be given in writing and, unless otherwise stated may be made by letter or facsimile. Any such notice will be deemed to be given as follows:

(a) if by letter, when delivered personally or on actual receipt; and

^(****) indicates material omitted and filed separately with the Commission.

27

(b) if by facsimile, when received in legible form.

However, a notice given in accordance with the above but received on a non-working day or after business hours in the place of receipt will only be deemed to be given on the next working day in that place. A notice to the Security Trustee will only be effective on actual receipt by it.

22. GOVERNING LAW

This Deed shall be governed by and construed in accordance with the laws of England and Wales.

23. ENFORCEMENT

23.1 Jurisdiction

(a) The English courts have exclusive jurisdiction to settle any dispute in connection with this Deed.

(b) The English courts are the most appropriate and convenient courts to settle any such dispute.

(c) This Clause is for the benefit of the Finance Parties only. To the extent allowed by law, a Finance Party may take:

(i) proceedings in any other court; and

(ii) concurrent proceedings in any number of jurisdictions.

23.2 Waiver of trial by jury

EACH PARTY WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION IN CONNECTION WITH ANY FINANCE DOCUMENT OR ANY TRANSACTION CONTEMPLATED BY ANY FINANCE DOCUMENT. THIS DEED MAY BE FILED AS A WRITTEN CONSENT TO TRIAL BY COURT.

THIS DEED has been entered into as a deed on the date stated at the beginning of this Deed.

28

SCHEDULE 1

FORM OF ACCESSION AGREEMENT

To:        [AGENT] as the Security Trustee

From:    [PROPOSED NEW PARTY]

Date:     [                    ]

Eggborough Power Limited - Intercreditor Agreement dated

September, 2004 (the Intercreditor Agreement)

We refer to the Intercreditor Agreement. This deed is supplemental to an intercreditor deed (the Intercreditor Deed) dated on or about 27th September, 2004 between amongst others, Eggborough Power Limited as the Borrower and Barclays Bank PLC as Security Trustee.

Words and expressions defined in the Intercreditor Deed have the same meaning when used in this Deed.

We, [name of new Party] of [address/registered office], agree with each other person who is or becomes a party to the Intercreditor Deed that with effect on and from the date hereof it will be bound by the Intercreditor Deed as a [Finance Party/Security Trustee] as if it had been party originally to the Intercreditor Deed in that capacity.

The address for notices of [the new Finance Party/Security Trustee] for the purposes of Clause 14 (Notices) of the Intercreditor Deed is:

[                    ]

                                                                                                                                           ].

This deed is intended to be executed as a deed and is governed by English law.

By:
[PROPOSED NEW PARTY]
EXECUTED as a DEED	)
by [                    ]	)
in the presence of [            ]	)
and [            ]	)

29

SCHEDULE 2

FINANCE PARTIES

Arab Bank plc

Banc of America Securities Limited

Barclays Bank PLC

Bear Stearns Bank plc

Citibank International plc

Credit Industriel et Commercial (Singapore Branch)

Credit Suisse First Boston

Deutsche Bank AG, London

Goldman Sachs Credit Partners L.P.

Morgan Stanley Bank International Limited

ORN European Debt S.à.r.l.

Scotiabank Europe plc

The Royal Bank of Scotland plc

The Toronto-Dominion Bank

WestLB AG

30

SIGNATORIES

Company
EXECUTED as a DEED by	)
EGGBOROUGH POWER LIMITED	)
acting by	)
and	)
Director
Director/Secretary
BET
EXECUTED as a DEED by	)
BRITISH ENERGY POWER AND	)
ENERGY TRADING LIMITED	)
acting by	)
and	)
Director
Director/Secretary
EPHL
EXECUTED as a DEED by	)
EGGBOROUGH POWER	)
(HOLDINGS) LIMITED	)
acting by	)
and	)
Director
Director/Secretary
Security Trustee and Facility Agent
BARCLAYS BANK PLC
By:
as Security Trustee and
as Facility Agent as agent for the Finance Parties

31

EX-4.35

Exhibit 4.35

CONFORMED COPY

AMENDMENT AND RESTATEMENT AGREEMENT

DATED 30 September, 2004

Between

EGGBOROUGH POWER LIMITED

as Borrower

BRITISH ENERGY POWER AND ENERGY TRADING LIMITED

EGGBOROUGH POWER (HOLDINGS) LIMITED

BARCLAYS CAPITAL

as Arranger

THE FINANCIAL INSTITUTIONS

Listed in Schedule 1

with

BARCLAYS BANK PLC

as Agent and Security Trustee

ALLEN & OVERY LLP

LONDON

CONTENTS

Clause		Page
1.	Interpretation	1
2.	Conditions Precedent	2
3.	Representations and Warranties	3
4.	Amendments and Acknowledgements	4
5.	Jurisdiction	5
6.	Governing Law	5
Schedule
1.	Banks	6
2.	Conditions Precedent	7
3.	Form of Amended and Restated Credit Agreement	10
4.	Form of Amended and Restated Intercreditor Agreement	11
Signatories		12

THIS AMENDMENT AND RESTATEMENT AGREEMENT is a deed and is dated 30 September, 2004

BETWEEN:

(1) EGGBOROUGH POWER LIMITED as borrower (the Borrower);

(2) BRITISH ENERGY POWER AND ENERGY TRADING LIMITED (BET);

(3) EGGBOROUGH POWER (HOLDINGS) LIMITED (EPHL);

(4) BARCLAYS BANK PLC as agent (in this capacity the Agent);

(5) BARCLAYS BANK PLC as security trustee (in this capacity the Security Trustee);

(6) BARCLAYS CAPITAL (the investment banking division of Barclays Bank PLC) as Arranger (in this capacity the Arranger); and

(7) THE FINANCIAL INSTITUTIONS listed in Schedule 1 (Banks) as banks (the Banks).

BACKGROUND:

(A) This Amendment and Restatement Agreement is supplemental to, and amends and restates, a credit agreement originally dated 13th July, 2000 (as amended) (the Credit Agreement), and an intercreditor agreement originally dated 8th September, 2000 (as amended) (the Intercreditor Agreement).

(B) The Parties now wish to amend and restate the terms of:

(i) the Credit Agreement on the terms set out in the amended and restated credit agreement (the Amended and Restated Credit Agreement) in Schedule 3 to this Amendment and Restatement Agreement; and

(ii) the Intercreditor Agreement on the terms set out in the amended and restated intercreditor agreement (the Amended and Restated Intercreditor Agreement) in Schedule 4 to this Amendment and Restatement Agreement.

(C) It is intended that this document take effect as a deed notwithstanding that a party may only execute this document under hand.

IT IS AGREED as follows:

1. INTERPRETATION

1.1 Definitions

(a) Capitalised terms defined in the Amended and Restated Credit Agreement have, unless expressly defined in this Amendment and Restatement Agreement, the same meaning in this Amendment and Restatement Agreement.

(b) Agreements means the Credit Agreement and the Intercreditor Agreement.

(c) Restructuring Date has the meaning given to it in the Creditor Restructuring Agreement.

(d) New Finance Document means:

(i) this Agreement;

1

(ii) the Credit Agreement, as amended by Clause 3 (Amendment and Restatement);

(iii) the Intercreditor Agreement, as amended by Clause 3 (Amendment and Restatement);

(iv) the New Debenture;

(v) the EPHL Security Document; and

(vi) the Accounts Agreement.

1.2 Construction

The provisions of clause 1.2 (Construction) of the Amended and Restated Credit Agreement apply to this Amendment and Restatement Agreement as though they were set out in full in this Amendment and Restatement Agreement except that references to the Amended and Restated Credit Agreement are to be construed as references to this Amendment and Restatement Agreement.

2. CONDITIONS PRECEDENT

(a) Subject as set out below, the Credit Agreement and the Intercreditor Agreement will be amended and restated on and from the later to occur of:

(i) the date on which the Agent notifies the Borrower and the Banks that it has received all of the documents and other evidence set out in Part I of Schedule 2 (Conditions Precedent), in form and substance reasonably satisfactory to the Agent (acting on the instructions of the Majority Banks). Such notice will be deemed to have been given on the date on which this Amendment and Restatement Agreement is signed by all the parties hereto;

(ii) the date on which the Agent notifies the Borrower and the Banks that it has received all of the documents and other evidence set out in Part II of Schedule 2 (Conditions Precedent), in form and substance reasonably satisfactory to the Agent (acting on the instructions of the Majority Banks); and

(iii) the date on which the CTA Bonds are sold to the Borrower pursuant to the Second Intercompany Loan Agreement,

(the Restatement Date).

(b) The Agent agrees that it will give each notice to the Borrower and the Banks specified in paragraph (a) above promptly after it has received all of the documents and other evidence set out in Part I or Part II of Schedule 2 (Conditions Precedent) respectively.

(c) The Banks agree to respond promptly to any notice from the Agent that relates to the documents and other evidence set out in Schedule 2 (Conditions Precedent) and to suspend the timing requirements under Clause 19.18(a) of the Credit Agreement for these purposes.

(d) If the Restatement Date has not occurred on or before the Restructuring Long Stop Date (as defined in the Creditor Restructuring Agreement), this Amendment and Restatement Agreement shall terminate.

2

(e) The Borrower shall ensure that the CTA Bond Account and the Asset Option Account are opened with Barclays Bank plc no later than 10 Business Days after the date of this Agreement.

3. AMENDMENT AND RESTATEMENT

Subject to the terms of this Amendment and Restatement Agreement, the Agreements will each be amended and restated on and from the Restatement Date in the case of the Credit Agreement, as set out in Schedule 3 and in the case of the Intercreditor Agreement, as set out in Schedule 4.

4. EXISTING SECURITY DOCUMENTS

(a) The Finance Parties agree that, from the Restatement Date:

(i) the exception in the definition of Secured Senior Liabilities in the Existing Debenture in respect of unlawful financial assistance under Sections 151 and 152 of the Companies Act 1985 includes, without limitation, any obligation of EPHL under the Share Option Agreement;

(ii) the Security Trustee may only convert a floating charge created by the Existing Debenture into a fixed charge in circumstances where it may convert a floating charge created under the New Debenture into a fixed charge;

(iii) the Borrower shall not be in breach of any representation or warranty given under the Existing Debenture unless it would be in breach of a corresponding representation or warranty under the New Debenture;

(iv) the Borrower shall not be in breach of any covenant in the Existing Debenture unless it would be in breach of a corresponding covenant in the New Debenture and EPL is not obliged to comply with any covenants in the Existing Debenture that are more onerous than the covenants in the New Debenture;

(v) Notwithstanding any provision in the Existing Debenture to the contrary, the Borrower may deal with the Relevant Agreements (as defined in the New Debenture) (and any payments thereunder) in the manner set out in the New Debenture;

(vi) the Security Trustee may only enforce the security constituted by the Existing Debenture in circumstances where the Security Trustee has the right to enforce the security constituted by the New Debenture;

(vii) the exceptions under the New Debenture as to when the Security Trustee may redeem any prior security interest, procure the transfer of a security interest to itself or settle and pass the accounts of a prior mortgagee, chargee or encumbrancer shall apply to the corresponding provisions of the Existing Debenture;

(viii) the Security Trustee or any administrative receiver, receiver or manager appointed under the Existing Debenture shall not be entitled to exercise any rights, powers or discretions over and above those granted to the Security Trustee or any administrative receiver, receiver or manager appointed under the New Debenture;

(ix) any moneys received by the Security Trustee or any Receiver under or pursuant to the Existing Debenture shall be applied in accordance with the Amended and Restated Intercreditor Agreement;

3

(x) the Borrower shall not be in breach of any representation or warranty given under the Shares Pledge or EPHL Assignment unless it would be in breach of a corresponding representation or warranty under the EPHL Security Document;

(xi) the Borrower shall not be in breach of any covenant in the Shares Pledge or EPHL Assignment unless it would be in breach of a corresponding covenant in the EPHL Security Document and EPL is not obliged to comply with any covenants in the Shares Pledge or EPHL Assignment that are more onerous than the covenants in the EPHL Security Document;

(xii) the Security Trustee may only enforce the security constituted by the Shares Pledge or the EPHL Assignment in circumstances where the Security Trustee has the right to enforce the security constituted by the EPHL Security Document;

(xiii) the exceptions under the EPHL Security Document as to when the Security Trustee may redeem any prior security interest, procure the transfer of a security interest to itself or settle and pass the accounts of a prior mortgagee, chargee or encumbrancer shall apply to the corresponding provisions of the Shares Pledge and the EPHL Security Assignment;

(xiv) the Security Trustee or any administrative receiver, receiver or manager appointed under the Shares Pledge or the EPHL Assignment shall not be entitled to exercise any rights, powers or discretions over and above those granted to the Security Trustee or any administrative receiver, receiver or manager appointed under the EPHL Security Document; and

any moneys received by the Security Trustee or any Receiver under or pursuant to the Shares Pledge or the EPHL Security Assignment shall be applied in accordance with the Amended and Restated Intercreditor Agreement.

(b) For the avoidance of doubt, nothing in paragraph (d) above amends or waives any Security Interest given by way of fixed charge, assignment, mortgage, floating charge or other security interest created under the Existing Debenture.

5. AMENDMENTS AND ACKNOWLEDGEMENTS

(a) This Amendment and Restatement Agreement is a Finance Document.

(b) Except as amended by this Amendment and Restatement Agreement, each of the Agreements shall after the Restatement Date remain in full force and effect.

(c) This Amendment and Restatement Agreement may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were in a single copy of this Amendment and Restatement Agreement.

6. CREDITOR RESTRUCTURING AGREEMENT

The Finance Parties acknowledge the terms of, and hereby agree to comply with, the terms of Schedule 3 to the Creditor Restructuring Agreement as of and from the date of this Amendment and Restatement Agreement.

4

7. JURISDICTION

7.1 Submission

For the benefit of each Finance Party, the Borrower agrees that the courts of England have jurisdiction to settle any disputes in connection with any Finance Document and accordingly submits to the jurisdiction of the English courts.

7.2 Non-exclusivity

Nothing in this clause 6.2 limits the right of a Finance Party to bring proceedings against the Borrower in connection with any Finance Document:

(a) in any other court of competent jurisdiction; or

(b) concurrently in more than one jurisdiction.

8. GOVERNING LAW

(a) This Amendment and Restatement Agreement is governed by English law.

(b) This Amendment and Restatement Agreement has been entered into on the date stated at the beginning of this Amendment and Restatement Agreement.

5

SCHEDULE 1

BANKS

Arab Bank plc

Banc of America Securities Limited

Barclays Bank PLC

Bear Stearns Bank plc

Citibank International plc

Credit Industriel et Commercial (Singapore Branch)

Credit Suisse First Boston

Deutsche Bank AG, London

Goldman Sachs Credit Partners L.P.

Morgan Stanley Bank International Limited

ORN European Debt S.à.r.l.

Scotiabank Europe plc

The Royal Bank of Scotland plc

The Toronto-Dominion Bank

WestLB AG

6

SCHEDULE 2

CONDITIONS PRECEDENT

PART I

Borrower

1. A certified copy of the constitutional documents of the Borrower and EPHL.

2. A certified copy of a resolution of the board of directors of the Borrower and EPHL approving the terms of, and the transactions contemplated by, this Amendment and Restatement Agreement and the New Finance Documents to which it is a party.

3. A certified copy of a resolution of the shareholders of the Borrower and EPHL approving the terms of, and the transactions contemplated by, this Amendment and Restatement Agreement and the other New Finance Documents to which it is a party.

4. A specimen of the signature of each person authorised on behalf of the Borrower and EPHL to execute or witness the execution of any New Finance Document or to sign or send any document or notice in connection with any New Finance Document.

5. A certificate of an authorised signatory of the Borrower certifying that each copy document (other than those expressed to be in agreed form and the Air Gas Production Electricity Supply Agreement, the Air Gas Production Connection Agreement, the Air Gas Production On-Site Supply Agreement and the shared spares agreement to be entered into by the Borrower and PowerGen UK PLC) referred to in Part I of this Schedule 2 is correct, complete and in full force at the date of this Amendment and Restatement Agreement.

Legal Opinions

1. An agreed form legal opinion of Allen & Overy LLP, legal advisers in England to the Agent, addressed to the Finance Parties named as parties on the date of this Amendment and Restatement Agreement.

2. An agreed form legal opinion of Tods Murray LLP, legal advisers in Scotland to the Agent, addressed to the Finance Parties, named as parties on the date of this Amendment and Restatement Agreement.

Finance and other documents

1. A copy of each of the New Finance Documents and copies of each of the other Finance Documents.

2. A copy of each of the Project Contracts.

3. A copy of each of the Station Contracts.

4. A copy of the FGD Contract.

5. A copy of each of the Revenue Agreements.

7

6. A copy of the First Intercompany Loan Agreement.

7. A copy of the Second Intercompany Loan Agreement.

8. A copy of any Environmental Licence.

9. A copy of the Sale of Business Agreement.

10. A copy of the Share Purchase Agreement.

11. Confirmation that all insurance arrangements required to be effected or maintained under the Credit Agreement are in full force and effect as at the date of this Amendment and Restatement Agreement.

Accounts

Evidence that all Accounts (other than the CTA Bond Account and the Asset Option Account) are open in accordance with the Credit Agreement, as amended by Clause 3 (Amendment and Restatement) of this Agreement, and the Accounts Agreement.

Other documents and evidence

Evidence that all fees and expenses due and payable from the Borrower under the Finance Documents have been or will be paid on or before the Restatement Date.

8

PART II

Legal Opinions

1. The executed legal opinion of Allen & Overy LLP referred to in Part I of this Schedule 2.

2. The executed legal opinion of Tods Murray LLP, referred to in Part I of this Schedule 2.

9

SCHEDULE 3

FORM OF AMENDED AND RESTATED CREDIT AGREEMENT

[TO BE ADDED]

10

SCHEDULE 4

FORM OF AMENDED AND RESTATED INTERCREDITOR AGREEMENT

[TO BE ADDED]

11

SIGNATORIES

Borrower
EXECUTED as a DEED by		)
EGGBOROUGH POWER LIMITED		)
acting by		)
and		)
Director	Neil O’Hara
Director/Secretary	Robert Armour
BET
EXECUTED as a DEED by		)
BRITISH ENERGY POWER AND		)
ENERGY TRADING LIMITED		)
acting by		)
and		)
Director	Neil O’Hara
Director/Secretary	Robert Armour
EPHL
EXECUTED as a DEED by		)
EGGBOROUGH POWER		)
(HOLDINGS) LIMITED		)
acting by		)
and		)
Director	Neil O’Hara
Director/Secretary	Robert Armour

Banks

ARAB BANK PLC
By:	Michael Clark
	Graham Pinnell

12

BANC OF AMERICA SECURITIES LIMITED
By:	Kenneth Schneier
BARCLAYS BANK PLC
By:	Allan Pover
BEAR STEARNS BANK PLC
By:	Liam MacNamara
CITIBANK INTERNATIONAL PLC
By:	William Bonsu
CREDIT INDUSTRIEL ET COMMERCIAL SINGAPORE BRANCH
By:	Robert Petty
CREDIT SUISSE FIRST BOSTON
By:	Kim Bailes and Edward Lowe
DEUTSCHE BANK AG LONDON
By:
GOLDMAN SACHS CREDIT PARTNERS LP
By:	Vladimira Mircheva
MORGAN STANLEY BANK INTERNATIONAL LIMITED
By:	Wendy Newby
ORN EUROPEAN DEBT S.à.r.l.
By:	Orn Capital LLP by Gordon Webb

13

SCOTIABANK EUROPE PLC
By:	Steve Dobson
THE ROYAL BANK OF SCOTLAND PLC
By:	Paul Sullivan

14

THE TORONTO-DOMINION BANK
By:	Graeme Francis
WESTLB AG
By:	David Stewart
	Tim Sai Louie
The Agent
BARCLAYS BANK PLC
By:	Simon Deaves
The Security Trustee
BARCLAYS BANK PLC
By:	Simon Deaves

15

EX-4.36

Exhibit 4.36

LIMITED LIABILITY PARTNERSHIP

CONFORMED COPY

EGGBOROUGH POWER (HOLDINGS) LIMITED

as Assignor

BRITISH ENERGY HOLDINGS PLC

as Assignee

FIRST SECURITY ASSIGNMENT

CONTENTS

Clause		Page
1.	Definitions And Interpretation	1
2.	Commencement	2
3.	Covenant To Pay	2
4.	Assignment	2
5.	Notice Of Assignment	2
6.	Assignor’s Undertakings	3
7.	Enforcement	3
8.	Exercise Of Rights	4
9.	Further Assurance	4
10.	Power Of Attorney	4
11.	Receiver	4
12.	Effectiveness Of Security	5
13.	Release Of Security	5
14.	Subsequent Interests And Accounts	6
15.	Application Of Moneys	6
16.	Assignment	7
17.	Successors	7
18.	Notices	7
19.	Governing Law	8
20.	Jurisdiction	8
SCHEDULE FORM OF NOTICE OF ASSIGNMENT		9

THIS ASSIGNMENT is made as a deed on 30 September 2004

BETWEEN:

(1) EGGBOROUGH POWER (HOLDINGS) LIMITED, a company incorporated in Scotland (registered no. SC201083) whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride G74 5PR (the “Assignor”); and

(2) BRITISH ENERGY HOLDINGS PLC, a public limited company incorporated in Scotland (registered no.SC270186) whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR (the “Assignee”).

IT IS AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

1.1 Terms defined in the First Intercompany Loan Agreement shall, unless otherwise defined in this Assignment, have the same meaning in this Assignment and in addition:

“Assigned Property” means the rights and property expressed to be assigned in Clause 4 (Assignment).

“Buyer” has the same meaning as given to it in the Share Option Agreement.

“Collateral Rights” means all rights, powers and remedies of the Assignee provided by this Assignment or by law.

“Contracts” means the Share Option Agreement, the Second Intercompany Loan Agreement, the Second Security Assignment and the Intercreditor Agreement.

“Demand Date” means the earlier of:

(a) the date on which the Assignee demands repayment of all or any part of the Loan pursuant to clause 6 of the First Intercompany Loan Agreement; and

(b) the date on which the Assignor is required to make a prepayment of all or any part of the Loan pursuant to clause 7 of the First Intercompany Loan Agreement.

“First Intercompany Loan Agreement” means the intercompany loan agreement dated on or about the date of this Assignment between the Assignee as lender and the Assignor as borrower.

“Notice of Assignment” means a notice of assignment substantially in the form of the Schedule (with such amendments as the Assignor and the Assignee may agree).

“Relevant Payments” means each and every sum paid or payable to the Assignor from time to time under or pursuant to any of the Contracts.

“Secured Obligations” means all obligations owing to the Assignee by the Assignor under or pursuant to the First Intercompany Loan Agreement, whether present or future, actual or contingent.

- 1 -

1.2 Any reference in this Assignment to:

(a) the “Assignor”, the “Assignee” or any other person shall be construed so as to include its and any subsequent permitted successors, assigns and transferees in accordance with their respective interests;

(b) a “Clause” or “Schedule” shall be construed as a reference to a clause of or schedule to this Assignment;

(c) this Assignment or any other agreement or document shall be construed as a reference to this Assignment or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented; and

(d) a statute or treaty shall be construed as a reference to such statute or treaty as the same may have been, or may from time to time be, amended or, in the case of a statute, re-enacted.

1.3 The Clause and Schedule headings in this Assignment are for ease of reference only and shall not affect its interpretation.

1.4 A person who is not a party to this Assignment has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Assignment.

2. COMMENCEMENT

The provisions of this Assignment shall only become effective on the occurrence of the Restructuring Condition.

3. COVENANT TO PAY

The Assignor shall on demand of the Assignee discharge each of the Secured Obligations and pay to the Assignee when due and payable each sum now or hereafter owing, due or incurred by the Assignor in respect of the Secured Obligations.

4. ASSIGNMENT

4.1 The Assignor assigns by way of security for the Secured Obligations absolutely and with full title guarantee to the Assignee all of its right, title and interest, present and future, in, under and to the Contracts and the Relevant Payments, together with all present and future claims and causes of action in respect thereof.

4.2 The Assignee shall not be under any obligation in relation to the Assigned Property or any of the Contracts as a consequence of this Assignment and the Assignor shall at all times remain liable to perform all obligations expressed to be assumed by it in respect of the Assigned Property and the Contracts.

5. NOTICE OF ASSIGNMENT

5.1 The Assignor shall promptly and in any event within ten (10) days of the date of this Assignment deliver to the Assignee Notices of Assignment in respect of each Contract duly executed by or on behalf of the Assignor and acknowledged by the other parties to the Contracts.

- 2 -

6. ASSIGNOR’S UNDERTAKINGS

6.1 The Assignor undertakes to the Assignee for the duration of this Assignment that, subject to the terms and conditions of the Finance Documents, it shall:

(a) not sell, assign, transfer or otherwise dispose of all or any part of the Assigned Property;

(b) not create, grant or permit to subsist any security interest over all or any of its right, title and interest in the Assigned Property;

(c) promptly notify the Assignee of any Relevant Payments which are contested or any circumstances which give rise, or may reasonably be expected to give rise, to a claim on or under the Assigned Property; and

(d) not vary, rescind or amend the Contracts or any of them except with the prior written consent of the Assignee.

7. ENFORCEMENT

7.1 At any time after the Demand Date, the Assignee shall be entitled, without prior notice to the Assignor or prior authorisation from any court, to enforce all or any part of the security constituted by this Assignment in any manner it sees fit. Without limiting any of the powers conferred on the Assignee by this Clause 7, the Assignee shall be entitled to:

(a) take possession of the Assigned Property or otherwise exercise in relation to it all of the rights of an absolute owner;

(b) assign any or all of the Assigned Property to any person on such terms as the Assignee considers appropriate; and

(c) collect, recover or compromise, and give a good discharge for, any moneys paid or payable to the Assignor under or in respect of the Assigned Property, and enforce (in any way whatsoever including, without limitation, by way of instituting proceedings in the Assignor’s name) any rights or claims arising under or in respect of the Assigned Property.

7.2 The power of sale or other disposal in Clause 7.1 shall operate as a variation and extension of the statutory power of sale under Section 101 of the Law of Property Act 1925 and such power shall arise (and the Secured Obligations shall be deemed due and payable for that purpose) on execution of this Assignment. The restrictions contained in Sections 93 and 103 of the Law of Property Act 1925 shall not apply to this Assignment or to any exercise by the Assignee of its right to consolidate mortgages or its power of sale.

- 3 -

7.3 A certificate in writing by an officer or agent of the Assignee that the power of sale or disposal has arisen and is exercisable shall be conclusive evidence of that fact in favour of a purchaser of all or any part of the Assigned Property.

8. EXERCISE OF RIGHTS

Subject always to the terms of this Assignment, the Assignor, as agent for and on behalf of the Assignee, shall be entitled to exercise all rights and powers arising under the Contracts or any of them with respect to the Relevant Payments until notified in writing of the Demand Date. The Assignee shall be entitled upon the giving of such notice to exercise all such rights and powers when they arise and the Assignor shall thereupon cease to be the agent of the Assignee.

9. FURTHER ASSURANCE

The Assignor shall promptly execute all documents and do all things (including the execution and delivery of any Notice of Assignment) that the Assignee may reasonably specify for the purpose of (a) exercising the Collateral Rights; (b) securing and perfecting its security over or title to all or any part of the Assigned Property; or (c) facilitating any dealings by the Assignee pursuant to the powers granted to the Assignee under this Assignment.

10. POWER OF ATTORNEY

The Assignor, by way of security, irrevocably appoints the Assignee to be its attorney and in its name, on its behalf and as its act and deed to execute, deliver and perfect all documents (including any Notice of Assignment) and do all things that the Assignee may consider to be necessary for (a) carrying out any obligation imposed upon the Assignor under this Assignment; or (b) exercising any of the Collateral Rights. The Assignor shall ratify and confirm all things done and all documents executed by the Assignee in the exercise of that power of attorney.

11. RECEIVER

11.1 Upon the occurrence of the Demand Date or if a petition or application is presented for the making of an administration order in relation to the Assignor or if any person who is entitled to do so gives written notice of its intention to appoint an administrator of the Assignor or files such a notice with the court, the Assignee may by writing (acting through an authorised officer of the Assignee) without notice to the Assignor appoint one or more persons to be receiver of the whole or any part of the Assigned Property (each such person being (a) entitled to act individually as well as jointly; and (b) for all purposes deemed to be the agent of the Assignor).

11.2 In addition to the powers of the Assignee conferred by Clause 7.1, each person appointed pursuant to Clause 11.1 shall have, in relation to the part of the Assigned Property in respect of which he was appointed, all the powers (a) conferred by the Law of Property Act 1925 on a receiver appointed under that Act; (b) of an administrative receiver set out in Schedule 1 to the Insolvency Act 1986 (whether or not such person is an administrative receiver); and (c) (if such person is an administrative receiver) all the other powers exercisable by an administrative receiver in relation to the Assignor by virtue of the Insolvency Act 1986.

- 4 -

12. EFFECTIVENESS OF SECURITY

12.1 The security created by this Assignment and the Collateral Rights shall be cumulative, in addition to and independent of every other security which the Assignee may at any time hold for the Secured Obligations or any rights, powers and remedies provided by law. No prior security held by the Assignee over the whole or any part of the Assigned Property shall merge into the security constituted by this Assignment.

12.2 This Assignment shall remain in full force and effect as a continuing security for the Secured Obligations unless and until the Assignee discharges it.

12.3 No failure on the part of the Assignee to exercise, or delay on its part in exercising, any Collateral Right shall operate as a waiver, nor shall any single or partial exercise of a Collateral Right prevent any further or other exercise of that or any other Collateral Right.

12.4 If, at any time, any provision of this Assignment is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, the legality, validity or enforceability of (a) the remaining provisions of this Assignment; and (b) such provision under the law of any other jurisdiction shall not in any way be affected or impaired thereby.

12.5 None of the Assignee, its nominee(s) or any receiver appointed pursuant to this Assignment shall be liable by reason of (a) taking any action permitted by this Assignment; (b) any neglect or default in connection with the Assigned Property; or (c) the taking possession or realisation of all or any part of the Assigned Property, except in the case of gross negligence or wilful default upon its part.

13. RELEASE OF SECURITY

13.1 Upon the Secured Obligations being discharged in full and the Assignee having no actual or contingent obligation under the First Intercompany Loan Agreement, the Assignee shall, at the request and expense of the Assignor, reassign to the Assignor the Assigned Property, subject to Clause 13.2 and without recourse to, or any representation or warranty by, the Assignee.

13.2 If the Assignee considers that any amount paid or credited to it is capable of being avoided or reduced by virtue of any bankruptcy, insolvency, liquidation or similar laws, the liability of the Assignor under this Assignment and the security constituted by this Assignment shall continue and such amount shall not be considered to have been irrevocably paid.

13.3 The Assignee may retain this Assignment, the security constituted by or pursuant to this Assignment and all documents relating to or evidencing ownership of all or any part of the Assigned Property for a period of seven months after any discharge in full of the Secured Obligations, provided that if at any time during that seven month period a petition or application is presented for an order for the winding-up of, or the making of an administration order in respect of, the Assignor or any person who is

- 5 -

entitled to do so gives written notice of its intention to appoint an administrator of the Assignor or files such a notice with the court or the Assignor commences to be wound-up voluntarily or any analogous proceedings are commenced in respect of it, the Assignee may continue to retain such security and such documents for such further period as the Assignee may determine and the security and such documents shall be deemed to have continued to be held as security for the Secured Obligations.

14. SUBSEQUENT INTERESTS AND ACCOUNTS

If the Assignee at any time receives notice of any subsequent mortgage, assignment, charge or other interest affecting all or any part of the Assigned Property, all payments made by the Assignor to the Assignee after that time shall be treated as having been credited to a new account of the Assignee and not as having been applied in reduction of the Secured Obligations as at the time when the Assignee received notice.

15. APPLICATION OF MONEYS

15.1 All moneys received or recovered by the Assignee or any receiver appointed pursuant to this Assignment or the powers conferred by it shall (subject to the claims of any person having prior rights thereto and by way of variation of the provisions of the Law of Property Act 1925) be applied first in the payment of the costs, charges and expenses incurred and payments made by such receiver, the payment of his remuneration and the discharge of any liabilities incurred by such receiver in, or incidental to, the exercise of any of his powers, and thereafter shall be applied by the Assignee (notwithstanding any purported appropriation by the Assignor) in such order and manner as the Assignee shall think fit:

(a) in or towards the discharge of all or any of the Secured Obligations which are then due and payable; or

(b) if any of the Secured Obligations are then contingent, in payment to the credit of any accounts selected by the Assignee to be held until such time as the Assignee shall think fit pending their application in or towards the discharge of all or any of the Secured Obligations which are at that time due and payable; or

(c) in payment to the credit of any suspense or impersonal account for so long as the Assignee shall think fit pending any further application of such moneys (as the Assignee shall be entitled, but not obliged, to do in its discretion) in accordance with the previous provisions of this Clause; and

(d) if the Assignor is under no further actual or contingent liability under the First Intercompany Loan Agreement, in payment of the surplus to the Assignor or any other person entitled thereto.

- 6 -

16. ASSIGNMENT

16.1 The Assignee may assign and transfer all or any of its rights and obligations under this Assignment. The Assignee shall be entitled to disclose such information concerning the Assignor and this Assignment to such parties, in each case, as the Assignee considers appropriate.

16.2 The Assignor may not assign and/or transfer any of its rights and/or obligations under this Agreement.

17. SUCCESSORS

This Assignment shall remain in effect despite any amalgamation or merger (however effected) relating to the Assignee; and references to the Assignee shall be deemed to include any person who, under the laws of its jurisdiction of incorporation or domicile, has assumed the rights and obligations of the Assignee under this Assignment or to which, under such laws, those rights and obligations have been transferred.

18. NOTICES

18.1 Any communication to be made by one person to another under or in connection with this Assignment shall be made in writing by fax or letter to the fax number or address set out in Clause 18.4 below (or any substitute address or fax number specified by that person by written notice to the other person received before the communication was despatched).

18.2 Any communication or document made or delivered by one person to another under or in connection with this Assignment will only be effective:

(a) if by way of fax, when received in legible form; or

(b) if by way of letter, when it has been left at the relevant address or five days after being deposited in the post postage prepaid in an envelope addressed to it at that address.

18.3 Any communication or document to be made or delivered to the Assignee will be effective only when actually received by the Assignee and then only if it is expressly marked for the attention of the officer (if any) specified by the Assignee for such purpose.

18.4 The address and fax number referred to in Clause 18.1 is:

Name of Party	Address
Assignor	Eggborough Power (Holdings) Limited 3 Redwood Crescent Peel Park East Kilbride, G74 5PR Attention: Corporate Affairs Director and Company Secretary Fax: 01355 594 022

- 7 -

Name of Party	Address
Assignee	British Energy Holdings plc 3 Redwood Crescent Peel Park East Kilbride, G74 5PR Attention: Corporate Affairs Director and Company Secretary Fax: 01355 594 022

19. GOVERNING LAW

19.1 This Assignment is governed by English law.

20. JURISDICTION

20.1 The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Assignment (including a dispute regarding the existence, validity or termination of this Assignment).

20.2 This Clause 20 is for the benefit of the Assignee only.

- 8 -

SCHEDULE

FORM OF NOTICE OF ASSIGNMENT

To: [•]

Date: [•]

Dear Sirs,

[Specify Contract] dated [•] (the “Contract”)

1. We refer to the first security assignment dated on or about 24 September 2004 between Eggborough Power (Holdings) Limited and British Energy Holdings plc (the “First Security Assignment”). Terms defined in the First Security Assignment shall have the same meaning in this notice and acknowledgement.

2. We hereby give you notice that, under the First Security Assignment, we have assigned to British Energy Holdings plc all our rights, title and interests in and to all moneys payable by you to us under the Contract.

3. With effect from the date of your receipt of this notice:

(a) all payments by you to us under or arising from the Contract (the “Payments”) shall be paid to British Energy Holdings plc or to its order as it may specify in writing from time to time;

(b) all remedies provided for in the Contract or available at law or in equity in respect of the Payments shall be exercisable by British Energy Holdings plc; and

(c) all rights, interests and benefits whatsoever accruing to or for the benefit of ourselves arising from the Payments shall belong to British Energy Holdings plc.

4. We shall continue to be solely responsible for the performance of our obligations under or in connection with the Contract.

5. You are authorised and instructed, without requiring further approval from us, to provide British Energy Holdings plc with such information relating to the Contract as it may from time to time request and to send copies of all notices issued by you under the Contract to British Energy Holdings plc as well as to us.

6. Should you wish to assign and/or transfer any of your rights and/or obligations under the Contract, you undertake to procure that each such buyer, assignee and/or transferee of such rights and/or obligations enters into an acknowledgement of assignment in substantially the same form attached hereto and agrees to be bound by the obligations and undertakings entered into by you in this Notice and Acknowledgement.

- 9 -

7. These instructions may not be revoked, nor may the terms of any Contract be amended, varied, waived or terminated, without the prior written consent of British Energy Holdings plc.

8. Please acknowledge receipt of this notice by signing the acknowledgement on the enclosed copy letter and returning it to British Energy Holdings plc.

9. This notice is governed by English law.

Yours faithfully,

Executed as a DEED

by

EGGBOROUGH POWER (HOLDINGS) LIMITED

Director

Director/Secretary

- 10 -

Acknowledgement

To: British Energy Holdings plc

Cc: Eggborough Power (Holdings) Limited

We acknowledge receipt of a notice in the terms set out above and confirm that we have not received notice of any previous assignments or charges of or over any of the rights, title or interests in, under or to the Contract or the Payments and that we will comply with the terms of the notice from the Assignor.

We further confirm that:

1. we have not claimed or exercised and have no outstanding right to claim or exercise any right of set-off, counterclaim or other right relating to the Payments;

2. no amendment, waiver or release of any rights, title or interests in, under or to the Contract or the Payments shall be effective without your prior written consent; and

3. should we wish to assign and/or transfer any of your rights and/or obligations under the Contract, we undertake to procure that each such buyer, assignee and/or transferee of such rights and/or obligations enters into an acknowledgement of assignment in substantially the same form as this acknowledgement and agrees to be bound by the obligations and undertakings entered into by us in this Notice and Acknowledgement.

We acknowledge receipt of instructions from you in connection with the assignment of the Contract and confirm that we shall act in accordance with them until we receive written notification from you to the contrary.

EXECUTED as a DEED by

[•]

Dated:                     

- 11 -

IN WITNESS WHEREOF this Assignment has been signed on behalf of the Assignee and executed as a deed by the Assignor and is intended to be and is hereby delivered by it as a deed on the date specified above.

EXECUTED as a DEED

THE ASSIGNOR
by EGGBOROUGH POWER LIMITED
Director	ROBERT ARMOUR
Director/Secretary	JEAN MACDONALD
THE ASSIGNEE
by BRITISH ENERGY GROUP HOLDINGS PLC
Director	MIKE ALEXANDER
Director/Secretary	ROBERT ARMOUR

- 12 -

EX-4.37

Exhibit 4.37

	LIMITED LIABILITY PARTNERSHIP
CONFORMED COPY

EGGBOROUGH POWER LIMITED

as Assignor

EGGBOROUGH POWER (HOLDINGS) LIMITED

as Assignee

SECOND SECURITY ASSIGNMENT

CONTENTS

Clause		Page
1.	Definitions And Interpretation	1
2.	Commencement	2
3.	Covenant To Pay	2
4.	Assignment	2
5.	Notice Of Assignment	3
6.	Assignor's Undertakings	3
7.	Enforcement	3
8.	Exercise Of Rights	4
9.	Further Assurance	4
10.	Power Of Attorney	4
11.	Receiver	5
12.	Effectiveness Of Security	5
13.	Release Of Security	5
14.	Subsequent Interests And Accounts	6
15.	Application Of Moneys	6
16.	Assignment	7
17.	Successors	7
18.	Notices	7
19.	Governing Law	8
20.	Jurisdiction	8
SCHEDULE 1 FORM OF NOTICE OF ASSIGNMENT OF CONTRACT		9
SCHEDULE 2 FORM OF NOTICE OF ASSIGNMENT OF ASSET OPTION ACCOUNT		12

THIS ASSIGNMENT is made as a deed on 30 September 2004

BETWEEN:

(1) EGGBOROUGH POWER LIMITED, a company incorporated in England and Wales (registered no. 03782700) whose registered office is at Barnett Way, Barnwood, Gloucestershire GL4 3RS (the “Assignor”).

(2) EGGBOROUGH POWER (HOLDINGS) LIMITED, a company incorporated in Scotland (registered no. SC201083) whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride G74 5PR (the “Assignee”).

IT IS AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

1.1 Terms defined in the Second Intercompany Loan Agreement shall, unless otherwise defined in this Assignment, have the same meaning in this Assignment and in addition:

“Accounts Agreement” means the accounts agreement dated on or about the date of this Assignment between EPL as borrower and Barclays Bank PLC as the account bank and agent.

“Amendment and Restatement Agreement” has the same meaning as given to it in the Credit Agreement.

“Asset Option Account” has the same meaning as given to it in the Accounts Agreement.

“Assigned Property” means the rights and property expressed to be assigned in Clause 4 (Assignment).

“Buyer” has the same meaning as given to it in the Asset Option Agreement.

“Collateral Rights” means all rights, powers and remedies of the Assignee provided by this Assignment or by law.

“Contracts” means the Asset Option Agreement and the Intercreditor Agreement.

“Demand Date” means the earlier of:

(a) the date on which the Assignee demands repayment of all or any part of the Loan pursuant to clause 6 of the Second Intercompany Loan Agreement; and

(b) the date on which the Assignor is required to make a prepayment of all or any part of the Loan pursuant to clause 7 of the Second Intercompany Loan Agreement.

“Notice of Assignment” means in respect of a Contract, a notice of assignment substantially in the form of Schedule 1 and in the case of the Asset Option Account, a notice of assignment substantially in the form of Schedule 2 (with such amendments as the Assignor and the Assignee may agree).

- 1 -

“Relevant Payments” means each and every sum paid or payable from time to time to the Assignor under or pursuant to any of the Contracts.

“Restatement Date” has the same meaning as given to it in the Credit Agreement.

“Second Intercompany Loan Agreement” means the intercompany loan agreement dated on or about the date of this Assignment between EPHL as lender and EPL as borrower.

“Secured Obligations” means all obligations owing to the Assignee by the Assignor under or pursuant to the Second Intercompany Loan Agreement, whether present or future, actual or contingent.

1.2 Any reference in this Assignment to:

(a) the “Assignor”, the “Assignee” or any other person shall be construed so as to include its and any subsequent permitted successors, assigns and transferees in accordance with their respective interests;

(b) a “Clause” or “Schedule” shall be construed as a reference to a clause of or schedule to this Assignment;

(c) this Assignment or any other agreement or document shall be construed as a reference to this Assignment or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented; and

(d) a statute or treaty shall be construed as a reference to such statute or treaty as the same may have been, or may from time to time be, amended or, in the case of a statute, re-enacted.

1.3 The Clause and Schedule headings in this Assignment are for ease of reference only and shall not affect its interpretation.

1.4 A person who is not a party to this Assignment has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Assignment.

1.5 This Assignment is subject to the terms and conditions of the Intercreditor Agreement.

2. COMMENCEMENT

The provisions of this Assignment shall only become effective on the occurrence of the Restatement Date.

3. COVENANT TO PAY

The Assignor shall on demand of the Assignee discharge each of the Secured Obligations and pay to the Assignee when due and payable each sum now or hereafter owing, due or incurred by the Assignor in respect of the Secured Obligations.

4. ASSIGNMENT

4.1 The Assignor assigns by way of security for the Secured Obligations absolutely and with full title guarantee to the Assignee all of its right, title and interest, present and future, in, under and to the Contracts, the Relevant Payments and the Asset Option Account, together with all present and future claims and causes of action in respect thereof.

- 2 -

4.2 The Assignee shall not be under any obligation in relation to the Assigned Property or any of the Contracts as a consequence of this Assignment and the Assignor shall at all times remain liable to perform all obligations expressed to be assumed by it in respect of the Assigned Property and the Contracts.

5. NOTICE OF ASSIGNMENT

5.1 The Assignor shall promptly and in any event within ten (10) days of the date of this Assignment deliver to the Assignee Notices of Assignment in respect of each Contract and the Asset Option Account duly executed by or on behalf of the Assignor and acknowledged by:

(a) in the case of the Contracts, the other parties to the Contracts; and

(b) in the case of the Asset Option Account, the bank with which the account is open or maintained.

6. ASSIGNOR’S UNDERTAKINGS

The Assignor undertakes to the Assignee for the duration of this Assignment that, subject to the terms and conditions of the Finance Documents, it shall:

(a) not sell, assign, transfer or otherwise dispose of all or any part of the Assigned Property;

(b) not create, grant or permit to subsist any security interest over all or any of its right, title and interest in the Assigned Property;

(c) promptly notify the Assignee of any Relevant Payments which are contested or any circumstances which give rise, or may reasonably be expected to give rise, to a claim on or under the Assigned Property; and

(d) not vary, rescind or amend the Contracts or any of them except with the prior written consent of the Assignee.

7. ENFORCEMENT

7.1 At any time on or after the Demand Date, the Assignee shall be entitled, without prior notice to the Assignor or prior authorisation from any court, to enforce all or any part of the security constituted by this Assignment in any manner it sees fit. Without limiting any of the powers conferred on the Assignee by this Clause 7, the Assignee shall be entitled to:

(a) take possession of the Assigned Property or otherwise exercise in relation to it all of the rights of an absolute owner;

- 3-

(b) assign any or all of the Assigned Property to any person on such terms as the Assignee considers appropriate; and

(c) collect, recover or compromise, and give a good discharge for, any moneys paid or payable to the Assignor under or in respect of the Assigned Property, and enforce (in any way whatsoever including, without limitation, by way of instituting proceedings in the Assignor’s name) any rights or claims arising under or in respect of the Assigned Property.

7.2 The power of sale or other disposal in Clause 7.1 shall operate as a variation and extension of the statutory power of sale under Section 101 of the Law of Property Act 1925 and such power shall arise (and the Secured Obligations shall be deemed due and payable for that purpose) on execution of this Assignment. The restrictions contained in Sections 93 and 103 of the Law of Property Act 1925 shall not apply to this Assignment or to any exercise by the Assignee of its right to consolidate mortgages or its power of sale.

7.3 A certificate in writing by an officer or agent of the Assignee that the power of sale or disposal has arisen and is exercisable shall be conclusive evidence of that fact in favour of a purchaser of all or any part of the Assigned Property.

8. EXERCISE OF RIGHTS

Subject always to the terms of this Assignment, the Assignor, as agent for and on behalf of the Assignee, shall be entitled to exercise all rights and powers arising under the Contracts or any of them with respect to the Relevant Payments until notified in writing of the Demand Date. The Assignee shall be entitled upon the giving of such notice to exercise all such rights and powers when they arise and the Assignor shall thereupon cease to be the agent of the Assignee.

9. FURTHER ASSURANCE

The Assignor shall promptly execute all documents and do all things (including the execution and delivery of any Notice of Assignment) that the Assignee may reasonably specify for the purpose of (a) exercising the Collateral Rights; (b) securing and perfecting its security over or title to all or any part of the Assigned Property; or (c) facilitating any dealings by the Assignee pursuant to the powers granted to the Assignee under this Assignment.

10. POWER OF ATTORNEY

The Assignor, by way of security, irrevocably appoints the Assignee to be its attorney and in its name, on its behalf and as its act and deed to execute, deliver and perfect all documents (including any Notice of Assignment) and do all things that the Assignee may consider to be necessary for (a) carrying out any obligation imposed upon the Assignor under this Assignment; or (b) exercising any of the Collateral Rights. The Assignor shall ratify and confirm all things done and all documents executed by the Assignee in the exercise of that power of attorney.

- 4 -

11. RECEIVER

11.1 Upon the occurrence of the Demand Date or if a petition or application is presented for the making of an administration order in relation to the Assignor or if any person who is entitled to do so gives written notice of its intention to appoint an administrator of the Assignor or files such a notice with the court, the Assignee may by writing (acting through an authorised officer of the Assignee) without notice to the Assignor appoint one or more persons to be receiver of the whole or any part of the Assigned Property (each such person being (a) entitled to act individually as well as jointly; and (b) for all purposes deemed to be the agent of the Assignor).

11.2 In addition to the powers of the Assignee conferred by Clause 7.1, each person appointed pursuant to Clause 11.1 shall have, in relation to the part of the Assigned Property in respect of which he was appointed, all the powers (a) conferred by the Law of Property Act 1925 on a receiver appointed under that Act; (b) of an administrative receiver set out in Schedule 1 to the Insolvency Act 1986 (whether or not such person is an administrative receiver); and (c) (if such person is an administrative receiver) all the other powers exercisable by an administrative receiver in relation to the Assignor by virtue of the Insolvency Act 1986.

12. EFFECTIVENESS OF SECURITY

12.1 The security created by this Assignment and the Collateral Rights shall be cumulative, in addition to and independent of every other security which the Assignee may at any time hold for the Secured Obligations or any rights, powers and remedies provided by law. No prior security held by the Assignee over the whole or any part of the Assigned Property shall merge into the security constituted by this Assignment.

12.2 This Assignment shall remain in full force and effect as a continuing security for the Secured Obligations unless and until the Assignee discharges it.

12.3 No failure on the part of the Assignee to exercise, or delay on its part in exercising, any Collateral Right shall operate as a waiver, nor shall any single or partial exercise of a Collateral Right prevent any further or other exercise of that or any other Collateral Right.

12.4 If, at any time, any provision of this Assignment is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, the legality, validity or enforceability of (a) the remaining provisions of this Assignment; and (b) such provision under the law of any other jurisdiction shall not in any way be affected or impaired thereby.

12.5 None of the Assignee, its nominee(s) or any receiver appointed pursuant to this Assignment shall be liable by reason of (a) taking any action permitted by this Assignment; (b) any neglect or default in connection with the Assigned Property; or (c) the taking possession or realisation of all or any part of the Assigned Property, except in the case of gross negligence or wilful default upon its part.

- 5 -

13. RELEASE OF SECURITY

13.1 Upon the Secured Obligations being discharged in full and the Assignee having no actual or contingent obligation under the Second Intercompany Loan Agreement, the Assignee shall, at the request and expense of the Assignor, reassign to the Assignor the Assigned Property, subject to Clause 13.2 and without recourse to, or any representation or warranty by, the Assignee.

13.2 If the Assignee considers that any amount paid or credited to it is capable of being avoided or reduced by virtue of any bankruptcy, insolvency, liquidation or similar laws, the liability of the Assignor under this Assignment and the security constituted by this Assignment shall continue and such amount shall not be considered to have been irrevocably paid.

13.3 The Assignee may retain this Assignment, the security constituted by or pursuant to this Assignment and all documents relating to or evidencing ownership of all or any part of the Assigned Property for a period of seven months after any discharge in full of the Secured Obligations, provided that if at any time during that seven month period a petition or application is presented for an order for the winding-up of, or the making of an administration order in respect of, the Assignor or any person who is entitled to do so gives written notice of its intention to appoint an administrator of the Assignor or files such a notice with the court or the Assignor commences to be wound-up voluntarily or any analogous proceedings are commenced in respect of it, the Assignee may continue to retain such security and such documents for such further period as the Assignee may determine and the security and such documents shall be deemed to have continued to be held as security for the Secured Obligations.

14. SUBSEQUENT INTERESTS AND ACCOUNTS

If the Assignee at any time receives notice of any subsequent mortgage, assignment, charge or other interest affecting all or any part of the Assigned Property, all payments made by the Assignor to the Assignee after that time shall be treated as having been credited to a new account of the Assignee and not as having been applied in reduction of the Secured Obligations as at the time when the Assignee received notice.

15. APPLICATION OF MONEYS

All moneys received or recovered by the Assignee or any receiver appointed pursuant to this Assignment or the powers conferred by it shall (subject to the claims of any person having prior rights thereto and by way of variation of the provisions of the Law of Property Act 1925) be applied first in the payment of the costs, charges and expenses incurred and payments made by such receiver, the payment of his remuneration and the discharge of any liabilities incurred by such receiver in, or incidental to, the exercise of any of his powers, and thereafter shall be applied by the Assignee (notwithstanding any purported appropriation by the Assignor) in such order and manner as the Assignee shall think fit:

(a) in or towards the discharge of all or any of the Secured Obligations which are then due and payable; or

- 6 -

(b) if any of the Secured Obligations are then contingent, in payment to the credit of any accounts selected by the Assignee to be held until such time as the Assignee shall think fit pending their application in or towards the discharge of all or any of the Secured Obligations which are at that time due and payable; or

(c) in payment to the credit of any suspense or impersonal account for so long as the Assignee shall think fit pending any further application of such moneys (as the Assignee shall be entitled, but not obliged, to do in its discretion) in accordance with the previous provisions of this Clause; and

(d) if the Assignor is under no further actual or contingent liability under the Second Intercompany Loan Agreement, in payment of the surplus to the Assignor or any other person entitled thereto.

16. ASSIGNMENT

16.1 The Assignee may assign and transfer all or any of its rights and obligations under this Assignment. The Assignee shall be entitled to disclose such information concerning the Assignor and this Assignment to such parties, in each case, as the Assignee considers appropriate.

16.2 The Assignor may not assign and/or transfer any of its rights and/or obligations under this Agreement.

17. SUCCESSORS

This Assignment shall remain in effect despite any amalgamation or merger (however effected) relating to the Assignee; and references to the Assignee shall be deemed to include any person who, under the laws of its jurisdiction of incorporation or domicile, has assumed the rights and obligations of the Assignee under this Assignment or to which, under such laws, those rights and obligations have been transferred.

18. NOTICES

18.1 Any communication to be made by one person to another under or in connection with this Assignment shall be made in writing by fax or letter to the fax number or address set out in Clause 18.4 below (or any substitute address or fax number specified by that person by written notice to the other person received before the communication was despatched).

18.2 Any communication or document made or delivered by one person to another under or in connection with this Assignment will only be effective:

(a) if by way of fax, when received in legible form; or

- 7 -

(b) if by way of letter, when it has been left at the relevant address or five days after being deposited in the post postage prepaid in an envelope addressed to it at that address.

18.3 Any communication or document to be made or delivered to the Assignee will be effective only when actually received by the Assignee and then only if it is expressly marked for the attention of the officer (if any) specified by the Assignee for such purpose.

18.4 The address and fax number referred to in Clause 18.1 is:

Name of Party	Address
Assignor	Eggborough Power Limited Barnett Way Barnwood Gloucestershire, GL4 3RS Attention: Corporate Affairs Director and Company Secretary Fax: 01355 594 022
Assignee	Eggborough Power (Holdings) Limited 3 Redwood Crescent Peel Park East Kilbride, G74 5PR Attention: Corporate Affairs Director and Company Secretary Fax: 01355 594 022

19. GOVERNING LAW

19.1 This Assignment is governed by English law.

20. JURISDICTION

20.1 The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Assignment (including a dispute regarding the existence, validity or termination of this Assignment).

20.2 This Clause 20 is for the benefit of the Assignee only.

- 8 -

SCHEDULE 1

FORM OF NOTICE OF ASSIGNMENT OF CONTRACT

To:      [·]

Date: [·]

Dear Sirs,

[Specify Contract] dated [·] (the “Contract”)

1. We refer to the second security assignment dated on or about 24 September 2004 between Eggborough Power Limited and Eggborough Power (Holdings) Limited (the “Second Security Assignment”). Terms defined in the Second Security Assignment shall have the same meaning in this notice and acknowledgement.

2. We hereby give you notice that under the Second Security Assignment, we have assigned to Eggborough Power (Holdings) Limited all our right, title and interest in and to all moneys payable by you to us under the Contract.

3. With effect from the date of your receipt of this notice:

(a) all payments by you to us under or arising from the Contract (the “Payments”) shall be paid to Eggborough Power (Holdings) Limited or to its order as it may specify in writing from time to time;

(b) all remedies provided for in the Contract or available at law or in equity in respect of the Payments shall be exercisable by Eggborough Power (Holdings) Limited; and

(c) all rights, interests and benefits whatsoever accruing to or for the benefit of ourselves arising from the Payments shall belong to Eggborough Power (Holdings) Limited.

4. We shall continue to be solely responsible for the performance of our obligations under or in connection with the Contract.

5. You are authorised and instructed, without requiring further approval from us, to provide Eggborough Power (Holdings) Limited with such information relating to the Contract as it may from time to time request and to send copies of all notices issued by you under the Contract to Eggborough Power (Holdings) Limited as well as to us.

6. Should you wish to assign and/or transfer any of your rights and/or obligations under the Contract, you undertake to procure that each such buyer, assignee and/or transferee of such rights and/or obligations enters into an acknowledgement of assignment in substantially the same form attached hereto and agrees to be bound by the obligations and undertakings entered into by you in this Notice and Acknowledgement.

- 9 -

7. These instructions may not be revoked, nor may the terms of any Contract be amended, varied, waived or terminated, without the prior written consent of Eggborough Power (Holdings) Limited .

8. Please acknowledge receipt of this notice by signing the acknowledgement on the enclosed copy letter and returning it to Eggborough Power (Holdings) Limited.

9. This notice is governed by English law.

Yours faithfully,

Executed as a DEED

by

EGGBOROUGH POWER LIMITED
___________________________	Director
___________________________	Director/Secretary

- 10 -

Acknowledgement

To: Eggborough Power (Holdings) Limited

Cc: Eggborough Power Limited

We acknowledge receipt of a notice in the terms set out above and confirm that we have not received notice of any previous assignments or charges of or over any of the rights, title or interests in, under or to the Contract or the Payments and that we will comply with the terms of the notice from the Assignor.

We further confirm that:

1. we have not claimed or exercised and have no outstanding right to claim or exercise any right of set-off, counterclaim or other right relating to the Payments;

2. no amendment, waiver or release of any rights, title or interests in, under or to the Contract or the Payments shall be effective without your prior written consent; and

3. should we wish to assign and/or transfer any of your rights and/or obligations under the Contract, we undertake to procure that each such buyer, assignee and/or transferee of such rights and/or obligations enters into an acknowledgement of assignment in substantially the same form as this acknowledgement and agrees to be bound by the obligations and undertakings entered into by us in this Notice and Acknowledgement.

We acknowledge receipt of instructions from you in connection with the assignment of the Contract and confirm that we shall act in accordance with them until we receive written notification from you to the contrary.

EXECUTED as a DEED by

[·]

Dated:                     

- 11-

SCHEDULE 2

FORM OF NOTICE OF ASSIGNMENT OF ASSET OPTION ACCOUNT

To:      [·]

Date:                     

Dear Sirs,

We hereby give you notice that we have assigned and charged to Eggborough Power (Holdings) Limited (the “Lender”) all of our right, title and interest in and to account number [insert account number], account name [insert account name] (including any renewal or redesignation of such account) and all monies standing to the credit of that account from time to time (the “Asset Option Account”).

With effect from the date of your receipt of this notice:

1. any existing payment instructions affecting the Asset Option Account are to be terminated and all payments and communications in respect of the Asset Option Account should be made to the Lender or to its order (with a copy to Eggborough Power Limited, marked for the attention of Corporate Affairs Director and Company Secretary).

2. all rights, interests and benefits whatsoever accruing to or for the benefit of ourselves arising from the Asset Option Account belong to Eggborough Power (Holdings) Limited.

Please accept this notice by signing the enclosed acknowledgement and returning it to the Lender at [insert address] marked for the attention of [·].

Yours faithfully,

Executed as a DEED

by

EGGBOROUGH POWER LIMITED
____________________________	Director
____________________________	Director/Secretary

- 12 -

Acknowledgement

To: Eggborough Power (Holdings) Limited

Cc: Eggborough Power Limited

At the request of Eggborough Power Limited we acknowledge receipt of the notice of assignment and charge, on the terms attached, in respect of the Asset Option Account (as described in those terms). We confirm that:

1. the balance standing to the Asset Option Account at today’s date is [•], no fees or periodic charges are payable in respect of the Asset Option Account and there are no restrictions on (a) the payment of the credit balance on the Asset Option Account; or (b) the assignment of the Asset Option Account to Eggborough Power (Holdings) Limited or any third party;

2. we have not received notice of any previous assignments of, charges over or trusts in respect of, the Asset Option Account and we will not, without Eggborough Power (Holdings) Limited’s consent (a) exercise any right of combination, consolidation or set off which we may have in respect of the Asset Option Account; or (b) amend or vary any rights attaching to the Asset Option Account; and

3. we will act only in accordance with the instructions given by persons authorised by the Eggborough Power (Holdings) Limited and we shall send all statements and other notices given by us relating to the Asset Option Account to Eggborough Power (Holdings) Limited.

EXECUTED as a DEED by

[·]

Dated:                     

- 13 -

IN WITNESS WHEREOF this Assignment has been signed on behalf of the Assignee and executed as a deed by the Assignor and is intended to be and is hereby delivered by it as a deed on the date specified above.

EXECUTED as a DEED

THE ASSIGNOR
by EGGBOROUGH POWER LIMITED
Director	NEIL O’HARA
Director/Secretary	ROBERT ARMOUR
THE ASSIGNEE
by EGGBOROUGH POWER (HOLDINGS) LIMITED
Director	ROBERT ARMOUR
Director/Secretary	JEAN MACDONALD

- 14 -

EX-4.38

Exhibit 4.38

	LIMITED LIABILITY PARTNERSHIP
	CONFORMED COPY

EGGBOROUGH POWER LIMITED

EGGBOROUGH POWER (HOLDINGS) LIMITED

BRITISH ENERGY GROUP PLC

BRITISH ENERGY HOLDINGS PLC

AND

BARCLAYS BANK PLC

SHARE SUBSCRIPTION DEED

CONTENTS

Clause		Page
1.	Interpretation	2
2.	Commencement	7
3.	Issue of Deferred Shares Following Option Completion	7
4.	Enforcement and Sale of CTA Bonds	8
5.	Issue of Deferred Shares Following Enforcement	8
6.	Set-Off and Issue of Deferred Shares	10
7.	Representations and Warranties	11
8.	Undertakings	11
9.	Assignment	11
10.	Power of Attorney	12
11.	Entire Agreement	12
12.	General	12
13.	Notices	13
14.	Governing Law and Jurisdiction	14
Schedule 1        Deed of Accession		16

THIS DEED is made on 30 September 2004

BETWEEN:

(1) EGGBOROUGH POWER LIMITED, a company incorporated in England and Wales (registered no. 03782700), whose registered office is at Barnett Way, Barnwood, Gloucester, Gloucestershire, GL4 3RS (“EPL”);

(2) EGGBOROUGH POWER (HOLDINGS) LIMITED, a company incorporated in Scotland (registered no. SC201083) whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR (“EPHL”);

(3) BRITISH ENERGY GROUP PLC, a company incorporated in Scotland (registered no. SC270184) whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR (the “Parent”);

(4) BRITISH ENERGY HOLDINGS PLC, a company incorporated in Scotland (registered no. SC270186) whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR (the “Issuer”); and

(5) BARCLAYS BANK PLC, a company incorporated in England and Wales (registered no. 01026167) whose registered office is at 54 Lombard Street, London EC3P 3AH as agent and security trustee for the Finance Parties (the “Security Trustee”).

WHEREAS:

The Parties have entered into the following transactions as part of the solvent restructuring of British Energy plc:

(A) The Issuer, the CTA Bondholder and the Security Trustee have agreed that immediately after an Asset Option Trigger Event, all the CTA Bonds shall be sold to the Issuer by the CTA Bondholder in consideration for the issue of Deferred Shares by the Issuer to the CTA Bondholder;

(B) The Issuer, EPL and the Security Trustee have agreed that immediately after a Share Option Trigger Event, all the CTA Bonds shall be sold to the Issuer by EPL in consideration for the issue of Deferred Shares by the Issuer to EPL;

(C) The Issuer, the CTA Bondholder and the Security Trustee have agreed that immediately after an Asset Security Trigger Event:

(1) if the Ascertained Security Value is equal to or greater than the Principal Amount Outstanding of the CTA Bonds, all the CTA Bonds shall be sold to the Issuer by the CTA Bondholder in consideration for the issue of Deferred Shares by the Issuer to the CTA Bondholder; or

(2) if the Ascertained Security Value is less than the Principal Amount Outstanding of the CTA Bonds, CTA Bonds in an amount equal to the Ascertained Security Value shall be sold to the Issuer by the CTA Bondholder in consideration for the issue of Deferred Shares by the Issuer to the CTA Bondholder;

- 1 -

(D) The Issuer, EPL and the Security Trustee have agreed that immediately after a Share Security Trigger Event:

(1) if the Ascertained Security Value is equal to or greater than the Principal Amount Outstanding of the CTA Bonds, all the CTA Bonds shall be sold to the Issuer by EPL in consideration for the issue of Deferred Shares by the Issuer to EPL; or

(2) if the Ascertained Security Value is less than the Principal Amount Outstanding of the CTA Bonds, CTA Bonds in an amount equal to the Ascertained Security Value shall be sold to the Issuer by EPL in consideration for the issue of Deferred Shares by the Issuer to EPL;

(E) EPL, EPHL and the Security Trustee have agreed that on the Set-Off Date, any sums owed by EPHL to EPL under the Existing Intercompany Loan at such time shall be set-off against any sums owed by EPL to EPHL under the Second Intercompany Loan at such time and, immediately after such set-off, EPHL shall issue to EPL at par such number of Deferred Shares in EPHL as have an issue price equal to the Post Set-Off Outstandings and in consideration therefore EPL shall accept that an amount of the Existing Intercompany Loan equal to the Post Set-Off Outstandings has been repaid by EPHL; and

(F) EPL, EPHL and the Security Trustee have agreed that immediately after the Share Security Trigger Event, EPHL shall issue to EPL at par such number of Deferred Shares in EPHL as have an issue price equal to all amounts outstanding under the Existing Intercompany Loan at such time and in consideration therefore EPL shall accept that all amounts outstanding under the Existing Intercompany Loan at such time have been repaid by EPHL.

1. INTERPRETATION

1.1 In this Deed:

“Act” means the Companies Act 1985.

“Affiliate” means, in relation to a person, any other person controlling or controlled by or under common control with such person.

“Ascertained Security Value” has the same meaning as given to it in the New Bonds Terms and Conditions.

“Amendment and Restatement Agreement” has the same meaning as given to it in the Credit Agreement.

“Asset Break Option” has the same meaning as given to “Break Option” in the Asset Option Agreement.

- 2 -

“Asset Enforcement Option” has the same meaning as given to “Enforcement Option” in the Asset Option Agreement.

“Asset Option Agreement” means the option agreement between the Security Trustee, EPL and BEPET, dated on or about the date of this Deed, under which EPL grants an option to the Security Trustee to acquire the Business and the Station Assets (each as defined in that agreement).

“Asset Option Trigger Event” means EPL ceasing to hold the CTA Bonds as a result of the completion of the Asset Break Option or the Asset Enforcement Option.

“Asset Security Trigger Event” means EPL ceasing to hold the CTA Bonds on or after the Determination Date as a result of enforcement of all or any part of the security constituted by the Debentures and/or the operation of Clause 4.1.2.

“BEPET” means British Energy Power and Energy Trading Limited a company with registered number SC200887 whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR.

“British Energy plc” means the company of that name with registered number SC162273 and whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR.

“Business Day” means a day other than a Saturday or Sunday or public holiday in England and Wales or Scotland.

“Credit Agreement” means the credit agreement originally dated 13 July 2000 as amended and restated on 8 September 2000, 24 October 2000, 12 December 2000, 5 February 2001, and on or about the date of this Deed between, inter alios, the Security Trustee and EPL.

“CTA Bonds” means the £150,000,000 7% fixed rate guaranteed bonds due 2005-2022 issued by the Issuer on or about the date of this Deed as represented by the CTA Global Bond Certificate.

“CTA Bondholder” means the person who will be the holder of the CTA Bonds immediately after an Asset Option Trigger Event or an Asset Security Trigger Event (as the case may be), as identified by the Security Trustee.

“CTA Global Bond Certificate” means the certificate issued in respect of the CTA Bonds by the Issuer to EPL on or about the date of this Deed.

“Debentures” has the same meaning as given to it in the Credit Agreement.

“Deed” means this deed, together with the Schedules hereto.

“Deed of Accession” means a deed of accession substantially in the form of Schedule 1 (Deed of Accession).

- 3 -

“Deferred Shares” means shares, each of a nominal share value of £1 issued with no voting rights and on the following terms:

(a) on return of capital, a right to the return of the amount paid up only and no right to share in any surplus;

(b) the return of the amount paid up to be deferred until the return on each other share in the Issuer has been paid in full and has received a £1,000,000 per share liquidation surplus; and

(c) a dividend right of £1 per annum per £1,000,000 of nominal share capital.

“Determination Date” has the same meaning as given to it in the Intercreditor Agreement.

“Encumbrance” means a mortgage, charge, pledge, lien, option, restriction, right of first refusal, right of pre-emption, third-party right or interest, other encumbrance or security interest of any kind, or another type of preferential arrangement (including a title transfer or retention arrangement) having similar effect.

“Enforcement Event” has the same meaning as given to it in the Intercreditor Agreement.

“EPL Shares” means all the shares in the capital of EPL registered in EPHL’s name immediately prior to a Share Trigger Event.

“EPHL Security Document” has the same meaning as given to it in the Credit Agreement.

“Existing Intercompany Loan” means the £550,000,000 intercompany loan agreement dated 8 September 2000 as amended and restated on or about the date of this Deed between EPL and EPHL.

“Finance Parties” has the same meaning as given to it in the Credit Agreement.

“Global Bond Certificate” has the same meaning as given to it in the Trust Deed.

“Group” has the same meaning as given to it in the Credit Agreement.

“Intercreditor Agreement” has the same meaning as given to it in the Credit Agreement.

“Individual Bond Certificate” has the same meaning as given to it in the Trust Deed.

“Long Stop Date” means the later of:

(a) the date on which the Options cease to be exercisable; or

(b) the Security Documents cease to be enforceable.

- 4 -

“New Bonds Terms and Conditions” means the terms and conditions of the £700,000,000 7% fixed rate guaranteed bonds due 2005-2022 issued on or about the date of this Deed by the Issuer.

“Options” means the Asset Break Option, the Asset Enforcement Option, the Share Break Option and the Share Enforcement Option.

“Party” means a person who is party to this Deed.

“Post Set-Off Outstandings” means all amounts outstanding under the Existing Intercompany Loan immediately after the set-off described in Clause 6.1.3.

“Principal Amount Outstanding” has the same meaning as given to it in the New Bonds Terms and Conditions.

“Receiver” means an administrative receiver, a receiver and manager or a receiver, in each case appointed under a Security Document.

“Restatement Date” has the same meaning as given to it in the Amendment and Restatement Agreement.

“Sale Restriction Period” means the period commencing on (and including) the date an Enforcement Event occurs and ending on (but not including) the Determination Date.

“Second Intercompany Loan” means the £150,000,000 intercompany loan agreement dated on or about the date of this Deed between EPL and EPHL.

“Security Documents” means the Debentures and the Share Security Documents.

“Senior Debt” has the same meaning as given to it in the Intercreditor Agreement.

“Senior Discharge Date” means the date on which all the Senior Debt has been unconditionally and irrevocably paid and/or discharged in full.

“Set-Off Date” means in the event that a Share Option Trigger Event has occurred, the Senior Discharge Date.

“Share Break Option” has the same meaning as given to “Break Option” in the Share Option Agreement.

“Share Enforcement Option” has the same meaning as given to “Enforcement Option” in the Share Option Agreement.

“Share Option Agreement” means the option agreement between the Security Trustee, EPHL, EPL and BEPET, dated on or about the date of this Deed, under which EPHL grants an option to the Security Trustee to acquire the Option Shares (as defined in that agreement).

“Share Option Trigger Event” means EPHL ceasing to hold the EPL Shares as a result of the completion of the Share Break Option or the Share Enforcement Option.

- 5 -

“Share Security Documents” means the Shares Pledge and the EPHL Security Document.

“Share Security Trigger Event” means in the event that EPL ceases to be a member of the Group on or at any time before the Determination Date as a result of the enforcement of all or any part of the security constituted by the Share Security Documents, the occurrence of the Determination Date.

“Share Trigger Event” means a Share Option Trigger Event or a Share Security Trigger Event.

“Shares Pledge” has the same meaning as given to it in the Credit Agreement.

“Trust Deed” has the same meaning as given to it in the New Bonds Terms and Conditions.

1.2 In this Deed, unless otherwise specified, a reference to:

1.2.1 a statute or treaty shall be construed as a reference to such statute or treaty as the same may have been, or may from time to time be, amended or, in the case of a statute, re-enacted;

1.2.2 in circumstances where the CTA Bondholder or EPL (as the case may be) is not an Affiliate of the Security Trustee at the relevant time “the Security Trustee shall procure that” shall be construed as meaning “the Security Trustee shall use its best endeavours to procure that”;

1.2.3 “control” shall be construed such that a company or corporation shall control another company or corporation if:

(a) more than half the issued share capital of that other company or corporation is beneficially owned, directly or indirectly, by the first company or corporation; or

(b) it is able to direct the affairs and/or control the composition of the board of directors or equivalent body of that company or corporation;

1.2.4 “disposal” shall be construed as any sale, lease, transfer, conveyance, assignment or other disposal and “dispose” shall be construed accordingly;

1.2.5 a “person” includes a reference to any individual, firm, company, corporation or other body corporate, government, state or agency of a state or any joint venture, association or partnership, works council or employee representative body (whether or not having separate legal personality) and includes a reference to that person’s legal personal representatives, permitted assignees (if any) and/or successors in title;

1.2.6 a reference to this Deed, or to any other agreement or document, shall be construed as a reference to this Deed, or as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented;

- 6 -

1.2.7 “sale” shall be construed as a sale with full title guarantee and free from any Encumbrance and “sell” shall be construed accordingly;

1.2.8 “£” is to the lawful currency of the United Kingdom;

1.2.9 a “Clause” or “Schedule”, unless the context otherwise requires, is a reference to a clause of, or schedule to, this Deed; and

1.2.10 the terms “include”, “includes” and “including” shall be construed without limitation.

1.3 The Clause and Schedule headings in this Deed shall not affect its interpretation.

1.4 A person who is not a party to this Deed has no rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Deed.

2. COMMENCEMENT

The provisions of this Deed shall only become effective on the occurrence of the Restatement Date.

3. ISSUE OF DEFERRED SHARES FOLLOWING OPTION COMPLETION

3.1 Immediately after an Asset Option Trigger Event:

3.1.1 the CTA Bondholder shall, and the Security Trustee shall procure that the CTA Bondholder shall, sell all the CTA Bonds to the Issuer and shall deliver the CTA Global Bond Certificate to the Issuer for cancellation; and

3.1.2 in consideration for the sale of all the CTA Bonds, the Issuer shall issue at par (and the CTA Bondholder shall, and the Security Trustee shall procure that the CTA Bondholder shall, subscribe for) such number of Deferred Shares in the Issuer as have an issue price equal to the Principal Amount Outstanding of the CTA Bonds immediately prior to their sale in accordance with Clause 3.1.1 (together with any interest that has accrued but not been paid under the CTA Bonds at such time).

3.2 Prior to the disposal of the CTA Bonds to the CTA Bondholder under the Asset Option Agreement, EPL and the Security Trustee shall procure that the CTA Bondholder delivers an executed Deed of Accession to each of the Parties.

3.3 Immediately after a Share Option Trigger Event:

3.3.1 EPL shall, and the Security Trustee shall procure that EPL shall, sell all the CTA Bonds to the Issuer and shall deliver the CTA Global Bond Certificate to the Issuer for cancellation; and

- 7 -

3.3.2 in consideration for the sale of all the CTA Bonds, the Issuer shall issue at par (and EPL shall, and the Security Trustee shall procure that EPL shall, subscribe for) such number of Deferred Shares in the Issuer as have an issue price equal to the Principal Amount Outstanding of the CTA Bonds immediately prior to their sale in accordance with Clause 3.3.1 (together with any interest that has accrued but not been paid under the CTA Bonds at such time).

4. ENFORCEMENT AND SALE OF CTA BONDS

4.1 Upon the occurrence of an Enforcement Event:

4.1.1 EPL shall not, and the Security Trustee shall procure that EPL and/or any Receiver of EPL shall not, dispose of all or any of the CTA Bonds at any time during the Sale Restriction Period; and

4.1.2 in the event that EPL remains within the Group on the Determination Date, EPL shall, and the Security Trustee shall procure that EPL and/or any Receiver of EPL shall, sell (and the CTA Bondholder shall, and the Security Trustee shall procure that the CTA Bondholder shall, buy) the CTA Bonds on the Determination Date in order that the provisions of Clause 5.1 may take effect.

4.2 Prior to any sale to the CTA Bondholder in accordance with Clause 4.1.2 and 5.1, EPL shall, and the Security Trustee shall procure that EPL and/or any Receiver of EPL shall, procure that the CTA Bondholder delivers an executed Deed of Accession to each of the Parties.

5. ISSUE OF DEFERRED SHARES FOLLOWING ENFORCEMENT

5.1 Immediately after an Asset Security Trigger Event:

5.1.1 if the Ascertained Security Value is equal to or greater than the Principal Amount Outstanding of the CTA Bonds at such time:

(a) the CTA Bondholder shall, and the Security Trustee shall procure that the CTA Bondholder shall, sell all the CTA Bonds to the Issuer and shall deliver the CTA Global Bond Certificate to the Issuer for cancellation; and

(b) in consideration for the sale of all the CTA Bonds, the Issuer shall issue at par (and the CTA Bondholder shall, and the Security Trustee shall procure that the CTA Bondholder shall, subscribe for) such number of Deferred Shares in the Issuer as have an issue price equal to the Principal Amount Outstanding of the CTA Bonds immediately prior to their sale in accordance with Clause 5.1.1(a) (together with any interest that has accrued but not been paid under the CTA Bonds at such time); or

- 8 -

5.1.2 if the Ascertained Security Value is less than the Principal Amount Outstanding of the CTA Bonds at such time:

(a) the CTA Bondholder shall, and the Security Trustee shall procure that the CTA Bondholder shall, sell CTA Bonds with a Principal Amount Outstanding equal to the Ascertained Security Value to the Issuer; and

(b) in consideration for the sale of CTA Bonds with a Principal Amount Outstanding equal to the Ascertained Security Value, the Issuer shall issue at par (and the CTA Bondholder shall, and the Security Trustee shall procure that the CTA Bondholder shall, subscribe for) such number of Deferred Shares in the Issuer as have an issue price equal to the Ascertained Security Value (together with any interest that has accrued but not been paid under the CTA Bonds being sold in accordance with Clause 5.1.2(a)),

and, in order to effect the transactions described in Clauses 5.1.2(a) and 5.1.2(b) above, the CTA Bondholder shall, and the Security Trustee shall procure that the CTA Bondholder shall, deliver the CTA Global Bond Certificate to the Issuer for cancellation and the Issuer shall either (i) issue a new Global Bond Certificate (or in the event that the existing Global Bond Certificate(s) have been exchanged for individual certificates, issue Individual Bond Certificates); or (ii) write up the existing Global Bond Certificate(s), in each case, in an amount equal to the Principal Amount Outstanding under the CTA Bonds not sold in accordance with Clause 5.1.2(a).

5.2 Immediately after a Share Security Trigger Event:

5.2.1 if the Ascertained Security Value is equal to or greater than the Principal Amount Outstanding of the CTA Bonds at such time:

(a) EPL shall, and the Security Trustee shall procure that EPL shall, sell all the CTA Bonds to the Issuer and deliver the CTA Global Bond Certificate to the Issuer for cancellation; and

(b) in consideration for the sale of all the CTA Bonds, the Issuer shall issue at par (and EPL shall, and the Security Trustee shall procure that EPL shall subscribe for) such number of Deferred Shares in the Issuer as have an issue price equal to the Principal Amount Outstanding of the CTA Bonds immediately prior to their sale in accordance with Clause 5.2.1(a) (together with any interest that has accrued but not been paid under the CTA Bonds at such time); or

5.2.2 if the Ascertained Security Value is less than the Principal Amount Outstanding of the CTA Bonds at such time:

(a) EPL shall, and the Security Trustee shall procure that EPL shall, sell CTA Bonds with a Principal Amount Outstanding equal to the Ascertained Security Value to the Issuer; and

- 9 -

(b) in consideration for the sale of CTA Bonds with a Principal Amount Outstanding equal to the Ascertained Security Value, the Issuer shall issue at par (and EPL shall, and the Security Trustee shall procure that EPL shall, subscribe for) such number of Deferred Shares in the Issuer as have an issue price equal to the Ascertained Security Value (together with any interest that has accrued but not been paid under the CTA Bonds being sold in accordance with Clause 5.2.2(a)),

and, in order to effect the transactions described in Clauses 5.2.2(a) and 5.2.2(b) above, EPL shall, and the Security Trustee shall procure that the EPL shall, deliver the CTA Global Bond Certificate to the Issuer for cancellation and the Issuer shall either (i) issue a new Global Bond Certificate (or in the event that the existing Global Bond Certificate(s) have been exchanged for individual certificates, issue Individual Bond Certificates); or (ii) write up the existing Global Bond Certificate(s), in each case, in an amount equal to the Principal Amount Outstanding under the CTA Bonds not sold in accordance with Clause 5.2.2(a).

6. SET-OFF AND ISSUE OF DEFERRED SHARES

6.1 On the Set-Off Date and in the following order:

6.1.1 EPL hereby demands, and the Security Trustee hereby procures that EPL demands, payment in full by EPHL of all amounts outstanding under the Existing Intercompany Loan at such time (and EPHL hereby agrees that, notwithstanding any provision of the Existing Intercompany Loan to the contrary, EPL may make such a demand under the Existing Intercompany Loan on the Set-Off Date);

6.1.2 EPHL hereby demands payment in full by EPL of all amounts outstanding under the Second Intercompany Loan at such time;

6.1.3 the amounts due and payable under the Existing Intercompany Loan shall be set-off against the amounts due and payable under the Second Intercompany Loan; and

6.1.4 EPHL shall issue at par (and EPL shall, and the Security Trustee shall procure that EPL shall, subscribe for) such number of Deferred Shares in EPHL as have an issue price equal to the Post Set-Off Outstandings and in consideration therefore EPL shall accept that an amount of the Existing Intercompany Loan equal to the Post Set-Off Outstandings has been repaid by EPHL.

6.2 Immediately after a Share Security Trigger Event, EPHL shall issue at par (and EPL shall, and the Security Trustee shall procure that EPL shall, subscribe for) such number of Deferred Shares in EPHL as have an issue price equal to the amount outstanding under the Existing Intercompany Loan at such time and in consideration therefore EPL shall accept that an amount of the Existing Intercompany Loan equal to the amount outstanding under the Existing Intercompany Loan as such time has been repaid by EPHL.

- 10 -

7. REPRESENTATIONS AND WARRANTIES

7.1 EPL, EPHL and the Issuer each make the following representations and warranties on the date of this Deed acknowledging that the other Parties are entering into this Deed in reliance upon the same:

7.1.1 it is duly incorporated and validly existing under the laws of its jurisdiction of incorporation;

7.1.2 it has the power to enter into this Deed and comply with its obligations hereunder in accordance with the terms and conditions hereof and has taken all necessary action to authorise the entry into and delivery of this Deed and the transactions contemplated by this Deed; and

7.1.3 its obligations under this Deed are legal, valid, binding and enforceable in accordance with the terms of this Deed.

8. UNDERTAKINGS

8.1 From the Date of this Deed until the Long Stop Date:

8.1.1 the Parent and the Issuer undertake:

(a) to take all action reasonably required under the provisions of the Act and the Issuer’s articles of association to permit the issue and allotment of Deferred Shares by the Issuer in accordance with Clauses 2 and 4; and

(b) to do all such further things as may be reasonably required to enable the CTA Bondholder or EPL, as the case may be, to become the registered holder of any Deferred Shares issued to it by the Issuer in accordance with Clauses 3 and 5.

8.1.2 EPHL and the Issuer undertake:

(a) to take all action reasonably required under the provisions of the Act and EPHL’s articles of association to permit the issue and allotment of Deferred Shares by EPHL in accordance with Clause 6; and

(b) to do all such further things as may be reasonably required to enable EPL to become the registered holder of any Deferred Shares issued to it by EPHL in accordance with Clause 6.

9. ASSIGNMENT

9.1 Subject to Clause 9.2, no Party may (nor purport to) assign, transfer, novate or declare a trust of the benefit of or in any other way dispose of its rights and/or obligations under this Deed in whole or in part without first having obtained the other Parties prior written consent.

- 11 -

9.2 The Security Trustee may transfer or novate all (but not part of) its rights and obligations under this Deed to a third party, provided that such third party has first executed and delivered to each of the Parties a Deed of Accession.

10. POWER OF ATTORNEY

Each of EPL and the CTA Bondholder by way of security for its obligations under this Deed, irrevocably appoint the Parent as its attorney to do anything which it is obliged to do under this Deed but have failed to so do. Each of EPL and the CTA Bondholder ratify and confirm whatever any attorney does or purports to do under or pursuant to this Clause 10.

11. ENTIRE AGREEMENT

11.1 This Deed (together with the agreements and other documents referred to herein) constitutes the entire agreement between the Parties in relation to its subject matter.

11.2 No Party is liable to any other (in equity, contract or tort (including negligence), under the Misrepresentation Act 1967 or in any other way) for a representation, statement, assurance, covenant, undertaking, indemnity, guarantee or commitment (whether contractual or otherwise) that is not set out in this Deed or any document referred to in it.

11.3 Each Party acknowledges and represents that it has not entered into this Deed in reliance on any representation, statement, assurance, covenant, undertaking, indemnity, guarantee or commitment (whether contractual or otherwise) other than those contained in this Deed or any document referred to in it.

11.4 Nothing in this Clause 11 shall have the effect of limiting or restricting any liability arising as a result of any fraud.

12. GENERAL

12.1 A variation of this Deed is only valid if it is in writing and executed as a deed by or on behalf of each Party.

12.2 The failure to exercise or delay in exercising a right or remedy provided by this Deed or by law does not impair or constitute a waiver of the right or remedy or an impairment of or a waiver of other rights or remedies. No single or partial exercise of a right or remedy provided by this Deed or by law prevents further exercise of the right or remedy or the exercise of another right or remedy.

12.3 The rights and remedies contained in this Deed are cumulative and not exclusive of rights or remedies provided by law.

- 12 -

12.4 Save as otherwise provided herein, any payment to be made by any Party under this Deed shall be made in full without any set off, restriction, condition or deduction for or on account of any counterclaim.

12.5 If at any time any provision of this Deed is or becomes illegal, invalid or unenforceable under the laws of any jurisdiction, that shall not affect or impair:

12.5.1 the legality, validity or enforceability in that jurisdiction of any other provision of this Deed; or

12.5.2 the legality, validity or enforceability under the law of any other jurisdiction of that or another provision of this Deed.

12.6 This Deed may be executed in any number of counterparts, each of which when executed and delivered is an original and all of which together evidence the same agreement.

13. NOTICES

13.1 A notice or other communication under or in connection with this Deed (a “Notice”) shall be:

13.1.1 in writing; and

13.1.2 delivered personally or sent by first class post pre-paid recorded delivery (and air mail if overseas) or by fax to the Party due to receive the Notice to the address set out in Clause 13.3 or to another address, person or fax number specified by that Party by written notice to the other Party received before the Notice was despatched.

13.2 Unless there is evidence that it was received earlier, a Notice is deemed given if:

13.2.1 delivered personally, when left at the address referred to in Clause 13.1.2;

13.2.2 sent by mail, except air mail, two Business Days after posting it;

13.2.3 sent by air mail, six Business Days after posting it; and

13.2.4 sent by fax, when confirmation of its transmission has been recorded by the sender’s fax machine.

- 13 -

13.3 The address referred to in Clause 13.1.2 is:

Name of Party	Address
EPL	Eggborough Power Limited Barnett Way Barnwood Gloucester Gloucestershire, GL4 3RS Attention: Corporate Affairs Director and Company Secretary Fax: 01355 594 022
EPHL	Eggborough Power (Holdings) Limited 3 Redwood Crescent Peel Park East Kilbride, G74 5PR Attention: Corporate Affairs Director and Company Secretary Fax: 01355 594 022
Parent	British Energy Group plc 3 Redwood Crescent Peel Park East Kilbride, G74 5PR Attention: Corporate Affairs Director and Company Secretary Fax: 01355 594 022
Issuer	British Energy Holdings plc 3 Redwood Crescent Peel Park East Kilbride, G74 5PR Attention: Corporate Affairs Director and Company Secretary Fax: 01355 594 022
Security Trustee	Barclays Bank PLC 5 The North Colonnade Canary Wharf London E14 4BB Attention: Head of Agency Fax: **** ****

14. GOVERNING LAW AND JURISDICTION

14.1 This Deed and any dispute, controversy, proceedings or claim of whatever nature arising out of or in any way relating to this Deed and its formation (a “Dispute”) shall be governed by and construed in accordance with English law.

14.2 The parties irrevocably agree that the courts of England shall have exclusive jurisdiction to hear and determine any suit, action or proceedings arising out of or connected with this Deed (“Proceedings”) and/or to settle any Dispute including a dispute regarding the existence, validity or termination of this Deed or the consequences of its nullity, and for the purpose of enforcement of any judgment against their respective assets.

^(****) indicates material omitted and filed separately with the Commission.

- 14 -

14.3 The parties agree that the courts of England are the most appropriate and convenient courts to hear and determine any Proceedings and/or to settle any Dispute and, accordingly, that they will not argue to the contrary.

14.4 The parties agree that the documents which start any Proceedings and any other documents required to be served in relation to those Proceedings may be served on the parties in accordance with Clause 13. These documents may, however, be served in any other manner allowed by law. This Clause 14.4 applies to all Proceedings wherever started.

- 15 -

SCHEDULE 1

DEED OF ACCESSION

To:	Eggborough Power Limited
	Barnett Way
	Barnwood
	Gloucester
	Gloucestershire, GL4 3RS
	Attention: Corporate Affairs Director and Company Secretary
	Eggborough Power (Holdings) Limited
	3 Redwood Crescent
	Peel Park
	East Kilbride G74 5PR
	Attention: Corporate Affairs Director and Company Secretary
	British Energy Group plc
	[3 Redwood Crescent
	Peel Park
	East Kilbride, G74 5PR]
	Attention: Corporate Affairs Director and Company Secretary
	British Energy Holdings plc
	3 Redwood Crescent
	Peel Park
	East Kilbride, G74 5PR
	Attention: Corporate Affairs Director and Company Secretary
	Barclays Bank PLC as Security Trustee
	5 The North Colonnade
	Canary Wharf
	London E14 4BB
	Attention: Head of Agency

Dear Sirs

THIS DEED dated [insert date] is supplemental to a share subscription deed (the “Share Subscription Deed”) dated on or about 24 September 2004 between, Eggborough Power Limited, Eggborough Power (Holdings) Limited, British Energy Group plc, British Energy Holdings plc and Barclays Bank PLC, as Security Trustee.

Words and expressions defined in the Share Subscription Deed have the same meaning when used in this Deed.

[Name of new Security Trustee/CTA Bondholder] of [registered office] hereby agrees with each other person who is or who becomes a party to the Share Subscription Deed that with effect on and from the date hereof it will be bound by the Share Subscription Deed as the [Security Trustee]/[CTA Bondholder] [delete as applicable] as if it had been party originally to the Share Subscription Deed in that capacity.

- 16 -

[We confirm that we are a company which is within the charge to UK corporation tax and which is not entitled to an exemption from tax in respect of interest paid to us on the CTA Bonds.] [Add if person is acceding as the CTA Bondholder]

The address for notices of the [Name of new Security Trustee/CTA Bondholder] for the purposes of Clause [·] (Notices) of the Share Subscription Deed is:

[Insert address for notices]

This Deed is governed by English law.

EXECUTED AS A DEED

By [insert name]

in the presence of [insert name]

and [insert name]

- 17 -

IN WITNESS HEREOF this Deed has been executed as a deed by the parties hereto and is intended to be and is hereby delivered by the parties hereto as a deed on the date written at the start of this Deed.

EXECUTED as a DEED by

EGGBOROUGH POWER LIMITED
Director	NEIL O’HARA
Director/Secretary	ROBERT ARMOUR
EXECUTED as a DEED by
EGGBOROUGH POWER (HOLDINGS) LIMITED
Director	NEIL O’HARA
Secretary	JEAN MACDONALD
EXECUTED as a DEED by
BRITISH ENERGY GROUP PLC
Director	MIKE ALEXANDER
Director/Secretary	ROBERT ARMOUR
EXECUTED as a DEED by
BRITISH ENERGY HOLDINGS PLC
Director	MIKE ALEXANDER
Director/Secretary	ROBERT ARMOUR

- 18 -

EXECUTED as a DEED by
BARCLAYS BANK PLC
acting by its attorney	SIMON DEAVES
in the presence of
Signature of witness
Name of witness	SHABAB DITTA
Address:	5c Camden Square
	Camden
	NW1 9UY
Occupation:	Solicitor

- 19 -

EX-4.39

Exhibit 4.39

LIMITED LIABILITY PARTNERSHIP

CONFORMED COPY

DATED 30 SEPTEMBER 2004

BRITISH ENERGY PLC

BRITISH ENERGY POWER AND ENERGY TRADING LIMITED

EGGBOROUGH POWER (HOLDINGS) LIMITED

EGGBOROUGH POWER LIMITED

BARCLAYS BANK PLC

THE ROYAL BANK OF SCOTLAND PLC

WEST LB AG

THE TORONTO-DOMINION BANK

AND

CERTAIN FINANCIAL INSTITUTIONS

DEED OF TERMINATION

THIS DEED is dated 30 September 2004

BETWEEN:

(1) BRITISH ENERGY PLC, a company incorporated in Scotland (registered no. SC162273), whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride G74 5PR (“BE”);

(2) BRITISH ENERGY POWER AND ENERGY TRADING LIMITED, a company incorporated in Scotland (registered no. SC200887), whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride G74 5PR (“BEPET”);

(3) EGGBOROUGH POWER (HOLDINGS) LIMITED, a company incorporated in Scotland (registered no. SC201083) whose registered office is at 3 Redwood Crescent, Peel Park, East Kilbride G74 5PR (“EPHL”);

(4) EGGBOROUGH POWER LIMITED, a company incorporated in England and Wales (registered no. 03782700), whose registered office is at Barnett Way, Barnwood, Gloucester, Gloucestershire GL4 3RS (“EPL”);

(5) BARCLAYS BANK PLC, a company incorporated in England and Wales (registered no. 01026167), whose registered office is at 54 Lombard Street, London EC3P 3AH in its capacity as agent for the Finance Parties (as defined in the Credit Agreement) (the “Agent”);

(6) BARCLAYS BANK PLC, a company incorporated in England and Wales (registered no. 01026167), whose registered office is at 54 Lombard Street, London EC3P 3AH in its capacity as security trustee for the Finance Parties (as defined in the Credit Agreement) (the “Security Trustee”);

(7) BARCLAYS BANK PLC, a company incorporated in England and Wales (registered no. 01026167), whose registered office is at 54 Lombard Street, London EC3P 3AH in its own capacity;

(8) THE ROYAL BANK OF SCOTLAND PLC, a company incorporated in Scotland (registered no. SC090312), whose registered office is at 36 St. Andrew Square, Edinburgh EH2 2YB in its own capacity;

(9) WESTLB AG, a financial institution incorporated in Germany with limited liability and having its head offices in Duesseldorf and Muenster where it is registered under numbers HRB42975 and HRB6400 respectively, acting through its London Branch at Woolgate Exchange, 25 Basinghall Street, London EC2V 5HA, registered in England and Wales as a branch under no. BR001899;

(10) THE TORONTO DOMINION BANK, a company incorporated in Canada (registered no. FC004422), whose registered office is at PO Box 1, Toronto-Dominion Centre, Toronto, Ontario, Canada M5K 1A2, acting through its London Branch at Triton Court, 14/18 Finsbury Square, London, EC2A 1DB;

(11) THE FINANCIAL INSTITUTIONS listed in Schedule 1.

- 1 -

WHEREAS:

The parties have agreed to terminate and release all their respective rights and obligations under the Agreements to which they are a party (in each and every capacity) as of the Restructuring Date.

1. DEFINITIONS

1.1 In this Deed:

“Agreements” means each of the Agreements listed in Schedule 2.

“Credit Agreement” means the credit agreement originally dated 13 July 2000 as amended and restated on 8 September 2000, 24 October 2000, 12 December 2000, 5 February 2001 and on or about the date of this Deed.

“Creditor Restructuring Agreement” means the creditor restructuring agreement dated as of 30 September 2003 between, inter alios, BE, EPL and EPHL.

“Deed” means this Deed and the Schedules hereto.

“Restructuring Date” has the same meaning as given to it in the Creditor Restructuring Agreement.

1.2 Any reference in this Deed to a person shall be construed as to include its and any subsequent permitted successors, assigns and transferees in accordance with their respective interests.

1.3 A person who is not a party to this Deed has no right under the Contract (Rights of Third Parties) Act 1999.

2. RELEASE

With effect from the Restructuring Date, the Agreements are terminated and each party to the Agreements (in each and every capacity) irrevocably and unconditionally releases the other parties to the Agreements (in each and every capacity) from their respective rights and obligations under the Agreements (whether present or future and/or actual or contingent).

3. COUNTERPARTS

This Deed may be executed in any number of counterparts, each of which is an original and all of which together evidence the same agreement.

4. GOVERNING LAW

This Deed and any dispute, controversy, proceedings or claim of whatever nature arising out of or in any way relating to this Deed and its formation shall be governed and construed in accordance with English law.

- 2 -

SCHEDULE 1

FINANCIAL INSTITUTIONS

Arab Bank plc

Banc of America Securities Limited

Barclays Bank PLC

Bear Stearns Bank plc

Citibank International plc

Credit Industriel et Commercial (Singapore Branch)

Credit Suisse First Boston

Deutsche Bank AG, London

Goldman Sachs Credit Partners L.P.

Morgan Stanley Bank International Limited

ORN European Debt S.à.r.l.

Scotiabank Europe plc

The Royal Bank of Scotland plc

The Toronto-Dominion Bank

WestLB AG

- 3 -

SCHEDULE 2

Agreements to be Terminated

1. The calculations and forecasting agreement originally dated 13 July 2000 as amended and restated on 8 September 2000 between EPL and the Agent.

2. The sponsor undertaking originally dated 13 July 2000 as amended and restated on 8 September 2000 between BE, EPHL, BEPET, EPL, the Agent and the Security Trustee.

3. The capacity and tolling agreement originally dated 13 July 2000 as amended and restated on 8 September 2000 and 5 February 2001 between BEPET and EPL.

4. The CTA guarantee dated 8 September 2000 given by BE to EPL.

5. The capacity and tolling agreement direct agreement originally dated 13 July 2000 as amended and restated on 8 September 2000 between BEPET, EPL and the Agent.

6. The deed of indemnity in relation to employees liabilities dated 13 July 2000 between BE and EPL.

7. The subordinated loan agreement originally dated 13 July 2000 as amended and restated on 8 September 2000 between EPL and BE.

8. The service contract dated 8 September 2000 between BE and EPL.

9. The accounts agreement dated 8 September between EPL and the Agent.

10. The deed of payment originally dated 13 July 2000 as amended and restated on 8 September 2000 between EPL and BEPET.

11. The ISDA Master Agreement originally dated 6 October 2000 as amended on 9 April 2003 between EPL and Barclays together with all associated confirmations.

12. The ISDA Master Agreement originally dated 15 March 2001 as amended on 10 April 2003 between EPL and RBS together with all associated confirmations.

13. The ISDA Master Agreement originally dated 5 May 2001 as amended on 24 April 2003 between EPL and WestLB together with all associated confirmations.

14. The ISDA Master Agreement originally dated 5 March 2001 as amended on 9 April 2003 between EPL and TDB together with all associated confirmations.

- 4 -

IN WITNESS WHEREOF this Deed has been executed as a deed by the parties to this Deed and is intended to and is hereby delivered by all the parties to this Deed as a deed on the date specified above.

EXECUTED as a deed by British Energy plc acting by
Signature of director
Name of director	MIKE ALEXANDER
Signature of director/secretary
Name of director/secretary	ROBERT ARMOUR
EXECUTED as a deed by British Energy Power and Energy Trading Limited acting by
Signature of director
Name of director	NEIL O’HARA
Signature of director/secretary
Name of director/secretary	ROBERT ARMOUR

- 5 -

EXECUTED as a deed by Eggborough Power (Holdings) Limited acting by
Signature of director
Name of director	ROBERT ARMOUR
Signature of secretary
Name of secretary	JEAN MACDONALD
EXECUTED as a deed by Eggborough Power Limited acting by
Signature of director
Name of director	NEIL O’HARA
Signature of director/secretary
Name of director/secretary	ROBERT ARMOUR
EXECUTED as a deed by Barclays Bank plc as Agent acting by its attorney
in the presence of	SIMON DEAVES
Signature of witness
Name of witness	Duncan Nash
Address:	5 The North Colonnade Canary Wharf
Occupation:	Bank Manager

- 6 -

EXECUTED as a deed by Barclays Bank plc as Security Trustee acting by its attorney
in the presence of	SIMON DEAVES
Signature of witness
Name of witness	Duncan Nash
Address:	5 The North Colonnade
	Canary Wharf
Occupation:	Bank Manager
EXECUTED as a deed by Barclays Bank plc in its own capacity acting by its attorney
in the presence of	ALLAN POVER
Signature of witness
Name of witness	Simon Deaves
Address:	5 The North Colonnade
	Canary Wharf
Occupation:	Bank Manager
EXECUTED as a deed by Arab Bank plc acting by its attorney
in the presence of	MICHAEL CLARK
Signature of witness
Name of witness	Colin Couchman
Address:
Occupation:

- 7 -

EXECUTED as a deed by Banc of America Securities Limited acting by its attorney
in the presence of	PETER YOUNG
Signature of witness
Name of witness	Robert I. Simon
Address:	9W. 57th Street
	2nd Floor, NY
	NY 10019
Occupation:	Banker
EXECUTED as a deed by Barclays Bank plc acting by its attorney
in the presence of	ALLAN POVER
Signature of witness
Name of witness	Simon Deaves
Address:	5 The North Colonnade
	Canary Wharf
Occupation:	Bank Manager
EXECUTED as a deed by Bear Stearns Bank plc acting by its attorney
in the presence of	LIAM MACNAMERA
Signature of witness
Name of witness	Marie Fitzgerald
Address:	Bear Stearns Bank plc, Block 8,
	Horcourt Centre, Charlotte way,
	Dublin
Occupation:

- 8 -

EXECUTED as a deed by Citibank International plc acting by its attorney
in the presence of	WILLIAM BONSU
Signature of witness
Name of witness	David Trowhill
Address:	38 Pearch Manor
	Chelmsford
Occupation:	Banker
EXECUTED as a deed by Credit Industriel et Commercial (Singapore Branch) acting by its attorney
in the presence of	ROBERT PETTY
Signature of witness
Name of witness	Kenneth E. Warren
Address:	485 Madison Avenue
	18th Floor, NY
	NY 10022
Occupation:	Controller
EXECUTED as a deed by Credit Suisse First Boston acting by its attorney
in the presence of
Signature of witness
Name of witness	Paul Biddulah
Address:	London E14 4QR
Occupation:	Banker

- 9 -

EXECUTED as a deed
by Deutsche Bank AG,London
acting by its attorney
in the presence of
Signature of witness
Name of witness	Fraser Mcgee
Address:	Winchester House
	London
	EC2N 2DB
Occupation:
EXECUTED as a deed
by Goldman Sachs Credit Partners L.P.
acting by its attorney
in the presence of	VLADIMIRA MIRCHEVA
Signature of witness
Name of witness	Joanna Goodsir
Address:	20 Boring Street
	London
	N1 3DP
Occupation:	Trainee Solicitor
EXECUTED as a deed
by Morgan Stanley Bank International Limited
acting by its attorney
in the presence of	WENDY NEWBY
Signature of witness
Name of witness	Gerard Jordan
Address:	No. 1 Radcliffe Path
	London
	SW8 3AX
Occupation:	Investment Banker

- 10 -

EXECUTED as a deed
by ORN European Debt S.à.r.l.
acting by its attorney
in the presence of	GORDAN WEBB
Signature of witness
Name of witness	Guillaume Martin - Saudax
Address:
Occupation:
EXECUTED as a deed
by Scotiabank Europe plc
acting by its attorney
in the presence of	STEVE DOBSON
Signature of witness
Name of witness	Tim Macillivary
Address:	Flat 5 ,30-38 Northcote Road
	London SW11 1N2
Occupation	Banker
EXECUTED as a deed
by The Royal Bank of Scotland plc
acting by its attorney
in the presence of	PAUL SULLIVAN
Signature of witness
Name of witness	Mark Wood
Address:	135 Bishopsgate
	EC2M 3UR
Occupation:	Banker

- 11 -

EXECUTED as a deed
by The Toronto-Dominion Bank
acting by its attorney
in the presence of	GRAEME FRANCIS
Signature of witness
Name of witness	Ian Flindt
Address:	Triton Court
	14/16 Finsbury Square
	London
	EC2A 1DB
Occupation:	Senior Manager, Legal Compliance
EXECUTED as a deed
by WestLB AG
acting by its attorney
in the presence of	DAVID STEWART
Signature of witness
Name of witness	Holde I. Szeman
Address:	London
Occupation:	Personal Assistant

- 12 -

EX-4.40

Exhibit 4.40

CONFORMED COPY

ACCOUNTS AGREEMENT

DATED 30 SEPTEMBER, 2004

Between

EGGBOROUGH POWER LIMITED

as Borrower

and

BARCLAYS BANK PLC

as Account Bank

and

BARCLAYS BANK PLC

as Agent

ALLEN & OVERY LLP

LONDON

CONTENTS

Clause		Page
1.	Interpretation	3
2.	General	5
3.	Operating Account	7
4.	Insurance Proceeds Account	7
5.	CTA Bond Account	7
6.	Asset option Account	8
7.	Revenue Account	8
8.	Authorised Investment Account	8
9.	Withdrawals	9
10.	Access to Books and Records; Audit Rights	10
11.	Authorised Investments	10
12.	Indemnity	13
13.	Miscellaneous	13
14.	Segregation	14
15.	Notices	15
16.	Governing Law	15
17.	Counterparts	15
Schedule
Project Accounts		16
Other Accounts		16
Signatories		17

2

THIS AGREEMENT is dated 30 September, 2004 and is made BETWEEN:

(1) EGGBOROUGH POWER LIMITED (the Borrower);

(2) BARCLAYS BANK PLC (in this capacity the Account Bank); and

(3) BARCLAYS BANK PLC (in this capacity the Agent).

IT IS AGREED as follows:

1. INTERPRETATION

1.1 Definitions

In this Agreement:

Accounts means the Project Accounts, the Asset Option Account and the Revenue Account.

Asset Option Account means the account opened by the Account Bank entitled “Asset Option Account” with the account number as set out in Part 2 of Schedule 1.

Authorised Investment has the meaning given to Cash Equivalents in the New Bonds Terms and Conditions;

Authorised Investment Account means the account opened by the Account Bank entitled “Authorised Investment Account” with the account number as set out in Part 1 of Schedule 1.

Credit Agreement means the credit agreement originally dated 13th July, 2000, as amended and/or restated on 8th September, 2000, 24th October, 2000, 12th December, 2000, 5th February, 2001 and on or about the date of this Agreement, between, among others, the Borrower and the Agent and under which a loan of £150,000,000 is made available to the Borrower;

CTA Bond Account means the account opened by the Account Bank entitled “CTA Bond Account” with the account number as set out in Part 1 of Schedule 1.

CTA Bonds means the £150,000,000 7% fixed rate guaranteed bonds due 2005-2022 issued by the Issuer on or about the date of this Agreement as represented by the CTA Global Bond Certificate.

CTA Global Bond Certificate means the certificate issued in respect of the CTA Bonds by the Issuer on or about the date of this Agreement.

Enforcement Event has the meaning given to it in the Intercreditor Deed.

Escrow Account means the account opened in accordance with the terms of the Asset Option Agreement by the Borrower entitled “Escrow Account”.

Escrow Agent has the meaning given to it in the Asset Option Agreement.

3

Income means any interest, dividends or other income arising from or in respect of an Authorised Investment.

Insurance Proceeds Account means the account opened by the Account Bank entitled “Insurance Proceeds Account” with the account number as set out in Part 1 of Schedule 1.

Insurance Proceeds means all Insurance Proceeds which are required to be paid into the Insurance Proceeds Account under the Insurance Arrangements.

Investment Proceeds means:

(a) any net proceeds received by the Account Bank upon disposal or realisation; or

(b) any sum received by the Account Bank upon maturity,

in respect of an Authorised Investment, but excluding all Income.

New Bonds Terms and Conditions means the terms and conditions of the £700,000,000 7% fixed rate guaranteed bonds due 2005-2022 (which include the CTA Bonds) issued on or about the date of this Agreement by the Issuer.

Operating Account means the account opened by the Account Bank entitled “Operating Account” with the account number as set out in Part 1 of Schedule 1.

Operating and Maintenance Costs has the meaning given to it in the Capacity and Tolling Agreement.

Project Accounts means:

(a) the Operating Account;

(b) the Insurance Proceeds Account;

(c) the CTA Bond Account; and

(d) the Authorised Investment Account.

Revenue Account means the account opened by the Account Bank entitled “Revenue Account” with the account number as set out in Part 2 of Schedule 1.

Revenue Agreements has the meaning given to it in the Credit Agreement.

Scheduled Capital Investment Works has the meaning given to it in the Capacity and Tolling Agreement.

Security Period has the meaning given to it in the Debentures.

1.2 Interpretation

Save as expressly defined herein, capitalised terms defined in the Credit Agreement shall have the same meanings in this Agreement as in the Credit Agreement.

**** indicates material omitted and filed separately with the Commission.

4

1.3 Construction

(a) Clause 1.2 (Construction) of the Credit Agreement shall apply to this Agreement (mutatis mutandis) as if the same had been set out in full herein.

(b) Notwithstanding paragraph (a) above, references to the Capacity and Tolling Agreement and the Eggborough Contracts means those agreements as at the Restructuring Date unless any subsequent amendments to such agreements have been agreed to by the Agent.

(c) The provisions of this Agreement shall only become effective upon the occurrence of the Restatement Date.

1.4 Accounts

(a) A reference to a bank account includes each sub or ledger account of that account and any replacement account.

(b) Unless the contrary intention appears, the Permitted Account “concerned with” an Authorised Investment is the Permitted Account from which amounts were invested in that Authorised Investment.

1.5 Contracts (Rights of Third Parties) Act 1999

(a) Unless expressly provided to the contrary in a Finance Document, a person who is not a party to a Finance Document may not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999.

(b) Notwithstanding any term of any Finance Document, the consent of any Third Party is not required for any variation (including any release or compromise of any liability under) or termination of the Finance Document.

2. GENERAL

2.1 General

(a) The Borrower will, subject to subparagraph (h), throughout the Security Period maintain the Accounts in its name at the London Branch of the Account Bank.

(b) Save with the consent of the Agent, the Borrower shall not open or maintain any bank, deposit, savings or other account except for the Accounts or any bank, deposit, savings or other account on which collateral or other credit support is held pursuant to the Industry Documents or the Gale Common Escrow Agreement. The Agent shall promptly notify the Borrower and the Account Bank if it gives its consent under this subparagraph (b) (such consent not to be unreasonably withheld).

(c) Each Project Account will be a separate account at the Account Bank.

(d) None of the restrictions contained in this Agreement on the withdrawal of funds from Project Accounts shall affect the obligations of the Borrower to make all payments required to be made to the Finance Parties on the due date for payment thereof in accordance with the Finance Documents.

**** indicates material omitted and filed separately with the Commission.

5

(e) The detailed operating procedures for the Project Accounts (including further detail regarding the calculation of interest payable on Project Accounts) shall be agreed (with the consent of the Agent, such consent not to be unreasonably withheld or delayed) from time to time between the Borrower and the Account Bank but, in the event of any inconsistency between this Agreement and those procedures, this Agreement shall prevail.

(f) The Borrower shall pay to the Account Bank such transaction charges and other fees as the Borrower and the Account Bank, both acting reasonably, may from time to time agree. The Borrower will consider in good faith proposals put forward by the Account Bank regarding such transaction charges and fees.

(g) The Account Bank shall not be obliged to make available to the Borrower any sum which it is expecting to receive for the account of the Borrower until it has been able to establish that it has received that sum.

(h) Save as may be otherwise agreed between the Borrower and the Account Bank, the Borrower will close the Project Accounts at the expiry of the Security Period and the Agent will then instruct the Account Bank to transfer any credit balances thereon to the order of the Borrower or to such account(s) as the Borrower may designate. The Account Bank will be bound to comply with any such instructions.

(i) Notwithstanding paragraph (h) above, the Borrower may close the Operating Account and the Revenue Account at any time after the termination of the Capacity and Tolling Agreement in accordance with its terms on 31st March, 2010.

(j) If, after the date referred to in paragraph (i) above, the Borrower continues to own and operate the Station, it is permitted to open new accounts with the Account Bank to the extent required by a Reasonable and Prudent Operator.

2.2 Notice of charge

(a) The Borrower hereby gives notice to the Account Bank of:

(i) the charge by the Borrower to the Security Trustee (under the Debentures) of all its rights, title and interest to all sums in cash and to any and all negotiable instruments and payment orders deposited from time to time in the Project Accounts, the Asset Option Account and the Revenue Account and any and all Authorised Investments and any bank account containing or representing Authorised Investments (together the Account Assets); and

(ii) the assignment by the Borrower to EPHL (under the Second Security Assignment) of all its rights, title and interest to all sums in cash and to any and all negotiable instruments and payment orders deposited from time to time in the Asset Option Account,

and, in each case, the Account Bank acknowledges the same.

(b) The Account Bank confirms to the Agent that it has not received notice of any other Security Interest in, or any assignment of, the Account Assets granted by the Borrower to any third party (other than under the Existing Debenture).

**** indicates material omitted and filed separately with the Commission.

6

3. OPERATING ACCOUNT

3.1 The Borrower shall procure that all amounts received by it from BET under the Capacity and Tolling Agreement are paid into the Operating Account forthwith on receipt of the same (provided that nothing in this subparagraph shall prevent BET from settling Operating and Maintenance Costs and/or Project Taxes with the relevant counterparty directly for and on behalf of EPL).

3.2 Subject to Clause 11 (Authorised Investments), the Borrower may only withdraw amounts standing to the credit of the Operating Account, which were paid in accordance with Clause 3.1, to make payments in respect of the following:

(a) Operating and Maintenance Costs;

(b) any Project Taxes; and

(c) to meet the cost of Scheduled Capital Investment Works,

in each case, as and when such amounts become due and payable.

3.3 The payment of Distributions is only permitted out of the Operating Account and, in each case, in accordance with the terms of the Finance Documents which include, without limitation, any applicable restrictions on Distributions set out in Clause 15.26 (Distributions) of the Credit Agreement.

4. INSURANCE PROCEEDS ACCOUNT

4.1 Subject to subparagraph 4.2 below and the terms of the Credit Agreement, the Borrower and the Agent shall each procure that all amounts received by it or to its order with respect to Insurance Proceeds (other than any Insurance Proceeds relating to third party liability received by the Borrower) are paid into the Insurance Proceeds Account immediately on receipt by it or on its behalf.

4.2 The Borrower shall apply the Insurance Proceeds in accordance with the terms of the Credit Agreement.

5. CTA BOND ACCOUNT

5.1 The Borrower will procure that all amounts received by it under the Trust Deed or otherwise with respect to the CTA Bonds are paid into the CTA Bond Account forthwith on receipt of the same.

5.2 The Borrower may only withdraw amounts standing to the credit of the CTA Bond Account to meet the interest payments, Repayment Instalments and any other amounts due from the Borrower under the Amended Credit Agreement.

5.3 Unless the Agent (acting on the instructions of the Majority Banks (acting reasonably)) agrees, amounts standing to the credit of the CTA Bond Account shall not be withdrawn from the CTA Bond Account except in accordance with Clause 5.2.

5.4 For the avoidance of doubt, no amount shall be paid from the CTA Bond Account to the Authorised Investment Account.

**** indicates material omitted and filed separately with the Commission.

7

6. ASSET OPTION ACCOUNT

6.1 The Borrower shall procure that all amounts received by it and for its account under the Asset Option Agreement (including any payments made by the Escrow Agent from the Escrow Account) are paid into the Asset Option Account forthwith on receipt of the same.

6.2 Immediately upon receipt of any monies into the Asset Option Account, the Borrower will withdraw an amount equal to the amount received and apply such monies in prepayment of the Second Intercompany Loan Agreement.

6.3 For the avoidance of doubt, no amount shall be paid from the Asset Option Account to the Authorised Investment Account.

7. REVENUE ACCOUNT

7.1 The Borrower shall procure that amounts received by it which are required to be paid to BET pursuant to the Capacity and Tolling Agreement, are paid:

(a) directly to BET in accordance with the Capacity and Tolling Agreement; or

(b) to the Revenue Account,

in each case, promptly on receipt of the same.

7.2 The Borrower may only withdraw amounts from the Revenue Account:

(a) to make payments under the Capacity and Tolling Agreement provided that:

(i) such payment is due and payable pursuant to the Capacity and Tolling Agreement;

(ii) an amount equal to the payment required under the Capacity and Tolling Agreement is standing to the credit of the Revenue Account; and

(iii) the payment is permitted pursuant to the terms of the Credit Agreement; and

(b) before any payment is due pursuant to the Capacity and Tolling Agreement, to invest such moneys in Authorised Investments provided that any Investment Proceeds or Income arising from such Authorised Investments, shall be paid to BET at such time as the payment is due under the Capacity and Tolling Agreement.

8. AUTHORISED INVESTMENT ACCOUNT

8.1 The Borrower may procure that amounts standing to the credit of the Operating Account, the Insurance Proceeds Account and the Revenue Account (the Permitted Accounts) are paid to the Authorised Investment Account for the purposes of investing from time to time in Authorised Investments in accordance with Clause 11.

8.2 The Borrower may only, subject to clause 8.3, withdraw amounts standing to the credit of the Authorised Investment Account for the purposes of:

(a) investing (or re-investing) from time to time in Authorised Investments in accordance with Clause 11;

**** indicates material omitted and filed separately with the Commission.

8

(b) making a payment of Investment Proceeds into the Permitted Account deemed to be concerned with any such Authorised Investment;

(c) making a payment of Income into the Permitted Account from which the investment was made.

8.3 Where any amount to be paid from the Authorised Investment Account to a Permitted Account would not, following such payment, be capable of being withdrawn from that Account to meet a permitted purpose under this Agreement that amount may instead by paid into the Operating Account.

9. WITHDRAWALS

9.1 Permitted Withdrawals - General

(a) No payments to, or withdrawals from, any Project Account shall be made except as expressly permitted by this Agreement or with the approval of the Majority Banks.

(b) All amounts withdrawn from any Project Account by the Borrower for application in or towards making a specific payment or meeting a specific liability shall be applied in or towards making that payment or meeting that liability and for no other purpose.

(c) Subparagraph (a) above shall not prevent withdrawals from, payments to or transfers to the Authorised Investment Account for the purpose of making an Authorised Investment in accordance with Clause 11 (Authorised Investments).

(d) No withdrawal shall be made from any Account to the extent that such Account would become overdrawn as a result.

9.2 Withdrawal procedures

(a) Subject to subparagraph (b), all requests for withdrawals from a Project Account (save in the case of a withdrawal for the purposes of making an Authorised Investment) shall be made in writing or in accordance with the terms of its mandate with the Account Bank.

(b) On the date of each withdrawal made by the Borrower from a Project Account, the Borrower shall be deemed to represent and warrant that:

(i) no Default would occur as a result of the withdrawal; and

(ii) in addition, in the case of a proposed withdrawal from the Operating Account or the Insurance Proceeds Account to meet a permitted payment, that such permitted payment has either become due and payable or will become due and payable within 30 days after the proposed date for withdrawal.

**** indicates material omitted and filed separately with the Commission.

9

9.3 Withdrawals During a Default

Notwithstanding the foregoing provisions of this Clause 9:

(a) on and at any time after the occurrence of an Event of Default which is continuing, the Account Bank, if directed by the Agent acting on the instructions of the Majority Banks, must not pay any moneys from any Project Account.

(b) the Borrower may not withdraw (and the Agent shall not be obliged to require the Account Bank to pay) any moneys from any Project Account following receipt by the Account Bank of a notice from the Agent pursuant to Clause 18.1 (Acceleration) of the Credit Agreement; and

(c) the Account Bank and the Borrower acknowledge that:

(i) upon any enforcement of its security over the Project Accounts, the Security Trustee shall be entitled to require the Account Bank to pay any monies standing to the credit of the Project Accounts and the Revenue Account to the Security Trustee for application in accordance with the Intercreditor Agreement; and

(ii) upon any enforcement of its security over the Asset Option Account, EPHL shall be entitled to require the Account Bank to pay any monies standing to the credit of the Asset Option Account to EPHL.

10. ACCESS TO BOOKS AND RECORDS; AUDIT RIGHTS

10.1 The Borrower irrevocably grants the Agent and any of its appointed representatives reasonable access to review the books and records of the Project Accounts. The Borrower authorises, and will authorise, the Account Bank to give the Agent unrestricted access to review such books and records held by the Account Bank. The Agent may disclose to any Bank any information which it has acquired as a result of any such review.

10.2 The Borrower irrevocably requests the Account Bank to provide quarterly a full statement to the Agent and the Borrower of all payments into or from the Project Accounts and the Agent may (if it reasonably determines that a material discrepancy may exist) arrange for a review of such statements to be carried out against the management accounts of the Borrower provided by the Borrower pursuant to Clause 15.2(c) of the Credit Agreement.

10.3 Any disclosure of information pursuant to this Clause 10 is subject to the terms of any confidentiality agreements from time to time in force between the Borrower and the Agent.

11. AUTHORISED INVESTMENTS

11.1 Power of Investment

The Borrower may require, subject as provided in this Agreement, that such part of the amounts standing to the credit of the Authorised Investment Account as may be prudent shall be invested from time to time in Authorised Investments in accordance with this Clause 11.

**** indicates material omitted and filed separately with the Commission.

10

11.2 Procedure for Investment

(a) All Authorised Investments will be made on behalf of the Borrower by the Account Bank on terms which are, in all material respects, no less favourable than the terms on which such investments are made for customers of the Account Bank of similar standing to the Borrower and will be made in the name of the Account Bank.

(b) The Borrower will at all times procure that there are maintained a prudent range of Authorised Investments (and will, if so requested by the Agent, demonstrate the same to its reasonable satisfaction) and will match the maturities of the Authorised Investments made out of moneys standing to the credit of the Authorised Investment Account, having regard to the availability of Authorised Investments which are readily marketable, and shall exercise its rights under Clause 11.4(b) or (at its option) liquidate (or procure that there are liquidated) Authorised Investments to the extent necessary for the purposes of payment of any amount due under the Documents. Insofar as it is possible in respect of each Authorised Investment, the Borrower shall specify that the Investment Proceeds from each such Authorised Investment are to be paid to the Authorised Investment Account.

(c) All documents of title or other documentary evidence of ownership with respect to Authorised Investments made out of the Authorised Investment Account will be held in the possession of the Account Bank and, if any such document or other evidence comes into the possession or control of the Borrower, it shall procure that the same is delivered immediately to the Account Bank.

(d) The Borrower may, from time to time, by notice in writing signed by a duly authorised signatory of the Borrower to the Account Bank or in accordance with the terms of its mandate with the Account Bank:

(i) require the Account Bank to apply an amount in the Authorised Investment Account in the purchase of, or subscription for, an Authorised Investment as may be specified by it in the notice; or

(ii) require the Account Bank to dispose of, realise or otherwise deal with an Authorised Investment as specified in the notice,

and the Account Bank shall be bound forthwith, to the extent it is within the Account Bank’s power so to do, to obtain, dispose of, realise or otherwise deal with that Authorised Investment as required in the relevant notice. In so doing the Account Bank shall act for the Borrower on an execution only basis and may assume that the Borrower is not relying on the Account Bank to exercise any judgment or give any advice to the Borrower as to the merits of or the suitability of the relevant transaction.

(e) For the avoidance of doubt, the Account Bank shall not make any Authorised Investments without the consent of the Borrower.

11.3 Realisations

(a) Whenever the Account Bank receives any Investment Proceeds or Income, the Account Bank shall:

**** indicates material omitted and filed separately with the Commission.

11

(i) in the case of Investment Proceeds, apply the Investment Proceeds by either:

(A) reinvesting them in further Authorised Investments nominated by the Borrower; or

(B) paying them into the Authorised Investment Account,

whichever the Borrower directs; and

(ii) in the case of Income, pay the same into the [Operating/Revenue] Account or, if the Authorised Investment from which the Income derives is to be retained after the Income is received and the Borrower so requests, reinvest the same in that Authorised Investment.

(b) The Account Bank agrees that, immediately upon receiving notice from the Agent pursuant to Clause 18.1 (Acceleration) of the Credit Agreement, it will (so far as may be within its power and save to the extent that such notice requires otherwise) take such steps as may be specified in that notice to sell or otherwise realise the specified Authorised Investments and shall pay the Investment Proceeds received by it to the Security Trustee for application in accordance with the Intercreditor Agreement.

11.4 Non-qualifying criteria

(a) The maximum aggregate amount of Authorised Investments (other than Treasury bills, Treasury bonds and Treasury CLIPS) with any one institution (other than the Account Bank) will be ************

(b) If any Authorised Investment ceases to be an Authorised Investment, the Borrower will as soon as reasonably practicable after becoming aware thereof procure that the relevant investment is replaced by an Authorised Investment or by cash, provided that this Clause 11.4 will not oblige the Borrower to liquidate any investment earlier than its normal maturity date unless the Agent reasonably requests the Borrower, giving its reasons, to do so.

11.5 Project Accounts include Authorised Investments

(a) Any reference in any Finance Document to the balance standing to the credit of one of the Permitted Accounts will be deemed to include a reference to the Authorised Investments in which all or part of such balance is, following the transfer of such amounts from such Permitted Account to the Authorised Investment Account, for the time being invested. In the event of any dispute as to the value of any Authorised Investment for the purpose of determining the amount deemed to be standing to the credit of a Permitted Account pursuant to this Clause 11.5, that value shall be determined in good faith by the Account Bank in conjunction with the Agent. If the Borrower so requests, the Account Bank will give the Borrower details of the basis and method of that determination.

(b) The Borrower may, by notice in writing to the Account Bank, deem an Authorised Investment to be concerned with a different Permitted Account so as to transfer Authorised Investments between Permitted Accounts, provided that an amount equal to the value of the transferred Authorised Investment is transferred between the Permitted Accounts concerned so that the aggregate amount standing to the credit of each Permitted Account remains the same. For the avoidance of doubt, any amount transferred pursuant to this subparagraph (b) may consist of a cash balance or any number of Authorised Investments.

**** indicates material omitted and filed separately with the Commission.

12

11.6 Information

Not later than 5 Business Days after the end of each calendar month commencing with the month in which an Authorised Investment is first made on behalf of the Borrower, the Account Bank will deliver to the Agent and the Borrower a schedule of the investments made, realised or liquidated during that month in respect of the Authorised Investment Account, in such detail as the Agent and the Borrower may reasonably require. The Agent shall be entitled to require the liquidation of any investment which appears to it not to be an Authorised Investment forthwith upon notice to that effect being given by the Agent to the Borrower and the Account Bank.

11.7 Protections to Account Bank

The Account Bank will use reasonable endeavours to comply with the Borrower’s instructions concerning Authorised Investments but will not be responsible for any loss in so doing and will have no obligation to investigate or monitor the terms of this Clause 11.

12. INDEMNITY

12.1 The Borrower shall at all times indemnify and keep indemnified the Account Bank fully and effectually from and against all liabilities and reasonable costs and expenses which the Account Bank may incur by reason of it acting as Account Bank and by reason of the acquisition, holding, disposal or realisation of any Authorised Investment (other than by reason of negligence or default by the Account Bank).

12.2 Any officer, employee or agent of the Account Bank may rely on this Clause 12 and enforce its terms under the Contracts (Rights of Third Parties) Act 1999.

13. MISCELLANEOUS

13.1 Waiver of rights by the Borrower

Save as provided in this Agreement, the Borrower agrees with the Agent and the Account Bank not to exercise any right which it may have under any applicable law (and the Account Bank agrees with the Agent to notify the Agent upon any purported exercise thereof) to direct the Account Bank to transfer any amount standing to the credit of a Project Account to the Borrower or to its order or to direct the Account Bank to transfer any Authorised Investment to the Borrower or to its order.

13.2 Waiver of rights by the Account Bank

The Account Bank acknowledges that:

(a) each Project Account and Authorised Investment is or may be the subject of security in favour of the Finance Parties collectively;

(b) the Asset Option Account is or may be the subject of security in favour of EPHL; and

**** indicates material omitted and filed separately with the Commission.

13

(c) the Revenue Account is or may be the subject of security in favour of BET,

and acknowledges that it is not entitled to, and undertakes not to claim or exercise any lien, right of set-off, combination of accounts or other right, remedy or security with respect to moneys standing to the credit of any Account or, in the course of being credited to it, any Income or any Investment Proceeds.

13.3 No duty to enquire

(a) The Account Bank shall not be under any obligation to enquire as to the purpose of any withdrawal from a Project Account. The Account Bank shall notify the Agent promptly if it becomes aware of the occurrence of a Default.

(b) Notwithstanding any other provision of this Agreement, the Account Bank shall not be required to act in a manner inconsistent with the Finance Documents.

13.4 Change of Account Bank

(a) In respect of any Project Account, the Account Bank may be changed (with the agreement of the Borrower) to another bank or financial institution if the Agent so requires provided that the consent of the Borrower is not required where either:

(i) the Account Bank has failed to perform any of its material obligations under this Agreement; or

(ii) the Account Bank has acted in a manner (other than as provided for in this Agreement) prejudicial to the Security Trustee’s Security Interest over the Project Accounts.

(b) A change only becomes effective upon the proposed new Account Bank agreeing with the Agent and the Borrower, in a manner satisfactory to the Agent, to fulfil the role of the Account Bank under, and in accordance with the terms of, this Agreement.

(c) In the event of a change of Account Bank, the amount (if any) standing to the credit of the Project Accounts maintained with the old Account Bank shall be transferred to the corresponding Project Accounts maintained with the new Account Bank forthwith upon the appointment taking effect. The Borrower shall take any action which the Agent may require to facilitate a change of Account Bank and any transfer of credit balances (including the execution of bank mandate forms).

(d) The Borrower shall do all such things as the Agent may reasonably request to grant and/or perfect the Security Trustee’s security over such new Project Accounts.

14. SEGREGATION

The Account Bank shall at all times ensure that investments held by it pursuant to this Agreement are segregated from all other investments.

**** indicates material omitted and filed separately with the Commission.

14

15. NOTICES

15.1 Giving of notices

All notices, approvals, consents or other communications under or in connection with this Agreement will be given in writing or fax, except for payment instructions which will be given in writing. Any such notice will be deemed to be given as follows:

(a) if in writing, when delivered; and

(b) if by facsimile, when received provided that such facsimile is confirmed in writing within three Business Days of such receipt.

However, a notice given in accordance with the above but received on a non-working day (or after business hours) in the place of receipt will only be deemed to be given on the next working day in that place.

15.2 Addresses for notices

The address and fax number of each party for all notices under or in connection with this Agreement are those notified from time to time by that party for the purposes of the Credit Agreement to the Agent (or, in the case of the Agent, by it to the other Parties) and, in the case of the Account Bank shall be:

Attn:	************
Address:	************************************************************
Tel:	************
Fax:	************

16. GOVERNING LAW

This Agreement is governed by English Law.

17. COUNTERPARTS

This Agreement may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.

THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.

**** indicates material omitted and filed separately with the Commission.

15

SCHEDULE 1

PART 1

PROJECT ACCOUNTS

Project Account	Account No.
Operating Account	****************
Insurance Proceeds Account	****************
Authorised Investment Account	****************
CTA Bond Account	To be opened within 10 Business Days of the date of this Agreement

PART 2

OTHER ACCOUNTS

	Account	Account No.
1.	Asset Option Account	To be opened within 10 Business Days of the date of this Agreement
	Revenue Account	*****************

**** indicates material omitted and filed separately with the Commission.

16

SIGNATORIES

Borrower
EGGBOROUGH POWER LIMITED
By:	Robert Armour
Account Bank
BARCLAYS BANK PLC
By:	Simon Deaves
The Agent
BARCLAYS BANK PLC
By:	Simon Deaves

**** indicates material omitted and filed separately with the Commission.

17

EX-4.41

Exhibit 4.41

DATED March 30, 2005

BETWEEN

BRITISH ENERGY GENERATION LIMITED

BRITISH ENERGY POWER AND ENERGY TRADING LIMITED

AND

BRITISH ENERGY DIRECT LIMITED

AGREEMENT

FOR THE SALE AND PURCHASE

OF THE

DIRECT SUPPLY AND EXPORT CONSOLIDATION BUSINESS

CONTENTS

Clause		Page
1.     INTERPRETATION		4
1.1	DEFINITIONS	4
1.2	CONSTRUCTION OF CERTAIN REFERENCES	7
1.3	HEADINGS	7
1.4	SCHEDULES	7
2.     SALE OF BUSINESS ASSETS		7
2.1	SALE AND PURCHASE	7
2.2	EXCLUSIONS	8
2.3	RISK AND INSURANCE	8
2.4	NO SALE OR PART ONLY	8
3.     CONSIDERATION		8
3.1	AMOUNT	8
3.2	ADJUSTMENT	9
3.3	METHOD AND TIMING FOR PAYMENT OF CONSIDERATION	9
4.     CONDITIONS		9
5.     COMPLETION		9
5.1	DATE AND PLACE OF COMPLETION	9
5.2	VENDORS’ OBLIGATIONS	9
5.3	PURCHASER’S OBLIGATIONS	9
5.4	FAILURE TO COMPLETE	10
6.     CONSENTS, CONTRACTS AND ASSUMED LIABILITIES		10
6.1	PENDING THIRD PARTY CONSENTS	10
6.2	TREATMENT OF CONTRACTS	10
6.3	ASSUMED LIABILITIES	10
7.     MUTUAL COVENANTS		11
7.1	VENDOR’S COVENANTS	11
7.2	PURCHASER’S COVENANTS	11
7.3	TAXATION, ROYALTIES AND ENVIRONMENTAL LEVYS, CHARGES AND PENALTIES	11
8.     POST COMPLETION OBLIGATIONS		11
8.1	POST COMPLETION OBLIGATIONS	11
9.     WARRANTIES AND RETENTION		11
9.1	GENERAL	11
9.2	PURCHASER’S KNOWLEDGE	12
9.3	WARRANTIES INDEPENDENT	12
9.4	DAMAGES	12
9.5	PENDING COMPLETION	12
9.6	FURTHER DISCLOSURE BY VENDOR	12
9.7	RESCISSION	12
10.     EMPLOYEES OF THE BUSINESS		13
10.1	CONTRACTS OF EMPLOYMENT	13
10.2	INFORMING EMPLOYEES	13
10.3	VENDOR INDEMNITY	13
10.4	CONDUCT OF CLAIMS	13
10.5	CONFIDENTIALITY AND OTHER RESTRICTIONS	13

2

11.     VALUE ADDED TAX		13
11.1	TRANSFER AS GOING CONCERN	13
11.2	PAYMENT OF VAT	14
11.3	PRE AND POST COMPLETION SUPPLIES	14
12.     PROVISIONS RELATING TO THIS AGREEMENT		14
12.1	ASSIGNMENT	14
12.2	WHOLE AGREEMENT	14
12.3	AGREEMENT SURVIVES COMPLETION	15
12.4	RIGHTS ETC CUMULATIVE AND OTHER MATTERS	15
12.5	RELEASE OF ONE VENDOR	15
12.6	FURTHER ASSURANCE	15
12.7	INVALIDITY	15
12.8	COUNTERPARTS	15
12.9	COSTS	15
12.10	NOTICES	15
13.     LAW AND JURISDICTION		16
13.1	ENGLISH LAW	16
13.2	JURISDICTION	16
13.3	PROCESS AGENT	16

SCHEDULES
THE CURRENT ASSETS	17
ADJUSTMENT OF CONSIDERATION	18
WARRANTIES AND REPRESENTATIONS	19

3

THIS AGREEMENT dated 30 day of March 2005 and made

BETWEEN

BRITISH ENERGY GENERATION LIMITED a company registered in England under number 03076445 whose registered office is at Barnett Way, Barnwood, Gloucester GL4 3RS (the “Vendor”);

BRITISH ENERGY POWER AND ENERGY TRADING LIMITED a company registered in Scotland under number SC200887 whose registered office is at Systems House, Alba Campus, Livingston EH54 7EG (the “Second Vendor”);

BRITISH ENERGY DIRECT LIMITED a company registered in England under number 04935015 whose registered office is at Barnett Way, Barnwood, Gloucester GL4 3RS (the “Purchaser”).

WHEREAS:

Each of the Vendor and the Second Vendor wishes to sell (or procure the sale) and the Purchaser wishes to acquire the goodwill and other associated assets of the business of British Energy Generation Limited carried on by the Vendor under the name British Energy Direct Supply and to assume certain obligations relating to such business in each case on and subject to the terms of this Agreement.

NOW IT IS HEREBY AGREED as follows:

1. Interpretation

1.1 Definitions

In this Agreement, where the context admits:

1.1.1  “Affiliate” means, in respect of any body corporate, a body corporate which is its subsidiary or holding company, or a body corporate which is a subsidiary of that holding company, and each such body corporate;

1.1.2  “Assumed Liabilities” means those liabilities of the Vendor in relation to the Business at the Transfer Time included in the Management Accounts and to the extent that the same are provided for or otherwise taken into account in the Completion Accounts;

1.1.3  “Balance Sheet Date” means 28 February 2005;

1.1.4  “Book Debts” means all debts and other amounts owing and due to the Vendor in respect of goods and services supplied in the Business as at the Transfer Time as shown in the Completion Accounts;

1.1.5  “Business” means the entire electricity supply business carried on by the Vendor under the name British Energy Direct Supply and the entire electricity export and consolidation business carried on by the Vendor;

1.1.6  “Business Assets” means the assets of the Business to be sold and purchased as specified in sub-clause 2.1 (Sale and Purchase);

1.1.7  “Business Day” means a day (other than Saturday or Sunday) on which banks are open for ordinary banking business in London;

1.1.8  “Completion” means completion of the sale and purchase of the Business in accordance with Clause 5 (Completion);

1.1.9  “Completion Accounts” has the meaning given in Schedule 2;

1.1.10  “Contracts” means those contracts and contractual arrangements of the Vendor in relation to the

4

Business details of which are set out in the Disclosure Letter and including the Systems Contracts and Listed Intellectual Property Agreements;

1.1.11  “Creditors” means the aggregate amounts owing by the Vendor to the trade creditors of the Vendor in the ordinary course of the Business as at the Transfer Time to the extent of which provision or reserve (but not note only) is made in the Completion Accounts;

1.1.12  “Current Assets” means the Prepayments and the assets of the kinds described in Schedule 1 but excluding the Excluded Assets, such assets being owned by the Vendor or the Second Vendor and used by the Vendor in the Business as at the Transfer Time;

1.1.13  “Disclosure Letter” means the letter dated the date hereof written and delivered by or on behalf of the Vendor the Purchaser in agreed terms;

1.1.14  “DSSS Software Licence” means the licence agreement setting out the rights which the Vendor grants to the Purchaser and the Second Vendor in respect of the use by them of the Direct Supply Settlement System software application to manage their business activities;

1.1.15  “Employees” means all the employees of the Second Vendor employed in the Business at the Transfer Time but excluding the Excluded Employees (and at the date hereof consists of those persons specified in the list attached to the Disclosure Letter) excluding the Excluded Employees;

1.1.16  “Encumbrance” includes any interest or equity of any person (including any right to acquire, option or right of pre-emption) or any mortgage, charge, pledge, lien, assignment, hypothecation, security interest (including any created by law), title retention or other security agreement or arrangement or a rental, hire purchase, credit sale or other agreement for payment on deferred terms;

1.1.17  “Excluded Assets” means cash in hand or at the bank and all cheques and other securities representing the same (other than those (if any) representing any of the Book Debts hereby agreed to be sold) and any assets of the Vendor or the Second Vendor which do not relate solely to the Business;

1.1.18  “Excluded Employees” means Robert Andris Bankovskis (employee number 0203084), Richard John Murphy (employee number 10008775), David William Taylor (employee number 0438927) and Yuliya Kiryeyeva (employee number 10026952);

1.1.19  “Excluded Liabilities” means any liabilities of the Vendor or the Second Vendor which do not relate solely to the Business;

1.1.20  “Goodwill” means all the goodwill, interest and connection of the Vendor in and concerning the Business together with the right to represent the Purchase as carrying on the Business as a going concern in succession to the Vendor;

1.1.21  “Intellectual Property” means patents, trade marks, service marks, rights (registered or unregistered) in any designs; applications for any of the foregoing, trade or business names, copyright (including rights in computer software) and topography rights; know-how; secret formulae and processes; lists of suppliers and customers and other confidential and proprietary knowledge and information; rights protecting goodwill and reputation; database rights and rights under licences and consents in relation to such things and all rights or forms of protection of a similar nature to any of the foregoing or having equivalent effect anywhere in the world;

1.1.22  “Intellectual Property Agreements” means agreements or arrangements relating in any way whether wholly or party to Intellectual Property;

1.1.23  “Intellectual Property Rights” means all Intellectual Property owned or used by the Vendor in relation to the Business in any part of the word (other than the Listed Intellectual Property Rights);

1.1.24  “Interest Rate” means interest at a rate equal to the base lending rate from time to time of The Bank of England less 0.8;

5

1.1.25  “Listed Intellectual Property” means the intellectual property referred to in the list annexed to the Disclosure Letter, if any;

1.1.26  “Listed Intellectual Property Agreements” means the Intellectual Property Agreements set out in the list annexed to the Disclosure Letter, if any;

1.1.27  “Management Accounts” means the management accounts of the Business for the period ending on the Balance Sheet Date, true copies of which are annexed to the Disclosure Letter;

1.1.28  “Prepayments” means the prepayments made and other amounts paid by the Vendor in respect of the Business and attributable in whole or in part to the period after the Transfer Time as shown in the Completion Accounts;

1.1.29  “Provisional Consideration” has the meaning given in Clause 3.1 (Amount);

1.1.30  “Records” means all the books, files, records and other documents of the Vendor or the Second Vendor relating wholly or mainly to the Business or any of the Business Assets and in whatever medium so held including, without limitation the following:

(a) all books of account, ledgers, payroll records, income records, information relating to clients customers and suppliers and other books, documents and computer records which relate to or are relevant to the Business;

(b) all promotional material, sales publications, catalogues, price lists, advertising materials, surveys, reports and other technical materials and sales matter relating to the Business; and

(c) (subject to Clause 14 (Value Added Tax)) all VAT records relating to the Business;

(but excluding any records the Vendor or the Second Vendor is required by law to retain including, without limit, all national insurance and PAYE records)

1.1.31  the “Regulations” means The Transfer of Undertakings (Protection of Employment) Regulations 1981 and any subsequent re-enactment or modification thereof;

1.1.32  “Systems Contracts” means the licencing, maintenance and support contracts and contractual arrangements of the Vendor in relation to the computer hardware utilised by the Employees in respect of the Business, details of which are set out in the Disclosure Letter and the DSSS Software Licence;

1.1.33 “Taxation” or “Tax” includes (without limitation) corporation tax, advance corporation tax, income tax, capital gains tax, the charge under s 601(2) of the Taxes Act 1988, value added tax, the charge to tax under s 419 of the Taxes Act 1988, customs and other import duties, inheritance tax, stamp duty, stamp duty reserve tax, capital duties, national insurance contributions, local authority council taxes, petroleum revenue tax, foreign taxation and duties, and any payment whatsoever which the Vendor may be or become bound to make to any person as a result of the operation of any enactment relating to any such taxes or duties, and all penalties, charges and interest relating to any of the foregoing or resulting from a failure to comply with the provisions of any enactment relating to taxation;

1.1.34  “Third Party Rights” means all rights of the Vendor against third parties arising out of or in connection with the Business Assets or the conduct of the Business prior to the Transfer Time (including, but not limited to, all rights under or in respect of the Contracts), but excluding any claim by or right of the Vendor in respect of:

(a) taxation; or

6

(b) insurance (other than that relating to any Business Asset hereby agreed to be sold);

1.1.35  the “Transfer” means the transfer of the Business pursuant to this Agreement;

1.1.36  “Transfer Time” means 0000 hours on 01 April 2005;

1.1.37  “VAT” means Value Added Tax;

1.1.38  “Vendor’s Group” means the Vendor and each of its Affiliates (including the Second Vendor); and

1.1.39  “Warranties” means the warranties and representations set out in Schedule 3 (Warranties and Representations).

1.2 Construction of Certain References

In this Agreement, where the context admits:

1.2.1  words and phrases the definitions of which are contained or referred to in part XXVI of the Companies Act 1985 shall be construed as having the meanings thereby attributed to them;

1.2.2  references to statutory provisions shall be construed as references to those provisions as amended or re-enacted or as their application is modified by other provisions from time to time and shall include references to any provisions of which they are re-enactments (whether with or without modification);

1.2.3  where any statement is qualified by the expression ‘so far as the Vendor is aware’ or ‘to the best of the Vendor’s knowledge and belief’ or any similar expression, that statement shall be deemed to include an additional statement that it has been made after due and careful enquiry;

1.2.4  references to Clauses and Schedules are references to clauses and schedules of and to this Agreement, references to Sub-clauses or Paragraphs are, unless otherwise stated, references to Sub-clauses of the Clause or Paragraphs of the Schedule in which the reference appears, and references to this Agreement include the Schedules; and

1.2.5  references to any document being in ‘agreed terms’ or in ‘agreed form’ are to that document in the form signed or initialled by or on behalf of the parties for identification.

1.3 Headings

The headings and sub-headings are inserted for convenience only and shall not affect the construction of this Agreement.

1.4 Schedules

Each of the Schedules shall have effect as if set out herein.

2. Sale of Business Assets

2.1 Sale and Purchase

Subject as hereinafter expressly provided, the Vendor and the Second Vendor shall each sell with full title guarantee (or to the extent it is not the owner thereof shall procure the sale, with full title guarantee by the same) and free from all encumbrances to the Purchaser and the Purchaser (with a view to carrying on the Business as a going concern in succession to the Vendor) shall purchase, with effect from the Transfer Time;

2.1.1  the Current Assets;

7

2.1.2  the Intellectual Property Rights;

2.1.3  the Goodwill;

2.1.4  the Listed Intellectual Property;

2.1.5  the Records;

2.1.6  the benefit (subject to the burden in so far as it relates to the period following the Transfer Time) of the Contracts;

2.1.7  the Third Party Rights; and

2.1.8  subject to Clause 2.2 (Exclusions), all other property, assets and rights of the Vendor used in or solely for the purposes of the Business or solely in connection with such Business Assets or any of them.

2.2 Exclusions

2.2.1  The sale and purchase pursuant to this Agreement shall not include the Excluded Assets nor the Excluded Liabilities;

2.2.2  The Vendor acknowledges and agrees that the Purchaser shall not assume or have any liability or obligation in respect of the Business which is not specifically assumed by it under this Agreement and, without limitation, the Purchaser shall have no responsibility in respect of the Excluded Liabilities. Accordingly, the Vendor hereby agrees to indemnify the Purchaser and hold it harmless against any obligation or liability of the Vendor in respect of the Business (including the Excluded Liabilities) not specifically assumed by the Purchaser under this Agreement.

2.3 Risk and Insurance

Risk in respect of the Business Assets agreed to be sold and purchased hereunder shall pass to the Purchaser at the Transfer Time and accordingly the Vendor shall carry on the Business between the date hereof and the Transfer Time for its own benefit and at its own risk.

2.4 No Sale or Part Only

Subject as provided in Sub-Clause 6.1 (Pending Third Party Consents) the Purchaser shall not be obliged to complete the purchase of any of the Business Assets unless the purchase of all such assets is effected simultaneously.

3. Consideration

3.1 Amount

The consideration for the sale and purchase of the Business Assets shall (subject to Sub-Clause 3.2 (Adjustment)) be the sum of £2 (the “Provisional Consideration”) which shall (subject as aforesaid) be apportioned between the Business Assets as follows:

3.1.1  for the Current Assets, the Records and the benefit (subject to the burden) of the Contracts the sum of £1 (subject to adjustments as provided in Schedule 2); and

3.1.2  for the Goodwill, the Listed Intellectual Property, the Intellectual Property Rights and the Third Party Rights the sum of £1,

and the Purchaser shall in addition discharge the Assumed Liabilities in accordance with Clause 6.3 (Assumed Liabilities). The apportionment of consideration is given for the sake of convenience only and the Vendor agrees that the Purchaser’s remedies shall not in any way be limited or affected by the amount apportioned to any particular Business Asset or category of Business Asset.

8

3.2 Adjustment

The Provisional Consideration shall be subject to adjustment in accordance with Schedule 2 (Adjustment of Consideration).

3.3 Method and Timing for Payment of Consideration

The consideration for the Business Assets shall be payable as follows:

3.3.1  An amount equal to the Provisional Consideration shall be paid by the Purchaser to the Vendor in cash at Completion, such payment to be in satisfaction of the purchase by the Purchaser of the Business Assets from both the Vendor and the Second Vendor.

3.3.2  The amount and method of payment in respect of any adjustment to the Provisional Consideration shall be determined in accordance with Schedule 2.

4. Conditions

Completion is conditional upon the transfer to the Purchaser of the licence for the supply of electricity granted to the Vendor under section 6(1)(d) of the Electricity Act 1989 (as amended) and in the event that the above conditions shall not have been satisfied with effect from open of business on 01 April 2005 this Agreement shall lapse and no party shall make any claim against any other in respect hereof, save for any antecedent breach.

5. Completion

5.1 Date and Place of Completion

Subject to clause 4 above, Completion shall take place at the Transfer Time or immediately upon this Agreement becoming unconditional, whichever is the later.

5.2 Vendors’ Obligations

On Completion the Vendor or, as the case may be, the Second Vendor shall deliver or cause to be delivered to the Purchaser:

5.2.1  the Current Assets and all relative documents of title;

5.2.2  an assignment of each of the Listed Intellectual Property in agreed terms;

5.2.3  assignments of, or copy assignment notices for, each of the Contracts, the Intellectual Property Rights, and the Third Party Rights each in such form as the Purchaser shall reasonably require;

5.2.4  the Records;

5.2.5  the DSSS Software Licence; and

5.2.6  to the extent not attached to the Disclosure Letter, a copy of a waiver of their rights to transfer pursuant to the Regulations executed by each of the Excluded Employees.

5.3 Purchaser’s Obligations

The Purchaser shall pay the Consideration for the Business Assets as provided by Sub-Clause 3.3 (Method and Timing for Payment of Consideration).

9

5.4 Failure to Complete

If in any respect the provisions of Sub-Clause 5.2 (Vendor’s Obligations) are not complied with on the date for Completion set by Sub-Clause 5.1 (Date and Place of Completion) the Purchaser may:

5.4.1  proceed to Completion so far as practicable (without prejudice to its rights hereunder); or

5.4.2  rescind this Agreement.

6. Consents, Contracts and Assumed Liabilities

6.1 Pending Third Party Consents

Without prejudice to any other provisions of this Agreement, the Vendor shall obtain all such consents as may be necessary for the transfer of the Business Assets to the Purchaser with effect from the Transfer Time and the Vendor declares itself with effect from the Transfer Time trustee for the Purchaser in respect of all such Business Assets until the same shall, with any necessary consents from third parties, have been finally assigned to the Purchaser. The Vendor undertakes that until completion of such assignments it will with effect from the Transfer Time act under the direction of the Purchaser and as its agents in all matters relating to such Business Assets. The Vendor shall be fully and effectively indemnified by the Purchaser in so acting.

6.2 Treatment of Contracts

In respect of the Contracts:

6.2.1  the Vendor shall with effect from the Transfer Time assign or hold to the order of the Purchaser or procure the assignment to the order of the Purchaser of all the Contracts which are capable of assignment without the consent of other parties;

6.2.2  in the case of those of the Contracts not so capable of assignment the Vendor shall, as soon as practicable following Completion, use all reasonable endeavours to obtain, at the Vendor’s cost and expense, all necessary consents for the assignment of the same or to arrange the novation thereof on terms acceptable to the Purchaser; and

6.2.3  in respect of the benefit of the Contracts, unless and until such consents are obtained or novation is effected (and in respect of the burden of performance of the Contracts after Transfer Time, unless and until such novation is effected) the Vendor shall, at the option of the Purchaser, following Completion either:

6.2.4  unless contractually prevented from so doing, sub-contract the same to the Purchaser on the same terms (mutandis mutandis) and for the same remuneration as apply to the Contracts in question; or

6.2.5  act in connection therewith in all respects as the Purchaser may from time to time reasonably direct;

6.2.6  and so that (without prejudice to the generality of the foregoing) the Purchaser shall perform the obligations and liabilities arising under the Contracts in question so far as any such obligation or liability arises after the Transfer Time (provided that (i) no such obligation or liability is attributable to a breach of duty or contract of the Vendor prior to the Transfer Time and (ii) such obligations have been notified by the Vendor to the Purchaser prior to the date hereof) and the full benefit of all contractual rights, benefits and claims thereunder whether arising before or after the Transfer Time shall vest in and be held on trust by the Vendor for the Purchaser absolutely.

6.3 Assumed Liabilities

The Purchaser shall assume responsibility as from the Transfer Time for the payment or

10

performance of the Assumed Liabilities and shall indemnify and hold harmless the Vendor in respect of the same.

7. Mutual Covenants

7.1 Vendor’s Covenants

Save as otherwise herein expressly provided the Vendor covenants with the Purchaser that:

7.1.1  the Vendor will pay, satisfy, discharge and fulfil all costs, claims, expenses, liabilities, obligations and undertakings whatsoever relating to the Business arising in respect of or by reference to any period up to the Transfer Time and will indemnify and hold harmless the Purchaser in respect of the same; and

7.1.2  in the event of any breach or delay by the Vendor in performing whatever is required of it under Sub-Clause (A), the Purchaser shall be entitled (but in no way obliged) to do, on behalf of the Vendor, whatever is reasonably required to satisfy or discharge any such liability and obligation and the Vendor will indemnify and hold harmless the Purchaser from and against all cost, claims, liabilities and expenses which the Purchaser may thereby reasonably suffer or incur.

7.2 Purchaser’s Covenants

Save as otherwise herein expressly provided the Purchaser covenants with the Vendor that it will pay, satisfy, discharge, and fulfil all costs, claims, expenses, liabilities, obligations and undertakings whatsoever relating to the Business in respect of any period commencing on the Transfer Time and will indemnify and hold harmless the Vendor in respect of the same.

7.3 Taxation, Royalties and Environmental Levys, Charges and Penalties

The Vendor acknowledges that the Purchaser shall not be liable in any respect of any liability of the Vendor for taxation royalties and environmental levys, charges and penalties arising from its conduct of the Business or ownership or disposal of the assets to be purchased pursuant to this Agreement and the Vendor shall fully and effectually indemnify and hold harmless the Purchaser in respect of the same.

8. Post Completion Obligations

8.1 Post Completion Obligations

8.1.1  All monies or other items belonging to the Purchaser which are received by the Vendor on or after Completion in connection with the Business or any of the Business Assets shall immediately be paid or passed by the Vendor to the Purchaser.

8.1.2  The Purchaser shall be entitled following Completion (after giving reasonable notice) to have access during normal business hours to any of the books of account, financial or other records which relate partly to the Business and which are retained by the Vendor following Completion and at the Purchaser’s expense to take copies of and extracts from the same.

9. Warranties and Retention

9.1 General

The Vendor hereby warrants and represents to the Purchaser in the terms of the Warranties (other than the Second Vendor’s Warranties (as defined below)) and acknowledges and accepts that the Purchaser is entering into this Agreement in reliance upon each of these Warranties (other than the said Second Vendor’s Warranties). The Second Vendor hereby warrants and represents to the Purchaser in terms of such of the Warranties as are expressed as given by the Second Vendor (“Second Vendor’s Warranties”) and acknowledges and accepts that the Purchaser is entering into this Agreement in reliance upon each of these Second Vendor Warranties.

11

9.2 Purchaser’s Knowledge

The Warranties are given subject to matters fairly disclosed in this Agreement or in the Disclosure Letter, but no other information relating to the Business of which the Purchaser has knowledge (actual or constructive) shall prejudice any claim made by the Purchaser under the Warranties or operate to reduce any amount recoverable. The provisions of s 6(2) of the Law of Property (Miscellaneous Provisions) Act 1994 are hereby excluded.

9.3 Warranties Independent

Each of the Warranties shall be separate and independent and, save as expressly provided, shall not be limited by reference to any other Warranty or anything in this Agreement.

9.4 Damages

Without restricting the rights of the Purchaser or the ability of the Purchaser to claim damages on any basis in the event that any of the Warranties is broken or proves to be untrue or misleading, the Vendor hereby covenants to pay, on demand, to the Purchaser:

9.4.1  the amount necessary to put the Purchaser and the Business into the position which would have existed if the Warranties had not been broken and had been true and not misleading; and

9.4.2  all costs and expenses incurred by the Purchaser, directly or indirectly, as a result of such breach.

9.5 Pending Completion

The Vendor and the Second Vendor shall procure that (save only as may be necessary to give effect to this Agreement) it shall not do, allow or procure any act or omission before Completion which would constitute a breach of any of the Warranties which are given by them if they were given at any and at all times from the date hereof down to Completion or which would make any of the Warranties inaccurate or misleading if they were so given.

9.6 Further Disclosure by Vendor

The Vendor or the Second Vendor, as the case may be, shall forthwith disclose in writing to the Purchaser any matter or thing which may arise or become known to the Vendor after the date hereof and before Completion which is inconsistent with any of the Warranties which are given by them or which might make any of them inaccurate or misleading if they were given at any and at all times from the date hereof down to Completion or which is material to be known to a purchaser for value of the Business.

9.7 Rescission

In the event of any matter or thing that is mentioned in Sub-Clause 9.5 becoming known to the Purchaser before Completion or in the event of it becoming apparent on or before Completion that the Vendor is in material breach of any of the Warranties or any other term of this Agreement the Purchaser may at its option either:

9.7.1  rescind this Agreement by notice in writing to the Vendor; or

9.7.2  proceed to Completion but without prejudice to its rights to claim for breach of this Agreement or such Warranties.

12

10. Employees of the Business

10.1 Contracts of Employment

The Purchaser acknowledges and agrees that the respective contracts of employment of the Employees shall have effect from and after the Transfer Time as if originally made between each of the Employees and the Purchaser and that (inter alia) the provisions of regs 5 and 7 of the Regulations shall apply.

10.2 Informing Employees

If not already done at or by the Transfer Time, as soon as practicable after the Transfer Time the Vendor shall prepare and sign a letter to each Employee in a form agreed with the Purchaser outlining the consequences of the Transfer and a copy of such letter shall be delivered to each Employee by the Vendor.

10.3 Vendor Indemnity

The Vendor covenants with the Purchaser that the Vendor will indemnify the Purchaser and hold the Purchaser harmless against all and any costs, claims, expenses, liabilities, demands, losses and actions (including legal costs on an indemnity basis) arising from any claims arising from facts or events occurring:

10.3.1  prior to the Transfer Time and/or which arise or are alleged to arise against the Purchaser by virtue of the operation of the Regulations in connection with this Agreement; or

10.3.2  at any time whether before or after the Transfer Time and which are brought by any person other than an Employee and which arise or are alleged to arise against the Purchaser by virtue of the operation of the Regulations in connection with this Agreement.

In this Clause 10 ‘person’ means any individual or organisation (including, without limitation, trade unions and elected representatives).

10.4 Conduct of Claims

In the event that any of the Employees or other person brings a claim against the Vendor or the Purchaser arising out of or in connection with the Transfer, the Vendor and the Purchaser shall at their own respective expense give to the other as soon as practicable after any request therefor all co-operation, assistance and information which may be reasonably relevant to the claim.

10.5 Confidentiality and Other Restrictions

The Vendor hereby agrees to assign to or otherwise hold for the Purchaser with effect from the Transfer Time the benefit of any confidentiality or other undertakings or restrictions given to the Vendor by any present or former employees of the Vendor in the Business where such undertakings or restrictions or the benefit thereof are not novated to or otherwise vested in the Purchaser by virtue of the Regulations and accordingly the Vendor hereby agrees pending formal assignment or novation of the same and at the request of the Purchaser to take such steps, actions and proceedings as the Purchaser shall reasonably require to enforce such undertakings and restrictions (or any of them) for the benefit of the Purchaser.

11. Value Added Tax

11.1 Transfer as Going Concern

The Purchaser and the Vendor intend that art 5 of the Value Added Tax (Special Provisions) Order 1995 shall apply to the transfer of the Business Assets hereunder and accordingly:

11.1.1  the Vendor and the Purchaser shall on the date of Completion give notice of such a transfer to HM Customs & Excise; and

13

11.1.2  on Completion the Vendor shall deliver to the Purchaser all records referred to in s 49(1) of the Value Added Tax Act 1994, relating to the Business (the Vendor shall be entitled to retain photocopies of such records and shall also be entitled at its own expense to, and the Purchaser shall permit, the Vendor or its agents access to the originals of such records upon giving reasonable notice to the Purchaser) and the Vendor agrees that it has not and will not seek a direction that the Vendor be entitled to keep such records.

11.2 Payment of VAT

11.2.1  To the extent that the Vendor and the Purchaser are not in the same VAT group at the time of Completion, they shall use all reasonable endeavours to secure that pursuant to the said art 5, the sale of the Business Assets pursuant to this Agreement is treated as neither a supply of goods nor a supply of services for the purposes of VAT and the Vendor and the Purchaser shall agree the form of a letter to be sent to their respective VAT offices seeking confirmation that art 5 applies to the transfer of Business Assets.

11.2.2  In the event that an amount is paid by the Purchaser to the Vendor in respect of VAT which is not properly chargeable then the Vendor shall be obliged to repay to the Purchaser an amount equal to such alleged VAT.

11.2.3  In the event that VAT is chargeable on the transfer of the Business Assets hereunder or any of them pursuant to the Agreement then subject to receipt by the Purchaser of the tax invoices relating thereto, the Purchaser shall pay to the Vendor an amount equal to the amount of VAT payable in respect of such transfer.

11.3 Pre and Post Completion Supplies

All VAT payable in respect of goods and services supplied or deemed to be supplied by the Vendor in connection with the business prior to Completion and all interest payable thereon and penalties attributable thereto shall be paid to HM Customs & Excise by the Vendor and the Vendor shall be entitled to receive and to retain for its own benefit all reimbursement or credit from HM Customs & Excise for VAT borne by the Vendor on goods and services supplied to the Vendor prior to Completion and any payments received in respect of VAT overpaid to HM Customs & Excise prior thereto.

12. Provisions Relating to this Agreement

12.1 Assignment

This Agreement shall be binding upon and enure for the benefit of the successors of the parties but shall not be assignable, save that the Purchaser may at any time assign all or any part of its rights and benefits under this Agreement, including the Warranties and any cause of action arising under or in respect of any of them, to any transferee of all or any part of the Business Assets or to any Affiliate of the Purchaser who may enforce them as if he had also been named in this Agreement as the Purchaser.

12.2 Whole Agreement

12.2.1  This Agreement, together with any documents referred to in it, constitutes the whole agreement between the parties relating to its subject matter and supersedes and extinguishes any prior drafts, agreements, undertakings, representations, warranties, assurances and arrangements of any nature, whether in writing or oral, relating to such subject matter.

12.2.2  No variation of this Agreement shall be effective unless made in writing and signed by each of the parties.

14

12.3 Agreement Survives Completion

The Warranties and all other provisions of this Agreement, in so far as the same shall not have been performed at Completion, shall remain in full force and effect notwithstanding Completion.

12.4 Rights etc Cumulative and Other Matters

12.4.1  The rights, powers, privileges and remedies provided in this Agreement are cumulative and are not exclusive of any rights, powers, privileges or remedies provided by law or otherwise.

12.4.2  No failure to exercise nor any delay in exercising any right, power, privilege or remedy under this Agreement shall in any way impair or affect the exercise thereof or operate as a waiver thereof in whole or in part.

12.4.3  No single or partial exercise of any right, power, privilege or remedy under this Agreement shall prevent any further or other exercise thereof or the exercise of any other right, power, privilege or remedy.

12.5 Release of One Vendor

The Purchaser may release or compromise the liability of any of the Vendors hereunder without affecting the liability of the other Vendor.

12.6 Further Assurance

At any time after the date hereof the Vendor shall, at the request and cost of the Purchaser, execute or procure the execution of such documents and do or procure the doing of such acts and things as the Purchaser may reasonably require for the purpose of vesting the respective Business Assets hereby agreed to be sold in the Purchaser or its nominees and/or otherwise giving to the Purchaser the full benefit of all the provisions of this Agreement.

12.7 Invalidity

If any provision of this Agreement shall be held to be illegal, void, invalid or unenforceable under the laws of any jurisdiction, the legality, validity and enforceability of the remainder of this Agreement in that jurisdiction shall not be affected, and the legality, validity and enforceability of the whole of this Agreement in any other jurisdiction shall not be affected.

12.8 Counterparts

This Agreement may be executed in any number of counterparts, which shall together constitute one Agreement. Any party may enter into this Agreement by signing any such counterpart.

12.9 Costs

Each party shall bear its own costs arising out of or in connection with the preparation, negotiation and implementation of this Agreement.

12.10  Notices

12.10.1  Any notice or other communication required to be given under this Agreement or in connection with the matters contemplated by it shall, except where otherwise specifically provided, be in writing in the English language and may be:

(a) personally delivered, in which case it shall be deemed to have been given upon delivery at the relevant address; or

15

(b) if within the United Kingdom, sent by first class pre-paid post, in which case it shall be deemed to have been given two Business Days after the date of posting; or

(c) sent by fax, in which case it shall be deemed to have been given when despatched, subject to confirmation of uninterrupted transmission by a transmission report, provided that any notice despatched by fax after 5 pm (at the place where such fax is to be received) on any day shall be deemed to have been received at 8am on the next Business Day.

12.10.2  Any party to this Agreement may notify the other parties of its address or other details, or any change thereto, provided that such notification shall be effective only on the date specified in such notice or five Business Days after the notice is given, whichever is later.

13. Law and Jurisdiction

13.1 English Law

This Agreement shall be governed by, and construed in accordance with, English law.

13.2 Jurisdiction

In relation to any legal action or proceedings to enforce this Agreement or arising out of or in connection with this Agreement (‘proceedings’) each of the parties irrevocably submits to the jurisdiction of the English courts and waives any objection to proceedings in such courts on the grounds of venue or on the grounds that the proceedings have been brought in an inconvenient forum.

13.3 Process Agent

The Second Vendor appoints the Vendor as its process agent to receive on its behalf service of process in any proceedings in England. Service upon the process agent shall be good service upon the Second Vendor whether or not it is forwarded to and received by the Second Vendor.

AS WITNESS the hands of the duly authorised representatives of the parties the day and year first above written.

16

SCHEDULE 1

THE CURRENT ASSETS

All cash in hand, in transit and at the bank and all cheques and securities representing the same including the Book Debts and Prepayments.

17

SCHEDULE 2

ADJUSTMENT OF CONSIDERATION

1. Within 5 (five) months from the date of Completion, the Purchaser shall produce and provide to the Vendor completion accounts on the following basis (“the Completion Accounts”):

(a) The Completion Accounts shall be prepared in respect of the Vendor only.

(b) The Completion Accounts shall be prepared as at 31 March 2005 and shall be a balance sheet prepared in accordance with the normal accounting practices of the Purchaser for the preparation of management accounts.

(c) Save in the event of manifest error the Completion Accounts shall be binding on the Vendor and the Second Vendor. In the event of manifest error the Vendor, the Second Vendor and the Purchaser shall act in good faith to meet and agree any changes which should be made to the Completion Accounts to remedy such manifest error.

2. Within 18 (eighteen) months from the date of Completion, the Purchaser shall produce and provide to the Vendor a payables and receivables reconciliation in respect of each of the following (each a “Payables and Receivables Reconciliation”):

(a) the amount, if any, of any third party charges paid by the Vendor following Completion in respect of Triad (as such term is defined in the Balancing and Settlement Code) or other charges imposed by the System Operator (as such term is defined in the Balancing and Settlement Code) in respect of the operation of the GB electricity transmission system, or any third party charges paid by the Vendor following Completion imposed by a Distributor (as such term is defined in the Electricity Act 1989 (as amended)) in respect of the operation of an electricity distributions system in Great Britain (expressed in each case as a positive number); and

(b) the amount, if any, of any monies received by the Purchaser from the Authority (as defined for the purposes of the Renewables Obligation Order 2002 (SI 2002/0914)) in respect of Renewable Obligations Certificates (as defined for the purposes of the Renewables Obligation Order 2002 (SI 2002/0914)) presented by the Vendor in respect of the Obligation Period (as defined for the purposes of the Renewables Obligation Order 2002 (SI 2002/0914)) ending on the Transfer Date (expressed as a positive number).

Save in the event of manifest error each Payables and Receivables Reconciliation shall be binding on the Vendor and the Second Vendor. In the event of manifest error the Vendor, the Second Vendor and the Purchaser shall act in good faith to meet and agree any changes which should be made to the Payables and Receivables Reconciliation so affected to remedy such manifest error.

3. The amount, if any, by which the net assets in the Completion Accounts exceed the net assets in the Management Accounts shall be an increase to the Provisional Consideration in that amount, and the amount, if any, by which the net assets in the Management Accounts exceed the net assets in the Completion Accounts shall be a decrease to the Provisional Consideration in that amount. Any such increase shall be paid by the Purchaser to the Vendor within 60 days of the date on which the Purchaser has provided the Completion Accounts to the Vendor. Any such decrease shall be paid by the Vendor to the Purchaser within 60 days of the date on which the Purchaser has provided the Completion Accounts to the Vendor.

4. The amount of each Payables and Receivables Reconciliation with a positive number, if any, shall be an increase to the Provisional Consideration (as such amount may have been adjusted pursuant to paragraph 3 above) in that amount, and the amount of a Payables and Receivables Reconciliation with a negative number, if any, shall be a decrease to the Provisional Consideration (as such amount may have been adjusted pursuant to paragraph 3 above) in that amount. Any such increase shall be paid by the Purchaser to the Vendor within 60 days of the date on which the Purchaser has provided the Payables and Receivables Reconciliation in question to the Vendor. Any such decrease shall be paid by the Vendor to the Purchaser within 60 days of the date on which the Purchaser has provided the Payables and Receivables Reconciliation in question to the Vendor.

18

SCHEDULE 1

WARRANTIES AND REPRESENTATIONS

1. Interpretation

1.1 In this Schedule, where the context admits:

1.1.1  ‘Operator of the Business’ or ‘Operator’ means any person carrying on the Business at the date hereof and includes the Vendor and any member of the Vendor’s Group and, after the Transfer Time, means the Purchaser;

1.1.2  ‘Computer Systems’ means the Software and Data;

1.1.3  ‘Data’ means any data or information used by or for the benefit of the Business at any time and stored electronically at any time;

1.1.4  ‘Software’ means any set of instructions for execution by microprocessor used by or for the benefit of the Business irrespective of application, language or medium; any question whether a person is connected with another shall be determined in accordance with Income and Corporation Taxes Act 1988, s 839 (subject to the deletion of the words from ‘Except’ to ‘arrangements’ in subs (4) thereof) which shall apply in relation to this schedule as it appears in relation to that Act;

1.2 reference to any Act, statutory instrument, regulation, bye-law or other requirement of English law and to any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall in respect of any jurisdiction other than England be deemed to include that which most nearly approximates in that jurisdiction to the English legal term; and

1.3 where, in this Schedule, a term is defined in and for the purposes of a particular Paragraph or Sub-Paragraph, the relevant definition shall apply, where the context admits, for all other purposes of this Schedule.

2. Vendor’s Warranties and Representations

The Vendor hereby warrants and represents to and for the benefit of the Purchaser in the following terms:

2.1 The Vendor and the Vendor’s Group

2.1.1  Capacity The Vendor has full power and authority to enter into and perform this Agreement and has full power and authority to carry on the Business as it is now being carried on and to sell the Business and the Business Assets (and each of them) to the Purchaser on the terms of this Agreement, and may execute and deliver this Agreement and perform its obligations under this Agreement.

2.1.2  Validity This Agreement constitutes valid and binding obligations on the Vendor in accordance with its terms.

2.1.3  Branches and Associations The Vendor is not, and has not agreed to become, in relation to the Business, a member of any partnership, joint venture, consortium or other unincorporated association, body or undertaking in which it is to participate with any other in any business or investment.

2.2 Licences, Litigation and the Law

2.2.1  Compliance with Laws There is no order, decree or judgment of any court or any governmental or other competent authority or agency of the United Kingdom or any other relevant foreign country outstanding against the Business or the Vendor which may have a material adverse effect upon the Business or the Business Assets.

19

2.2.2  Licences etc

(A) All licences, consents, permits, approvals and authorisations (public and private) necessary and/or desirable for utilising any of the Business Assets in the Business or carrying on effectively any aspect of the Business are in full force and effect and are not likely to be suspended, cancelled or revoked.

(B) All reports, returns and information required by law or as a condition of any licence, consent, permission, approval or other authorisation to be made or given to any person or authority in connection with the Business have been made or given to the appropriate person or authority.

2.2.3  Breach of statutory provisions Neither the Vendor, nor any of its officers, agents or employees (during the course of their duties in relation to the Business) have committed, or omitted to do, any act or thing the commission or omission of which is, or could be, in contravention of any Act, Order, Regulation, or the like in the United Kingdom or elsewhere which is punishable by fine or other penalty and no notice in respect thereof has been received.

2.2.4  Litigation

(A) None of the Vendor’s officers or agents, and none of the employees of the Business is engaged in or the subject of any litigation, arbitration, administrative or criminal proceedings, whether as plaintiff, defendant or otherwise, which adversely affects or is likely to have an adverse effect on the Business and/or the Business Assets and/or the ability of the Vendor or any purchaser to carry on the Business in the same manner and to the same extent as previously carried on.

(B) No such litigation or arbitration, administrative or criminal proceedings are pending, threatened or expected, and so far as the Vendor is aware, there are no facts or circumstances likely to give rise to any such litigation or arbitration or administrative or criminal proceedings.

2.2.5  Inducements So far as the Vendor is aware no officer, agent or employee of the Vendor in relation to the Business has paid any bribe (monetary or otherwise) or used any of the Business Assets unlawfully to obtain an advantage for any person.

2.3 Accounts and Records

2.3.1 Management Accounts

(A) The Vendor is not aware of any fact which would lead a purchaser to believe that the Management Accounts did not show a true and fair view of the assets and liabilities of the Vendor and the Business as at, and the profits of the Vendor and the Business for the accounting reference period ended on, the Balance Sheet Date.

(B) The Vendor does not consider the Management Accounts misleading.

2.3.2  Books and Records

(A) All the books and other material comprised in the Records which are to be delivered or otherwise made available to the Purchaser in accordance with the terms of this Agreement have been fully, properly and accurately maintained and do not contain or reflect any material inaccuracies or discrepancies and no notice or allegation that any of the same is incorrect or should be rectified has been received;

20

(B) Without prejudice to the generality of the foregoing, the Records will fully reflect and provide full and sufficient details of:

(i) all entitlements of customers of the Business to any special terms, discounts, rebates, allowances and the like in respect of or by reference to the terms on which goods or services have been supplied by the Vendor to such customers prior to the Transfer Time; and

(ii) the names and addresses of all current customers, brokers, agents and/or suppliers of the Business, all dealings between the Vendor and such customers, brokers, agents and/or suppliers in respect of whom there is a debt or credit outstanding.

2.4 The Conduct of Business and the Effect of Sale

2.4.1  Business since the Balance Sheet Date Since the Balance Sheet Date:

(A) there has been no material deterioration in the financial or trading position or prospects or turnover of the Business;

(B) there has been no significant event or occurrence (including, but not limited to the loss of any significant customer or supplier) which has had or may following Completion have a material adverse affect on the Business (or any of the Business Assets) or its or their respective value, profitability or prospects;

(C) the Vendor has paid creditors of the Business in accordance with their respective credit terms or (if not) within the time periods usually applicable to such creditors and save as disclosed there are no debts outstanding by the Vendor in relation to the Business which have been due for more than 90 days; and

(D) the Vendor has not done or omitted to do anything which might prejudicially affect the Goodwill.

(E) No substantial customer representing more than 5 per cent of the Business has since the Balance Sheet Date and preceding the date of this Agreement:

(i) ceased or indicated an intention to cease trading or reduce its level of trading with the Business;

(ii) changed or is likely to change the terms on which it is prepared to trade with the Business;

2.4.2  Consequence of Acquisition of the Business by the Purchaser The Vendor is not aware of any circumstances (whether or not connected with the Purchaser and/or the sale of the Business Assets hereunder) indicating that, nor has it been informed or is otherwise aware that any person who now has business dealings with the Business would or might cease to do so from and after Completion.

2.5 The Business and its Assets

2.5.1  Business Assets

(A) The Business Assets comprise all of the assets, rights and privileges (other than cash) which are currently or have since the Balance Sheet Date been used or required by the Vendor to carry on the Business.

(B) To the best of the knowledge, information and belief of the Vendor there is no dispute or circumstances likely to give rise to a dispute directly or indirectly relating to all or any of the Business Assets which would materially affect the trading or financial position or prospects of the Business.

21

2.5.2  Intellectual Property Rights

(A) As far as the Vendor is aware, none of the processes or products of the Vendor and/or used in the Business infringes any Intellectual Property or any right of any other person relating to Intellectual Property or involves the unlicensed use of confidential information disclosed to the Vendor in relation to the Business by any person in circumstances which might entitle that person to make a claim against the Vendor in relation to the Business.

(B) Confidential information and know-how used in the Business is kept strictly confidential and the Vendor operates and fully complies with procedures which maintain such confidentiality. The Vendor is not aware of any such confidentiality or procedure relating to such confidentiality having been breached. The Vendor has not disclosed (except in the ordinary course of its business) any of its know-how, trade secrets or list of customers to any other person.

(C) The Listed Intellectual Property Agreements are all the Intellectual Property agreements to which the Vendor is a party and each of them is valid and binding and the Vendor is not in breach of any of the provisions of such agreements.

(D) The Vendor has, if required to do so under the Data Protection Act 1984 duly registered as a data user in respect of the Business and has complied with the data protection principles as set out in that Act.

(E) All current advertising, marketing and sales promotions by the Business comply with all applicable codes of practice and self-regulatory schemes. The Vendor has not been disciplined under any scheme or code in respect of any such advertising, marketing or sales promotion and no complaint has been made against it in respect thereof and there are no outstanding complaints or disciplinary proceedings against the Vendor in respect thereof.

2.5.3  Insurances

(A) Details of all the insurance policies other than insurance policies covering all Affiliates of the Vendor (including, without limitation, the limit and basis of cover under each policy and the amount of the applicable excess) in which the Vendor has an interest in relation to the Business (the ‘Insurances’) are given in the Disclosure Letter.

(B) All the Insurances are in full force and effect and will be maintained in full force without alteration pending Completion, there are no circumstances which might lead to any liability under any of the Insurances being avoided by the insurers or the premiums being increased. In relation to the Insurances there are no special or unusual terms, restrictions or rates of premium and all premiums have been paid on time. There is no claim outstanding under any Insurance nor is the Vendor aware of any circumstances likely to give rise to a claim nor (if the Vendor was to renew the Insurances) is the Vendor aware of any circumstances as to why the insurers would refuse to renew them.

2.5.4  Trade Associations Full particulars of all trade or business associations of which the Vendor is a member of in relation to the Business are set out in the Disclosure Letter, and the Vendor is now and has been at all material times in compliance in all material respects with the regulations or guidelines laid down by any such trade or business association and all reports, comments and recommendations made by any such association during the six years prior to the date of this Agreement are annexed to the Disclosure Letter.

2.5.5  Terms of Business True and complete copies of the standard terms upon which the Vendor carries on the Business or provides goods or services to any person in relation to the Business are annexed to the Disclosure Letter and, save as disclosed in the Disclosure Letter, the Vendor does not provide and has not provided any goods or services to any person on terms which differ from its standard terms in relation to the Business as annexed.

22

2.6 Contracts and Contractual Arrangements

2.6.1  The Contracts

(A) The schedule of Contracts annexed to the Disclosure Letter is complete and accurate in all material respects.

(B) No notice of termination of any such Contract has been received or served by the Vendor.

(C) The Vendor is not now and will not at the Transfer Time in relation to the Business be a party to or subject to any agreement, transaction, obligation, commitment, understanding, arrangement or liability (including, without limit, any of the Contracts) which:

(i) is known by the Vendor to be likely to result in a loss to the Vendor or to the Business on completion of performance; or

(ii) cannot readily be fulfilled or performed by the Vendor on time and without undue or unusual expenditure of money or effort; or

(iii) involves or is likely to involve obligations, restrictions, expenditure or receipts of any unusual onerous or exceptional nature; or

(iv) requires the Vendor to pay any commission, finder’s fee, royalty or the like.

(D) There are no agreements or arrangements relating to the Business or any part thereof to which the Vendor or any member of the Vendor’s Group is a party (including, but not limited to the Contracts) which in any way restricts the freedom of the Vendor to carry on the Business in whole or in part or to use or exploit any of the Business Assets in any part of the world as it thinks fit.

2.6.2  Defaults

(A) Neither the Vendor nor the Business nor any other party to any agreement with the Vendor or the Business is in default thereunder, and the Vendor is not aware of any invalidity or grounds for termination, avoidance, rescission or repudiation of any agreement to which it or the Business is a party which in any such case would be material in the context of the financial or trading position of the Business or in the context of the Business Assets] nor (so far as the Vendor is aware) are there any circumstances likely to give rise any such event.

(B) Full details of any customers (or any persons to whom the Vendor in the course of Business has supplied goods or services in the twelve months ending on the date hereof) who have defaulted (or who are believed by the Vendor to be likely to default) in the payment when due of any monies to the Vendor or the Business are specified in the Disclosure Letter.

2.6.3  Non-arm’s length contracts The Vendor has not in relation to the Business been a party to, nor has the profits or financial position of the Business during the last three years been affected by any agreement or arrangement which is not entirely of an arm’s length nature.

2.6.4  Tenders, etc No offer, tender, or the like is outstanding which is capable of being converted into an obligation of the Vendor in respect of the Business by an acceptance or other act of some other person and the Vendor is not in negotiations with, nor has it put proposals forward or entered into discussions with any customer or supplier for the renewal of any existing business or acquisition of any new business other than those specified in the Disclosure Letter.

2.7 Miscellaneous

2.7.1  Sureties There is not now outstanding in respect of the Business or any of the Business Assets any guarantee or warranty or agreement for indemnity or for suretyship given by or for the accommodation of the Business or in respect of the Business Assets.

2.7.2  All Material Matters Disclosed All information contained or referred to in this Agreement

23

(including the Schedules and the documents in the agreed terms) and in the Disclosure Letter or any annexure thereto or which has otherwise been disclosed by or on behalf of the Vendor to the Purchaser on or prior to the date hereof is true and accurate in all material respects and the Vendor is not aware of any other fact or matter which renders any such information misleading because of any omission or ambiguity or for any other reason. The Vendor has disclosed to the Purchaser all information and facts relating to the Business (including financial information) which are or may be material for disclosure to a purchaser of the Business and/or the Business Assets on the terms of this Agreement and all information and facts so disclosed are true and accurate in all material respects.

3. Second Vendor’s Warranties and Representations

The Second Vendor hereby warrants and represents to and for the benefit of the Purchaser in the following terms:

3.1 The Second Vendor

Capacity The Second Vendor has full power and authority to enter into and perform this Agreement and to sell such of the Business Assets as it is selling pursuant to this Agreement to the Purchaser.

3.2 The Business Assets

To the best of the knowledge, information and belief of the Second Vendor there is no dispute or circumstances likely to give rise to a dispute directly or indirectly relating to all or any of the Business Assets which would materially affect the trading or financial position or prospects of the Business.

3.3 Employees

3.3.1  Particulars of Employees

(A) The Employees are all employed by the Second Vendor in sole respect of the Business at the date of this Agreement and notice of termination will not be given by the Second Vendor on or before the Transfer Time. There are no other individuals employed at the date of this Agreement in the Business wheresoever. There will be no other individuals employed at the Transfer Time in the Business wheresoever.

(B) Save as specified in the Disclosure Letter, there are no subsisting contracts for the provision by any person of any consultancy services to the Business.

(C) None of the Employees has given notice terminating his contract of employment.

(D) None of the Employees is under notice of dismissal or has any outstanding dispute with the Second Vendor or any other member of the Vendor’s Group in connection with or arising from his employment nor is there any liability outstanding to such persons except for remuneration or other benefits accruing due and no such remuneration or other benefit which has fallen due for payment has not been paid.

(E) During the period of six months ending with the execution of this Agreement neither the Second Vendor nor any member of the Vendor’s Group nor any other person carrying on the Business has directly or indirectly terminated the employment of any person employed in or by the Business where the reason or principal reason for such termination was the transfer of the Business.

(F) There are no loans owned by any of the Employees to any of the Second Vendor or any member of the Vendor’s Group.

(G) Since the last review date, no change has been made in (i) the rate of remuneration, or the emoluments or pension benefits or other contractual benefits, of any officer of the

24

Second Vendor or any of the Employees or (ii) the terms of engagement of any such officer or any of the Employees.

(H) None of the Employees will become entitled by virtue of their contract of service to any enhancement in or improvement to their remuneration, benefits or terms and conditions of service only by reason of the execution of this Agreement or the completion of the sale and purchase under or pursuant to this Agreement.

(I) Neither the Second Vendor nor any member of the Vendor’s Group have in the last twelve months, entered into any informal or formal agreement to amend or change the terms and conditions of employment of any of the Employees (whether such amendment or change is to take effect prior to or after the Transfer Time).

3.3.2  Disputes with Employees There is no:

(A) outstanding claim by any person who is now or has been an employee of the Second Vendor or any member of the Vendor’s Group in relation to the Business or any dispute outstanding with any of the said persons or with any unions or any other body representing all or any of them in relation to their employment in the Business or of any circumstances likely to give rise to any such dispute;

(B) industrial action involving any employee, whether official or unofficial, currently occurring or threatened; or

(C) industrial relations matter which has been referred to ACAS or any similar governmental agency in the applicable jurisdiction for advice, conciliation or arbitration.

25

SIGNED BY David Jeremy Western	)
Duly authorised for and on	)
behalf of British Energy Generation Limited	)
SIGNED BY Andrew Neil O’Hara	)
Duly authorised for and on	)
behalf of British Energy Power and Energy Trading Limited	)
SIGNED BY Andrew Neil O’Hara	)
Duly authorised for and on	)
behalf of British Energy Direct Limited	)

26

EX-4.42

Exhibit 4.42

AGREEMENT

between

BRITISH ENERGY GENERATION (UK) LIMITED

and

BRITISH ENERGY GENERATION LIMITED

For the acquisition of substantially all the business and associated

assets of British Energy Generation (UK) Limited

CONTENTS

Clause	Page No.
1.      DEFINITIONS AND INTERPRETATION	1
2.      SALE AND PURCHASE	5
3.      CONSIDERATION	5
4.      RISK, ETC.	6
5.      CONDITIONS	6
6.      COMPLETION	6
7.      ASSUMPTION OF LIABILITIES	8
8.      THE CONTRACTS	8
9.      WARRANTIES	9
10.    FURTHER ASSURANCE	9
11.    PPC CONSENTS	9
12.    UNDERTAKING	9
13.    VALUE ADDED TAX	9
14.    EMPLOYEES	10
15.    EXPENSES	10
16.    GENERAL	10
17.    GOVERNING LAW	10
PART 1	12
PART 2A	14
PART 2B	15
PART 3	16
PART 4A	17
PART 4B	18
PART 4C	19
PART 5	20
PART 6	21
PART 7	27

AGREEMENT

Between

(1) BRITISH ENERGY GENERATION (UK) LIMITED, incorporated in Scotland under the Companies Acts (No.SC117121) and having its registered office at Systems House, Alba Campus, Livingston, EH54 7EG (“the Vendor”)

and

(2) BRITISH ENERGY GENERATION LIMITED, a company incorporated in England and Wales under the Companies Acts (No.03076445) and having its registered office at Barnett Way, Barnwood, Gloucester, GL4 3RS (“the Purchaser”)

WHEREAS:-

A. the Vendor carries on the Business;

B. the Vendor is the beneficial owner of the whole of the issued share capital of the Purchaser;

C. the Vendor has agreed to sell and the Purchaser has agreed to purchase, as a going concern, the undertaking and all of the assets (other than the Excluded Assets and the Charged Assets) of the Vendor; and

D. the Purchaser and the Vendor have agreed to set out the terms of the sale and purchase and associated matters herein.

It is agreed as follows:-

1. DEFINITIONS AND INTERPRETATION

1.1 In this agreement, unless the context otherwise requires:-

Accounting Records means all accounting books, records, vouchers, information and data (howsoever recorded or stored) kept by the Vendor in connection with the Business at the Time of Sale;

Agreed Form means the form agreed by the parties on or prior to the date hereof;

Assets means the assets referred to in clause 2;

Bank means HSBC Bank plc;

Book Debts means the debts owed to the Vendor at the Time of Sale;

Business means the business (other than the Excluded Business) carried on by the Vendor as at the Time of Sale;

Business Day means a day on which the Scottish clearing banks are open for over-the-counter business in Scotland;

Cash means all cash (whether at credit of any account with any bank or institution or in hand) held by the Vendor at the Time of Sale;

Charged Accounts has the meaning provided for in the Corporate Deposit Deed;

Charged Assets means the Charged Accounts and the Deposits;

Completion means completion of the sale and purchase of the Assets as described in clause 6;

Completion Balance Sheet means the balance sheet referred to in clause 3.3;

1

Completion Date means the later of 30^th June 2005 and the Business Day by which all of the Conditions have been purified;

Conditions means the conditions to Completion set out in clause 5;

Contracts means the all outstanding contracts, orders and engagements (whether written or oral) existing at the Time of Sale between the Vendor and third parties, which remain (in whole or in part) to be performed but excluding the Employment Contracts and the Excluded Employment Contracts;

Corporate Deposit Deed means the Corporate Deposit Deed between the Vendor and Citibank NA;

Deposits has the meaning provided for in the Corporate Deposit Deed;

Dispositions means the dispositions of the Heritable Properties in the Agreed Form;

Drawdown Date means the Completion Date;

Employees means those persons who are employed by the Vendor at the Time of Sale other than the Excluded Employees;

Employment Contracts means the contracts and other terms of employment between the Vendor and the Employees;

Employment Regulations means the Transfer of Undertakings (Protection of Employment) Regulations 1981 (as amended);

Encumbrance means any encumbrance, option, pledge or other right or interest of a similar nature;

Equipment means, other than the Third Party Assets, all fixed and moveable fittings, equipment, plant, machinery, furniture, stationery, implements and effects and all other fixed and moveable assets (other than the Heritable Property) of the Vendor;

Event of Default means any of the events specified in condition 6 of Part 7 of the Schedule;

Excluded Assets means (i) those assets which are used by the Excluded Employees for the purpose of the Excluded Business (ii) the Excluded Employment Contracts and (iii) the Shares;

Excluded Business means support services relative to business planning; administrative and secretarial support to engineering and safety and regulation divisions, documentation support, and provision of IT management and IT support services, including desktop support and application support;

Excluded Employees means the employees listed in part 1 of the Schedule;

Excluded Employment Contracts means the contracts and other terms of employment between the Vendor and the Excluded Employees;

Excluded Liabilities means all liabilities of the Vendor incurred for the purpose of the Excluded Business and/or the employment of Excluded Employees;

Expert means an independent chartered accountant appointed by agreement between the Vendor and the Purchaser or, failing such agreement within 5 Business Days of the dispute arising, appointed on the application of either party by the then president of the Institute of Chartered Accountants of Scotland.

Goodwill means the goodwill associated with the Business, including (without limiting the generality of the foregoing) the exclusive right of the Purchaser to carry on (and represent that it is carrying on) the Business in succession to the Vendor;

2

Greenhouse Gas Permits means the permits granted in terms of the Greenhouse Gas Emissions Trading Scheme Regulations 2003 more fully described in Part 4C of the Schedule;

Heritable Properties means the heritable properties more fully described in part 2A of the Schedule;

Interest Period means the period determined, as appropriate, in accordance with condition 2.3 of Part 7 of the Schedule;

IPC Consents means the integrated pollution control consents granted in terms of Part I of the Environmental Protection Act 1990 more fully described in Part 4A of the Schedule;

Intellectual Property means all intellectual property of the Vendor other than that used exclusively for the purpose of the Excluded Business;

Keeper means the Keeper of the Registers of Scotland;

Leased Properties means the properties more fully described in part 2B of the Schedule;

Leases means the leases of, or any other document under which the Vendor has rights of occupation in respect of, the Leased Properties;

Liabilities means all liabilities and obligations of the Vendor existing at the Time of Sale (other than the Excluded Liabilities) whether or not incurred in connection with the Business and the Assets and whether or not such liabilities and obligations fall due for performance or satisfaction before or after Completion including, for the avoidance of doubt, any liability for contamination (whether radioactive or non-radioactive) of the Properties;

Loan means the loan provided for in clause 3.2.2;

Net Book Value shall have the meaning given to it in clause 3.1;

NII means Her Majesty’s Nuclear Installations Inspectorate;

NLF means Nuclear Liabilities Fund Limited, a company incorporated under the Companies Acts (Company Number SC164685) and having its Registered Office at 16 Rothesay Place, Edinburgh EH3 7SQ;

Nuclear Site Licences means licences to operate nuclear reactors or prescribed installations in terms of section 1(1) of the Nuclear Installations Act 1965;

Nuclear Site Licensees Co-operation Agreement means a valid duly executed Agreement between the Purchaser and Magnox Electric Limited in the Agreed Form

PPC Consents means consents granted by SEPA in terms of the Pollution Prevention and Control (Scotland) Regulations 2000 for combustion activities carried out at the Stations;

Properties means the Leased Properties and the Heritable Properties;

Potential Event of Default means any event which, with the giving of notice or the making of any determination or the expiry of any period of time or the satisfaction of any other condition, may constitute an Event of Default;

Radioactive Substances Consents means the consents granted in terms of the Radioactive Substances Act 1993 more fully described in Part 4B of the Schedule;

Records means all:-

(a) books, vouchers, customer records, supplier records, catalogues, correspondence files, sales literature, publicity/promotional material and marketing material;

(b) personnel records, payroll records, pensions records and all national insurance and PAYE records relating, in each case, to the Employees;

3

(c) computer data (including all disks and software on which it is stored) relating to the Business and/or the Assets;

(d) all documentation relative to the Properties; and

(e) all records required to be kept by statute (including but not limited to the Nuclear Installations Act 1965) and all documents and records required to be retained under the Nuclear Site Licences currently held by the Vendor and for any specific periods defined in such licences, or in the arrangements of the Vendor made to meet the conditions contained in such licences or as otherwise agreed with the NII, including but not limited to all environmental records, and health and safety records (including the Nuclear Safety Case and the Emergency Plan) relative to each Station;

and includes (without limiting the generality of the foregoing) the Accounting Records;

Recoverable Amount means the Loan, all interest accrued or accruing thereon and all other sums which may be recoverable by the Vendor in terms of Part 7 of the Schedule;

SEPA means the Scottish Environment Protection Agency;

Secretary of State means Her Majesty’s Secretary of State for Trade and Industry;

Secretary of State for Scotland means Her Majesty’s Secretary of State for Scotland;

Security Documentation means valid, duly executed standard securities in the Agreed Form by the Purchaser in favour of the NLF over the Stations and a valid, duly executed letter from the NLF to the Purchaser substantially in the form of the draft forming Part 5 of the Schedule;

Security Interest means any fixed or floating security, charge, pledge, lien, right of retention, obligation to account or other encumbrance whatsoever;

Shares means all shares held or beneficially owned by the Vendor in British Energy Investment Limited and British Energy International Holdings Limited;

Stations means Torness power station and Hunterston B power station;

Stocks means all stocks of fuel, spent fuel, spare parts, nuclear waste, raw materials and consumable stores of the Vendor at the Time of Sale, wherever situated;

Technical Documentation means all documents and other media containing and/or referring to Intellectual Property;

Terminated Contracts means (other than in connection with the Excluded Assets or the Excluded Employees) all contracts, orders and engagements (whether written or oral) which have been terminated or have been performed in full by the Vendor prior to the Time of Sale;

Third Party Assets means assets held by the Vendor in connection with the Business at the Time of Sale which are subject to lease, hire purchase, rental or similar agreements;

Third Party Rights means:-

(a) the benefit of all sums to which the Vendor is (or after the Time of Sale may become) entitled, either from third parties or insurers, in respect of damage or injury to any of the Assets or the Business where such damage or injury arose prior to Completion (but whether or not the same became apparent prior to or after Completion) save to the extent of sums expended prior to Completion in making good such damage or injury; and

(b) the benefit of all rights and claims which the Vendor may have, whether in respect of warranties, guarantees or otherwise, against any third party in respect of any of the Assets and/or the Business or under the Terminated Contracts;

4

Time of Sale means that time on the day following the Completion Date which is an instant past midnight on the Completion Date;

VAT means value added tax;

the 1979 Act shall mean the Land Registration (Scotland) Act 1979 together with all amendments thereof and the Statutory Instruments and Rules issued thereunder.

1.2 Reference to any statute or statutory provision includes a reference to that statute or statutory provision as from time to time amended, extended or re-enacted (save to the extent that any amendment, extension or re-enactment imposes more onerous obligations than otherwise exist at Completion) and to any former statute or statutory provision replaced (with or without modification) by the statute or statutory provision referred to.

1.3 The singular includes the plural and vice versa and any gender includes all genders.

1.4 The clause headings are inserted for ease of reference only and shall not affect the interpretation or construction of this agreement.

2. SALE AND PURCHASE

2.1 With effect from the Time of Sale, the Vendor shall sell, as beneficial owner, to the Purchaser, free from all Security Interests, and the Purchaser shall purchase from the Vendor, as a going concern, the Business together with the following assets:-

2.1.1  the Book Debts;

2.1.2  the Cash;

2.1.3  the Contracts;

2.1.4  the Equipment;

2.1.5  the Goodwill;

2.1.6  the Records;

2.1.7  the Stocks;

2.1.8  the Technical Documentation;

2.1.9  the Third Party Rights;

2.1.10 the Employment Contracts;

2.1.11 the Heritable Properties;

2.1.12 the Leases;

2.1.13 all other property and assets owned by the Vendor other than the Excluded Assets and the Charged Assets.

2.2 The Excluded Business, the Excluded Assets, and the Charged Assets shall be excluded from the sale and purchase contemplated by this agreement.

3. CONSIDERATION

3.1 The consideration for the sale and purchase of the Business and the Assets shall be a sum equal to the net book value of the Business and the Assets as at the Completion Date (“the Net Book Value”) as determined in accordance with the provisions of clause 3.3 below.

3.2 The consideration shall be satisfied as follows:-

3.2.1  by the Purchaser indemnifying the Vendor (as it hereby undertakes to do on demand) against the Liabilities notwithstanding the Liabilities may be greater than the Net Book Value; and

5

3.2.2  as to the amount, if any, by which the Net Book Value exceeds the Liabilities by the creation of an inter-company loan by the Vendor to the Purchaser to be made on the conditions set out in Part 7 of the Schedule.

3.3 The Vendor shall procure the preparation of the Completion Balance Sheet showing the net book value and the liabilities as at 3^rd July 2005 as soon as reasonably practicable following Completion (but not later than 30^th November 2005) and shall thereafter deliver a copy thereof to the Purchaser. Save in the case of manifest error, the Completion Balance Sheet as so prepared shall be conclusive and binding on the parties hereto. The net book value as shown in the Completion Balance Sheet shall be adjusted, in such manner as shall be agreed between the parties at their absolute discretion, to determine the Net Book Value and the Liabilities. In the event of the parties failing to agree the Net Book Value and the Liabilities by 28^th February 2006 then the matter may be referred by either party to the Expert for determination whose decision shall, in the absence of manifest error, be final and binding.

4. RISK, ETC.

Risk, property and title in and to the Assets shall pass to the Purchaser at the Time of Sale.

5. CONDITIONS

Completion of this agreement is conditional upon:-

5.1 receipt of the consents of the Secretary of State and the Secretary of State for Scotland to the transfer of the Stations; and

5.2 receipt from the NII of new Nuclear Site Licences for each of the Stations in favour of the Purchaser.

6. COMPLETION

A. Completion shall take place on the Completion Date at MacRoberts, Excel House, Semple Street, Edinburgh or at such other place as the parties may agree when the Vendor shall deliver to the Purchaser:-

6.1 the Cash, the Equipment, the Records, the Stocks, the Technical Documentation, the Third Party Assets and all other Assets which are capable of physical delivery (provided that the Purchaser shall accept delivery of the same by their being left at the Properties at which they are located) together with all documents of title pertaining thereto insofar as the same are in the possession of the Vendor; and

6.2 a valid, duly executed assignation (in the Agreed Form) in favour of the Purchaser of the following Assets:-

6.2.1  the Book Debts;

6.2.2  the Intellectual Property;

6.2.3  the Goodwill; and

6.2.4  the Third Party Rights;

6.3 the documents listed in part 3 of the Schedule;

6.4 the Greenhouse Gas Permits, the IPC Consents (or, as the case may be, subject to clause 11, the PPC Consents) and the Radioactive Substances Consents) all in the name of the Purchaser;

6

6.5 a valid marketable title to the Heritable Properties with (at the Vendor’s cost) Form 10 and Form 11 Reports brought down to a date not earlier than 3 days prior to the Completion Date and showing no entries adverse to the Vendor’s interest.

6.6 the Vendor shall, at the Vendor’s expense, deliver to the Purchaser such documents and evidence as the Keeper may require to enable the Keeper to issue a Land Certificate in name of the Purchaser as the registered proprietor of the Heritable Properties and containing no exclusion of indemnity in terms of Section 12(2) of the 1979 Act. Such documents and evidence will include a plan or bounding description sufficient to enable the Heritable Properties to be identified on the ordnance map and evidence that the description of the Heritable Properties as contained in the relevant title deeds habile to include the whole of the occupied extent of the Heritable Properties. The Land Certificate to be issued to the Purchaser will disclose no entry, due or diligence prejudicial to the Purchaser’s interest other than such as are created by or against the Purchaser;

6.7 searches (including interim reports) in the register of charges and company files against the Vendor and against each company which has had a proprietorial interest in the Heritable Properties within the 10 year prescriptive period such searches to be brought down (in the case of the Vendor) to the date 22 days after the registration of the Purchaser’s title or (in the case of prior limited companies) to the date 22 days after the company ceased to have an interest in the Heritable Properties, such interim reports to be dated not earlier than 3 Business Days prior to the Completion Date. No such search (including interim reports) will disclose any entries prejudicial to the Vendor’s or the prior proprietors’ (as the case may be) ability to grant valid dispositions of the Heritable Properties. In the event that the search (or interim report) in the register of charges against the Vendor discloses one or more floating charges, the Vendor will deliver a letter of non-crystallisation of each such floating charge from the holder thereof in terms acceptable to the Purchaser, including the consent of the chargeholder to the transfer of the Heritable Properties to the Purchaser. Without prejudice to the generality of the foregoing, the Vendor will deliver a letter of non-crystallisation and consent from the NLF;

6.8 a valid marketable title to the Leased Properties with Form 10 and Form 11 Reports brought down to a date not earlier than 3 days prior to the Completion Date and showing no entries adverse to the Vendor’s interest. In addition, the Vendor shall, at the Vendor’s expense, deliver to the Purchaser such documents and evidence as the Keeper may require to enable the Keeper to issue a Land Certificate in name of the Purchaser as the registered proprietor of the tenant’s interest in the Leased Properties and containing no exclusion of indemnity in terms of Section 12(2) of the 1979 Act. Such documents and evidence will include a plan or bounding description sufficient to enable the Leased Properties to be identified on the ordnance map and evidence that the description of the Leased Properties as contained in the relevant title deeds habile to include the whole of the occupied extent of the Leased Properties. The Land Certificate to be issued to the Purchaser will disclose no entry, due or diligence prejudicial to the Purchaser’s interest other than such as are created by or against the Purchaser; and

6.9 searches (including interim reports) in the register of charges and company files against the Vendor and against each incorporated company which has had an interest (whether heritable or leasehold) in the Leased Properties within the 10 year prescriptive period such searches to be brought down (in the case of the Vendor) to the date 22 days after the date upon which the Purchaser obtains a real right in the Leased Properties or (in the case of prior incorporated companies) to the date 22 days after the company ceased to have an interest in the Leased Properties, such interim reports to be dated not earlier than 3 Business Days prior to the Completion Date. No such search (including interim reports) will disclose any entries prejudicial to the Vendor’s or the prior proprietors’ (as the case may be) ability to grant a valid disposition of the Leased Properties and /or a valid assignation of the tenant’s interest in the Leased Properties. In the event that the search (or interim report) in the register of charges against the Vendor discloses one or more floating charges, the Vendor will deliver a letter of non-crystallisation of each such floating charge from the holder thereof in terms acceptable to the Purchaser, including the consent of the chargeholder to the transfer of the Leased Properties to the Purchaser. Without prejudice to the generality of the foregoing, the Vendor will deliver a letter of non-crystallisation and consent from the NLF.

7

6.10 The Purchaser may waive, in its absolute discretion, any requirement contained in clause 6.2 to clause 6.9 both inclusive.

B. On the Completion Date, the Purchaser shall deliver to MacRoberts, 152 Bath Street, Glasgow the Security Documentation and the Nuclear Site Licensees Co-operation Agreement.

7. ASSUMPTION OF LIABILITIES

Without prejudice to clause 3.2.1, the Purchaser undertakes to:-

7.1 discharge, perform and satisfy the Liabilities; and

7.2 indemnify the Vendor, on demand, in respect of all claims, actions, demands, losses and expenses in connection with the Liabilities.

8. THE CONTRACTS

8.1 The Purchaser shall:-

8.1.1  assume and carry out all of the obligations of the Vendor under the Contracts; and

8.1.2  indemnify the Vendor, on demand, in respect of all costs, claims, liabilities, losses and expenses in connection therewith.

8.2 If the benefit of any of the Contracts can be assigned by the Vendor without any person’s consent, then this agreement shall constitute an assignation by the Vendor of those Contracts (which includes, but is not limited to the contracts, set out in Part 6 of the Schedule) from Completion and the Vendor hereby assigns to the Purchaser, with effect from the Time of Sale, its whole right, title and interest, post, present and future in and to such contracts.

8.3 If a Contract cannot be transferred to the Purchaser except by an assignation made with the consent of a third party or by a novation agreement:

8.3.1  this Agreement does not constitute an assignation, an attempted assignation, novation or attempted novation of the Contract if the assignation, attempted assignation, novation or attempted novation would constitute a breach of the Contract;

8.3.2  both before and after Completion the Purchaser and the Vendor shall each make all reasonable efforts to obtain the third party’s consent to the assignation, or achieve the novation, of the Contract; and

8.3.3  until the consent is obtained or novation is achieved, the Vendor shall, at the Purchaser’s sole cost and risk, hold such Contract and all monies, goods, services or other benefits thereunder as trustee for the Purchaser and do each act and thing reasonably requested of it by the Purchaser to enable performance of the Contract and to provide for the Purchaser the benefits of the Contract (including, without limitation, enforcement of a right of the Vendor against another party to the Contract arising out of its termination by the other party or otherwise) and shall upon receipt of any monies, goods, services or benefits account for and pay or deliver the same to the Purchaser.

8.4 Following Completion, the Purchaser shall have the exclusive right to receive payment of any sums received by the Vendor in connection with its carrying on business prior to Completion, whether or not received in connection with the Business and Assets (and in particular, but without limitation, any sums received in connection with the Charged Assets and the Terminated Contracts) (other than any sums received in connection with the Excluded Assets and/or Excluded Employees), and any such sums received by the Vendor shall be remitted by the Vendor to the Purchaser forthwith upon receipt. The Vendor shall pass to the Purchaser, forthwith upon receipt, copies of all correspondence invoices or communications relating to such sums.

8

9. WARRANTIES

9.1 The Vendor warrants that it is entitled to sell and transfer the full legal and beneficial ownership of the Assets to the Purchaser on the terms set out in this agreement.

9.2 Each party warrants to the other party that:

9.2.1  it has full capacity and authority to enter into this agreement and to perform its obligations under this agreement and it has taken all necessary action to authorise the execution, delivery and performance by it of this agreement;

9.2.2  all necessary resolutions of its board of directors authorising its execution, delivery and performance of this agreement have been obtained and such resolutions remain in full force and effect as of the date hereof without revocation or amendment; and

9.2.3  it is not aware of any reason which may affect its ability to perform its obligations under this agreement.

10. FURTHER ASSURANCE

10.1 In addition to the matters specified in clause 6 A., the Vendor shall, at the request of the Purchaser, at or after Completion, do and execute all acts, things and documents and use all reasonable endeavours to procure that the same be done by third parties having a relevant interest so that the full benefit of this agreement, the Assets and the Business is vested in the Purchaser.

10.2 The Vendor shall supply the Purchaser with any information which it may request in respect of the Business, Assets and Liabilities to allow the Purchaser to report fully to British Energy Group plc (“BE Group”) so that BE Group can meet its reporting obligations under the Deed of Undertaking entered into between British Energy plc (now British Energy Limited) and the Secretary of State dated 8^th October 2004.

10.3 The Purchaser undertakes to maintain the Records on the same terms and conditions as the Vendor is required to maintain same under LC6(2) of the Nuclear Site Licences currently held by the Vendor.

11. PPC CONSENTS

11.1 In the event that the PPC Consents have been applied for but are not granted prior to Completion then, subject to the provisions of clause 11.2, the Vendor shall assign either the application for the PPC Consents or the PPC Consents, as the case may be, in such manner and in such timescale as the Purchaser may reasonably and lawfully require.

11.2 The Vendor shall take all steps as the Purchaser may reasonably require with a view to procuring the consent of SEPA to any assignation required pursuant to clause 11.1.

12. UNDERTAKING

To the extent that the principal current use of the Properties or any part thereof has been for an activity (the “generation of electricity”) for which an exemption or licence is required under section 5 or 6 of the Electricity Act 1989 or involving the distribution of electricity (insofar as it does not require a licence under section 6 of the Electricity Act 1989) the Purchaser agrees and undertakes to the Vendor to continue to use the Properties or the relevant part thereof for the generation of electricity until at least 31^st March 2006.

13. VALUE ADDED TAX

All sums payable hereunder by the Purchaser are exclusive of any VAT which may be chargeable thereon.

9

14. EMPLOYEES

The parties acknowledge that, pursuant to the Employment Regulations, the Employment Contracts will have effect after the Time of Sale as if originally made between the Purchaser and the Employees.

15. EXPENSES

The Purchaser shall meet all legal and other costs, charges and expenses arising, whether directly or indirectly, in connection with the negotiation, preparation, execution and completion of this agreement and any documentation referred to herein.

16. GENERAL

16.1 Insofar as not implemented on the Completion Date and save as otherwise provided herein, this agreement shall remain in full force and effect and the undertakings and indemnities provided for herein shall be enforceable in accordance with their terms.

16.2 Neither this agreement nor any documents referred to herein shall be capable of variation unless such variation shall be made in writing and be signed by both the Purchaser and the Vendor.

16.3 No waiver by either party of any of the requirements hereof or of any of its rights hereunder shall be effective unless given in writing and signed by or on behalf of that party and no forbearance, delay or indulgence by either party in enforcing the provisions of this agreement shall prejudice or restrict the rights of that party nor shall any waiver by either party of any of the requirements hereof or any of its rights hereunder release the other from full performance of its other obligations stated herein.

16.4 Each provision of this agreement shall be construed separately and (save as otherwise expressly provided herein) none of the provisions hereof shall limit or govern the extent, application or construction of any other of them and, notwithstanding that any provision of this agreement may prove to be unenforceable, the remaining provisions of this agreement shall continue in full force and effect.

16.5 This agreement together with the documents referred to as being in the Agreed Form constitute the entire agreement between the parties relative to its subject matter and supersedes any previous agreement between them.

16.6 This agreement shall not be capable of being assigned, either in whole or in part.

17. GOVERNING LAW

This agreement shall be construed and receive effect in accordance with the law of Scotland and, insofar as not already subject thereto, the parties hereto submit to the non-exclusive jurisdiction of the Scottish courts.

IN WITNESS WHEREOF:

SIGNED on behalf of BRITISH ENERGY GENERATION (UK) LIMITED by ,

Authorised Signatory at                    on            June 2005 in the presence of:

Witness:
Full Name:
	Authorised Signatory
Address:

10

SIGNED on behalf of BRITISH ENERGY GENERATION LIMITED by                    , Authorised Signatory at                    on             June 2005 in the presence of:

Witness:
Full Name:
	Authorised Signatory
Address:

11

This is the schedule referred to in the foregoing agreement between British Energy Generation (UK) Limited and British Energy Generation Limited

Schedule

PART 1

Excluded Employees

McLaughlin, Mr. Gerard Archibald	Business Planning - Finance
Mcmillan, Miss Margaret Carolyn	ED S&RPS Management
Weidner, Mrs. Christine	ED S&RPS Management
McGeough, Mr. Grant	ED Work Management - Programme Control
Mcculloch, Mrs. Elaine	ED S&RPS Rotating Plant & Dynamics
Forbes, Mr. Alan	PIP Performance Improvement Project
McGranaghan, Mrs. Laura	ED S&RPS Management
Weir, Miss Karen	ED S&RPS Management
Sinclair, Mr. Craig	Fuel Cycle
Simm, Mr. John Theodore	Nuclear Security Arrangements
Butchart, Mr. Peter Appleby Irons	GS Quality (n)
Barrett, Mrs. Moira Wendy Ilett	GS Quality (n)
Imm, Mr. Clinton John	IM AM Business Account Managers
Sparrow, Mr. Ronald Frederick	IM AM Business Account Managers
Pearman, Mr. Stephen Robert	IM AM Business Account Managers
Lloyd, Mr. Melvyn Thomas	IM AM Business Account Managers
Scott, Miss Fiona Melville	IM AM Business Analysis
Barker, Mr. Robert James	IM Applications Support Barnwood
Sarti, Miss Leonora	ED PPK Closure
Taylor, Mr. Nigel	IM Projects & Services
Wragby, Mr. Martin	IM AS BEPET Apps Support Barnwood
Collins, Mr. Andrew	IM Corporate Network Support BWD
Pettifer, Mr. Nigel John	IM Data Centre & Magnox Services
Hale, Mr. Graham	IM DN Applications Infrastructure
Steven, Mr. Gordon	IM DN Applications Infrastructure
Wakeman, Mr. Martin	IM Fleet Data Enhancement
Quar, Mr. George	IM Generation Network Support PPK
Stanfield, Mr. Alan John Maclure (Stan)	IM Internal Support

12

Robertson, Miss Paula	IM Internal Support
Hale, Mr. Christopher Royden	IM Networks
Ralston, Mr. Andrew	IM Projects & Services
Pinkerton, Mr. Angus Ian	IM Security
Kelly, Mr. Ian James Neil	IM Security
Jarvis, Mr. Douglas Smith	Nuclear Security Arrangements
Morrisson, Mr. Stuart Leslie	IM Servers
Taylor, Mr. Paul Steven	IM Strategy & Arch
Hughes, Mr. Brian Joseph	IM Strategy, IT Governance & Security
Anderson, Mrs. Shirley J	Internal Audit
McGee, Ms. Karen Elizabeth Rettie	SRD Industrial Safety
Hosie, Mrs. Kirsti	SRD Industrial Safety
Black, Mr. Fraser	IM AM Station IM HNB
Derrick, Mr.Ian	IM SERV Eng & Station UNIX BWD
Mills, Mr. Craig	IM DN Desktop Support BWD
Ferris, Mr. Kenneth	IM DN Desktop Support BWD
Darby, Miss Nicola	IM Corporate Network Support BWD
Greenwood, Mr. Paul	IM DN Applications Infrastructure
Hallala-Romowicz, Mrs. Paulina	IM AS Generation Apps BBWD

13

PART 2A

Heritable Properties

Hunterston B Power Station, West Kilbride, Ayrshire and Torness Power Station, Dunbar, East Lothian in each case as described in full in the Dispositions.

14

PART 2B

Leased Properties

Hunterston Railhead Facility, being the area of ground shown outlined in red on Plan A annexed and signed as relative to the Lease between Hunterston Bulk Handling Limited and Scottish Nuclear Limited .

Off site emergency support and control centre, Cockenzie being the subjects described in the Lease between Scottish Power plc and Scottish Nuclear Limited.

North Ayrshire Emergency Centre, Cunninghame House, Irvine being the subjects more particularly described in Licence between North Ayrshire Council and British Energy Generation (UK) Limited.

Emergency control room located within the cooling water pump house complex at or adjoining the District Survey Laboratory, Hunterston A Power Station, Hunterston, Ayrshire being the subjects described in the Licence Agreement between Nuclear Electric plc and Scottish Nuclear Limited.

15

PART 3

Property Documentation

Heritable Properties

Valid, duly executed dispositions (in the Agreed Form) by the Vendor in favour of the Purchaser of the Heritable Properties.

Leasehold Properties

Valid, duly executed assignations (in the Agreed Form) by the Vendor in favour of the Purchaser of:

(i) the Lease between Scottish Power plc and Scottish Nuclear Limited in respect of Cockenzie Emergency Station;

(ii) the Lease between Hunterston Bulk Handling Limited and Scottish Nuclear Limited; and

(iii) the Licence between North Ayrshire Council and British Energy Generation (UK) Limited in respect of North Ayrshire Emergency Centre Cunninghame House, Irvine;

(iv) the Licence between Nuclear Electric plc and Scottish Nuclear Limited of the emergency control room at Hunterston A Power Station, Hunterston, Ayrshire.

Discharges

Valid and duly executed discharges (in the Agreed Form) by the NLF in favour of the Vendor of the Standard Securities dated and recorded in the General Register of Sasines on 14 January 2005 in respect of the Stations.

16

PART 4A

IPC Consents

Consent IPC/004/1994 effective 20 May 1994, as amended, relating to Hunterston B

Consent IPC/026/1993 effective 1 May 1993, as amended, relating to Torness

17

PART 4B

Radioactive Substances Consents

Hunterston B

1. Authorisation concerning liquids to Firth of Clyde relating to BEG(UK) (ref IPB/4/1/4/3 004/96) effective 16 January 1996

2. Authorisation concerning disposal of Scintillant & oily rags to Re-chem relating to BEG(UK) (ref IPB/4/1/4/3 005/96) effective 16 January 1996

3. Authorisation concerning incineration of lubricating oil relating to BEG(UK) (ref IPB/4/1/4/3 072/96) effective 31 March 1996

4. Authorisation concerning gases (and suspended particles of solid or liquid) relating to BEG(UK) (ref IPB/4/1/4/3 073/96) effective 31 March 1996

5. Disposal of LLW to Drigg or Sellafield relating to BEG(UK) (ref IPB/4/1/3/3 074/96) effective 31 March 1996

Torness

1. Authorisation concerning disposal of solid & liquid combustible to Re-chem relating to BEG(UK) (ref IPB/4/1/5/3 RSA/E/013/99) effective 01 April 1999

2. Authorisation concerning disposal of LLW to Drigg or Sellafield relating to BEG(UK) (ref IPB/4/1/5/3 028/96) effective 31 March 1996

3. Authorisation concerning liquids relating to BEG(UK) (ref IPB/4/1/5/3 029/96) effective 31 March 1996

4. Authorisation concerning gases (and suspended particles of solid or liquid) relating to BEG(UK) (ref IPB/4/1/5/3 030/96) effective 31 March 1996

5. Authorisation concerning incineration of lubricating oil relating to BEG(UK) (ref IPB/4/1/5/3 031/96) effective 31 March 1996

18

PART 4C

Greenhouse Gas Permits

Greenhouse gas emissions permit ETS/W/300004 relating to Hunterston B

Greenhouse gas emissions permit ETS/E/10010 relating to Torness

19

PART 5

“Magnox Letter”

British Energy Generation Limited

Barnett Way,

Barnwood,

Gloucester GL4 3RS

Date                    

Dear Sirs

Hunterston “B” Power Station, Hunterston (“the Property”)

With reference to the standard security granted or about to be granted by you British Energy Generation Limited of Barnett Way, Barnwood, Gloucester GL4 3RS (“BEG”) in favour of Nuclear Liabilities Fund Limited of 16 Rothesay Place, Edinburgh EH3 7SQ (“NLF”) over the property known as Hunterston “B” Power Station (“the Standard Security”) and with reference to the Nuclear Site Licensees Co-operation Agreement entered into or to be entered into between you BEG and Magnox Electric Limited (“the Agreement”) we NLF hereby confirm and undertake to you BEG as follows:-

1. That prior to becoming a Licensee (as that term is defined in the Agreement) we shall enter into an agreement in writing with the Other Party (as that term is defined in the Agreement) in the same terms mutatis mutandis as the Agreement; and

2. That on the assignation or transfer of our interest in the Standard Security to a third party we shall procure that the said third party grants to you an undertaking in the same terms as this letter, including this clause, and

3. That on any enforcement of the Standard Security, we shall procure that, prior to the disposition, conveyance, letting, disposal, transfer or other parting with or sharing of possession or occupation of the Property or any part thereof or granting any licence in relation thereto to any party, the said party enters into an agreement in writing with the Other Party (as that term is defined in the Agreement) in the same terms mutatis mutandis as the Agreement.

Yours faithfully,

__________________

Name _____________

Authorised Signatory

For and on behalf of Nuclear Liabilities Fund Limited

I, the Secretary of State undertake to the NLF that I will not instruct NLF to take any action in breach of its undertakings in the above letter.

___________________

A senior official of the Department of Trade and Industry duly authorised to sign on behalf of The Secretary of State for Trade and Industry

Date ___________________

20

PART 6

Contracts to be assigned pursuant to the terms of this agreement

For the purposes of this part 6 of the Schedule the following definitions shall apply:

“BEG” – British Energy Generation limited

“BEG (UK)” – British Energy Generation (UK) Limited

“BNFL” – British Nuclear Fuels plc

“CLG” – Nirex CLG Limited

“Magnox” – Magnox Electric Limited (formerly Magnox Electric plc)

“NGC” – National Grid Company plc

“Secretary of State” – the Secretary of State for the Department of Trade and Industry

“SNL” – Scottish Nuclear Limited

“UKAEA” – United Kingdom Atomic Energy Authority

Part A – Contracts governed by English Law

1.	Agreement between BNFL and SNL (now BEG (UK)) for the Supply of Fuel for Use in Advanced Gas Cooled Reactors dated 30th March 1995 as amended by the Deed of Amendment dated 31st March 2003 and further amended by Deed of Amendment dated 22nd July 2003 and further amended by Deed of Amendment dated 30th October 2003 (for the Fuel Supply Period from 1st April 1989 to 31st March 2006)
2.	Agreement between BNFL, BEG (UK) and BE for the supply of fuel for use in advanced gas cooled reactors from 1st April 2006 dated 31st March 2003, as amended by Deed of Amendment dated 31st March 2003 and further amended by Deed of Amendment dated 22nd July 2003 and further amended by Deed of Amendment dated 30th October 2003 (for the Fuel Supply Period from 1st April 2006)
3.	Agreement for New Spent Fuel Management Services between BNFL, BEG (UK), British Energy Trading Services Limited (as agent for BEG (UK)) and British Energy plc dated 16th May 2003 and amended by Deed of Amendment dated 30th October 2003
4.	Agreement for the storage and reprocessing of the irradiated oxide fuel and related services between BNFL and SNL dated 30th March 1995, as amended, by the Deed of Amendment dated 16th May 2003 between BNFL and BEG (UK) 2003 and further amended by Deed of Amendment dated 30th October 2003.
5.	Agreement for the long term storage of irradiated oxide fuel and related services between BNFL and SNL (now BEG(UK)) dated 30th March 1995, as amended, by the Deed of Amendment dated 16th May 2003 between BNFL and BEG (UK) 2003 and further amended by Deed of Amendment dated 30th October 2003
6.	Agreement between BNFL and SNL for Oxide Flask Maintenance dated 29th March 1996, as amended by the Deed of Amendment dated 16th May 2003 between BNFL and BEG (UK), relating to the Agreement of Oxide Flask Maintenance 2003 and further amended by Deed of Amendment dated 30th October 2003.

21

7.	Agreement between BNFL and SNL, dated 3rd June 1997, as amended by the Deed of Amendment dated 16th May 2003 between BNFL and BEG (UK), relating to the new Agreement for Oxide Flask Maintenance Services 2003 and further amended by Deed of Amendment dated 30th October 2003.
8.	Agreement for Oxide Miscellaneous Services between BNFL and SNL, dated 29 March 1996, as amended by the Deed of Amendment dated 16th May 2003 between BNFL and BEG (UK) 2003 and further amended by Deed of Amendment dated 30th October 2003.
9.	Agreement between BNFL and BEG (UK) for the Manufacture of Non Standard Fuel and Provision of Services dated 30th March 1995 and amended by Deed of Amendment dated 30th October 2003.
10.	Technical Services Agreement dated 30th March 1995 between BNFL and BEG (UK) 2003.
11.	Agreement between BEG, BEG (UK) and Parsons Brinckerhoff Limited for Quality Inspection and Surveillance Services for AGR Fuel Fabrication carried out by BNFL’s Westinghouse UK Fuel Business dated October 2002
12.	Draft Amendments to BEG (UK) Conditions of Contract for Turbine Services between BEG (UK) and Alstom Power Limited.
13.	Industry Management Committee Programme Agreement between SNL and Nuclear Electric plc (now Magnox Electric plc) and BNFL dated 14 November 1994.
14.	Agreement in Respect of Tie Bar Manufacturing Route Change between BNFL, BEG & BEG (UK), dated 28 August 2003.
15.	Agreement between BEG (UK) and BNFL for the disposal of Low Level Radioactive Waste (Reference: WM/LLW/303) dated 16 October 2002 together with letter dated 16th October 2002
16.	Agreement for Rail Transport Services of Irradiated Nuclear Fuel in the United Kingdom between BNFL and SNL, dated 3rd June 1997, as amended by the Deed of Amendment dated 16th May 2003 between BNFL and BEG (UK). 2003 and further amended by Deed of Amendment dated 30th October 2003
17.	Company Agreement (Supply and Services) dated 16 July 2003 between BEG, BEG (UK) and Wyko Industrial Services Limited
18.	Support Agreement between BE plc and NNC Limited dated 8th January 2001
19.	British Energy – Contract No. 40083420/40086630 for the Provision of Access, Thermal Insulation and Associated Services by C & D Industrial Services Limited and Plettac NSG plc (Synergy Combined Services) for BEG and BEG (UK) at Hartlepool, Sizewell B and Torness Power Stations
20.	Business Agreement (Ref: 40049503) covering the maintenance of Weir Manufactured Pumps, and Associated Equipment at British Energy Power Stations and the Provision of Strategic Spares between BEG, BEG (UK) and Weir Valves and Controls UK Limited
21.	BEG and Sulzer Pumps UK Limited – Business Agreement the Maintenance of Sulzer Manufactured Pumps and Associated Equipment of British Energy Power Stations and the Provision of Strategic Spares (Business Agreement Ref: 40039244)

22

22.	Contract no. 40093269 for the provision of fuel route support services at British Energy Stations between BE, BEG (UK) and Strachan and Henshaw Limited dated 1 July 2003
23.	Contract no. 40086939 between BEG, BEG (UK) and Beran Instruments Limited, for gas circulator on-line vibration monitoring system (including signal conditioning)
24.	Contract no. 40068022 between BEG, BEG (UK) and Alstec Limited for the replacement of channel gas outlet rate temperature trip units dated 6 February 2002
25.	Contract no. 40089953 between BEG (UK) and Canberra Harwell Limited for the replacement of neutron flux monitoring pulse count measurement equipment dated 31 March 2003
26.	Contract between BEG (UK), BEG and Beran Instruments Limited, for gas circulator on-line vibration monitoring system (including signal conditioning) (Contract number 40086939) in respect of Torness and Heysham ‘B’ power stations dated 30 January 2003.
27.	Contracts between BEG, BEG (UK) and Alstec Limited for the replacement of channel gas outlet temperature rate trip units (Contract No 40068022) at Hinkley Point ‘B’ and Hunterston ‘B’ power stations dated 6 February 2002.
28.	Contract Letter dated 31 May 2000 and Contract Renewal Letter dated 31 March 2003 for the provision of certain IT Support Services together with the BEG (UK)’s standard conditions of contract for support services with agreed amendments.
29.	Letter addressed to Initial Electronic Security Systems Limited regarding all British Energy UK Nuclear Power Stations, Site Security Systems Maintenance, Contract number 40069440.
30.	Letter addressed to Syseca Limited, Southmoor House regarding the Hunterston Power Station, Ferranti Argus 700 Data Logger Support Contract. Contract No. PPK 400 29371
31.	Letter addressed to Syseca Limited, Southmoor House regarding the Torness Power Station, Ferranti Argus 700 TOLCS System Support, Contract Number PPK 400 29362.
32.	Total Gas Management Contract (Business Agreement: BE/NAT/05001) between Nuclear Electric Limited, SNL and Linde Gas UK Limited, dated 2 October 1998.
33.	Contract Letter from BEG and BEG (UK) to Weir Valves and Controls UK Limited regarding Hunterston B, Hinkley Point B, Hartlepool and Heysham 1 Power Stations, Cast Iron Cooling Water Systems Replacement Values. Contract number 4011 6891.
34.	Contract Number 40093267 for the Provision of Fuel Route Support Services at British Energy Stations between BEG, BEG (UK) and Alstec Limited dated July 2003.
35.	British Energy plc and Eurest Managed Services (A Trading Division of Compass Services (UK) Limited) – Conditions of Contract dated January 2001

23

36.	Contracts governed by Nuclear Electric Plc Conditions of Contract for Supply or Repair and Installation of Plant (1992)
37.	Contracts governed by Conditions for Contract for Minorworks 1997NE/MW/1997
38.	Contracts governed by Nuclear Electric plc Conditions of Contract for Supply or Repair and Delivery of Plant (1992)
39.	Contracts governed by BEG Conditions of Purchase 1999
40.	Contracts governed by Nuclear Electric Ltd General Conditions of Contract for Site Work 1996
41.	Contracts governed by Nuclear Electric Conditions for Contract 1991 for feasibility studies and prototype design and/ or development
42.	Contracts governed by Nuclear Electric plc General Conditions of Contract For Site Work 1991
43.	Contracts governed by Nuclear Electric Conditions of Contract for Supply or Repair and Installation of Plant (1992 – BE – Joint)
44.	Contracts governed by BEG (UK)—Conditions of Purchase 1999 and 2001
45.	Contracts governed by General Conditions for Professional Services
46.	Contracts governed by Conditions of Contract for the Employment of Agency Staff (1997)
47.	Contracts governed by EB/BEAMA Conditions 1979 (A) – Conditions of Contract for Plant (including erection)
48.	Contracts governed by EB/BEAMA Conditions 1979 (B) – Conditions of Contract for Plant (without erection).
49.	Connection Agreement between BEG (UK) and NGC in relation to Hunterston Power Station
50.	Connection Agreement between BEG (UK) and NGC in relation to Torness Power Station
51.	Transmission Related Agreement regarding Bid-Price/Offer Price Hedge following failure to comply with restrictions on availability – Hunterston – between BEG (UK) and NGC
52.	Transmission Related Agreement regarding Bid-Price/Offer Price Hedge following failure to comply with restrictions on availability – Torness– between BEG (UK) and NGC
53.	Connection and Use of System Code Mandatory Service Agreement relating to Hunterston B Power Station – between BEG (UK) and NGC
54.	Connection and Use of System Code Mandatory Service Agreement relating to Torness Power Station – between BEG (UK) and NGC
55.	Ancillary Services Agreement for Reactive Power – Torness – between BEG (UK) and NGC dated 7th March 2005

24

56.	Bilateral Connection Agreement between BEG (UK) and NGC in relation to Hunterston B Power Station dated 31 March 2005
57.	Bilateral Connection Agreement between BEG (UK) and NGC in relation to Torness Power Station dated 31 March 2005
58.	Transmission Related Agreement regarding Bid-Price/Offer Price Hedge following failure to comply with restrictions on availability – Hunterston – between BEG (UK) and NGC dated 31 March 2005
59.	Transmission Related Agreement regarding Bid-Price/Offer Price Hedge following failure to comply with restrictions on availability – Torness– between BEG (UK) and NGC dated 31 March 2005
60.	Connection and Use of System Code Mandatory Service Agreement relating to Hunterston B Power Station – between BEG (UK) and NGC dated 10 March 2005
61.	Connection and Use of System Code Mandatory Service Agreement relating to Torness Power Station – between BEG (UK) and NGC dated 10 March 2005
62.	Ancillary Services Agreement for Reactive Power – Torness – between BEG (UK) and NGC dated 7 March 2005.
63.	Agreement to Vary the Bilateral Connection Agreement in relation to Hunterston B Power Station between BEG (UK) and NGC dated 6 June 2005.
64.	Construction Agreement in respect of Hunterston 400kv between BEG (UK) and NGC dated 6 June 2005.

25

Part B

Contracts governed by the Law of Scotland

65.	Contract for Remote Operation Services at Hunterston and Torness between BEG (UK) and SP Transmission Limited
66.	Agreement between SP Power Systems Limited and BEG (UK) re works at Hunterston 400kv sub-station dated 17 May 2005.
67.	Agreement between BEG (UK) and Magnox relative to the provision of security services at Hunterston dated 27 March 1996 (as amended).
68.	Agreement between BEG (UK) and Magnox relative to the provision of district survey and boundary monitoring services at Hunterston dated 27 March 1996 (as amended).
69.	Agreement between BEG (UK) and Magnox relative to the provision of pumping and sewerage treatment services at Hunterston dated 27 March 1996 (as amended).
70.	Agreement between BEG (UK) and Magnox relative to active effluent treatment and discharge at Hunterston dated 27 March 1996 (as amended).
71.	Agreement between BEG (UK) and Magnox relative to site access roads at Hunterston dated 27 March 1996 (as amended).
72.	Agreement between BEG (UK) and Magnox relative to the provision of towns water supplies at Hunterston dated 27 March 1996 (as amended).
73.	Agreement between BEG (UK) and Magnox relative to the provision of emergency services at Hunterston dated 27 March 1996 (as amended).
74.	Agreement between BEG (UK) and Magnox relative to the provision of decontamination and first aid services at Hunterston dated 27 March 1996 (as amended)
75.	Agreement between BEG (UK) and Magnox for the supply and laundering of personal protective equipment formed on the basis of letters from BNFL Environmental Services dated 20 September and 18 November 2002 accepted by BEG(UK) on 27 November 2002 as subsequently amended and extended.

26

PART 7

Conditions of Inter-Company Loan

1. REPAYMENT OF THE LOAN

1.1 The Purchaser undertakes to repay the Loan in one instalment within 3 Business Days of written demand therefor being served on the Purchaser by the Vendor.

1.2 Repayment of the Loan will be made by telegraphic transfer to such account of the Vendor as the Vendor may notify to the Purchaser for this purpose.

2. INTEREST

2.1 Interest shall accrue on the Loan in respect of each Interest Period at 7.25% per annum (the “Rate”) on the principal amount of the Loan outstanding on the first day of the Interest Period in question.

2.2 Interest on the Loan shall be payable, in arrears, on the last Business Day of each Interest Period, save in respect of the First Interest Period (as defined in condition 2.3.1 below). Interest shall be payable in respect of the First Interest Period on the First Business Day following agreement or determination of the Net Book Value in accordance with clause 3.3 of the agreement.

2.3 The following shall apply for the purposes of determining the duration of each period in respect of which interest shall accrue on the Loan:-

2.3.1  the first such period (“the First Interest Period”) shall commence on the Completion Date and terminate on the date on which the Net Book Value has been agreed or determined in accordance with the provisions of clause 3.3 of the agreement;

2.3.2  the second such period shall commence forthwith on the expiry of the First Interest Period and terminate on the last Business Day of the calendar month next following that in which the Net Book Value has been agreed or determined in accordance with the provisions in clause 3.3 of the agreement,

2.3.3  subject to condition 2.3.4, each subsequent period shall last until the last Business Day of the calendar month next following that in which the preceding such period shall have expired; and

2.3.4  the last such period shall terminate on the date on which the Loan (or the last outstanding part of it, as the case may be) is repaid.

2.4 The Purchaser shall deduct any income or other tax required by law to be deducted from each interest payment hereunder.

2.5 Without prejudice to any other provision of this Part 7, in the event of default by the Purchaser in paying any monies (whether principal or interest) due in respect of the Loan, it shall pay interest thereon at the rate of 2% per annum above the Rate and that from the date of default until all such monies (and all interest thereon) have been paid in full.

3. NO DEDUCTIONS

All sums payable by the Purchaser hereunder shall be paid in full without any set-off or counterclaim whatsoever and, except to the extent compelled by law, without any deduction for, or on account of, taxes.

27

4. NEGATIVE COVENANTS

The Purchaser covenants with and undertakes to the Vendor that, while the Recoverable Amount or any part thereof remains outstanding, it shall not without the Vendor’s prior written consent:-

4.1 make or pay any distribution or dividend on any class of its share capital;

4.2 redeem or purchase any of its share capital; or

4.3 reduce its share capital or the amount (if any) for the time being standing to the credit of its share premium account or capital redemption reserve (save, in either such case by means of a capitalisation issue) in any manner for which the consent of the court would be required pursuant to the Companies Act 1985.

5. POSITIVE COVENANTS

The Purchaser covenants with and undertakes to the Vendor that, while the Recoverable Amount or any part thereof remains outstanding, it shall (save with the Vendor’s prior written consent):-

5.1 procure that the Purchaser does not pay any remuneration to its directors or shadow directors or any person associated therewith;

5.2 maintain in good standing its corporate existence, rights, privileges and franchises and qualify and remain duly qualified to do business and own property;

5.3 advise the Vendor forthwith of the details of any litigation, arbitration or administrative proceeding pending or threatened against the Purchaser;

5.4 pay or discharge or cause to be paid or discharged when the same shall become due all taxes imposed upon the Purchaser;

5.5 promptly notify the Vendor in writing of the occurrence of any Event of Default and/or Potential Event of Default;

5.6 deliver to the Vendor copies of all notices, circulars and documents despatched to shareholders of the Purchaser (or any class thereof) at the time when the same are despatched to the shareholders;

5.7 keep proper books of account and records in which complete and correct entries will be made of all of its business and financial transactions, such entries to be made in accordance with generally accepted accounting principles consistently applied; and

5.8 effect and maintain insurance cover in respect of the Properties against loss or damage by fire and/or such other risks as the Vendor may specify from time to time and that for the full replacement value thereof, exhibit to the Vendor receipts for the insurance premiums paid in respect thereof within 7 days after the commencement date or the due date for renewal of such insurance cover, as appropriate, and, if requested by the Vendor, procure that the insurance policies are endorsed or noted with reference to the interest of the Vendor.

6. REPAYMENT IN CASE OF DEFAULT

It shall be an event of default if, for whatever reason and whether or not within the control of the Purchaser, any of the following events occur:-

6.1 the Purchaser fails to pay any sum due under this agreement on the date upon which it is payable;

6.2 there shall be a contravention or breach (other than is provided for in condition 6.1 above) on the part of the Purchaser of any covenant or undertaking contained in this agreement and, where such breach is capable or remedy, it is not remedied by the Purchaser within 10 Business Days of it being required so to do, in writing, by the Vendor;

28

6.3 the Loan becomes repayable by the Purchaser prior to the due date for payment thereof or is not satisfied or discharged on the due date or within any applicable period of grace or any security given by the Purchaser is enforced or becomes unenforceable (otherwise than being released or discharged by the security holder);

6.4 the Purchaser is wound-up or dissolved;

6.5 a resolution is passed for the winding-up or dissolution of the Purchaser (other than a resolution for the purpose of any reconstruction or amalgamation or a member’s voluntary winding-up, in each case, in terms previously approved in writing by the Vendor, such approval not to be unreasonably withheld or delayed);

6.6 a liquidator, trustee, receiver, administrator, administrative receiver or similar officer is appointed over the whole or any material part of the property, assets or undertaking of the Purchaser;

6.7 any diligence, distress, execution, sequestration or other process is levied or enforced upon or sued out against the property of the Purchaser and is not discharged, in full, within 5 Business Days;

6.8 the Purchaser suspends payment of its debts or is unable or is deemed to be unable to pay its debts (within the meaning of the Insolvency Act 1986 or any statutory modification or re-enactment thereof);

6.9 a proposal is made or a nominee or supervisor is appointed for a composition in satisfaction of the debts of the Purchaser or for a scheme of arrangement of the affairs of the Purchaser or the Purchaser commences negotiations with one or more of its creditors with a view to the general readjustment or rescheduling of all or part of its debts or enters into any composition or other arrangement for the benefit of its creditors generally or any class of creditors or proceedings are commenced in relation to the Purchaser under any law, regulation or procedure relating to the reconstruction or readjustment of debt;

6.10 any of the matters referred to in conditions 6.4 to 6.9 above (inclusive) occurs in relation to a holding company of the Purchaser;

6.11 the Purchaser ceases to carry on its business or substantially the whole of its business;

in which case, at any time thereafter (and notwithstanding any other provision of this agreement to the contrary), the Vendor may, in its sole discretion, by notice in writing to the Purchaser:-

(a) declare the Loan to be immediately due and payable together with all interest, fees and other amounts payable hereunder in respect thereof and, upon such declaration, such sums shall become immediately due without demand or other notice of any kind, all of which are expressly waived by the Purchaser; and/or

(b) pursue any and all remedies available to the Vendor in terms of these conditions.

7. EXPENSES

The Purchaser shall reimburse the Vendor, on demand, for all reasonable costs and expenses incurred by it in connection with any variation or amendment of these conditions, or in enforcing, perfecting, protecting or preserving (or attempting so to do) any of its respective rights hereunder.

8. TIME OF THE ESSENCE

Time is of the essence as regards any date or period mentioned in these conditions.

29

9. NOTICES

9.1 Any notice required to be given by the Vendor or the Purchaser to the other shall be deemed validly served if served by:-

9.2 prepaid registered letter post addressed to the address set out in at the beginning of this agreement or to such other address as may from time to time be notified in writing to it by the other party for this purpose; or

9.3 personal delivery by hand to such address;

and any notice so served shall be deemed to have been served:-

(a) in the case of 9.1 above, two Business Days after posting the same; and

(b) in the case of 9.2 above, upon delivery.

10. GENERAL

10.1 No waiver by the Vendor of any of the requirements hereof or of any of its rights under these conditions shall be effective unless given in writing and signed by or on behalf of the Vendor and no forbearance, delay or indulgence by the Vendor in enforcing the provisions of these conditions shall prejudice or restrict the rights of the Vendor.

10.2 The rights and remedies provided in these conditions are cumulative and not exclusive of any rights or remedies otherwise provided by law.

10.3 Each provision of these conditions shall be construed separately and (save as otherwise expressly provided herein) none of the provisions hereof shall limit or govern the extent, application or construction of any other of them and, notwithstanding that any provision of these conditions may prove to be illegal or unenforceable, the remaining provisions of these conditions shall continue in full force and effect.

11. GOVERNING LAW AND SUBMISSION TO JURISDICTION

These conditions shall be construed and receive effect in accordance with the Law of Scotland and in so far as not already subject thereto, the Purchaser and the Vendor submit to the non-exclusive jurisdiction of the Scottish courts.

30

EX-4.43

Exhibit 4.43

STANDARD SECURITY

By

BRITISH ENERGY GENERATION (UK) LIMITED

in favour of

NUCLEAR GENERATION DECOMMISSIONING FUND LIMITED

Re: Torness Power Station

STANDARD SECURITY

By

(1) BRITISH ENERGY GENERATION (UK) LIMITED, a company incorporated under the Companies Acts (Company Number SC117121) and having its registered office at Systems House, Alba Campus, Livingston EH54 7EG (the “Company”)

in favour of

(2) NUCLEAR GENERATION DECOMMISSIONING FUND LIMITED of 16 Rothesay Place, Edinburgh EH3 7SQ (registered in Scotland no. SC164685) (the “NLF”)

WHEREAS

A. In terms of the Government Restructuring Agreement the Company undertook, among other things, (on request) to execute and deliver to the NLF valid fixed and floating security in favour of the NLF to secure inter alia the Decommissioning Default Payment (as defined in the Contribution Agreement) on such terms as the NLF may reasonably require; and

B. Following a request by the NLF, the Company now grants the security aftermentioned.

THEREFORE THE PARTIES HEREBY AGREE AND DECLARE AS FOLLOWS:

1. DEFINITIONS AND INTERPRETATIONS

1.1 Definitions

In this Standard Security:

“Debenture” means the Debenture by the Obligors in favour of the NLF dated 14 January 2005;

“Government Restructuring Agreement” means the Government Restructuring Agreement entered into between the British Energy PLC, British Energy Generation (UK) Limited, British Energy Generation Limited, the other British Energy Parties, Nuclear Generation Decommissioning Fund Limited, the Trustees of the Nuclear Trust and the Secretary of State for Trade and Industry dated 1 October 2003;

“Insurance” means the Company’s interest in all contracts and policies of insurance which are from time to time taken out or effected by or on behalf of the Company in connection with the Property;

“Property” means ALL and WHOLE the property known as and forming Torness Power Station, Torness, East Lothian as more particularly described in the Schedule annexed and signed as relative to this Standard Security;

“Security” means any mortgage, standard security, charge (whether fixed or floating), pledge, lien, assignation by way of security, assignment by way of security,

- 2 -

hypothecation, or other security interest securing any obligation of any person (including without limitation title transfer and/or retention arrangements having a similar effect) (and “secured” shall be construed accordingly);

“Standard Security” means this standard security together with the schedule annexed and signed as relative hereto and any document which is expressed to amend this standard security;

1.2 In this Standard Security, save where referred to in Clause 1.1, terms defined and references defined in the Debenture shall have the same meaning and construction in this Standard Security.

1.3 Any reference in this Standard Security to any other document to which the parties hereto are party (including the Debenture) shall be construed as a reference to that document as amended, varied, novated or supplemented as the case may be with, where it is so required, the prior written consent of the NLF.

2. STANDARD SECURITY

2.1 In continuing security for payment and discharge of all the Secured Liabilities, the Company hereby grants a Standard Security in favour of the NLF over the Property.

2.2 The Standard Conditions specified in Schedule 3 of the Conveyancing and Feudal Reform (Scotland) Acts 1970 and 1971 as varied (i) herein and by (ii) the Contribution Agreement and by (iii) the Debenture shall apply and where any inconsistency shall arise between (a) the said Standard Conditions, and (b) the terms of the Contribution Agreement or (c) the terms of the Debenture, then the terms of the Contribution Agreement shall prevail and shall have effect in preference to the said Standard Conditions and the Debenture and where any inconsistency shall arise between (a) the said Standard conditions and (b) the terms of the Debenture then the terms of the Debenture shall prevail and shall have effect in preference to the said Standard Conditions; Notwithstanding this clause 2.2 nothing shall prevent or restrict NLF rights and powers under Standard Condition 10; Provided Always that (i) the Company shall not be deemed to be in breach of any Standard Conditions (a) if it has complied with the obligations imposed on it by the Contribution Agreement which relates to the same subject matter as the relevant Standard Condition and (b) where such breach is as a consequence of the Company complying with its obligations under the Contribution Agreement and (ii) the Standard Conditions shall not be construed so as to impose more onerous obligations on the Company to the NLF than under the Contribution Agreement.

2.3 Without prejudice to the generality of the foregoing Clause 2.2, the Standard Conditions referred to therein shall be varied so that (i) notwithstanding Standard Condition 5, Insurance shall be effected in accordance with Clause 7.6 of the Debenture and (ii) notwithstanding Standard Condition 9, default of the Company in terms hereof shall be determined exclusively by reference to the Default Events contained in Clause 17 of the Contribution Agreement and the Company shall only be held to be in default where such a Default Event is continuing.

- 3 -

2.4 The Company acknowledges the rights and powers of the NLF under this Standard Security are subject to Clause 1.5 of the Debenture.

2.5 The Company hereby confirms that it is the sole legal and beneficial owner of the Property.

3. RANKING

3.1 This Standard Security shall rank in priority to any fixed security which shall be created by the Company before, on or after its execution of this Standard Security, and to any floating charge which shall be created by the Company before, on or after its execution of this Standard Security and no such fixed security or floating charge shall rank in priority to or equally with this Standard Security.

3.2 Except with the prior written consent of the NLF, the Company shall not create, incur, assume or permit to subsist any Security on all or any part of the Property except for any security created by or pursuant to the Negative Pledge Exemptions.

4. ASSIGNATION

The NLF may assign and transfer all of its rights and obligations under this Standard Security to a successor in accordance with the terms of the Clause 22.7 of the Contribution Agreement.

5. CERTIFICATION

A Certificate signed by any official of or person authorised by the NLF shall, in the absence of manifest error, conclusively determine the Secured Liabilities at any relevant time.

6. CONSENT TO REGISTRATION

The Company grants warrandice but excepting therefrom any current leases, licences and other third party rights of occupancy, rights of way, servitudes and wayleaves granted by us or our predecessors in title but without prejudice to the right of the NLF to quarrel or impugn the same on any ground not inferring warrandice against us and the NLF hereby consents to the registration of this Standard Security and of any such Certificate for preservation and execution: IN WITNESS WHEREOF these presents typewritten on this and the preceding two pages together with the schedule annexed and signed as relative hereto are executed as follows:-

SUBSCRIBED FOR AND ON BEHALF OF

BRITISH ENERGY GENERATION (UK) LIMITED

At

On the      day of

By

before this witness

NAME

- 4 -

Director/Authorised Signatory

ADDRESS

Witness

- 5 -

SCHEDULE REFERRED TO IN THE FOREGOING STANDARD SECURITY BY BRITISH ENERGY GENERATION (UK) LIMITED IN FAVOUR OF NUCLEAR GENERATION DECOMMISSIONING FUND LIMITED

Property

ALL and WHOLE the subjects known as Torness Power Station lying in the Parish of Innerwick and the Country of East Lothian together with the whole buildings and other erections thereon, the heritable fixtures and fittings, plant and equipment therein and thereon but only in so far as belonging to the Company, and under exception of any plant equipment and others owned by Scottish Power plc to the extent to which these are specifically referred to in Minute of Agreement between Scottish Power plc and Scottish Nuclear Limited dated 13 and 29 May and registered in the said Division of the General register of Sasines on 4 November, both months in the year 1991, and the parts, privileges and pertinents thereof which subjects are more particularly described in, and title taken to in terms of, Notice of Title by Scottish Nuclear Limited dated 16 May 1996 and recorded in the Division of the General Register of Sasines applicable to the County of East Lothian on 21 May 1996

Director/Authorised Signatory

- 6 -

EX-4.44

Exhibit 4.44

LIMITED LIABILITY PARTNERSHIP

BRITISH ENERGY GENERATION (UK) LIMITED

in favour of

NUCLEAR GENERATION DECOMMISSIONING FUND

LIMITED

Re: Hunterston “B” Power Station

STANDARD SECURITY

STANDARD SECURITY by

(1) BRITISH ENERGY GENERATION (UK) LIMITED, a company incorporated under the Companies Acts (Company Number SC117121) and having its registered office at Systems House, Alba Campus, Livingston EH54 7EG (the “Company”)

in favour of

(2) NUCLEAR GENERATION DECOMMISSIONING FUND LIMITED of 16 Rothesay Place, Edinburgh EH3 7SQ (registered in Scotland no. SC 164685) (the “NLF”)

WHEREAS

(A) In terms of the Government Restructuring Agreement the Company undertook, among other things, (on request) to execute and deliver to the NLF valid fixed and floating security in favour of the NLF to secure inter alia the Decommissioning Default Payment (as defined in the Contribution Agreement) on such terms as the NLF may reasonably require; and

(B) Following a request by the NLF, the Company now grants the security aftermentioned. THEREFORE THE PARTIES HEREBY AGREE AND DECLARE AS FOLLOWS:

1. DEFINITIONS AND INTERPRETATIONS

1.1 Definitions

In this Standard Security:

“Debenture” means the Debenture by the Obligors in favour of the NLF dated 14^`x’ January 2005;

“Government Restructuring Agreement” means the Government Restructuring Agreement entered into between the British Energy PLC, British Energy Generation (UK) Limited, British Energy Generation Limited, the other British Energy Parties, Nuclear Generation Decommissioning Fund Limited, the Trustees of the Nuclear Trust and the Secretary of State for Trade and Industry dated 1 October 2003;

“Insurance” means the Company’s interest in all contracts and policies of insurance which are from time to time taken out or effected by or on behalf of the Company in connection with the Property;

“Property” means ALL and WHOLE the property known as and forming Hunterston “B” Power Station, Hunterston, Ayrshire as more particularly described in the Schedule annexed and signed as relative to this Standard Security;

“Security” means any mortgage, standard security, charge (whether fixed or floating), pledge, lien, assignation by way of security, assignment by way of security, hypothecation, or other security interest securing any obligation of any person (including without limitation title transfer and/or retention arrangements having a similar effect) (and “secured” shall be construed accordingly);

- 1 -

“Standard Security” means this standard security together with the schedule annexed and signed as relative hereto and any document which is expressed to amend this standard security;

1.2 In this Standard Security, save where referred to in Clause 1.1, terms defined and references defined in the Debenture shall have the same meaning and construction in this Standard Security.

1.3 Any reference in this Standard Security to any other document to which the parties hereto are party (including the Debenture) shall be construed as a reference to that document as amended, varied, novated or supplemented as the case may be with, where it is so required, the prior written consent of the NLF.

2. STANDARD SECURITY

2.1 In continuing security for payment and discharge of all the Secured Liabilities, the Company hereby grants a Standard Security in favour of the NLF over the Property.

2.2 The Standard Conditions specified in Schedule 3 of the Conveyancing and Feudal Reform (Scotland) Acts 1970 and 1971 as varied (i) herein and by (ii) the Contribution Agreement and by (iii) the Debenture shall apply and where any inconsistency shall arise between (a) the said Standard Conditions, and (b) the terms of the Contribution Agreement or (c) the terms of the Debenture, then the terms of the Contribution Agreement shall prevail and shall have effect in preference to the said Standard Conditions and the Debenture and where any inconsistency shall arise between (a) the said Standard Conditions and (b) the terms of the Debenture then the terms of the Debenture shall prevail and shall have effect in preference to the said Standard Conditions; Notwithstanding this clause 2.2 nothing shall prevent or restrict NLF rights and powers under Standard Condition 10; Provided Always that (i) the Company shall not be deemed to be in breach of any Standard Conditions (a) if it has complied with the obligations imposed on it by the Contribution Agreement which relates to the same subject matter as the relevant Standard Condition and (b) where such breach is as a consequence of the Company complying with its obligations under the Contribution Agreement and (ii) the Standard Conditions shall not be construed so as to impose more onerous obligations on the Company to the NLF than under the Contribution Agreement.

2.3 Without prejudice to the generality of the foregoing Clause 2.2, the Standard Conditions referred to therein shall be varied so that (i) notwithstanding Standard Condition 5, Insurance shall be effected in accordance with Clause 7.6 of the Debenture and (ii) notwithstanding Standard Condition 9, default of the Company in terms hereof shall be determined exclusively by reference to the Default Events contained in Clause 17 of the Contribution Agreement and the Company shall only be held to be in default where such an Default Event is continuing.

- 2 -

2.4 The Company acknowledges the rights and powers of the NLF under this Standard Security are subject to Clause 1.5 of the Debenture.

2.5 The Company hereby confirms that it is the sole legal and beneficial owner of the Property.

3. RANKING

3.1 This Standard Security shall rank in priority to any fixed security which shall be created by the Company before, on or after its execution of this Standard Security, and to any floating charge which shall be created by the Company before, on or after its execution of this Standard Security and no such fixed security or floating charge shall rank in priority to or equally with this Standard Security.

3.2 Except with the prior written consent of the NLF, the Company shall not create, incur, assume or permit to subsist any Security on all or any part of the Property except for any security created by or pursuant to the Negative Pledge Exemptions.

4. ASSIGNATION

The NLF may assign and transfer all of its rights and obligations under this Standard Security to a successor in accordance with the terms of the Clause 22.7 of the Contribution Agreement.

5. CERTIFICATION

A Certificate signed by any official of or person authorised by the NLF shall, in the absence of manifest error, conclusively determine the Secured Liabilities at any relevant time.

6. CONSENT TO REGISTRATION

The Company grants warrandice but excepting therefrom any current leases, licences and other third party rights of occupancy, rights of way, servitudes and wayleaves granted by us or our predecessors in title but without prejudice to the right of the NLF to quarrel or impugn the same on any ground not inferring warrandice against us and the NLF hereby consents to the registration of this Standard Security and of any such Certificate for preservation and execution: IN WITNESS WHEREOF these presents typewritten on this and the preceding two pages together with the schedule annexed and signed as relative hereto are executed as follows:

- 3 -

SUBSCRIBED FOR AND ON BEHALF OF

BRITISH ENERGY GENERATION (UK) LIMITED

At

On the     day of

before this witness

By:

NAME

Director/Authorised Signatory

ADDRESS

Witness

- 4 -

SCHEDULE REFERRED TO IN THE FOREGOING STANDARD SECURITY BY BRITISH ENERGY GENERATION (UK) LIMITED IN FAVOUR OF NUCLEAR GENERATION DECOMMISSIONING FUND LIMITED

Property

ALL and WHOLE the subjects and others known as and forming the Hunterston “B” Power Station, Hunterston, Ayrshire which subjects and others are more particularly described in and title taken to by the Notice of Title by Scottish Nuclear Limited recorded in the Division of the General Register of Sasines applicable to the County of Ayr on 14 October 1991 UNDER EXCEPTION of (1) ALL and WHOLE the subjects and others known as and forming the Hunterston “A” Power Station, Hunterston, Ayrshire being the subjects more particularly described in and disponed by Disposition by Scottish Nuclear Limited in favour of Nuclear Electric plc recorded in the said Division of the General Register of Sasines on 3 April 1996 and the servitude rights disponed by the said Disposition and (2) ALL and WHOLE the subjects and others more particularly described in Disposition by Scottish Nuclear Limited in favour of Clydeport Operations Limited recorded in the said Division of the General Register of Sasines on 3 April 1996; TOGETHER WITH by way of inclusion (one) all buildings and other erections on the subjects hereby secured (two) the parts, privileges and pertinents thereof, the heritable fixtures and fittings, plant and equipment therein and thereon but only insofar as belonging to the Company, and under exception of any plant, equipment and others owned by or vested in Scottish Power plc to the extent which these are specifically referred to in the Minute of Agreement between Scottish Power plc and Scottish Nuclear Limited dated 13 and 29 May and recorded in the said Division of the General Register of Sasines on 4 November, both months in 1991.

Director/Authorised Signatory

- 5 -

EX-4.45

Exhibit 4.45

STANDARD SECURITY

By

BRITISH ENERGY GENERATION LIMITED

in favour of

NUCLEAR LIABILITIES FUND LIMITED

Re:    Torness Power Station

1

STANDARD SECURITY

by

(1) BRITISH ENERGY GENERATION LIMITED, a company incorporated under the Companies Acts (Company Number 03076445) and having its registered office at Barnett Way, Barnwood, Gloucester GL4 3RS (the “Company”)

in favour of

(2) NUCLEAR LIABILITIES FUND LIMITED of 16 Rothesay Place, Edinburgh EH3 7SQ (registered in Scotland no. SC164685) (the “NLF”)

WHEREAS

A. In terms of the Government Restructuring Agreement BEG(UK) granted in favour of the NLF the BEG(UK) Standard Security to secure inter alia the Decommissioning Default Payment (as defined in the Contribution Agreement);

B. In terms of the Transfer Agreement BEG(UK) agreed to sell and the Company agreed to purchase, as a going concern, the undertaking and all of the assets of BEG(UK) on the terms contained therein; and

C. The terms of the Transfer Agreement include inter alia that the NLF shall execute and deliver to the Company a valid Discharge of the BEG(UK) Standard Security and that the Company shall execute and deliver to the NLF a valid fixed security in favour of NLF over the Property to continue to secure inter alia the Decommissioning Default Payment; and

D. Accordingly the Company now grants the security aftermentioned.

THEREFORE THE PARTIES HEREBY AGREE AND DECLARE AS FOLLOWS:

1 DEFINITIONS AND INTERPRETATIONS

1.1 Definitions

In this Standard Security:

“BEG(UK)” means British Energy Generation (UK) Limited, incorporated under the Companies Acts (Number SC 117121) and having its Registered Office at Systems House, Alba Campus, Livingston;

“BEG(UK) Standard Security” means the Standard Security granted by BEG(UK) in favour of the NLF dated and recorded in the Division of the General Register of Sasines for the County of East Lothian on 14^th of January 2005 over the Property;

“Debenture” means the Debenture by the Obligors in favour of the NLF dated 14^th January 2005;

“Government Restructuring Agreement” means the Government Restructuring Agreement entered into between the British Energy PLC, British Energy Generation (UK) Limited, British Energy Generation Limited, the other British Energy Parties, Nuclear Generation Decommissioning Fund Limited, the Trustees of the Nuclear Trust and the Secretary of State for Trade and Industry dated 1 October 2003;

2

“Insurance” means the Company’s interest in all contracts and policies of insurance which are from time to time taken out or effected by or on behalf of the Company in connection with the Property;

“Property” means ALL and WHOLE the property known as and forming Torness Power Station, Torness, East Lothian as more particularly described in the Schedule annexed and signed as relative to this Standard Security;

“Security” means any mortgage, standard security, charge (whether fixed or floating), pledge, lien, assignation by way of security, assignment by way of security, hypothecation, or other security interest securing any obligation of any person (including without limitation title transfer and/or retention arrangements having a similar effect) (and “secured” shall be construed accordingly);

“Standard Security” means this standard security together with the schedule and plan annexed and signed as relative hereto and any document which is expressed to amend this standard security;

“Transfer Agreement” means the Business Transfer Agreement entered into between BEG(UK) and the Company dated 27^th June 2005;

1.2 In this Standard Security, save where referred to in Clause 1.1, terms defined and references defined in the Debenture shall have the same meaning and construction in this Standard Security.

1.3 Any reference in this Standard Security to any other document to which the parties hereto are party (including the Debenture) shall be construed as a reference to that document as amended, varied, novated or supplemented as the case may be with, where it is so required, the prior written consent of the NLF.

2 STANDARD SECURITY

2.1 In continuing security for payment and discharge of all the Secured Liabilities, the Company hereby grants a Standard Security in favour of the NLF over the Property.

2.2 The Standard Conditions specified in Schedule 3 of the Conveyancing and Feudal Reform (Scotland) Acts 1970 and 1971 as varied (i) herein and by (ii) the Contribution Agreement and by (iii) the Debenture shall apply and where any inconsistency shall arise between (a) the said Standard Conditions, and (b) the terms of the Contribution Agreement or (c) the terms of the Debenture, then the terms of the Contribution Agreement shall prevail and shall have effect in preference to the said Standard Conditions and the Debenture and where any inconsistency shall arise between (a) the said Standard Conditions and (b) the terms of the Debenture then the terms of the Debenture shall prevail and shall have effect in preference to the said Standard Conditions; Notwithstanding this clause 2.2 nothing shall prevent or restrict NLF rights and powers under Standard Condition 10; Provided Always that (i) the Company shall not be deemed to be in breach of any Standard Conditions (a) if it has complied with the obligations imposed on it by the Contribution Agreement which relates to the same subject matter as the relevant Standard Condition and (b) where such breach is as a consequence of the Company complying with its obligations under the Contribution Agreement and (ii) the Standard Conditions shall not be construed so as to impose more onerous obligations on the Company to the NLF than under the Contribution Agreement.

2.3 Without prejudice to the generality of the foregoing Clause 2.2, the Standard Conditions referred to therein shall be varied so that (i) notwithstanding Standard Condition 5, Insurance shall be effected in accordance with Clause 7.6 of the Debenture and (ii) notwithstanding Standard Condition 9, default of the Company in terms hereof shall be determined exclusively by reference to the Default Events contained in Clause 17 of the Contribution Agreement and the Company shall only be held to be in default where such an Default Event is continuing.

3

2.4 The Company acknowledges the rights and powers of the NLF under this Standard Security are subject to Clause 1.5 of the Debenture.

2.5 The Company hereby confirms that it is the sole legal and beneficial owner of the Property.

3 RANKING

3.1 This Standard Security shall rank in priority to any fixed security which shall be created by the Company before, on or after its execution of this Standard Security, and to any floating charge which shall be created by the Company before, on or after its execution of this Standard Security and no such fixed security or floating charge shall rank in priority to or equally with this Standard Security.

3.2 Except with the prior written consent of the NLF, the Company shall not create, incur, assume or permit to subsist any Security on all or any part of the Property except for any security created by or pursuant to the Negative Pledge Exemptions.

4 ASSIGNATION

The NLF may assign and transfer all of its rights and obligations under this Standard Security to a successor in accordance with the terms of the Clause 22.7 of the Contribution Agreement.

5 CERTIFICATION

A Certificate signed by any official of or person authorised by the NLF shall, in the absence of manifest error, conclusively determine the Secured Liabilities at any relevant time.

6 CONSENT TO REGISTRATION

The Company grants warrandice but excepting therefrom any current leases, licences and other third party rights of occupancy, rights of way, servitudes and wayleaves granted by us or our predecessors in title but without prejudice to the right of the NLF to quarrel or impugn the same on any ground not inferring warrandice against us and the NLF hereby consents to the registration of this Standard Security and of any such Certificate for preservation and execution: IN WITNESS WHEREOF these presents typewritten on this and the preceding two pages together with the schedule and plan annexed and signed as relative hereto are executed as follows: –

SUBSCRIBED FOR AND ON BEHALF OF
BRITISH ENERGY GENERATION LIMITED
At
on the        day of
by
		Director/Authorised Signatory
	Witness
NAME
ADDRESS

4

SCHEDULE REFERRED TO IN THE FOREGOING STANDARD SECURITY BY BRITISH ENERGY GENERATION LIMITED IN FAVOUR OF NUCLEAR LIABILITIES FUND LIMITED

Property

ALL and WHOLE the subjects known as Torness Power Station lying in the Parish of Innerwick and the County of East Lothian, being the subjects shown outlined in red on the plan annexed and executed as relative hereto; TOGETHER WITH (ONE) the whole buildings, heritable fixtures and fittings, plant and equipment therein and thereon; (TWO) the whole rights common, mutual, exclusive and otherwise pertaining thereto, including without prejudice to the generality of the foregoing (First) all rights and others contained in and granted by Agreement between Scottish Power plc and Scottish Nuclear Limited dated Thirteenth and Twenty ninth May and recorded in the Division of the General Register of Sasines applicable to the County of East Lothian on Fourth November, both months of Nineteen hundred and ninety one (as varied by Ancillary Agreement between BEG (UK), SP Transmission Limited and SP Distribution Limited dated Twenty third and Twenty ninth both days of March Two thousand and five and as the rights and liabilities thereunder have been assigned by BEG (UK) to the Company pursuant to Assignation granted or to be granted between BEG (UK) and the Company); and (Second) the heritable and irredeemable servitude rights and others contained in and granted by Deed of Servitude by Blue Circle Industries Public Limited Company in favour of South of Scotland Electricity Board dated Twenty ninth January and recorded in the said Division of the General Register of Sasines on Third March, both months of Nineteen hundred and eighty eight; (THREE) the whole mines, metals and minerals so far as we have right thereto; (FOUR) the whole parts, privileges and pertinents thereof; and (FIVE) our whole right, title and interest, present and future therein and thereto; which subjects comprise and comprehend (FIRST) ALL and WHOLE the subjects consisting of (primo) the two areas of ground extending together to Thirteen acres and sixty-four decimal or one hundredth parts of an acre or thereby lying in the said Parish and County and (secundo) the foreshore extending to Three acres and sixty decimal or one hundredth parts of an acre or thereby lying in the said Parish and County, which subjects (FIRST) (primo) and (secundo) are more particularly described in, disponed by and delineated and coloured pink and numbered respectively “1” and “2” on the plan annexed and subscribed as relative to Disposition by Victor Charles Vereker Cowley in favour of South of Scotland Electricity Board dated First and recorded in the said Division of the General Register of Sasines on Eleventh both days of March Nineteen hundred and seventy-five; TOGETHER WITH (One) the whole minerals thereunder so far as we have right thereto; (Two) the teinds so far as we have right thereto; (Three) the whole buildings and other erections thereon; (Four) the parts, pendicles and the whole pertinents, rights and privileges pertaining thereto; (Five) the fittings and fixtures in and upon the said subjects; and (Six) our whole right, title and interest, present and future, in and to the said subjects; (SECOND) ALL and WHOLE those two plots or areas of ground at Skateraw in the said Parish and County extending in all to Thirty four acres and fifteen decimal or one hundredth parts of an acre or thereby Imperial Measure, being the subjects more particularly described in, disponed by and delineated and outlined in red on the plan annexed and subscribed as relative to Disposition by Mrs Margaret Fraser Falgate or Bowe or Fasson and Others as Trustees of the late David Rutherford Bowe in favour of South of Scotland Electricity Board dated Second, Sixth and Seventh and recorded in the said Division of the General Register of Sasines on Eleventh all days of January Nineteen hundred and seventy seven; TOGETHER WITH (One) the dwellinghouses known as the Pantile Cottages erected on the smaller of the said two areas of ground and the whole other buildings and erections on the said subjects; (Two) the fittings and fixtures in and upon the said subjects; (Three) the teinds, parsonage and vicarage of the said subjects all in so far as belonging to us; (Four) the whole parts, privileges and pertinents effeiring to the said subjects; (Five) the whole minerals (other than coal and mines of coal vested in the National Coal Board

5

(now the Coal Authority)) within or under the said subjects; and (Six) our whole right, title and interest, present and future, therein and thereto; (THIRD) ALL and WHOLE those two areas or pieces of ground extending to Thirteen acres and eighty six decimal or one hundredth parts of an acre or thereby and Forty nine acres and forty decimal or one hundredth parts of an acre or thereby respectively lying in the said Parish and County, being the subjects more particularly described in, disponed by and delineated in black and coloured pink on the plan annexed and subscribed as relative to Disposition by Jack Walker Taylor with consent therein mentioned in favour of South of Scotland Electricity Board dated Fifteenth and Twenty third November and recorded in the said Division of the General Register of Sasines on Ninth December both months of the year Nineteen hundred and seventy six; TOGETHER WITH (One) the whole buildings and erections on the said subjects; (Two) the fittings and fixtures in and upon the said subjects; (Three) the teinds, parsonage and vicarage of the said subjects so far as we have right thereto; (Four) the whole parts, privileges and pertinents effeiring to the said subjects; and (Five) our whole right, title and interest, present and future in and to the said subjects; TOGETHER ALSO WITH a heritable and irredeemable servitude right of access to the said subjects over the access roadway leading from the main A1 public road all as the said access roadway is shown coloured blue on the said plan annexed and subscribed as relative to the said Disposition by Jack Walker Taylor with consent thereinmentioned in favour of South of Scotland Electricity Board dated and recorded as aforesaid; (FOURTH) (primo) ALL and WHOLE those areas of ground extending in total to Fifty six hectares and seven hundred and thirty four decimal or one thousandth parts of an hectare or thereby at Thorntonloch in the District of East Lothian and Lothian Region and for the purpose of registration of writs in the said County all as more particularly described in, disponed by and shown coloured green, yellow, brown and purple on the plan annexed and subscribed as relative to Disposition by the Secretary of State for Scotland in favour of South of Scotland Electricity Board dated Twenty eighth June and recorded in the said Division of the General Register of Sasines on Fourteenth July both months of the year Nineteen hundred and seventy eight and (secundo) ALL and WHOLE that area of foreshore extending to Sixteen hectares and seven hundred and thirteen decimal or one thousandth parts of an hectare or thereby at Thorntonloch in the said District and Region and for the purpose of registration of writs in the said County situated ex adverso the subjects (FOURTH) (primo) hereinbefore secured, being the subjects more particularly described in, disponed by and shown coloured blue on the said plan annexed and subscribed as relative to the aforementioned Disposition by the Secretary of State for Scotland in favour of South of Scotland Electricity Board dated and recorded as aforesaid, and all as the said subjects (FOURTH) (primo) and (FOURTH) (secundo) are together outlined in red on the said plan; TOGETHER WITH (One) the teinds of the said subjects so far as we have right thereto; (Two) the whole shale, iron and stone, clay and all mines and minerals in the said subjects excluding coal and mines of coal belonging to the National Coal Board (now the Coal Authority); (Three) the whole buildings and erections and fences on the said subjects all so far as belonging to us; (Four) the whole servitudes including wayleaves and rights of access effeiring to the said subjects; (Five) the whole rights, parts, privileges and pertinents effeiring to the said subjects; and (Six) our whole right, title and interest, present and future, in and to the said subjects; With free ish and entry to the subjects hereinbefore secured (FOURTH) (primo) and (FOURTH) (secundo) by the minor public road running northwards from the Dunbar/Berwick Trunk Road known as the A1 and the minor public road leading to Thorntonloch Caravan Site all as more particularly described in and granted by the aforementioned Disposition by the Secretary of State for Scotland in favour of South of Scotland Electricity Board dated and recorded as aforesaid; (FIFTH) ALL and WHOLE that area or piece of ground extending to One hectare and five hundred and seventy four decimal or one thousandth parts of an hectare or thereby together with the foreshore ex adverso thereof extending to Sixteen hectares and nine hundred and ninety decimal or one thousandth parts of an hectare or thereby now or formerly on the farm of Thorntonloch in the said Parish and County, being the subjects more particularly described in, disponed by and delineated and outlined in red on the plan annexed and subscribed as relative to Disposition by The East Lothian District Council in favour of South of Scotland

6

Electricity Board dated Twenty eighth September and recorded in the said Division of the General Register of Sasines on Seventeenth October both months of the year Nineteen hundred and seventy eight; TOGETHER WITH any erections on the said subjects, the whole rights, parts, privileges and pertinents effeiring to the said subjects and our whole right, title and interest, present and future in and to the said subjects; (SIXTH) ALL and WHOLE the three pieces of land extending in total to Eight acres and forty-one one hundredth or decimal parts of an acre or thereby Imperial Measure being parts of the bed of the sea below low water mark of ordinary spring tides otherwise known as Mean Low Water Springs, situated at Torness in the said Parish and County one piece of land being occupied by a breakwater and jetty and the other two pieces of land being occupied by infilling and power station works and together with the heritable and irredeemable rights of wayleave and others pertaining thereto all as more particularly described in, disponed by and as the said pieces of land are shown delineated and coloured pink on the plan annexed and subscribed as relative to Feu Disposition by The Crown Estate Commissioners in favour of South of Scotland Electricity Board dated Seventeenth October Nineteen hundred and eighty and recorded in the said Division of the General Register of Sasines on Thirtieth January Nineteen hundred and eighty one; (SEVENTH) (primo) ALL and WHOLE that area of ground and part of the foreshore extending in all to Forty two acres and thirty five decimal or one-hundredth parts of an acre or thereby Imperial Standard Measure lying in the said Parish and County, being the subjects more particularly described in and disponed (In the First Place) by and shown delineated in black and coloured red on the plan annexed and subscribed as relative to Disposition by Colonel Victor Charles Vereker Cowley in favour of South of Scotland Electricity Board dated Fourth and recorded in the said Division of the General Register of Sasines on Eighth both days of October Nineteen hundred and eighty two and (secundo) ALL and WHOLE the remaining foreshore ex adverso the said subjects hereinbefore secured SEVENTH (primo), being the subjects more particularly described in, disponed (In the Second Place) by and shown delineated in black and coloured green on the said plan annexed and subscribed as relative to the aforesaid Disposition by Colonel Victor Charles Vereker Cowley in favour of South of Scotland Electricity Board dated and recorded as aforesaid; TOGETHER WITH (One) the whole minerals thereunder so far as we have right thereto; (Two) the teinds of the said subjects; (Three) the whole buildings and other erections thereon; (Four) the whole rights of access for vehicular and pedestrian traffic; (Five) the whole other rights, parts, privileges and pertinents thereof; (Six) the fittings and fixtures in and upon the said subjects; and (Seven) our whole right, title and interest, present and future, in and to the said subjects; (EIGHTH) (primo) ALL and WHOLE that area of ground extending to approximately One acre and six hundred and fifty seven decimal or one-thousandth parts of an acre or thereby Imperial Standard Measure lying to the South of the de-trunked A1 road lying in the said Parish and County (secundo) ALL and WHOLE that area of ground extending to Thirty four decimal or one-hundredth parts of an acre or thereby Imperial Standard Measure lying in the said Parish and County and (tertio) ALL and WHOLE the solum of an access road, which subjects (primo), (secundo) and (tertio) are more particularly described in, disponed by and shown respectively delineated in black and coloured pink, blue and orange on the plan annexed and subscribed as relative to Conveyance and Deed of Servitude by Jack Walker Taylor with consent thereinmentioned in favour of South of Scotland Electricity Board dated Twenty third December Nineteen hundred and eighty seven and Fifth September and recorded in the said Division of the General Register of Sasines on Fifteenth September Nineteen hundred and eighty eight; TOGETHER WITH (One) the heritable and irredeemable servitude rights more particularly described in and granted by the said Conveyance and Deed of Servitude by Jack Walker Taylor with consent thereinmentioned in favour of South of Scotland Electricity Board dated and recorded as aforesaid; (Two) the whole other rights, parts, privileges and pertinents thereof; (Three) the fittings and fixtures therein and thereon; and (Four) our whole right, title and interest, present and future, therein and thereto; (NINTH) ALL and WHOLE that triangular plot or area of ground extending in total to Sixty nine decimal or one-hundredth parts of an hectare or thereby, lying adjacent to the A1 Trunk Road at Skateraw in the said Parish and County as the said plot or area of ground is more particularly described in,

7

disponed by and shown delineated in black and coloured pink on the plan annexed and executed as relative to Disposition by The Secretary of State for Scotland in favour of South of Scotland Electricity Board dated Sixth May and recorded in the said Division of the General Register of Sasines on Twelfth July both months in the year Nineteen hundred and eighty eight; TOGETHER WITH (One) the whole mines, metals and minerals in or under the said plot or area of ground so far as we have right thereto; (Two) the parts, privileges and pertinents pertaining thereto; (Three) the fixtures and fittings therein and thereon; and (Four) our whole right, title and interest, present and future, therein and thereto; (TENTH) ALL and WHOLE that plot or area of ground known as Beachfield at Skateraw in the said Parish and County extending to five acres or thereby Imperial Measure being the subjects more particularly described in, disponed by and delineated in black and shown coloured blue on the plan annexed and signed as relative to Disposition by Jack Walker Taylor in favour of South of Scotland Electricity Board dated Twenty ninth September and recorded in the said Division of the General Register of Sasines on Sixteenth October both months in the year Nineteen hundred and eighty nine; TOGETHER WITH (One) the whole rights, common, mutual and otherwise; (Two) the parts, privileges and pertinents effeiring thereto; (Three) the fittings and fixtures therein and thereon; (Four) our whole right, title and interest, present and future, therein and thereto; (Five) a heritable and irredeemable servitude right of access over the access roadway leading from the main A1 public road to subjects formerly belonging to South of Scotland Electricity Board all as the said access roadway is shown coloured blue on the plan annexed and signed as relative to Disposition by Jack Walker Taylor in favour of South of Scotland Electricity Board of the plot of ground known as The Paddock at Skateraw, aforesaid dated Twenty ninth September and recorded in the said Division of the General Register of Sasines on Sixteenth October both months in the year Nineteen hundred and eighty nine and (Six) the whole minerals (other than coal and mines of coals vested in the National Coal Board (now the Coal Authority))within or under the said plot or area of ground; and (ELEVENTH) ALL and WHOLE that plot or area of ground known as The Paddock at Skateraw in the said Parish and County extending to Five acres and forty eight decimal or one-hundredth parts of an acre or thereby Imperial Measure, being the subjects more particularly described in, disponed by and delineated in black and shown coloured pink on the plan annexed and subscribed as relative to the said Disposition by Jack Walker Taylor in favour of South of Scotland Electricity Board dated Twenty ninth September and recorded in the said Division of the General Register of Sasines on Sixteenth October both months in the year Nineteen hundred and eighty nine; TOGETHER WITH (One) the whole rights common, mutual and otherwise; (Two) the parts, privileges and pertinents effeiring thereto; (Three) the fittings and fixtures therein and thereon; (Four) our whole right, title and interest, present and future, therein and thereto; (Five) a heritable and irredeemable servitude right of access to the said area of ground over the access roadway leading from the main A1 public road all as the said access roadway is shown coloured blue on the said plan annexed and subscribed as relative to the said lastmentioned Disposition by Jack Walker Taylor in favour of South of Scotland Electricity Board dated and recorded as aforesaid; and (Six) the whole minerals (other than coal and mines of coal vested in the National Coal Board (now the Coal Authority)) within or under the said plot or area of ground; BUT EXCEPTING THEREFROM (One) ALL and WHOLE that area of ground with the dwellinghouse outbuildings and greenhouse thereon and garden ground pertaining thereto known as Number Twenty one Thorntonloch, Innerwick, East Lothian, in the said District, Region and County extending to One thousand two hundred and fifty one decimal or ten thousandth parts of an hectare or thereby all as more particularly described in, disponed by and delineated in red on the plan annexed and subscribed as relative to Feu Disposition by South of Scotland Electricity Board in favour of Alexander Robert Brown and Mrs Mary Gray or Brown dated Twenty fourth April and recorded in the said Division of the General Register of Sasines on Eighth May both months of the year Nineteen hundred and eighty and (Two) ALL and WHOLE those two areas of ground extending in all to Thirty eight acres and eighteen decimal or one-hundredth parts of an acre or thereby Imperial Standard Measure both shown delineated in black and coloured yellow on the plan annexed and subscribed as relative to Disposition by South of Scotland Electricity Board in favour of Jack Walker Taylor dated Eighteenth August and Twenty third December Nineteen

8

hundred and eighty seven and recorded in the said Division of the General Register of Sasines on Fifteenth September Nineteen hundred and eighty eight; PROVIDED ALWAYS that the whole buildings and other erections, heritable fixtures and fittings, plant and equipment therein and thereon are only hereby secured insofar as belonging to the Company and there shall be excepted from the subjects and others hereby secured any plant, equipment and others owned by or vested in any third party (including without prejudice to the foregoing generality any plant, equipment and others owned by Scottish Power plc, SP Transmission Limited and/or SP Distribution Limited) to the extent to which these are specifically referred to in the said Agreement between Scottish Power plc and Scottish Nuclear Limited dated and recorded as aforesaid (as varied by the said Ancillary Agreement between BEG(UK), SP Transmission Limited and SP Distribution Limited dated as aforesaid and as the rights and liabilities thereunder have been assigned by BEG(UK) to the Company pursuant to the said Assignation granted or to be granted between BEG(UK) and the Company)

Director/Authorised Signatory

9

EX-4.46

Exhibit 4.46

STANDARD SECURITY

By

BRITISH ENERGY GENERATION LIMITED

in favour of

NUCLEAR LIABILITIES FUND LIMITED

Re:    Hunterston “B” Power Station

STANDARD SECURITY

by

(1) BRITISH ENERGY GENERATION LIMITED, a company incorporated under the Companies Acts (Company Number 03076445) and having its registered office at Barnett Way, Barnwood, Gloucester GL4 3RS (the “Company”)

in favour of

(2) NUCLEAR LIABILITIES FUND LIMITED of 16 Rothesay Place, Edinburgh EH3 7SQ (registered in Scotland no. SC164685) (the “NLF”)

WHEREAS

A. In terms of the Government Restructuring Agreement BEG(UK) granted in favour of the NLF the BEG(UK) Standard Security to secure inter alia the Decommissioning Default Payment (as defined in the Contribution Agreement);

B. In terms of the Transfer Agreement BEG(UK) agreed to sell and the Company agreed to purchase, as a going concern, the undertaking and all of the assets of BEG(UK) on the terms contained therein; and

C. The terms of the Transfer Agreement include inter alia that the NLF shall execute and deliver to the Company a valid Discharge of the BEG(UK) Standard Security and that the Company shall execute and deliver to the NLF a valid fixed security in favour of NLF over the Property to continue to secure inter alia the Decommissioning Default Payment; and

D. Accordingly the Company now grants the security aftermentioned.

THEREFORE THE PARTIES HEREBY AGREE AND DECLARE AS FOLLOWS:

1 DEFINITIONS AND INTERPRETATIONS

1.1 Definitions

In this Standard Security:

“BEG(UK)” means British Energy Generation (UK) Limited, incorporated under the Companies Acts (Number SC 117121) and having its Registered Office at Systems House, Alba Campus, Livingston;

“BEG(UK) Standard Security” means the Standard Security granted by BEG(UK) in favour of the NLF dated and recorded in the Division of the General Register of Sasines for the County of Ayr on 14^th January 2005 over part of the Property;

“Debenture” means the Debenture by the Obligors in favour of the NLF dated 14^th January 2005;

“Government Restructuring Agreement” means the Government Restructuring Agreement entered into between the British Energy PLC, British Energy Generation (UK) Limited, British Energy Generation Limited, the other British Energy Parties, Nuclear Generation Decommissioning Fund Limited, the Trustees of the Nuclear Trust and the Secretary of State for Trade and Industry dated 1 October 2003;

“Insurance” means the Company’s interest in all contracts and policies of insurance which are from time to time taken out or effected by or on behalf of the Company in connection with the Property;

“Property” means ALL and WHOLE the property known as and forming Hunterston “B” Power Station, Hunterston, Ayrshire as more particularly described in the Schedule annexed and signed as relative to this Standard Security;

“Security” means any mortgage, standard security, charge (whether fixed or floating), pledge, lien, assignation by way of security, assignment by way of security, hypothecation, or other security interest securing any obligation of any person (including without limitation title transfer and/or retention arrangements having a similar effect) (and “secured” shall be construed accordingly);

“Standard Security” means this standard security together with the schedule and plan annexed and signed as relative hereto and any document which is expressed to amend this standard security;

“Transfer Agreement” means the Business Transfer Agreement entered into between BEG(UK) and the Company dated 27^th June 2005;

1.2 In this Standard Security, save where referred to in Clause 1.1, terms defined and references defined in the Debenture shall have the same meaning and construction in this Standard Security.

1.3 Any reference in this Standard Security to any other document to which the parties hereto are party (including the Debenture) shall be construed as a reference to that document as amended, varied, novated or supplemented as the case may be with, where it is so required, the prior written consent of the NLF.

2 STANDARD SECURITY

2.1 In continuing security for payment and discharge of all the Secured Liabilities, the Company hereby grants a Standard Security in favour of the NLF over the Property.

2.2 The Standard Conditions specified in Schedule 3 of the Conveyancing and Feudal Reform (Scotland) Acts 1970 and 1971 as varied (i) herein and by (ii) the Contribution Agreement and by (iii) the Debenture shall apply and where any inconsistency shall arise between (a) the said Standard Conditions, and (b) the terms of the Contribution Agreement or (c) the terms of the Debenture, then the terms of the Contribution Agreement shall prevail and shall have effect in preference to the said Standard Conditions and the Debenture and where any inconsistency shall arise between (a) the said Standard Conditions and (b) the terms of the Debenture then the terms of the Debenture shall prevail and shall have effect in preference to the said Standard Conditions; Notwithstanding this clause 2.2 nothing shall prevent or restrict NLF rights and powers under Standard Condition 10; Provided Always that (i) the Company shall not be deemed to be in breach of any Standard Conditions (a) if it has complied with the obligations imposed on it by the Contribution Agreement which relates to the same subject matter as the relevant Standard Condition and (b) where such breach is as a consequence of the Company complying with its obligations under the Contribution Agreement and (ii) the Standard Conditions shall not be construed so as to impose more onerous obligations on the Company to the NLF than under the Contribution Agreement.

2.3 Without prejudice to the generality of the foregoing Clause 2.2, the Standard Conditions referred to therein shall be varied so that (i) notwithstanding Standard Condition 5, Insurance shall be effected in accordance with Clause 7.6 of the Debenture and (ii) notwithstanding Standard Condition 9, default of the Company in terms hereof shall be determined exclusively by reference to the Default Events contained in Clause 17 of the Contribution Agreement and the Company shall only be held to be in default where such an Default Event is continuing.

2.4 The Company acknowledges the rights and powers of the NLF under this Standard Security are subject to Clause 1.5 of the Debenture.

2.5 The Company hereby confirms that it is the sole legal and beneficial owner of the Property.

3 RANKING

3.1 This Standard Security shall rank in priority to any fixed security which shall be created by the Company before, on or after its execution of this Standard Security, and to any floating charge which shall be created by the Company before, on or after its execution of this Standard Security and no such fixed security or floating charge shall rank in priority to or equally with this Standard Security.

3.2 Except with the prior written consent of the NLF, the Company shall not create, incur, assume or permit to subsist any Security on all or any part of the Property except for any security created by or pursuant to the Negative Pledge Exemptions.

4 ASSIGNATION

The NLF may assign and transfer all of its rights and obligations under this Standard Security to a successor in accordance with the terms of the Clause 22.7 of the Contribution Agreement.

5 CERTIFICATION

A Certificate signed by any official of or person authorised by the NLF shall, in the absence of manifest error, conclusively determine the Secured Liabilities at any relevant time.

6 CONSENT TO REGISTRATION

The Company grants warrandice but excepting therefrom any current leases, licences and other third party rights of occupancy, rights of way, servitudes and wayleaves granted by us or our predecessors in title but without prejudice to the right of the NLF to quarrel or impugn the same on any ground not inferring warrandice against us and the NLF hereby consents to the registration of this Standard Security and of any such Certificate for preservation and execution: IN WITNESS WHEREOF these presents typewritten on this and the preceding two pages together with the schedule and plan annexed and signed as relative hereto are executed as follows: - -

SUBSCRIBED FOR AND ON BEHALF OF
BRITISH ENERGY GENERATION LIMITED
At
on the        day of
by
		Director/Authorised Signatory
before this witness
	Witness
NAME
ADDRESS

SCHEDULE REFERRED TO IN THE FOREGOING STANDARD SECURITY BY BRITISH ENERGY GENERATION LIMITED IN FAVOUR OF NUCLEAR LIABILITIES FUND LIMITED

Property

ALL and WHOLE (Primo) ALL and WHOLE the subjects known as and forming Hunterston “B” Power Station forming part of the Estate of Hunterston, West Kilbride lying in the Parish of West Kilbride and the County of Ayr and (Secundo) ALL and WHOLE that area of ground known as and forming Southannan Fields, forming part of the said Estate in the said Parish and County; which said subjects (Primo) and (Secundo) are together shown delineated in red on the plan annexed and executed as relative hereto; TOGETHER WITH in respect of the whole subjects (Primo) and (Secundo) herein secured (One) the whole buildings, heritable fixtures and fittings, plant and equipment therein and thereon (Two) the whole rights common, mutual and exclusive and otherwise pertaining thereto including without prejudice to the generality of the foregoing (First) all rights and others contained in and granted by Agreement between Scottish Power plc and Scottish Nuclear Limited dated Thirteenth and Twenty ninth May and recorded in the Division of the General Register of Sasines applicable to the County of Ayr on Fourth November, both months of Nineteen hundred and ninety one (as varied by Ancillary Agreement between BEG (UK), SP Transmission Limited and SP Distribution Limited dated Twenty third and Twenty ninth both days of March Two thousand and five and as the rights and liabilities thereunder have been assigned by BEG (UK) to the Company pursuant to Assignation granted or to be granted between BEG(UK) and the Company; (Second) the heritable and irredeemable servitude rights and others contained in and granted by Deed of Servitude containing Disposition by Clydeport Operations Limited in favour of Scottish Nuclear Limited dated Twentieth and Twenty second March and recorded in the said Division of the General Register of Sasines on Third April, both months of Nineteen hundred and ninety six; (Third) all rights and others contained in and granted by Deed of Conditions by Scottish Nuclear Limited dated Twenty seventh March and recorded in the said Division of the General Register of Sasines on Third April, both months of Nineteen hundred and ninety six; (Fourth) the heritable and irredeemable servitude rights and others contained in and granted by Deed of Servitude containing Disposition by British Steel Corporation in favour of South of Scotland Electricity Board dated Twentieth December Nineteen hundred and seventy six and recorded in the said Division of the General Register of Sasines on Twenty ninth June Nineteen hundred and seventy seven; (Fifth) the heritable and irredeemable servitude rights and others contained in and granted by Deed of Servitude containing Disposition by Clydeport Operations Limited in favour of Huntor Limited dated Twentieth and Twenty second March and recorded in the said Division of the General Register of Sasines on Third April, both months of Nineteen hundred and ninety six; and (Sixth) the heritable and irredeemable servitude rights and others contained in and granted by Deed of Servitude containing Disposition by Robert Alexander Montgomerie of Southannan in favour of South of Scotland Electricity Board dated Twenty second March and recorded in the said Division of the General Register of Sasines on Eighteenth April both months of Nineteen hundred and seventy two; (Three) the whole parts, privileges and pertinents thereof; and (Four) our whole right, title and interest, present and future therein and thereto; Which subjects (Primo) herein secured comprise and comprehend (FIRST) (One) ALL and WHOLE that plot or area of ground lying in the said Parish and County extending to ninety acres and five hundred and sixty five decimal or one thousandth parts of an acre or thereby Imperial Standard Measure; (Two) ALL and WHOLE that plot or area of ground lying in the said Parish and County extending to fifty acres and four hundred and eighteen decimal or one thousandth parts of an acre or thereby Imperial Standard Measure and comprising the foreshore ex adverso the said plot or area of ground hereinbefore secured (FIRST) (One); (Three) ALL and WHOLE the salmon fishings in the sea ex adverso the said plot or area of ground hereinbefore secured (FIRST) (One); (Four) ALL and WHOLE that plot or area of ground lying in the said Parish and County extending to fourteen acres and ninety one decimal or one thousandth parts of an acre or thereby Imperial Standard Measure; and (Five) ALL and WHOLE that plot or area of ground lying in the said Parish and County extending to three acres and four hundred and eighty two decimal or one thousandth parts of an acre or thereby Imperial Standard Measure all as the said plots or areas of ground hereinbefore secured (FIRST) (One), (Two), (Three), (Four), and

(Five) are all more particularly described in, disponed by and shown coloured pink on the plan annexed and signed as relative to Disposition by Miss Eleonora Hunter of Hunterston in favour of South of Scotland Electricity Board dated Twenty fourth June and recorded in the said Division of the General Register of Sasines on Ninth July both months of the year Nineteen hundred and fifty eight; TOGETHER WITH (One) the whole erections, fences and others erected on the said plots or areas of ground hereinbefore secured (FIRST) (One), (Two), (Three), (Four) and (Five); (Two) the whole mines, metals and minerals (other than coal and mines of coal vested in the National Coal Board (now the Coal Authority)) in and under the said plots or areas of ground; (Three) the teinds, parsonage and vicarage effeiring thereto; (Four) all rights and pertinents belonging thereto; (Five) all servitude rights and others granted by the said Disposition by Miss Eleonora Hunter of Hunterston in favour of South of Scotland Electricity Board dated and recorded as aforesaid; and (Six) our whole right, title and interest, present and future therein and thereto; (SECOND) (One) ALL and WHOLE that area of ground lying in the said Parish and County extending to twelve acres and twenty eight decimal or one hundredth parts of an acre or thereby Imperial Measure and (Two) ALL and WHOLE that area of ground lying in the said Parish and County extending to three acres and sixty five decimal or one hundredth parts of an acre or thereby Imperial Measure, all as the said areas of ground hereinbefore secured (SECOND) (One) and (Two) are more particularly described in, disponed by and delineated and shown coloured pink on the plan annexed and signed as relative to Disposition by Miss Eleonora Hunter of Hunterston in favour of South of Scotland Electricity Board dated Fifth and recorded in the said Division of the General Register of Sasines on Eleventh both days of July Nineteen hundred and sixty seven; TOGETHER WITH (One) the fences, farmhouse and all other buildings and erections and others on the areas of ground hereinbefore secured (SECOND) (One) and (Two); (Two) the whole mines, metals and minerals (other than coal and mines of coal vested in the National Coal Board (now the Coal Authority)) in and under the said areas of ground; (Three) the teinds, parsonage and vicarage effeiring thereto; (Four) all rights and pertinents effeiring thereto; and (Five) our whole right, title and interest, present and future, therein and thereto; (THIRD) ALL and WHOLE that area or piece of ground lying in the said Parish and County extending to five acres and ninety five decimal or one hundredth parts of an acre or thereby being the subjects more particularly described in, disponed by and delineated in black and shown coloured pink on the plan annexed and signed as relative to Disposition by Ladyland Limited in favour of South of Scotland Electricity Board dated Twenty fifth June and recorded in the said Division of the General Register of Sasines on Twelfth July both months of the year Nineteen hundred seventy six; TOGETHER WITH (One) the parts, privileges and pertinents effeiring thereto; and (Two) our whole right, title and interest, present and future, therein and thereto; (FOURTH) (One) ALL and WHOLE that area of ground lying in the said Parish and County extending to one acre and twenty four decimal or one hundredth parts of an acre or thereby Imperial Standard Measure and (Two) ALL and WHOLE that area of ground lying in the said Parish and County extending to thirteen decimal or one hundredth parts of an acre or thereby Imperial Standard Measure all as the said areas of ground hereinbefore secured (FOURTH) (One) and (Two) are more particularly described in, disponed by and delineated and shown coloured pink on the plan annexed and signed as relative to Disposition by Miss Eleonora Hunter of Hunterston in favour of South of Scotland Electricity Board dated Eighteenth June and recorded in the said Division of the General Register of Sasines on Twenty fourth July both months of the year Nineteen hundred and sixty eight; TOGETHER WITH (One) the whole mines, metals and minerals (other than coal and mines of coal vested in the National Coal Board (now the Coal Authority)) in and under the said areas of ground hereinbefore secured (FOURTH) (One) and (Two); (Two) the teinds, parsonage and vicarage effeiring thereto; (Three) all rights and privileges effeiring thereto; (Four) all servitude rights of access and others more particularly described in and disponed by the said lastmentioned Disposition by Miss Eleonora Hunter of Hunterston in favour of South of Scotland Electricity Board dated and recorded as aforesaid; and (Five) our whole right, title and interest, present and future, therein and thereto; (FIFTH) ALL and WHOLE that area of ground in the said Parish and County extending to seven acres and seven hundred and fifty decimal or one thousandth parts of an acre or thereby more particularly described in, disponed by and delineated in black and coloured red on the plan annexed and subscribed as relative to Disposition by Ladyland Limited in favour of South of Scotland Electricity Board dated First and recorded in the said Division of the General Register of Sasines on Twenty second both days of October Nineteen hundred and eighty one; TOGETHER WITH (One) the whole mines, metals

and minerals lying under said area of ground hereinbefore secured (FIFTH) (other than coal and mines of coal now vested in the National Coal Board (now the Coal Authority)); (Two) all servitudes, wayleaves and other rights common, mutual or otherwise in favour of, effeiring to or affecting the said areas of ground; (Three) the parts, privileges and pertinents pertaining thereto; and (Four) our whole right, title and interest, present and future, therein and thereto; (SIXTH) ALL and WHOLE that plot or area of ground lying in the said Parish and County extending to two acres and four hundred and forty five decimal or one thousandth parts of an acre or thereby Imperial Standard Measure, being the subjects more particularly described in, disponed by and delineated and shown coloured pink on the plan annexed and signed as relative to Disposition by The Right Honourable Archibald William Alexander Montgomerie, Earl of Eglinton and Winton etcetera T.D. and others, the Trustees under a Deed of Trust and Disposition by Lieutenant Colonel George Jardine Kidston-Montgomerie of Southannan in favour of South of Scotland Electricity Board dated Seventh, Fifteenth and Twentieth all days of January and recorded in the said Division of the General Register of Sasines on Fifth February both months of Nineteen hundred and fifty nine; TOGETHER WITH (One) the whole erections, fences, walls and others erected on and bounding the said plot or area of ground hereinbefore secured (SIXTH); (Two) the mines, metals and minerals (other than coal and mines of coal vested in the National Coal Board (now the Coal Authority)) in and under the said plot or area of ground; (Three) all rights and pertinents belonging thereto; and (Four) our whole right, title or interest, present or future, therein and thereto; (SEVENTH) ALL and WHOLE that area of ground lying in the said Parish and County extending to eighty five decimal or one hundredth parts of an acre or thereby being the subjects more particularly described IN THE FIRST PLACE in, disponed by and shown coloured blue on the plan annexed and signed as relative to Contract of Excambion between British Steel Corporation and South of Scotland Electricity Board dated Fifteenth and Twenty ninth August and recorded in the said Division of the General Register of Sasines on Fourth October both months of the year Nineteen hundred and seventy eight; TOGETHER WITH the heritable and irredeemable servitude rights reserved to the said South of Scotland Electricity Board in the said Contract of Excambion between British Steel Corporation and South of Scotland Electricity Board dated and recorded as aforesaid and more particularly described therein; (EIGHTH) ALL and WHOLE the heritable and irredeemable servitude rights more particularly described in and disponed by Grant of Servitude by The Crown Estate Commissioners in favour of South of Scotland Electricity Board dated Sixth March and recorded in the said Division of the General Register of Sasines on Second April, both months of the year Nineteen hundred and sixty two; (NINTH) ALL and WHOLE the heritable and irredeemable servitude rights more particularly described in and disponed by Grant of Servitude by The Crown Estate Commissioners in favour of South of Scotland Electricity Board dated Thirteenth and recorded in the said Division of the General Register of Sasines on Twenty seventh both days of June Nineteen hundred and seventy three; (TENTH) ALL and WHOLE the heritable and irredeemable servitude rights more particularly described in and disponed by Deed of Servitude by Neil Aylmer Hunter of Hunterston with consents thereinmentioned in favour of South of Scotland Electricity Board dated Fifteenth, Twentieth and Twenty sixth days of May and recorded in the said Division of the General Register of Sasines on Third June both months of the year Nineteen hundred and seventy one; (ELEVENTH) ALL and WHOLE the heritable and irredeemable servitude rights more particularly described in and disponed by Deed of Servitude by Neil Aylmer Hunter of Hunterston with consents thereinmentioned in favour of South of Scotland Electricity Board dated Twenty sixth and Twenty ninth March and First April and recorded in the said Division of the General Register of Sasines on Twenty third April both months of Nineteen hundred and seventy four; BUT EXCEPTING THEREFROM (One) ALL and WHOLE those three areas of ground lying in the said Parish and County extending respectively to one acre and thirty four decimal or one hundredth parts of an acre, forty three decimal or hundredth parts of an acre and ninety two decimal or one hundredth parts of an acre all Imperial Standard Measure more particularly described in, disponed by and delineated and coloured pink on the plan annexed and signed as relative to Disposition by South of Scotland Electricity Board in favour of Miss Eleonora Hunter of Hunterston dated Twenty third December Nineteen hundred and sixty four and recorded in said Division of the General Register of Sasines on Twenty second February Nineteen hundred and sixty five; (Two) ALL and WHOLE those three areas of ground lying in the said Parish and County extending respectively to eight hundred and eighty four square yards or thereby, eighty seven square yards or thereby and three hundred and thirty four square yards or thereby Imperial Standard Measure all as the said three plots or areas of ground are more particularly described in, disponed by and delineated and coloured pink on the plan

annexed and subscribed as relative to Disposition by South of Scotland Electricity Board in favour of the Secretary of State for Scotland dated First and recorded in the said Division of the General Register of Sasines on Twenty second both days of February Nineteen hundred and sixty; (Three) ALL and WHOLE those two areas of ground amounting to three acres and seven decimal or one hundredth parts of an acre or thereby lying in the said Parish and County more particularly described in and disponed by and delineated in black and shaded red on the plan annexed and subscribed as relative to Disposition by South of Scotland Electricity Board in favour of British Steel Corporation dated Thirteenth and recorded in the said Division of the General Register of Sasines on Twenty eighth both days of August Nineteen hundred and seventy four; (Four) ALL and WHOLE that area of ground lying in the said Parish and County extending to one acre and fifty decimal or one hundredth parts of an acre or thereby and more particularly described IN THE SECOND PLACE in, disponed by and shown coloured red on the plan annexed and signed as relative to the said Contract of Excambion between British Steel Corporation and South of Scotland Electricity Board dated and recorded as aforesaid; and (Five) ALL and WHOLE that plot or area of ground lying in the said Parish and County forming inter alia part of the access roadway leading from the A78 public road to Hunterston Power Station, which plot or area of ground is shown coloured pink on the plan (comprising three joined sections each of which has been signed separately) annexed and executed as relative to Disposition by Scottish Nuclear Limited in favour of Clydeport Operations Limited dated Twenty second March and recorded in the said Division of the General Register of Sasines on Third April, both months in the year Nineteen hundred and ninety six; And which subjects (Secundo) herein secured comprise and comprehend (IN THE FIRST PLACE) ALL and WHOLE that area of ground and foreshore in the said Parish and County extending to one hundred and sixty nine acres and eighty decimal or one hundredth parts of an acre or thereby being the subjects more particularly described (Second) in, disponed by and delineated in red and green and marked “AREA E” on the plan annexed and executed as relative to Disposition by Neil Aylmer Hunter with consent thereinmentioned in favour of British Steel Corporation dated Eleventh and Sixteenth and recorded in the said Division of the General Register of Sasines on Twenty sixth May Nineteen hundred and seventy five (Book 5561, Folio 211); (IN THE SECOND PLACE) ALL and WHOLE that area of ground in the said Parish and County extending to four hundred and thirty one acres and sixty eight decimal or one hundredth parts of an acre or thereby being the subjects more particularly described (Third) in, disponed by and delineated in red and marked “AREA F” on the plan annexed and executed as relative to the said Disposition by Neil Aylmer Hunter with consent thereinmentioned in favour of British Steel Corporation dated and recorded as aforesaid; TOGETHER WITH in relation to the subjects (IN THE FIRST PLACE) and (IN THE SECOND PLACE) hereinbefore secured (One) the whole buildings and other erections thereon; (Two) the whole fittings and fixtures therein and thereon; (Three) the whole parts, privileges and pertinents effeiring thereto; and (Four) our whole right, title and interest, present and future therein and thereto; (IN THE THIRD PLACE) ALL and WHOLE that area of ground in the said Parish and County extending to ninety five acres and fifty one decimal or one hundredth parts of an acre or thereby, being the subjects more particularly described (Third) in, disponed by and delineated in red and marked “AREA C” on Plan Number Two annexed and executed as relative to Disposition by Robert Alexander Montgomerie with consent thereinmentioned in favour of British Steel Corporation dated Thirteenth and Sixteenth and recorded in the said Division of the General Register of Sasines on Twenty sixth May Nineteen hundred and seventy five; TOGETHER WITH our whole right, title and interest, present and future therein and thereto; BUT ALWAYS EXCLUDING from the subjects herein secured (IN THE SECOND PLACE) (First) that area of ground in the said Parish and County delineated in red and marked “THIS AREA EXCLUDED” on the said plan annexed and executed as relative to the said Disposition by Neil Aylmer Hunter with consent therein mentioned in favour of British Steel Corporation dated and recorded as aforesaid; (Second) ALL and WHOLE that area of ground lying in the said Parish and County extending to eighty five decimal or one hundredth parts of an acre or thereby being the area of ground more particularly described IN THE FIRST PLACE in, disponed by and shown coloured blue on the plan annexed and signed as relative to the said Contract of Excambion between British Steel Corporation and South of Scotland Electricity Board dated and recorded as aforesaid; (Third) ALL and WHOLE that plot or area of ground in the said Parish and County extending to four acres and twenty three decimal or one hundredth parts of an acre or thereby being the subjects more particularly described in, disponed by and outlined in red on the plan annexed and executed

as relative to Disposition by British Steel Corporation in favour of James Niven Grant and Another dated Thirtieth November and recorded in the said Division of the General Register of Sasines on Twenty second December, both months in the year Nineteen hundred and eighty two; (Fourth) any part thereof lying on or towards the north and north east of the said area of ground extending to eighty five decimal or one hundredth parts of an acre or thereby hereinbefore EXCLUDED (Second); and (Fifth) ALL and WHOLE those two discontiguous areas of ground in the said Parish and County extending respectively to two hundred and eighty eight acres and twenty five decimal or one hundredth parts of an acre or thereby and twenty five decimal or one hundredth parts of an acre or thereby being the two areas of ground more particularly described in, disponed by and shown outlined in green on the plan annexed and executed as relative to Disposition by Huntor Limited in favour of Ladyland Limited dated Twenty fourth December Nineteen hundred and ninety three and recorded in the said Division of the General Register of Sasines on Seventeenth February Nineteen hundred and ninety four; AND ALWAYS EXCLUDING from the subjects hereby secured (IN THE SECOND PLACE) and (IN THE THIRD PLACE) ALL and WHOLE those five plots or areas of ground in the said Parish and County extending respectively to thirteen thousand two hundred and twelve square metres or thereby, four hundred and sixty square metres or thereby, five thousand one hundred and twenty square metres or thereby, one thousand one hundred and forty five square metres or thereby and one hundred and sixty square metres or thereby, being the plot or area of ground more particularly described (First), (Second), (Third), (Fourth) and (Fifth) in, conveyed by and delineated in black and coloured pink and marked plots 1, 2, 3 and 7 on Plan A and Plot 8 on Plan B annexed and signed as relative to Conveyance by British Steel Corporation in favour of the Secretary of State for Scotland dated Eighth April and recorded in the said Division of the General Register of Sasines on Thirteenth May both months of Nineteen hundred and eighty six; AND ALWAYS EXCLUDING from the subjects hereinbefore secured (IN THE THIRD PLACE) ALL and WHOLE that plot or area of ground extending to twelve thousand three hundred and thirty square metres or thereby lying on the west side of the road from Fairlie to Seamill in the said Parish and County being the plot or area of ground more particularly described in, disponed by and delineated and coloured pink and marked Plot 1 on the plan annexed and executed as relative to Conveyance by British Steel Corporation in favour of the Secretary of State for Scotland dated Fourteenth July and recorded in the said Division of the General Register of Sasines on Seventeenth August Nineteen hundred and eighty three; and (IN THE FOURTH PLACE) ALL and WHOLE (FIRST) that area of ground in the said Parish and County lying to the north of Hunterston House extending to one acre and twenty decimal or one hundredth parts of an acre or thereby being the subjects more particularly described (First) in, disponed by and shown outlined in pink, coloured purple and cross hatched in black on the plan annexed and signed as relative to Disposition by Ladyland Limited in favour of Huntor Limited dated Thirty first January and recorded in the said Division of the General Register of Sasines on Seventeenth February, both months of Nineteen hundred and ninety four (hereinafter referred to as “the 1994 Disposition”); (SECOND) ALL and WHOLE that area of ground in the said Parish and County lying generally to the north and east of Hunterston Nuclear Generating Station extending to fifty six acres or thereby and being the subjects more particularly described (Second) in, disponed by and shown outlined in pink on the plan annexed to the 1994 Disposition BUT UNDER EXCEPTION of that area of ground in the said Parish and County extending to Thirteen decimal or one hundredth parts of an acre or thereby Imperial Standard Measure, being the subjects more particularly described (First) (Secundo) in, disponed by and delineated and shown coloured pink on the plan annexed and signed as relative to the said Disposition by Miss Eleonora Hunter of Hunterston in favour of South of Scotland Electricity Board dated Eighteenth June and recorded in the said Division of the General Register of Sasines on Twenty fourth July Nineteen hundred and sixty eight; (THIRD) ALL and WHOLE that area of foreshore in the said Parish and County lying to the west of the subjects hereinbefore secured (IN THE FOURTH PLACE) (Second) extending to eight acres and five decimal or one tenth parts of an acre or thereby being the subjects more particularly described (Third) in, disponed by and shown outlined in pink on the plan annexed and executed as relative to the 1994 Disposition; (FOURTH) ALL and WHOLE the salmon fishings in the sea ex adverso the subjects hereinbefore secured (IN THE FOURTH PLACE) (THIRD); and (FIFTH) the heritable and irredeemable right of access and egress for pedestrian and lightweight vehicles over the roadway shown coloured blue on the said plan annexed and signed as relative to the 1994 Disposition, all as more particularly described in, and (FIFTH) disponed by Disposition by Huntor

Limited in favour of Scottish Nuclear Limited dated Twenty first March and recorded in the said Division of the General Register of Sasines on Third April, both months in the year Nineteen hundred and Ninety six; BUT ALWAYS EXCLUDING from the subjects (Secundo) hereinbefore secured ALL and WHOLE the exclusive right to the salmon fishings in the sea ex adverso that area of foreshore in the Parish of West Kilbride and County of Ayr extending to Eight acres and Five decimal or one tenth parts of an acre or thereby which area of foreshore is more particularly described (Third) in, disponed by and shown outlined in pink on the plan annexed and executed as relative to the Disposition by Ladyland Limited in favour of Huntor Limited dated Thirty first January and recorded in the said Division of the General Register of Sasines on Seventeenth February both months in the year Nineteen hundred and ninety four; AND EXCLUDING FROM the said areas (Primo) and (Secundo) hereinbefore secured ALL and WHOLE that area of ground and foreshore in the said Parish and County extending to three hundred and sixty thousand five hundred and twenty six square metres (360,526 m²) or thereby forming and known as Hunterston “A” Power Station at Hunterston in the Region of Strathclyde bounded on the west in part by the low water mark of ordinary spring tides and in part by the jetty access ground, being the subjects more particularly described in, disponed by and shown delineated in red on the plan annexed and executed as relative to Disposition by Scottish Nuclear Limited in favour of Nuclear Electric PLC dated Twenty seventh March and recorded in the said Division of the General Register of Sasines on Third April, both months in the year Nineteen hundred and ninety six; PROVIDED ALWAYS that the whole buildings and other erections, heritable fixtures and fittings, plant and equipment therein and thereon are only hereby secured insofar as belonging to the Company and there shall be excepted from the subjects and others hereby secured any plant, equipment and others owned by or vested in any third party (including without prejudice to the foregoing generality any plant, equipment and others owned by Scottish Power plc, SP Distribution Limited and/or SP Transmission Limited) to the extent to which these are specifically referred to in the said Agreement between Scottish Power plc and Scottish Nuclear Limited dated and recorded as aforesaid (as varied by the said Ancillary Agreement between BEG(UK), SP Transmission Limited and SP Distribution Limited dated as aforesaid and as the rights and liabilities thereunder have been assigned by BEG(UK) to the Company pursuant to the said Assignation granted or to be granted between BEG(UK) and the Company);

Director/Authorised Signatory

EX-8.1

Exhibit 8.01

	Name	Registration No.
1	British Energy Direct Limited	4935015
2	British Energy Employee Share Trustees Ltd	SC165586
3	British Energy Finance Ltd	SC173733
4	British Energy Generation (UK) Ltd	SC117121
5	British Energy Generation Ltd	3076445
6	British Energy Group plc	SC270184
7	British Energy Holdings plc	SC270186
8	British Energy International Holdings Ltd	SC138614
9	British Energy International Ltd	SC166316
10	British Energy Investment Ltd	SC173730
11	British Energy Limited	SC162273
12	British Energy Power & Energy Trading Ltd	SC200887
13	British Energy Renewables Ltd	SC214892
14	British Energy Technical Services Ltd	SC152227
15	British Energy Trading Services Ltd	SC223960
16	British Energy Treasury Finance Limited	SC251425
17	British Energy Trustees Ltd	SC164014
18	District Energy Ltd	2362017
19	Eggborough Land Ltd	3978950
20	Eggborough Power (Holdings) Ltd	SC201083
21	Eggborough Power Ltd	3782700
22	International Nuclear Ltd	2353241
23	Lewis Cable Holdings Limited	SC231105
24	Lewis Cable Limited	SC231104
25	Lewis Wind Power Ltd	SC225262
26	Northern Power Ltd	SC155131
27	Nuclear Electric Ltd	SC185990
28	Nuclear International Ltd	SC185699
29	Scotia Energy Ltd	SC148800
30	Scottish Nuclear Ltd	SC189408
31	Sleaford Power Ltd	SC172300
32	Stornoway Wind Power Limited	SC225263
33	Western Isles Renewables Limited	SC231107

EX-12.1

Exhibit 12.01

CERTIFICATION

I, William Coley, certify that:

1. I have reviewed this annual report on Form 20-F of British Energy Group plc (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure control and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: July 28, 2005

	/s/ William Coley
Name:	William Coley
Title:	Chief Executive

EX-12.2

Exhibit 12.02

CERTIFICATION

I, Stephen Billingham, certify that:

1. I have reviewed this annual report on Form 20-F of British Energy Group plc (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure control and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: July 28, 2005

	/s/ Stephen Billingham
Name:	Stephen Billingham
Title:	Finance Director

EX-13.1

Exhibit 13.01

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying Annual Report on Form 20-F of British Energy Group plc, (the “Company”) for the annual period ended March 31, 2005 (the “Periodic Report”), I, William Coley, Chief Executive of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge the Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ William Coley

William Coley

Chief Executive

Date: July 28, 2005

EX-13.2

Exhibit 13.02

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying Annual Report on Form 20-F of British Energy Group plc, (the “Company”) for the annual period ended March 31, 2005 (the “Periodic Report”), I, Stephen Billingham, Finance Director of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge the Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Stephen Billingham

Stephen Billingham

Finance Director

Date: July 28, 2005

EX-15.1

Exhibit 15.01

BRITISH ENERGY PLC

- and -

MICHAEL ALEXANDER

SERVICE AGREEMENT

FOR EXECUTIVE DIRECTOR

Page 1 of 16

CONTENTS

Clause
1.	COMMENCEMENT AND TERM OF EMPLOYMENT	3
2.	DUTIES	4
3.	OFFICE OF DIRECTOR	5
4.	REMUNERATION	5
5.	PENSION SCHEME	6
6.	MEDICAL EXPENSES	6
7.	PERSONAL ACCIDENT INSURANCE	7
8.	COMPANY CAR	7
9.	EXPENSES	7
10.	HOLIDAYS	7
11.	INCAPACITY	8
12.	RESTRICTIONS DURING EMPLOYMENT	8
13.	INVENTIONS	9
14.	CONFIDENTIALITY	10
15.	TERMINATION OF DIRECTORSHIP	11
16.	SUMMARY TERMINATION OF EMPLOYMENT	12
17.	RESIGNATION FROM DIRECTORSHIPS UPON TERMINATION	13
18.	RECONSTRUCTION OR AMALGAMATION	13
19.	EXECUTIVE DIRECTOR’S COVENANTS	14
20.	NOTICES	15
21.	DISCIPLINARY AND GRIEVANCE PROCEDURE	15
22.	STATUTORY INFORMATION	15
23.	MISCELLANEOUS	16

Page 2 of 16

T H I S    A G R E E M E N T is made BETWEEN:

(1) BRITISH ENERGY PLC whose registered office is at 3 Redwood Crescent, East Kilbride, G74 5PR (the “Company”); and

(2) MICHAEL ALEXANDER, 8 Bearswood End, Beaconsfield, Bucks HP9 2NR (the “Executive Director”).

WHEREAS it is agreed that the Company shall employ the Executive Director and the Executive Director shall serve the Company as Executive Director of the Company on the following terms and subject to the following conditions:

1. COMMENCEMENT AND TERM OF EMPLOYMENT

1.1 Subject to paragraph 1.2 below the employment of the Executive Director (subject to termination as provided below) shall commence on 1 March 2003 (the “Commencement Date”).

1.2 The employment of the Executive Director (subject to termination as provided below) shall continue unless and until terminated by the Company giving not less than 12 months notice in writing to expire at any time after the Commencement Date or by the Executive Director giving not less than twelve months notice in writing at any time after the Commencement Date.

1.3 In the event that the Company gives notice to the Executive Director other than for good’ cause within twelve months of the commencement date, then the Executive Director will be entitled to receive 24 months’ notice.

1.4 In the event that during the first year of employment the Executive Director’s employment is terminated other than for good cause without notice or if during the first year of employment notice is given which is shorter than the notice provided for in this contract or if during the first year of employment the appropriate notice is given but subsequently the Executive Director is prevented by the Company from completing said period of notice, then in relation to any claim for damages which the Executive Director may have against the Company in respect of the failure to give notice or the shortening of the notice period, the Company agrees that the Executive Director shall be relieved of any duty or obligation to -mitigate his loss in respect of the notice period or any balance of the notice period as the case may be.

1.5 The Executive Director’s continuous period of employment for statutory purposes shall commence on 1 March 2003.

Page 3 of 16

2. DUTIES

2.1 The Executive Director shall during his employment under this Agreement:

2.1.1 serve the Company and its subsidiaries to the best of his ability in the capacity of Chief Executive of British Energy PLC or in such other equivalent capacity as the Board may from time to time determine; and

2.1.2 perform equivalent duties and exercise the powers which the Board may from time to time properly assign to him; and

2.1.3 in the absence of any specific directions from the board (but subject always to the memorandum and articles of association of the Company) exercises general control and management of British Energy PLC.

2.1.4 do all in his power to promote, develop and extend the business of the Company and of its Subsidiaries and at all times and in all respects conform to and comply with the proper and reasonable directions and regulations of the Board (but subject always to the memorandum and articles of association of the Company); and

2.1.5 at all times keep the Board promptly and fully informed (in writing if so requested) of his conduct of the business, finances and affairs of the Company and shall provide such explanations and supply all information in his possession as the Board may require in connection with such conduct of the business, finances or affairs of the Company; and

2.1.6 if and so long as the Board so directs perform and exercise the said duties and powers on behalf of any Associated Company and act as a director or other officer of any Associated Company.

2.2 The Executive Director shall carry out his duties as Chief Executive and exercise his powers jointly with any other director appointed by the Board to act jointly with him and the Board may at any time require the Executive Director to cease performing or exercising the said or any duties or powers, without such requirement giving rise to a Breach of Contract by the Company.

2.3 In accordance with the Memorandum of Association of the Company, the principal office of the Chief Executive will be in Scotland and is currently at 3 Redwood Crescent, East Kilbride. It is anticipated however, that the majority of the Executive Director’s time will be spent at the Company’s office at 52 Jermyn Street, London (or such other address in London at which the Company may have offices from time to time), with the remainder of time spent either at East Kilbride or at any office within the United Kingdom which the Board may require for the proper performance and exercise of his duties and powers and he may be required to travel on the business of the Company or any of its Associated Companies and/or Subsidiaries anywhere within the world.

Page 4 of 16

2.4 The Company shall not be under any obligation to provide the Executive Director with any work and the Company may at any time during the continuance of his employment without notice, suspend the Executive Director and/or exclude him from all or any premises of the Company or any Associated Company for any period not exceeding 12 months provided that throughout such a period, the Executive Director’s salary and other contractual benefits shall continue to be paid or provided by the Company.

2.5 The Executive Director shall at any time if directed to do so by the Board undergo a medical examination by a medical practitioner of the Company’s choice and at its expense. The Executive Director hereby authorises (such authorisation to be deemed to include the consent of the Executive Director for the purposes of Section 3 of the Access to Medical Reports Act 1988) such medical practitioner to disclose the results of such examination (whether in a medical report or otherwise) to the Company, subject to the Executive Director being informed by the Company of such request prior to it being made.

3. OFFICE OF DIRECTOR

3.1 During his employment under this Agreement the Executive Director shall not:

3.1.1 voluntarily resign as a director of the Company; .

3.1.2 voluntarily do or refrain from doing any act whereby his office as a director of the Company is or becomes liable to be vacated;

3.1.3 do anything that would cause him to be disqualified from continuing to act as a director.

4. REMUNERATION

4.1 The remuneration of the Executive Director shall be a fixed salary (which shall accrue from day to day) payable from the Commencement Date and at the rate of £400,000 per year (or such higher rate as may be recommended by the Remuneration Committee of the Board and approved by the Company in General Meeting from time to time) inclusive of any directors’ fees payable to him under the articles of association of the Company and the Associated Companies payable in arrears by equal monthly installments on the 24^th day of every month (or such other day as the Company may from time to time decide). The Executive Director’s salary shall be subject to review no less than annually commencing with effect from 1 July 2004 which shall be date of the first review.

4.2 The Executive Director will be entitled to participate in any Board Bonus Scheme which may be established varied or withdrawn from time to time by the Remuneration Committee at its discretion. You will be able to earn up to an additional 60% of base salary. In the event that any notice of termination of the Executive Director’s employment commences during the first year of employment, the Executive Director’s bonus shall be deemed to be 30% of base salary for the notice period and for any period prior to the notice period for which no bonus has been declared.

4.3 Should this employment terminate for reasons other than those set out in paragraph 16 then the Executive Director shall be entitled to that proportion of his bonus as corresponds to the part of the Company’s financial year which the Executive Director has worked at the date of termination (subject to the provisions of paragraph 1.3).

Page 5 of 16

5. PENSION SCHEME

5.1 “The Pension Schemes” means the British Energy Generation Group (BEGG) of the Electricity Supply Pension Scheme (ESPS), and the Unapproved Unfunded Retirement Benefit arrangement (UURB) or such other arrangement that the Company shall determine.

5.2 The term “Pensionable Pay” will have the meaning assigned to it in the documents governing the British Energy Generation Group of the ESPS.

5.3 The Executive Director is assumed to be, is treated as and, where he has not been already, will be admitted as a contributing member of the British Energy Generation Group of the Electricity Supply Pension Scheme (“the ESP Scheme”) subject to Inland Revenue limits.

5.4 Participation in the British Energy Generation Group of the ESPS Scheme is on the standard terms for staff effective from 1 January 2001. In addition, the Company will put an Unfunded Unapproved Retirement Benefit arrangement, so that, taking into account the benefits payable to the Executive Director from the British Energy Generation Group of the ESPS and the UURB, the Executive Director’s cumulative pension benefits under both the British Energy Generation Group of the ESPS and the UURB will accrue at the rate of £10,000 per annum for each complete year of service and pro-rata for part years. The terms on which such benefits will be paid are as set out in the Schedule attached, subject at all times to Inland Revenue Rules.

5.5 From the commencement of the Executive Director’s employment with the Company, contributions to the Pension Schemes will be deducted in respect of the Executive Director at the rate of five per cent (5%) of his salary. For this purpose, salary will be calculated in the same way as Pensionable Pay is calculated for the purposes of the British Energy Generation Group of the ESPS, without any limitation by reference to the Permitted Maximum or other Inland Revenue restrictions.

6. MEDICAL EXPENSES

6.1 Subject to his complying with and satisfying any applicable requirement of the relevant insurers the Company shall during the continuance of his employment cover the cost of membership for the Executive Director and the Executive Director’s spouse and/or nominated partner, and while aged under 21 years children and, stepchildren of a private patients medical plan with a reputable medical expenses insurance scheme as the Company shall in its absolute discretion decide from time to time.

Page 6 of 16

7. PERSONAL ACCIDENT INSURANCE

7.1 The Company shall provide the Executive Director with personal accident insurance with such reputable personal accident insurance scheme as the Company shall decided from time to time in accordance with the Company’s Personal Accident Insurance Policy.

8. COMPANY CAR

8.1 The Company will supply the Executive Director with a car deemed by the Board to be suitable for the performance of his duties under this Agreement in respect of which the Company will pay all running costs including insurance, petrol and maintenance.

8.2 The Executive Director shall take good care of the car and ensure that the provisions and conditions of any insurance policy relating to it are observed and shall return the car and its keys to the Company at its registered office (or any other place the Company may reasonably nominate) immediately upon the termination of his employment however arising.

9. EXPENSES

9.1 The Company shall by way of reimbursement pay or procure to be paid to the Executive Director:

9.1.1 all reasonable travelling, accommodation, meal and other expenses wholly exclusively and necessarily incurred by him in or about the performance of his duties under this Agreement; and

9.1.2 the cost of subscription to all professional bodies to which he is obliged to belong in order to maintain his professional qualifications

provided that the Executive Director shall provide the Company with such appropriate evidence (including receipts, invoices, tickets and/or vouchers) of the expenditure in respect of which he claims reimbursement as the Company may reasonably require.

10. HOLIDAYS

10.1 The Executive Director shall (in addition to the usual public and bank holidays) be entitled to 25 days holiday in each holiday year (as specified by the Company) to be taken at a time or times convenient to the Company and as agreed with the Chairman.

10.2 The Executive Director shall not be entitled to carry forward any annual holiday entitlement foregone by him for any reason during the holiday year in which it accrued without the prior written consent of the Board.

Page 7 of 16

10.3 Upon the termination of his employment for reasons other than those set out in paragraph 16 the Executive Director’s entitlement to accrued holiday pay (which accrues at the rate of 2 days per month) shall be calculated on a pro rate basis in respect of each completed month of service in the holiday year in which his employment terminates and the appropriate amount shall be paid to the Executive Director provided that if the Executive Director shall have taken more days holiday than his accrued entitlement the Company is hereby authorised to make an appropriate deduction from the Executive Director’s final salary payment.

11 INCAPACITY

11.1 During any period of absence from work due to Incapacity salary payable to the Executive Director under the terms of this Agreement shall be paid in full for the first twelve months of continuous absence (such payment to be inclusive of any statutory sick pay or social security benefits to which he may be entitled).

11.2 Thereafter the Executive Director shall continue to be paid salary only at the discretion of the Company.

11.3 If the Incapacity shall be or appear to be occasioned by actionable negligence of a third party in respect of which damages are or may be recoverable, then all sums paid by the Company during the period of absence in terms of paragraph 11.1 above shall constitute loans to the Executive Director who shall immediately notify the Board of the fact and he shall use all reasonable endeavours to recover damages for loss over the period for which salary has been or will be paid to him by the Company and he shall notify the Board of any claim compromise settlement or judgement made or awarded in connection with it and shall give to the Board all particulars the Board may reasonably require and shall if required by the Board refund to the Company that part of any damages recovered relating to loss of earnings for the period of the Incapacity as the Board may reasonably determine provided that the amount to be refunded shall not exceed the amount of damages or compensation recovered by him less any costs borne by the Executive Director in connection with the recovery of such damages or compensation and shall not exceed the total remuneration paid to him by way of salary in respect of the period of the Incapacity.

12. RESTRICTIONS DURING EMPLOYMENT

12.1 During the continuance of his employment under this Agreement the Executive Director shall unless prevented by Incapacity devote all of his time, attention and skill as are necessary to properly perform his duties under this agreement and shall not without the prior written consent of the Board:

(a) engage in any other business; or ;

Page 8 of 16

(b) be concerned or interested in any other business of a similar nature to or competitive with that carried on by the Company or any of its Associated Companies provided that nothing in this paragraph shall preclude the Executive Director from holding or being otherwise interested in any shares or other securities of any company which are for the time being quoted on any recognised investment exchange (as defined by section 207(1) Financial Services Act 1986) (or in respect of which dealing takes place in the Alternative Investment Market) provided such interest does not exceed 5% of the issued share capital of such company.

13 INVENTIONS

13.1 The parties foresee that the Executive Director may make, discover or create Intellectual Property in the course of his duties under this Agreement. In addition, because of the nature of his duties and particular responsibilities arising therefrom, the parties acknowledge that the Executive Director has a special obligation to further the interests of the Company. In this Agreement, “Intellectual Property” shall mean any and all intellectual or industrial property rights of any description in any country (whether registered or registrable or not) including, but not limited to, patents, registered design rights, unregistered design rights, copyright, database right, trademarks. (whether registered or unregistered) and inventions in any form of media whatsoever.

13.2 If at any time in the course of his employment under this Agreement the Executive Director makes or discovers or participates in the making or discovery of any Intellectual Property relating to, or capable of, being used in the business for the time being carried on by the Company or any of its Subsidiaries or Associated Companies, full details of the Intellectual Property shall immediately be communicated by him to the Company and shall be the absolute property of the Company. The Executive Director shall hold all details relating to the Intellectual Property upon trust for the benefit of the Company and shall keep them confidential. At the request and expense of the Company, the Executive Director shall give and supply all such information, data, drawings and assistance as may be requisite to enable the Company to exploit the Intellectual Property to the best advantage and shall execute all documents and do all things which may be necessary or desirable for obtaining patent or other protection for the Intellectual Property in such parts of the world as may be specified by the Company and for vesting the same in the Company or as it may direct. The Executive Director assigns, by way of present assignation of future rights, all copyright, database right and design rights in all works made, originated or developed by him in the course of his employment with the Company (whether or not made, originated or developed during working hours) and any other proprietary rights capable of assignment by way of present assignation of future rights for the full term of such rights.

Page 9 of 16

13.3 The Executive Director irrevocably appoints the Company to be his attorney in his name and on his behalf to sign execute or do any such instrument or thing and generally to use his name for the purpose of giving to the Company (or its nominee) the full benefit of the provisions of this paragraph 13 and for the purposes of any third party a certificate in writing signed by any director or the secretary of the Company that any instrument or act falls within the authority conferred by this paragraph 13 shall be conclusive evidence that such is the case.

13.4 If the Executive Director makes or discovers or participates in the making or discovery of any Intellectual Property during his employment under this Agreement but which is not the property of the Company under paragraph 13.2 the Company shall subject only to the provisions of the Patents Act 1977 have the right to acquire for itself or its nominee the Executive Director’s rights in the Intellectual Property within 3 months after disclosure pursuant to paragraph 13.2 on fair and reasonable terms to be agreed or settled by a single arbitrator.

13.5 The Executive Director waives all of his moral rights as defined in the Copyright, Designs and Patents Act 1988 in respect of any confidential information, inventions or other Intellectual Property developed or made or produced by him.

13.6 Rights and obligations under this paragraph 13 shall continue in force after termination of this Agreement in respect of Intellectual Property made or discovered during the Executive Director’s employment under this Agreement and shall be binding upon his representatives.

14. CONFIDENTIALITY

14.1 The Executive Director is aware that in the course of employment under this Agreement he will have access to and be entrusted with information in respect of the business and financing of the Company and its dealings transactions and affairs and likewise in relation to its Associated Companies all of which information is or may be confidential.

14.2 The Executive Director shall not (except in the proper course of his duties or except with the prior written consent of the Board or unless ordered by a court of competent jurisdiction) at any time during or after the period of his employment under this Agreement disclose or communicate or divulge to any person whatever or otherwise make use whether for his own benefit or for the benefit of any person other than the Company or an Associated Company of any confidential information which may come to his knowledge in the course of his employment and the Executive Director shall during the continuance of his employment use his best endeavours to prevent the unauthorised publication or misuse of any confidential information provided that such restrictions shall cease to apply to any confidential information which may enter the public domain other than through the default of the Executive Director.

Page 10 of 16

14.3 All notes and memoranda of any confidential information concerning the business of the Company and the Associated Companies or any of its or their suppliers agents distributors or customers which shall have been acquired received or made by the Executive Director during the course of his employment shall be the property of the Company and shall be surrendered by the Executive Director to someone duly authorised in that behalf at the termination of his employment or at the request of the Board at any time during the course of his employment.

14.4 For the avoidance of doubt, and without prejudice to the generality of the foregoing, the following is a non-exhaustive list of matters which in relation to the Company and any Associated Company are considered confidential and must be treated as such by the Executive Director:-

(a) any trade secrets of the Company or any Associated Company; and

(b) any information in respect of which the Company or any Associated Company is bound by an obligation of confidence to any third party; and

(c) unpublished and price-sensitive information relating to securities listed on any recognised Stock Exchange; and

(d) customer lists and details of contacts with or requirements of customers of the Company or any associated company; and

(e) marketing strategies, plans, customer lists, pricing strategies, discount rates and sales figures of the Company or any associated company; and

(f) lists of suppliers and rates of charge of the Company or any associated company; and

(g) any invention, technical data, know-how or other manufacturing or trade secret of the Company and/or of any Associated Company; and

(h) information concerning any litigation proposed, in progress or settled; and

(i) any information relating to the Company or any associated company made available to the Executive Director which is identified to the Executive Director as being of a confidential nature.

15 TERMINATION

15.1 Subject to the provision of paragraph 18, this Agreement shall terminate automatically in the event of the Executive Director ceasing to be a director of the Company and in that event the Executive Director shall have no claim for damages against the Company unless the Company is not otherwise entitled to determine his employment under this Agreement.

Page 11 of 16

16 SUMMARY TERMINATION OF EMPLOYMENT

16.1 The employment of the Executive Director may be terminated by the Company without notice or payment in lieu of notice:

16.1.1 if the Executive Director is guilty of any gross default or gross misconduct in connection with or affecting the business of the Company or any Subsidiary or Associated Company to which he is required by this Agreement to render services; or

16.1.2 in the event of any serious or repeated breach or non-observance by the Executive Director of any of the stipulations contained in this Agreement; or

16.1.3 if the Executive Director has an interim receiving order made against him, becomes bankrupt or makes any composition or enters into any deed of arrangement with his creditors; or

16.1.4 if the Executive Director is convicted of any arrestable criminal offence (other than an offence under road traffic legislation in the United Kingdom or elsewhere for which a fine or non-custodial penalty is imposed); or

16.1.5 if the Executive Director is disqualified from holding office in another company in which he is concerned or interested because of wrongful trading under the Insolvency Act 1986; or

16.1.6 if the Executive Director is convicted of an offence under the Companies Securities (Insider Dealing) Act 1985 or under any other present or future statutory enactment or regulations relating to insider dealings; or

16.1.7 if the Executive Director is guilty of conduct which brings or is likely to bring himself, the Company or any Associated Company into disrepute; or

16.1.8 if the Executive Director is, in the opinion of the Board, incapable by reasons of mental disorder of discharging his duties; or

16.1.9 if the Executive Director resigns as a director of the Company otherwise than at the request of the Company.

Page 12 of 16

17. RESIGNATION FROM DIRECTORSHIPS UPON TERMINATION

17.1 Upon the termination by whatever means of this Agreement:

17.1.1 the Executive Director shall at the request of the Company immediately resign from office as a director of the Company and from such offices held by him in Associated Companies as may be so requested without claim for compensation for such loss of office (but without prejudice to any other claim for compensation which the Executive Director may have under this Agreement) and in the event of his failure so to do the Company is hereby irrevocably authorised to appoint some person in his name and on his behalf to sign and deliver such resignation or resignations to the Company and to each of the Associated Companies of which the Executive Director is at the material time a director or other officer; and

17.1.2 the Executive Director shall not without the consent of the Company at any time thereafter represent himself still to be connected with the Company or any of the Associated Companies; and

17.1.3 the Executive Director shall forthwith deliver to the Company all documents. (including correspondence lists notes memoranda plans reports papers drawings charts and other materials of whatsoever nature whether original or copies) films computer hardware computer software tapes models photographs made or compiled by or received by the Executive Director during the course of his employment with the Company and concerning the business finances or affairs of the Company any Associated Company or any supplier or customer of such company and shall not retain any copies; and

17.1.4 the Executive Director shall forthwith return to the Company all property of the Company and of any Associated Company (including any monies which the Executive Director may hold to the Company of any Associated Company’s account) in the possession or under the control of the Executive Director.

18 RECONSTRUCTION OR AMALGAMATION

18.1 If the employment of the Executive Director under this Agreement is terminated by reason of the liquidation of the Company for the purpose of reconstruction or amalgamation and the Executive Director is offered employment with any concern or undertaking resulting from the reconstruction or amalgamation on terms and conditions not less favourable than the terms of this Agreement then the Executive Director shall have no claim against the Company in respect of the termination of his employment under this Agreement.

Page 13 of 16

19 EXECUTIVE DIRECTOR’S COVENANTS

19.1 The Executive Director acknowledges that during the course of his employment with the Company he will receive and have access to confidential information of the Company (and its Associated Companies) and he will also receive and have access to detailed client/customer lists and information relating to the operations and business requirements to those clients/customers and accordingly he is willing to enter into the covenants described below in order to provide the Company and its associated companies with what he considers to be reasonable protection for those interests.

19.2 The Executive Director covenants with the Company that he will not for the period of one year after ceasing to be employed under this Agreement without the prior written consent of the Board:

19.2.1 be concerned in connection with the carrying on of any business in competition with the business of generating electricity and/or of any nuclear business carried on by the Company on his own behalf or on behalf of any person Firm or company directly or indirectly; or .

19.2.2 seek to produce orders from or do business with any person firm or company with whom he shall have done business on behalf of the Company within one year period immediately preceding such cesser; or

19.2.3 solicit or entice away or endeavour to solicit or entice away from the Company or any Associated Company any person who has at any time during the one year period immediately preceding such cesser been employed or engaged by the Company or any Associated Companies in a senior capacity and with whom the Executive Director had dealings in the course of his employment during the said, one year period.

provided that nothing in this paragraph 19.2 shall prohibit the seeking or procuring of orders or the doing of business not relating or not similar to the business or businesses described above.

19.3 The Executive Director covenants with the Company that he will not within England and/or Wales and/or Scotland for the period of one year after ceasing to be employed under this Agreement without the prior written consent of the Board either alone or jointly with or as manager, agent, consultant or employee of any person firm or company (or in any other capacity including without limitation as a shareholder) directly or indirectly carry on or be engaged in any activity or business which shall be in competition with the business of electricity generating and/or of any nuclear business carried on by the Company

Page 14 of 16

19.4 The covenants contained in paragraphs 19.2.1, 19.2.2, 19.2.3 and 19.3 are intended to be separate and severable and enforceable as such.

19.5 The Executive Director hereby undertakes that he will immediately notify the Company of any offer of employment or any other engagement or arrangement made to the Executive Director by any third party or parties which may give rise to a breach of one or more of the covenants contained in Paragraphs 19.2.1, 19.2.2, 19.2.3 and 19.3 (“Notifiable Offer”) and further undertakes that on receipt of any Notifiable Offer he will immediately inform the third party or parties responsible for that offer of the existence of those covenants.

20 NOTICES

20.1 Any notice required or permitted to be given under this Agreement shall be given in writing delivered personally or sent by first class post pre-paid recorded or registered delivery (air mail if overseas) or by fax to the party due to receive such notice at, in the case of the Company, its registered office from time to time and, in the case of the Executive Director his address as set out in this Agreement (or such address as he may have notified to the Company in accordance with this paragraph).

20.2 Any notice delivered personally shall be deemed to be received when delivered to the address provided in paragraph 20.1 and any notice sent by pre-paid recorded or registered delivery post shall be deemed (in the absence of evidence of earlier receipt) to be received 2 days after posting (6 days in sent air mail) and in proving the time of despatch it shall be sufficient to show that the envelope containing such notice was properly addressed, stamped and posted. A notice sent by fax shall be deemed to have been received on receipt by the sender of the correct “transmit receipt”.

21. DISCIPLINARY AND GRIEVANCE PROCEDURE

21.1 For statutory purposes there is no formal disciplinary procedure in relation to the Executive Director’s employment. The Executive Director shall be expected to maintain the highest standards of integrity and behaviour. All disciplinary matters for Executive Directors are dealt with by the Board.

21.2 For statutory purposes there is no formal grievance procedure. The Executive Director should apply to the Board to seek redress for any grievance.

21.3 There is a right of appeal to the Board whose decision shall be final.

22. STATUTORY INFORMATION

22.1 For the avoidance of doubt this Agreement also constitutes the statement of particulars of terms and conditions of employment which is required to be given to the Executive Director by Section 1 Employment Rights Act 1996 as amended.

Page 15 of 16

23 MISCELLANEOUS

23.1 In this Agreement unless the context otherwise requires the following expressions shall have the following meanings:

“Associated Company”	a Subsidiary and any other company which is for the time being a holding company (as defined by the Companies Acts 1985 and 1989) or the Company or another subsidiary of any such holding company;
“Board”	the Board of Directors for the time being of the Company

by and shall be construed in accordance with the laws of Scotland;

23.2 The parties to this Agreement submit to the exclusive jurisdiction of the Scottish courts;

23.3 This Agreement contains the entire understanding between the parties and supersedes all previous agreements and arrangements (if any) relating to the employment of the. Executive Director by the Company (which shall be deemed to have been terminated by mutual consent).

23.4 The expiry or determination of this Agreement howsoever arising shall not affect such of the provisions hereof as are expressed to operate or have effect after the termination of this Agreement and shall be without prejudice to any right of action already accrued to either party in respect of any breach of this Agreement by the other party. For the avoidance of doubt the clauses of this Agreement that operate after the termination of this Agreement are 13, 14, 15, 17, 18, 19 and 20.

IN WITNESS whereof this Agreement has been duly executed the day and year first above written

Michael Alexander	Witness
	Name
	Address
For and on behalf of British Energy PLC
Director	Witness

Page 16 of 16

EX-15.2

Exhibit 15.02

DRAFT

DATED

BRITISH ENERGY PLC

- and -

WILLIAM A. COLEY

SERVICE AGREEMENT

FOR EXECUTIVE DIRECTOR

CONTENTS

1.	COMMENCEMENT AND TERM OF EMPLOYMENT	3
2.	DUTIES	3
3.	OFFICE OF DIRECTOR	6
4.	REMUNERATION	6
5.	PENSION SCHEME	7
6.	MEDICAL EXPENSES	7
7.	PERSONAL ACCIDENT INSURANCE	7
8.	EXPENSES	8
10.	HOLIDAYS	9
11.	INCAPACITY	10
12.	RESTRICTIONS DURING EMPLOYMENT	10
13.	INVENTIONS	11
14.	CONFIDENTIALITY	13
15.	TERMINATION	15
16.	SUMMARY TERMINATION OF EMPLOYMENT	16
17.	RESIGNATION FROM DIRECTORSHIPS UPON TERMINATION	17
18.	RECONSTRUCTION OR AMALGAMATION	18
19.	EXECUTIVE DIRECTOR’S COVENANTS	18
20.	NOTICES	20
21.	DISCIPLINARY AND GRIEVANCE PROCEDURE	21
22.	STATUTORY INFORMATION	21
23.	MISCELLANEOUS	22

Page 2 of 23

THIS AGREEMENT is made between

(1) BRITISH ENERGY GROUP PLC whose registered office is 3 Redwood, Crescent, East Kilbride G74 5PR (the “Company”); and

(2) William A. Coley of 1231 Wareham Court, Charlotte, North Carolina, USA (the “Executive Director”).

WHEREAS it is agreed that the Company shall employ the Executive Director and the Executive Director shall serve the Company as Executive Director of the Company on the following terms and subject to the following conditions:

1. COMMENCEMENT AND TERM OF EMPLOYMENT

1.1 The employment of the Executive Director (subject to termination as provided below) commenced on 14 April 2005 (the “Commencement Date”).

1.2 The employment of the Executive Director (subject to termination as provided below) shall be capable of being terminated by either party giving six months in writing to the other such notice to expire at any time.

1.3 The Executive Director’s continuous period of employment for statutory purposes shall commence on the Commencement Date.

2. DUTIES

2.1 The Executive Director shall during his employment under this Agreement:

2.1.1 serve the Company and its subsidiaries to the best of his ability in the capacity of Chief Executive of British Energy Group PLC or in such other equivalent capacity as the Board may from time to time determine; and

2.1.2 perform equivalent duties and exercise the powers which the Board may from time to time properly assign to him; and

Page 3 of 23

2.1.3 in the absence of any specific directions from the Board (but subject always to the memorandum and articles of association of the Company) exercise general control and management of British Energy Group PLC; and

2.1.4 do all in his power to promote, develop and extend the business of the Company and of its Subsidiaries and at all times and in all respects conform to and comply with the proper and reasonable directions and regulations of the Board (but subject always to the memorandum and articles of association of the Company); and

2.1.5 at all times keep the Board promptly and fully informed (in writing if so requested) of his conduct of the business, finances and affairs of the Company and shall provide such explanations and supply all information in his possession as the Board may require in connection with such conduct of the business, finances or affairs of the Company; and

2.1.6 if and so long as the Board so directs perform and exercise the said duties and powers on behalf of any Associated Company and act as a director or other officer of any Associated Company.

2.2 The Executive Director shall carry out his duties and exercise his powers jointly with any other director appointed by the Board to act jointly with him and the Board may at any time require the Executive Director to cease performing or exercising the said or any duties or powers without such requirement giving rise to a Breach of Contract by the Company. The Executive acknowledges that, in view of his continuing to receive Director’s fees he shall not be entitled to serve on the Executive Committee responsible for determining Director’s fees and non-executive remuneration.

Page 4 of 23

2.3 The principal office of the Executive Director shall be based at the Company’s offices in Sheldon Square, Paddington, London, (or such other location in London as the Company may have) or in any other place within the United Kingdom which the Board may require for the proper performance and exercise of his duties and powers. The Executive Director may be required to travel on the business of the Company or any of its Associated Companies and/or Subsidiaries anywhere within the world.

2.4 The Company shall not be under any obligation to provide the Executive Director with any work and the Company may at any time during the continuance of his employment without notice, suspend the Executive Director and/or exclude him from all or any premises of the Company or any Associated Company for any period not exceeding sixty days provided that throughout such a period, the Executive Director’s salary and other contractual benefits shall continue to be paid or provided by the Company.

2.5 The Executive Director shall at any time if directed to do so by the Board undergo a medical examination by a medical practitioner of the Company’s choice and at its expense. The Executive Director hereby authorises (such authorisation to be deemed to include the consent of the Executive Director for the purposes of Section 3 of the Access to Medical Reports Act 1988) such medical practitioner to disclose the results of such examination (whether in a medical report or otherwise) to the Company, subject to the Executive Director being informed by the Company of such request prior to it being made.

2.6 The Company shall, to the extent permitted by law or statute, reimburse the Executive Director for all reasonable legal costs, travel and other expenses incurred by him in defending any claims against him or the Company arising out of his service as Chief Executive under this Agreement.

Page 5 of 23

3. OFFICE OF DIRECTOR

Subject to Clause 16 below during his employment under this Agreement the Executive Director shall not:

3.1 voluntarily resign as a director of the Company;

3.2 voluntarily do or refrain from doing any act whereby his office as a Director of the Company is or becomes liable to be vacated;

3.3 do anything that would cause him to be disqualified from continuing to act as a Director.

4. REMUNERATION

4.1 The remuneration of the Executive Director shall be a fixed salary (which shall accrue from day to day) payable from the Commencement Date and at the rate of £531,915 per annum (or such higher rate as may be recommended by the Remuneration Committee of the Board and approved by the Company in General Meeting from time to time) in addition to any Directors’ fees of £27,000 per annum and shares in the Company having a value at the date of payment of £13,000 per annum payable to him under the articles of association of the Company and the Associated Companies under the Executive Director’s previous terms of appointment as a Non-Executive Director, in each case payable in arrears by equal monthly instalments on the 24^th day of every month (or such other day as the Company may from time to time decide) - save for the payment of shares in the Company which shall be made quarterly.

Page 6 of 23

4.2 The Executive Director will be eligible for a bonus of up to £265,958 payable [on the first anniversary of the Commencement Date] subject to the absolute discretion of the Remuneration Committee and approval by the Board, on the basis of performance targets to be determined by the Remuneration Committee and notified to the Executive Director as soon as practicable.

4.3 Should this employment terminate for reasons other than those set out in paragraph 15 [before the first anniversary of the Commencement Date] then the Executive Director shall be entitled to that proportion of his bonus under paragraph 4.2 as corresponds to the part of the fixed 12 month term of this Agreement which the Executive Director has worked at the date of termination.

5. PENSION SCHEME

5.1 The Executive Director shall not be eligible for membership of any occupational pension scheme and should make his own pension arrangements.

6. MEDICAL EXPENSES

6.1 Subject to his complying with and satisfying any applicable requirement of the relevant insurers, the Company shall during the continuance of his employment cover the cost of membership for the Executive Director and the Executive Director’s spouse and/or nominated partner, and while aged under 21 years children and stepchildren of a private patients medical plan with a reputable medical expenses insurance scheme as the Company shall in its absolute discretion decide from time to time.

Page 7 of 23

7. PERSONAL ACCIDENT INSURANCE

7.1 The Company shall provide the Executive Director with personal accident insurance with such reputable personal accident insurance scheme as the Company shall decide from time to time in accordance with the Company’s Personal Accident Insurance Policy.

8. EXPENSES

8.1 The Company shall by way of reimbursement pay or procure to be paid to the Executive Director:

8.1.1 all reasonable costs incurred by the Executive Director in relocating himself and his family to the United Kingdom;

8.1.2 all reasonable travelling, accommodation, meal and other expenses wholly exclusively and necessarily incurred by him in or about the performance of his duties under this Agreement;

8.1.3 the cost of subscription to all professional bodies to which he is obliged to belong in order to maintain his professional qualifications provided that the Executive Director shall provide the Company with such appropriate evidence (including receipts, invoices, tickets and/or vouchers) of the expenditure in respect of which he claims reimbursement as the Company may reasonably require; and

8.1.4 all reasonable costs incurred by the Executive in relocating himself and his family to North Carolina within 60 days of the termination of this Agreement provided that his employment under this Agreement is not terminated in accordance with Clause 15.

8.2 The Company will pay to the Executive Director for the term of this Agreement and the period of 30 days thereafter a housing allowance of £105,770 per annum in respect of a house or apartment rented by the Executive Director in reasonable proximity to the Company’s office in Paddington, London (the “Housing Allowance”).

Page 8 of 23

8.3 The first Housing Allowance payment shall be increased on a one off basis by a supplement of £12,200 (the “Supplement”) to recognise the cost to the Executive Director of paying a deposit. In the event that this Agreement is terminated for any reason the Supplement shall be deducted from or set off against any final Housing Allowance, salary or other payment due to the Executive Director pursuant to this Agreement and the Executive Director hereby consents to such deduction being made.

9. HOLIDAYS

9.1 The Executive Director shall (in addition to the usual public and bank holidays) be entitled to 25 days holiday in each holiday year (as specified by the Company) to be taken at a time or times convenient to the Company and as agreed with the Chairman.

9.2 The Executive Director shall not be entitled to carry forward any annual holiday entitlement foregone by him for any reason during the holiday year in which it accrued without the prior written consent of the Board.

9.3 Upon the termination of his employment for reasons other than those set out in paragraph 16 the Executive Director’s entitlement to accrued holiday pay (which accrues at the rate of 2 days per month) shall be calculated on a pro rate basis in respect of each completed month of service in the holiday year in which his employment terminates and the appropriate amount shall be paid to the Executive Director provided that if the Executive Director shall have taken more days holiday than his accrued entitlement the Company is hereby authorised to make an appropriate deduction from the Executive Director’s final salary payment.

Page 9 of 23

10. INCAPACITY

10.1 During any period of absence from work due to Incapacity salary payable to the Executive Director under the terms of this Agreement shall be paid in full for the first twelve months of continuous absence (such payment to be inclusive of any statutory sick pay or social security benefits to which he may be entitled).

10.2 Thereafter the Executive Director shall continue to be paid salary only at the discretion of the Company.

10.3 If the Incapacity shall be or appear to be occasioned by actionable negligence of a third party in respect of which damages are or may be recoverable, then all sums paid by the Company during the period of absence in terms of paragraph 10.1.1 above shall constitute loans to the Executive Director who shall immediately notify the Board of that fact and shall use all reasonable endeavours to recover damages for loss over the period for which salary has been or will be paid to him by the Company and he shall notify the Board of any claim compromise settlement or judgement made or awarded in connection with it and shall give to the Board all particulars the Board may reasonably require and shall if required by the Board refund to the Company that part of any damages recovered relating to loss of earnings for the period of the Incapacity as the Board may reasonably determine provided that the amount to be refunded shall not exceed the amount of damages or compensation recovered by him less any costs borne by the Executive Director in connection with the recovery of such damages or compensation and shall not exceed the total remuneration paid to him by way of salary in respect of the period of the Incapacity.

11. RESTRICTIONS DURING EMPLOYMENT

11.1 During the continuance of his employment under this Agreement the Executive Director shall unless prevented by Incapacity devote all of his time, attention and skill as are necessary to properly perform his duties under this agreement and shall not

Page 10 of 23

without the prior written consent of the Board:

• engage in any other business; or

• be concerned or interested in any other business of a similar nature to or competitive with that carried on by the Company or any of its Associated Companies provided that nothing in this paragraph shall preclude the Executive Director from holding or being otherwise interested in any shares or other securities of any company which are for the time being quoted on any recognised investment exchange (as defined by section 207(1) Financial Services Act 1986) (or in respect of which dealing takes place in the Alternative Investment Market) provided such interest does not exceed 5% of the issued share capital of such Company;

provided always that the Executive Director may retain any other directorships held by him at the Commencement Date which have been notified to the Company and retain the fees or remuneration therefrom and may be absent from the United Kingdom for the purpose of performing his duties as a director in relation to those offices provided that he shall notify the Chairman of the Company in advance of such absences (and provided that such appointments do not conflict with his appointment pursuant to this Agreement).

12. INVENTIONS

12.1 The parties foresee that the Executive Director may make, discover or create Intellectual Property in the course of his duties under this Agreement. In addition, because of the nature of his duties and particular responsibilities arising thereform, the parties acknowledge that the Executive Director has a special obligation to further the interests of the Company. In this Agreement, “Intellectual Property” shall mean any and all intellectual or industrial property rights of any description in any country (whether registered or registrable or not) including, but not limited to, patents, registered design rights, unregistered design rights, copyright, database right, trademarks (whether registered or unregistered) and inventions in any form of media whatsoever.

Page 11 of 23

12.2 If at any time in the course of his employment under this Agreement the Executive Director makes or discovers or participates in the making or discovery or any Intellectual Property relating to, or capable of, being used in the business for the time being carried on by the Company or any of its Subsidiaries or Associated Companies, full details of the Intellectual Property shall immediately be communicated by him to the Company and shall be the absolute property of the Company. The Executive Director shall hold all details relating to the Intellectual Property upon trust for the benefit of the Company and shall keep them confidential. At the request and expense of the Company, the Executive Director shall give and supply all such information, data, drawings and assistance as may be requisite to enable the Company to exploit the Intellectual Property to the best advantage and shall execute all documents and do all things which may be necessary or desirable for obtaining patent or other protection for the Intellectual Property in such parts of the world as may be specified by the Company and for vesting the same in the Company or as it may direct. The Executive Director assigns, by way of present assignation of future rights, all copyright, database right and design rights in all works made, originated or developed by him in the course of his employment with the Company (whether or not made, originated or developed during working hours) and any other proprietary rights capable of assignment by way of present assignation of future rights for the full term of such rights.

Page 12 of 23

12.3 The Executive Director irrevocably appoints the Company to be his attorney in his name and on his behalf to sign execute or do any such instrument or thing and generally to use his name for the purpose of giving to the Company (or its nominee) the full benefit of the provisions of this paragraph 12 and for the purposes of any third party a certificate in writing signed by any director or the secretary of the Company that any instrument or act falls within the authority conferred by this paragraph 14 shall be conclusive evidence that such is the case.

12.4 If the Executive Director makes or discovers or participates in the making or discovery of any Intellectual Property during his employment under this Agreement but which is not the property of the Company under paragraph 14.2 the Company shall subject only to the provisions of the Patents Act 1977 have the right to acquire for itself or its nominee the Executive Director’s rights in the Intellectual Property within 3 months after disclosure pursuant to paragraph 14.2 on fair and reasonable terms to be agreed or settled by a single arbitrator.

12.5 The Executive Director waives all of his Moral Rights as defined in the Copyright, Designs and Patents Act 1988 in respect of any a confidential information, inventions or other Intellectual Property developed or made or produced by him.

12.6 Rights and obligations under paragraph 14 shall continue in force after termination of this Agreement in respect of Intellectual Property made or discovered during the Executive Director’s employment under this Agreement and shall be binding upon his representatives.

13. CONFIDENTIALITY

13.1 The Executive Director is aware that in the course of employment under this Agreement he will have access to and be entrusted with information in respect of the business and financing of the Company and its dealings transactions and affairs and likewise in relation to its Associated Companies all of which information is or may be confidential.

Page 13 of 23

13.2 The Executive Director shall not (except in the proper course of his duties or except with the prior written consent of the Board or unless ordered by a court of competent jurisdiction) at any time during or after the period of his employment under this Agreement disclose or communicate or divulge to any person whatever or otherwise make use whether for his own benefit or for the benefit of any person other than the Company or an Associated Company of any confidential information which may come to his knowledge in the course of his employment and the Executive Director shall during the continuance of his employment use his best endeavours to prevent the unauthorised publication or misuse of any confidential information provided that such restrictions shall cease to apply to any confidential information which may enter the public domain other than through the default of the Executive Director.

13.3 All notes and memoranda of any confidential information concerning the business of the Company and the Associated Companies or any of its or their suppliers agents distributors or customers which shall have been acquired received or made by the Executive Director during the course of his employment shall be the property of the Company and shall be surrendered by the Executive Director to someone duly authorised in that behalf at the termination of his employment or at the request of the Board at any time during the course of his employment.

13.4 For the avoidance of doubt, and without prejudice to the generality of the foregoing, the following is a non-exhaustive list of matters which in relation to the Company and any Associated Company are considered confidential and must be treated as such by the Executive Director:-

• any trade secrets of the Company or any Associated Company; and

Page 14 of 23

• any information in respect of which the Company or any Associated Company is bound by obligation of confidence to any third party; and

• unpublished and price-sensitive information relating to securities listed on any recognised Stock Exchange; and

• customer lists and details of contacts with or requirements of customers; and

• marketing strategies, plans, customer lists, pricing strategies, discount rates and sales figures of the Company or any associated company, and

• lists of suppliers and rates of charge of the Company or any associated company; and

• any invention, technical data, know-how or other manufacturing or trade secret of the Company and/or of any Associated Company; and

• information concerning any litigation proposed, in progress or settled; and

• any information relating to the Company or any associated company made available to the Executive Director which is identified to the Executive Director as being of a confidential nature.

14. TERMINATION

14.1 This Agreement shall terminate automatically in the event of the Executive Director ceasing to be a Director of the Company and in that event the Executive Director shall have no claim for damages against the Company unless the Company is not otherwise entitled to determine his employment under this Agreement.

Page 15 of 23

15. SUMMARY TERMINATION OF EMPLOYMENT

The employment of the Executive Director may be terminated by the Company without notice or payment in lieu of notice:

15.1 If the Executive Director is guilty of any gross default or gross misconduct in connection with or affecting the business of the Company or any Subsidiary or Associated Company to which he is required by this Agreement to render services; or

15.2 In the event of any serious or repeated breach or non-observance by the Executive Director of any of the stipulations contained in this Agreement; or

15.3 If the Executive Director has an interim receiving order made against him, becomes bankrupt or makes any composition or enters into any deed of arrangement with his creditors; or

15.4 If the Executive Director is convicted of any arrestable criminal offence (other than an offence under road traffic legislation in the United Kingdom or elsewhere for which a fine or non-custodial penalty is imposed); or

15.5 If the Executive Director is disqualified from holding office in another company in which he is concerned or interested because of wrongful trading under the Insolvency Act 1986; or

15.6 If the Executive Director is convicted of an offence under the Companies Securities (Insider Dealing) Act 1985 or under any other present or future statutory enactment or regulations relating to insider dealings; or

Page 16 of 23

15.7 If the Executive Director is guilty of conduct which brings or is likely to bring himself, the Company or any Associated Company into disrepute; or

15.8 If the Executive Director is, in the opinion of the Board, incapable by reasons of mental disorder of discharging his duties; or

15.9 If the Executive Director resigns as a director of the Company otherwise than at the request of the Company.

16. RESIGNATION FROM DIRECTORSHIPS UPON TERMINATION

Upon the termination by whatever means of this Agreement:

16.1 The Executive Director shall at the request of the Company immediately resign from office as a director of the Company and from such offices held by him in Associated Companies as may be so requested without claim for compensation for such loss of office (but without prejudice to any other claim for compensation which the Executive Director may have under this Agreement) and in the event of his failure so to do the Company is hereby irrevocably authorised to appoint some person in his name and on his behalf to sign and deliver such resignation or resignations to the Company and to each of the Associated Companies of which the Executive Director is at the material time a director or other officer; and

16.2 The Executive Director shall not without the consent of the Company at any time thereafter represent himself still to be connected with the Company or any of the Associated Companies; and

16.3 The Executive Director shall forthwith deliver to the Company all documents (including correspondence, lists, notes, memoranda, plans, reports, papers, drawings, charts and other materials of whatsoever nature whether original or copies) films computer hardware computer software tapes models photographs made or compiled by or received by the Executive Director

Page 17 of 23

during the course of his employment with the Company and concerning the business finances or affairs of the Company any Associated Company or any supplier or customer of such company and shall not retain any copies; and

16.4 The Executive Director shall forthwith return to the Company all property of the Company and of any Associated Company (including any monies which the Executive Director may hold to the Company of any Associated Company’s account) in the possession or under the control of the Executive Director.

17. RECONSTRUCTION OR AMALGAMATION

17.1 If the employment of the Executive Director under this Agreement is terminated by reason of the liquidation of the Company for the purpose of reconstruction or amalgamation and the Executive Director is offered employment with any concern or undertaking resulting from the reconstruction or amalgamation on terms and conditions not less favourable than the terms of this Agreement then the Executive Director shall have no claim against the Company in respect of the termination of his employment under this Agreement.

18. EXECUTIVE DIRECTOR’S COVENANTS

18.1 The Executive Director acknowledges that during the course of his employment with the Company he will receive and have access to confidential information of the Company (and its Associated Companies) and he will also receive and have access to detailed client/customer lists and information relating to the operations and business requirements to those clients/customers and accordingly he is willing to enter into the covenants described below in order to provide the Company and its associated companies with what he considers to be reasonable protection for those interests.

Page 18 of 23

18.2 The Executive Director covenants with the Company that he will not for the period of one year after ceasing to be employed under this Agreement without the prior written consent of the Board:

18.2.1 be concerned within England and/or Wales and/or Scotland in connection with the carrying on of any business in competition with the business of generating electricity and/or of any nuclear business carried on by the Company on his own behalf or on behalf of any person firm or company directly or indirectly; or

18.2.2 seek to produce orders from or do business with any person firm or company with whom he shall have done business on behalf of the Company within one year period immediately preceding such cesser; or

18.2.3 solicit or entice away or endeavour to solicit or entice away from the Company or any Associated Company any person who has at any time during the one year period immediately preceding such cesser been employed or engaged by the Company or any Associated Companies in a senior capacity and with whom the Executive Director had dealings in the course of his employment during the said one year period provided that nothing in this paragraph 18.2 shall prohibit the seeking or procuring of orders or the doing of business not relating or not similar to the business or businesses described above.

Page 19 of 23

18.3 The Executive Director covenants with the Company that he will not within England and/or Wales and/or Scotland for the period of one year after ceasing to be employed under this Agreement without the prior written consent of the Board either alone or jointly with or as manager, agent, consultant or employee of any person firm or company (or in any other capacity including without limitation as a shareholder) directly or indirectly carry on or be engaged in any activity or business which shall be in competition with the business of electricity generating and/or of any nuclear business carried on by the Company.

18.4 The covenants contained in paragraphs 18.2.1, 18.2.2 and 18.3 are intended to be separate and severable and enforceable as such.

18.5 The Executive Director hereby undertakes that he will immediately notify the Company of any offer of employment or any other engagement or arrangement made to the Executive Director by any third party or parties which may give rise to a breach of one or more of the covenants contained in paragraphs 18.2.1, 18.2.2 and 18.3 (“Notifiable Offer”) and further undertakes that on receipt of any Notifiable Offer he will immediately inform the third party or parties responsible for that offer of the existence of those covenants.

19. NOTICES

19.1 Any notice required or permitted to be given under this Agreement shall be given in writing delivered personally or sent by first class post pre-paid recorded or registered delivery (air mail if overseas) or by fax to the party due to receive such notice at, in the case of the Company, its registered office from time to time and, in the case of the Executive Director his address as set out in this Agreement (or such address as he may have notified to the Company in accordance with this paragraph).

Page 20 of 23

19.2 Any notice delivered personally shall be deemed to be received when delivered to the address provided in paragraph 19.1 and any notice sent by pre-paid recorded or registered delivery post shall be deemed (in the absence of evidence of earlier receipt) to be received 2 days after posting (6 days if sent air mail) and in proving the time of despatch it shall be sufficient to show that the envelope containing such notice was properly addressed, stamped and posted. A notice sent by fax shall be deemed to have been received on receipt by the sender of the correct “transmit receipt”.

20. DISCIPLINARY AND GRIEVANCE PROCEDURE

20.1 For statutory purposes there is no formal disciplinary procedure in relation to the Executive Director’s employment. The Executive Director shall be expected to maintain the highest standards of integrity and behaviour. All disciplinary matters for Executive Directors are dealt with by the Board.

20.2 For statutory purposes there is no formal grievance procedure. The Executive Director should apply to the Board to seek redress for any grievance.

20.3 There is a right of appeal to the Board whose decision shall be final.

21. STATUTORY INFORMATION

For the avoidance of doubt this Agreement also constitutes the statement of particulars of terms and conditions of employment which is required to be given to the Executive Director by Section 1 Employment Rights Act 1996 as amended.

Page 21 of 23

22. MISCELLANEOUS

22.1 In this Agreement unless the context otherwise requires the following expressions shall have the following meanings:

“Associated Company”	a Subsidiary and any other company which is for the time being a holding company (as defined by the Companies Acts 1985 and 1989) or the Company or another subsidiary of any such holding company;
“Board”	the Board of Directors for the time being of the Company.

This Agreement is governed by and shall be construed in accordance with the laws of England.

22.2 This Agreement contains the entire understanding between the parties and supersedes all previous agreements and arrangements (if any) relating to the employment of the Executive Director by the Company (which shall be deemed to have been terminated by mutual consent).

22.3 The expiry or determination of this Agreement howsoever arising shall not affect such of the provisions hereof as are expressed to operate or have effect after the termination of this Agreement and shall be without prejudice to any right of action already accrued to either party in respect of any breach of this Agreement by the other party. For the avoidance of doubt the clauses of this Agreement that operate after the termination of this Agreement are 12, 13, 14, 16, 17, 18 and 19.

Page 22 of 23

IN WITNESS whereof this Agreement has been duly executed the day and year first above written:

William A. Coley	Witness
	Name
	Address
For and on behalf of British Energy Group PLC
Director	Witness

Page 23 of 23

EX-15.3

Exhibit 15.03

CONTRACT OF EMPLOYMENT

between

BRITISH ENERGY Plc

having its registered office at 3 Redwood Crescent, Peel Park,

East Kilbride, G74 5PR

and

Neil O’Hara

residing at Greenways, Garden Close Lane, Newbury, RG14 6PP

INDEX OF CLAUSES

1.	Definitions and Interpretation	3
2.	Term and Commencement of Employment	4
3.	Duties	5
4.	Attention to Duties	5
5.	Salary	5
6.	Pensions	5
7.	Expenses	6
8.	Other Benefits	6
9.	Holidays	6
10.	Intellectual Property	7
11.	Exclusive Service	9
12.	Place of Work	9
13.	Termination	9
14.	Illness	9
15.	Retirement	11
16.	Undertakings	11
17.	Amalgamation	12
18.	Notices	12
19.	Previous Agreements	13
20.	Grievances	13
21.	Code of Conduct and Disciplinary Rules	13
22.	Career Support Policy	13
23.	Workplace Policies	13
24.	Data Protection	13
25.	Working Time Directive	13
26.	Collective Agreements	14
27.	Law	14

Page 2

CONTRACT OF EMPLOYMENT

between

BRITISH ENERGY Plc having its registered office at

3 Redwood Crescent, Peel Park, East Kilbride, G74 5PR

(“the Employer”)

and

Neil O’Hara, Greenways, Garden Close Lane, Newbury, RG14 6PP (“you”)

WHEREAS:-

(a) The Employer has resolved to employ you;

(b) You have agreed to accept such employment; and

(c) The Employer and you have agreed to set out the terms of such employment

NOW THEREFORE it is hereby agreed as follows:-

1. DEFINITIONS AND INTERPRETATION

1.1. In this agreement, unless the context otherwise requires:-

(a) “Board” means the board of directors of the Employer from time to time or a duly constituted committee thereof;

(b) “Business Day” means a day on which the Scottish clearing banks are open for over-the-counter business in Scotland;

(c) “CDPA” means the Copyright, Designs and Patents Act 1988;

(d) “Companies Acts” means the Companies Acts 1985 to 1989;

(e) “Confidential Information” means all information having the quality of confidence communicated to you during your employment with the Employer which relates to any business, work, investigation, secrets, prices, accounts, dealings, transactions, research, secret process or manufacture carried on or made by or on behalf of the Employer including, without prejudice to the foregoing generality, all trade secrets relating to the business of the Employer, all information relating to Inventions and Know-how which is confidential to the Employer (whether or not such Invention belongs to the Employer) and all confidential information relating to the customers and clients of the Employer;

(f) “Design” means a design (within the meaning of section 213(2) of CDPA) produced by you in the course of your employment with the Employer;

(g) “Design Right” means design right in terms of Part III of CDPA;

(h) “Drawing” means a drawing, plan or sketch made by you in the course of your employment with the Employer;

(i) “Expert” means an independent patent agent (who shall act as an expert and not as an arbiter) appointed by agreement between the parties or, failing agreement, appointed on the application of either party by the President for the time being of the Chartered Institute of Patent Agents;

(j) “Group” means the Employer, any subsidiary of the Employer, any holding company of the Employer and any subsidiary of any such holding company.

(k) “Intellectual Property” means each and every intellectual or industrial property right of any nature whatsoever in any part of the world (whether registered,

Page 3

registrable or not) including but not limited to any patent, patent application, trade mark, trade mark application, trade name, business name, copyright, database right, Design, Registrable Design, Invention, Know-how, Drawing, process, formula, specification, improvement, technique and domain names;

(l) “Invention” means an invention (within the meaning of section 39 of PA) together with the right to apply throughout the world for appropriate protection therefor (whether by virtue of any treaty, convention or otherwise);

(m) “Know-how” means any know-how, discovery, secret process, technical information or the like (not amounting to an Invention) devised by or originating with you in the course of your employment with the Employer;

(n) “PA” means the Patents Act 1977;

(o) “Registrable Design” means any registrable design (within the meaning of the Registered Designs Act 1949) produced by you in the course of your employment with the Employer;

1.2. Reference to any statute or statutory provision shall include a reference to any statute or statutory provision which amends, extends, consolidates or replaces the same (save to the extent that any amendment, extension, consolidation or replacement would impose more onerous obligations than otherwise exist at the date of execution of this agreement by you) or which has been amended, extended, consolidated or replaced by the same and shall include any orders, regulations, instruments or other subordinate legislation made under the relevant statute or statutory provision.

1.3. The singular includes the plural and vice versa and any gender includes all genders.

1.4. Save as otherwise provided herein or as the context may otherwise require, expressions in this agreement which are defined in the Companies Acts shall have the meanings given to them therein.

1.5. The headings are inserted for convenience only and shall not affect the construction of this agreement.

2. TERM AND COMMENCEMENT OF EMPLOYMENT

2.1 Without prejudice to clause 2.2 the parties acknowledge and agree that, for the purposes of employment law in force, from time to time, your period of continuous employment began on a date to be determined.

2.2 Subject to clause 2.1, the Employer will employ you from a date to be determined in the capacity of Trading Director at the Barnwood office in Gloucester, unless and until terminated at any time by the Employer giving to you 12 months notice in writing, or you giving to the Employer 6 months notice in writing.

2.3 Notwithstanding the foregoing, or any other provision of this agreement, the Employer shall not be under any obligation to provide you with any work and the Employer may at any time during the continuance of your employment without notice suspend you and/or exclude you from all or any premises of the Employer provided that throughout such period of suspension your salary and any other contractual benefits shall continue to be paid by the Employer

2.4 Where the Employer requires you to remain away from work during the notice period (whether you or the Employer gave notice) you will be required to comply with any conditions laid down by the Employer, as appropriate and whilst on full pay during such time you will not be permitted to work for any other person, firm, client or company on your own behalf without the prior written consent of the Employer.

Page 4

2.5 Should your employment terminate, for whatever reason, the Employer reserves the right to make a cash allowance in lieu of the use during the notice period of any car provided by the Employer. Any such car will have to be returned by you in a clean and proper condition. The Employer reserves the right to alter or withdraw any car allowance to reflect the condition of the car or the need for any repairs upon its return.

3. DUTIES

In your capacity as Trading Director, you shall perform the duties and exercise the powers and directions consistent with such appointment together with such other duties and powers as may, from time to time, be reasonably assigned to or vested in you by the Employer. Your normal hours of work will be 37 hours per week between such starting and stopping times as may be the normal working hours determined from time to time for your appointed location. In addition, you shall also provide services to the Employer as the Employer may, from time to time, determine and work such additional hours as the duties of your post may require, without entitlement to further fees or remuneration. Reference is made to clause 25 in this regard.

It is a condition of employment that you will adhere to the Employer’s emergency arrangements and you may be required to participate in the Employer’s emergency plans and undertake emergency training as appropriate.

4. ATTENTION TO DUTIES

You, in the capacity mentioned above, shall:-

(a) devote your whole time and attention to the business of the Employer (save where otherwise agreed in writing by the Employer or where you are prevented from so doing by ill-health);

(b) well and faithfully serve the Employer;

(c) conform to and comply with, in all respects, any reasonable directions and reasonable instructions given to you by the Employer; and

(d) use your best endeavours to promote the interests of the Employer.

5. SALARY

5.1 Subject to clause 16, throughout the period of your employment hereunder, the Employer shall pay to you a salary at the rate of £175,000 per annum. Such salary shall be deemed to accrue from day to day and shall be paid in equal monthly instalments in arrears on or around the 24^th day of each month.

5.2 The Employer will review the salary payable to you pursuant to clause 5.1 from time to time and may, if it thinks fit, increase the salary so payable. For the avoidance of doubt, any increase of salary pursuant to such review shall be without prejudice to any of the other terms and conditions of this agreement and nothing herein contained shall confer on you any right to any increase in salary.

6. PENSIONS

6.1 British Energy contributes to a contracted out occupational pension scheme, the Electricity Supply Pension Scheme – British Energy Generation Group (“the Scheme”), which has been set up for the benefit of employees of the Employer. As a permanent employee working 34.5 hours or more per week, you will be assumed to be and treated as a contributing member of the Scheme, under the relevant rules in place on the commencement of your employment, and contributions of 5% will be deducted from your pensionable salary, unless by virtue of age or personal circumstances you do not yet qualify, or you indicate that you do not wish to be a contributing member.

6.2 In addition, the Company will put in place special arrangements so that, taking into account the Pension Scheme and special

Page 5

arrangements, your pension will accrue at a rate of up to 1/45^th of base salary, subject to Inland Revenue maximum, (which term excludes bonus, benefits in kind, share option schemes and the like), for each completed year of service. Above the level of the pensions cap, the Company will meet its obligations by an Unapproved Unfunded Retirement Benefits Scheme.

6.3 A Contracting Out Certificate within the meaning of the Social Security (Pensions) Act 1975 is in force, in relation to your employment.

7. EXPENSES

In addition to the remuneration payable to you in terms of this Agreement, the Employer hall as appropriate, pay or reimburse the cost of all travelling, hotel and other expenses properly incurred by you in or about the performance of your duties hereunder, subject to the production of appropriate vouchers or receipts therefore.

8. OTHER BENEFITS

8.1. Throughout the period of your employment hereunder, you shall be entitled to the following benefits:-

(a) Bonus

You may, at the discretion of the Employer, receive a bonus in accordance with the rules of the Group’s policy on Performance Related Pay. The maximum potential performance bonus payable to you is 60% of your annual base salary.

(b) Car

You will be entitled to participate in the Car Ownership Scheme provided by British Energy Finance Limited, or any alternative arrangement provided by any member of the Group from time to time. Participants will at all times be bound by the rules of said Car Ownership Scheme or any such alternative arrangement.

(c) Private Healthcare

Membership of an appropriate private patients plan or any alternative private health scheme which the Employer may negotiate from time to time; provided and for as long as you are able to comply with the standard terms and premiums, and within the rules, of such a plan or scheme, you, your spouse and your dependent children under the age of 21 years (unless in full time education), will be entitled to receive free cover thereunder.

(d) Telephone Allowance

A telephone allowance (as specified by the Employer from time to time) for the reimbursement of rental and business calls;

(e) Professional Subscription

The Employer will fund the cost of one professional subscription.

8.2 The foregoing benefits are subject always to the rules of such schemes, details of which are available from your Human Resources Department.

9. HOLIDAYS

The holiday year runs from 1^st April to 31^st March (“the Holiday Year”) and you shall (in addition to 8 public holidays to be taken as determined for your appointed location) be entitled to 25 days holiday in each Holiday Year to accrue and to be taken at a time or times convenient to the Employer.

You may not carry forward any unused part of your holiday entitlement to a subsequent Holiday Year. Payment in lieu of

Page 6

holidays accrued and due but not taken as at the date of termination of employment will be made on the basis of one day’s pay (which will be calculated as being 1/260 of your annual salary) for one day’s untaken holiday; or will be refunded by you to the Employer in respect of any holidays taken in excess of your accrued entitlement.

10. INTELLECTUAL PROPERTY

10.1 Invention

(a) The ownership of any Invention made by you shall be determined in accordance with the provisions of PA. In the event of a dispute between you and the Employer as to ownership of any Invention, and the parties failing to resolve that dispute within 20 Business Days of it arising, the matter in dispute shall be referred to an Expert for determination.

(b) Forthwith upon making an Invention, you shall serve written notice on the Employer giving full details thereof and, pending clarification of ownership, neither you or the Employer shall disclose the existence or details of the Invention to any third party.

(c) If it is agreed or determined that property in any Invention vests in you, the Employer may serve a written offer to purchase the same on you at any time during the period of 60 Business Days commencing on the date of such agreement or determination. Until the expiry of that period (or, if sooner, on the date of receipt by you of written intimation from the Employer that they do not intend to submit such an offer), you shall not disclose the existence or details of the Invention to any third party.

(d) In respect of any Invention which belongs to the Employer, you shall, if and when required to do so by the Employer at any time before or after the termination of your employment hereunder, at the expense of the Employer:-

• furnish all descriptions, drawings, specifications and other information as the Employer may require in relation to such Invention;

• apply or join in applying for patent and/or such other protection in the United Kingdom and/or elsewhere as the Employer shall think fit; and

• execute all such documents and do all such acts and things as the Employer may reasonably require for applying for and obtaining such patent and/or other protection, for vesting the same and all rights therein and the title thereto in the Employer (or in such person as the Employer may direct) absolutely and for maintaining such patent and/or other protection in force or for extending the term thereof.

(e) You shall keep secret and shall not communicate to any third party the existence or details of any Invention which is owned by the Employer until the same is published by or with the consent of the Employer.

10.2 Know-how

All Know-how shall be the property of the Employer at the time of the creation of the Know–how; and you shall serve written notice on the Employer giving full details thereof immediately upon your devising or acquiring it. You shall not communicate Know-how to any third party and shall not use the same on your own behalf or on behalf of any third party.

10.3 Designs

All Designs and Registrable Designs shall be the property of the Employer and you shall, if and when required to do so by the Employer at any time before or after the termination of your employment [by the Employer], at the Employer’s expense:-

(a) furnish all descriptions, drawings and other information as the Employer may require in relation to such Design or Registrable Design being their property;

Page 7

(b) apply for or join in applying for registered design and/or such other protection in the United Kingdom and/or elsewhere as the Employer may think fit; and

(c) execute all such documents and do all such acts and things as the Employer may reasonably require for obtaining such registered design and/or other protection, for vesting the same and all rights therein and the title thereto in the Employer (or in such person as the Employer may direct) absolutely and for the purpose of maintaining such registered design and/or other protection in force or for extending the term thereof.

10.4 Copyrights and Design Rights

Any copyright which may subsist in any and all works of whatever nature created, originated or conceived by you, whether or not in the course of your employment, insofar as such works are capable of use or application in the ordinary course of the Group’s business, including but not limited to any text, Drawing and any Design Right which may subsist in a Design shall be the absolute property of the Employer and you hereby assign to the Employer by way of assignation of present and future copyright, the copyright and all of the proprietary rights, if any, for the full term thereof throughout the world in respect of such works. You undertake to execute all such documents and do all such acts and things as the Employer may reasonably require for obtaining copyright protection for, vesting the same and all rights therein and the title thereto in the Employer (or any such person or entity as the Employer may direct) absolutely and for the purpose of maintaining such copyright and/or other protection in force or for extending the term thereof.

10.5 Confidential Information during Employment

You shall not, during or following termination of your employment, communicate any item of Confidential Information to a third party and shall not use the same on your own behalf or on behalf of a third party. In certain circumstances disclosure of information which would potentially prejudice the security of a nuclear site could be contrary to the Anti-Terrorism Crime and Security Act 2001.

10.6 Papers

All memoranda, notes, records, reports, Drawings and other documents and all specimens, models and samples made, executed or acquired by you during the course of your employment shall be the property of the Employer and shall be surrendered to the Employer together with all documents, papers and other goods and articles belonging to a member of the Group, from time to time, on demand, and/or on termination of your employment hereunder.

10.7 Power of Attorney

You hereby irrevocably appoint the Employer to be your true and lawful attorney, in your name and on your behalf, to execute any instrument, do any thing and generally to use your name for the purpose of giving the full benefit of this clause to the Employer.

10.8 Intellectual Property

Without prejudice to clauses 10.1, 10.2, 10.3, 10.4, 10.5 and 10.6, the parties agree that all Intellectual Property created by you in the course of your employment with the Employer shall belong to and vest in the Employer absolutely.

10.9 Expert

If any matters are referred to an Expert pursuant hereto, the parties undertake to co operate fully and timeously with such Expert and to provide the Expert with all information that he may require. The decision of such Expert (including his determination as to liability for costs) shall be final and binding on the parties.

Page 8

11. EXCLUSIVE SERVICE

Save with the prior written consent of the Employer, you shall not accept any other office or employment or engage or be concerned or interested, directly or indirectly, in any other business whatsoever at any time during the subsistence of your employment hereunder, provided always that this is without prejudice to you being a holder (by way of bona fide investment) of investments listed on recognised stock exchanges provided you do not hold more than five per cent of the issued share capital of any company engaged in any business similar to or competitive with the business of the Group. It is your duty to disclose an interest or connection with any person or business with whom the Group has a business connection or contract.

12. PLACE OF WORK

12.1 You will be employed at the Barnwood office in Gloucester, but the Employer reserves the right to transfer and appoint you to any location where the Employer has operations, as appropriate. You will be required by the Employer to travel to such places (whether in or outside the United Kingdom) and in such manner and on such occasions as the Employer may from time to time reasonably require.

12.2 If the Employer requires you to work permanently at a place which necessitates a move from your present address, the Employer will reimburse such removal expenses directly and reasonably incurred as a result of that requirement, but always in accordance with the British Energy Relocation Policy.

13. TERMINATION

13.1 Notwithstanding the provisions of clause 2, your employment hereunder may, at the option of the Employer, be terminated:-

(a) forthwith by notice in writing if you shall have:-

• been guilty of persistent or wilful neglect of your duties;

• been guilty of any conduct likely to bring the Group into disrepute;

• refused to carry out the instructions of the Employer provided that such instructions are such as, from the nature of your duties, you may reasonably and properly have been expected to carry them out;

• been absent from business for a continuous period exceeding 1 week without leave of absence unless such absence shall be due to ill-health or accident and have been reported in accordance with provisions of Clause 16.

(b) summarily (i.e. without notice) at any time if the Employer considers that you are guilty of gross misconduct. Some examples of the type of conduct which the Employer considers to be gross misconduct are set out in the British Energy Code of Conduct and Disciplinary Rules.

13.2 If your employment is terminated pursuant to clause 13.1 you shall not be entitled to any compensation or any other payment in respect of such termination other than your salary up to the date of such termination.

14. ILLNESS

You shall be entitled to continue to be paid by the Employer during any absence due to incapacity (such payment to be inclusive of any statutory sick pay or social security benefits to which you may be entitled) for a period as shown in the following table, always subject to clauses 14.2 and 14.4.

Page 9

Period of Continuous Service	At Full Salary	At Half Salary
Not exceeding 4 months	30 days	—
Exceeding 4 months but not exceeding 1 year	30 days	60 days
Exceeding 1 year but not exceeding 2 years	60 days	60 days
Exceeding 2 years but not exceeding 3 years	91 days	91 days
Exceeding 3 years but not exceeding 4 years	121 days	121 days
Exceeding 4 years but not exceeding 5 years	151 days	151 days
Exceeding 5 years	182 days	182 days

14.2 Sick pay will be calculated on the first day of each period of sickness and by deducting any sick pay entitlement utilised within the previous 12 months. In the event of you exhausting your sick pay entitlement, an uninterrupted period of 6 months must elapse before there is renewed entitlement to further sick pay at full salary.

(a) Should you be unable to report for duty as a result of illness, you must provide notification at the earliest opportunity and in accordance with any local administrative arrangements indicating, where possible, the expected duration of the illness. For illnesses lasting up to 7 calendar days, a sickness absence certificate should be completed upon your return to work. If the illness continues beyond 7 calendar days then a medical certificate must be submitted to your line manager as soon as possible. Medical certificates must then continue to be submitted to your line manager on an ongoing basis covering the entire period of absence.

(b) Any sick pay paid by the Employer will be subject to the proviso that the combined total of such sick pay and any statutory sick pay shall not exceed the equivalent of your full salary.

(c) The Employer may, at its discretion and in taking account of individual circumstances, extend the payment of full salary, half salary, or part salary where the entitlement to sick pay set out above has been exhausted.

14.3 If your absence is caused by the negligence of a third party in respect of which damages are recoverable, then all sums paid by the Employer during the period of absence in terms of Clause 14.1 shall constitute loans to you, and you shall:-

(a) immediately notify the Employer of all the relevant circumstances and of any claim made against that third party and any compromise, settlement or judgement made or awarded; and

(b) if the Employer so requires, refund to it an amount determined by the Employer, not exceeding the lesser of:

• the amount of damages recovered by you in respect of loss of earnings during the period of absence under any compromise, settlement or judgement; and

• the sums advanced to you by the Employer in respect of the period of incapacity.

14.4 The Employer may require you to attend an examination by a medical practitioner nominated and paid for by the Employer. Refusal by you to attend a medical examination could lead to the suspension of sick pay.

(a) The Employer, based on advice from the Employer’s Chief Medical Officer following consultation with your medical practitioner, retains the right to require you to undertake suitable alternative duties as an alternative to the payment of sick pay.

Page 10

(b) If the Employer has reason to believe you have acted in a manner prejudicial to your recovery or have failed to observe the conditions relating to payment of sick pay or where you have contributed to the absence or where there has been negligence on your part, or where you have refused alternative duties, then your sick pay may be withheld by the Employer until investigations into the matter are completed. You will be told that investigations are being made and will have a right to make representations to the Employer before any decision to suspend your sick pay is made.

(c) If you have received medical advice or are required by the Employer to remain absent from work due to contact with a notifiable disease, then that period of absence will not be taken into account when calculating your sick pay. Subject to the Employer being notified and agreeing in advance, any absence shall be with full salary less any state benefits which may be payable during such absence.

(d) If you are sick whilst on annual leave and submit a medical certificate (not a self certificate) covering the relevant period, the period will be reckoned as sick leave.

(e) If you are sick on a public holiday and submit a medical certificate (not a self certificate) covering that period you will be entitled to equivalent time off within the current year at a mutually convenient time.

15. RETIREMENT

Notwithstanding the other provisions of this agreement, your employment will automatically terminate on the day preceding your 65th, this being your normal retirement date. However, if you were a member of the Electricity Supply Pension Scheme prior to 1^st April 1988, you will have the option of terminating your employment at any time between your 60^th and 65^th birthday.

16. UNDERTAKINGS

16.1 Since you are likely to obtain knowledge of the trade secrets and other Confidential Information relating to the business of the Group in the course of your employment hereunder, you agree with the Employer that you will not (without the consent of the Employer in writing) either personally, through an agent or as an employee, director or shareholder of or consultant for any company, firm or person and whether directly or indirectly:-

(a) during the period of 12 months following the termination of your employment hereunder for whatever reason, either on your own account or for any other person, firm or company which is in competition with any member of the Group, solicit, interfere with or endeavour to entice away from any member of the Group, the business of any person, firm, company, other body corporate or statutory or other authority where such business of such organisation was handled by the Group and with whom or with which you have had contact and with whom or with which you dealt on behalf of the Employer in the period of twelve months immediately prior to the date of termination of your employment;

(b) during the term hereof or during the period of 6 months following the termination aforesaid (for whatever reason), either on your own account or for any other person, firm or company, solicit the services of or endeavour to entice

Page 11

away from a member of the Group, any director, employee or consultant in a senior capacity or in any capacity involving technical or professional expertise where the loss of that expertise could, in the opinion of the Board, cause damage to that member of the Group (whether or not such person would commit any breach of their contract of employment or engagement by reason of leaving the service of that member of the Group); or

(c) at any time during the term hereof or during the period of 12 months following the termination aforesaid (for whatever reason) be employed by or associated with any person, firm or company which is engaged in the United Kingdom upon any work, investigation, research or manufacture (whether by way of research or regular business activity) in which you have engaged, or with which you have become familiar during the course of your employment with the Employer if such person, firm or company is or intends to be so engaged in competition with a member of the Group;

(d) at any time during the term hereof, or following the termination aforesaid, either on your own account or for any other person, firm or company, use any Confidential Information or communicate the same to a third party.

16.2 While the restrictions aforesaid are considered by the parties to be reasonable in all the circumstances, it is agreed that if any of such restrictions shall be adjudged to be void or ineffective for whatever reason but would be adjudged to be valid and effective if part of the wording thereof was deleted or the periods thereof reduced or the area thereof reduced in scope, the said restrictions shall apply with such modifications as may be necessary to make them valid and effective.

16.3 You agree that, having regard to the facts and matters aforesaid, the restrictive covenants herein contained are reasonable and necessary for the protection of the legitimate interest of the Group and you agree that, having regard to those circumstances, those covenants do not work harshly on you.

16.4 Notwithstanding any other provision of this agreement, you shall not be prevented or restricted from using or communicating any item of information which has entered the public domain (other than at your instance, directly or indirectly).

16.5 Subject to the provisions of this agreement, you shall be entitled to use the skill and experience acquired by you during the course of the Group’s business.

17. AMALGAMATION

In the event of this agreement being terminated by reason of the liquidation of the Employer for the purpose of amalgamation or reconstruction and your being offered continuous employment with such reconstructed or amalgamated company on terms and conditions no less favourable in all respects than the terms and conditions of this agreement, you shall have no claim against the Employer in respect of such termination.

18. NOTICES

Any notice required to be given pursuant hereto shall be deemed validly served if served by:-

(a) pre-paid registered letter post to, in the case of the Employer, its registered office address for the time being or to such other address (if any) as may from time to time be notified to you for this purpose, or, in the case of you, to the address notified by you to the Employer for this purpose, or, failing such notification, to your last known residential address; or

Page 12

(b) personal delivery by hand to such address;

and any notice so served shall be deemed to have been served:-

• in the case of (a) above, 2 Business Days after posting the same; and

• in the case of (b) above, upon delivery.

In proving service, it shall be sufficient to prove that the notice was properly addressed and posted or that delivery took place (as the case may be).

19. PREVIOUS AGREEMENTS

This agreement supersedes all previous agreements between the Employer and its predecessors (and any member of the Group) and you (whether verbal or in writing) in relation to your employment with the Employer, its predecessors or the Group (as appropriate).

20. GRIEVANCES

In the event of you seeking redress for any grievance relating to your employment, or if you are dissatisfied with any disciplinary decision relating to you, you will be entitled to make representations to the Director, Human Resources. These representations should be set out in writing and will be dealt with in accordance with the Employer’s Grievance Procedure.

21. DISCIPLINARY RULES AND CODE OF CONDUCT.

The British Energy Code of Conduct and Disciplinary Rules, to which you are referred, shall apply to you and may be invoked in respect of any disciplinary matter arising from your employment.

22. CAREER SUPPORT POLICY

You are referred to the British Energy Career Support Policy. Its provisions may apply to you, if you are eligible, and always subject to the conditions and terms outlined in said Policy. With the exception of the statutory maternity, paternity and parental leave provisions, which are outlined in said Policy, all other provisions are discretionary.

23. WORKPLACE POLICIES

You will be bound by Group policies and the Employer’s workplace policies on various subjects. You will be issued with a non-exhaustive list of those Group and Employer policies which apply to your employment, at the commencement of your employment. These policies may be altered or removed or replaced with other policies as the Group and as your Employer may from time to time determine.

24. DATA PROTECTION

The Group will process personal data relating to you in accordance with the Data Protection Act 1998. You agree that the Group shall be entitled to process your personal data so as to comply with the requirements of any regulator, or government body, and shall be entitled to use that data, including your National Insurance Number, for the purposes of works management and individual identification.

25. WORKING TIME DIRECTIVE

(a) Without prejudice to clause 3 of this agreement, you hereby agree that the hours which you may be required to work may exceed an average of more than 48 hours each week and in that event, you agree to work such hours as may necessarily be required and that the limit imposed by regulation 4(1) and (2) of the Working Time Regulations 1998 (“the Regulations”) shall not apply to your average weekly working hours.

(b) You acknowledge that it has been explained to you that this agreement may have the effect that you may work longer hours than the 48 hour average working hours limit provided under the Regulations.

Page 13

(c) You hereby acknowledge that this agreement constitutes an individual voluntary agreement to disapply the weekly working time limit, and shall apply indefinitely subject to your right to terminate this clause of the agreement on giving three months notice in writing to the Employer of your intention to terminate this clause; or by any subsequent amendment of the Regulations.

26. COLLECTIVE AGREEMENTS

There are no collective agreements which directly affect the terms and conditions of employment.

27. LAW

This agreement shall, in all respects, be construed and interpreted and shall receive effect in accordance with the law of Scotland and the parties each submit to the non-exclusive jurisdiction of the delete as appropriate Scottish courts.

Page 14

SIGNED on behalf of BRITISH ENERGY Plc by Linda Whitla, on 3^rd March 2004 in the presence of the following witness:-

Authorised Signatory

Witness Signature:

Witness Full Name:

Witness Address:

SIGNED by                      at on             , 2004 in the presence of the following witness:-

Employee Signature

Witness Signature:

Witness Full Name:

Witness Address:

Page 15

3^rd March 2004

PERSONAL - ADDRESSEE ONLY

Mr Neil O’Hara

Greenways

Garden Close Lane

Newbury

RG14 6PP

Dear Neil

I write to offer you a conditional appointment as Trading Director based in Barnwood, Gloucester. You will be a member of the British Energy Executive Committee and report to Mike Alexander, Chief Executive of British Energy plc.

This appointment is conditional upon the following:-

• Medical clearance

• Satisfactory references

• A satisfactory meeting with the Bond Holders

• Satisfactory psychometric testing results

My secretary Mary Burns will contact you regarding psychometric testing and to make arrangements for your medical to be carried out.

In recognition of the duties and responsibilities associated with your position your salary will be £175,000 per annum. The next review of your salary will be 1^st July 2005. Please complete the attached Method of Payment and Employee Joining Forms and return to me as soon as possible.

You may receive a discretionary bonus in accordance with the rules of the Group’s policy on Performance Related Pay. The maximum potential performance bonus payable to you is 60% of your annual base salary. Subject to you joining us prior to the end of June, we will guarantee £25,000 of your bonus in the financial year ended March 2005. In addition, we are prepared to reimburse up to £25,000 against any loss of bonus caused by you leaving your current employer. As well as the performance related bonus, the company is considering implementing a long term incentive plan which you will be invited to join.

Your package includes an entitlement to a car via the Company’s Car Ownership Scheme full details of which will be sent to you in due course. Your Car Ownership Scheme allowance will be £340 per month (based on an annual business mileage of not less than 2,500 miles).

You will be entitled to participate in the employer’s Pension Scheme (British Energy Generation Group of the Electricity Supply Pension Scheme) on the standard terms for staff. In addition, the Company will put in place special arrangements so that, taking into account the Pension Scheme and special arrangements, your pension will accrue at a rate of up to 1/45th of base salary (which term excludes bonus, benefits in kind, share option schemes and the like), for each completed year of service. Above the level of the pensions cap, the Company will meet its obligations by an Unapproved Unfunded Retirement Benefits Scheme. Details of the Pension Scheme are attached.

Page 16

We currently operate a private health scheme which is managed by PPP and you are entitled to free cover for yourself and family. A pack is enclosed with an application form. Should you wish to join please complete and return the application form to myself.

All employees are subject to the Company’s Disciplinary Rules and Code of Conduct, a copy of which is enclosed. Please complete the attached receipt and return to myself once you have read the rules.

All employees are subject to the Unannounced Drug and Alcohol Testing Policy, a copy of which is also enclosed.

As a condition of this offer of appointment, you are required to agree to all companies within the British Energy Group holding and processing, by computer or otherwise, personal data and any other information obtained about you as a consequence of your application. Please advise me in writing by return if you object to the above.

Two copies of your Contract are enclosed. Please sign both copies and return one when you are satisfied with its contents. Should you have any queries, please do not hesitate to contact me.

As you will appreciate we are anxious for you to join us and I look forward to receiving an indication of your start date as soon as this is available.

If you have any further questions, please do not hesitate to contact me.

Best Regards

Yours sincerely

SALLY SMEDLEY

Director, Human Resources

Page 17

EX-15.4

Exhibit 15.04

CONTRACT OF EMPLOYMENT BETWEEN

BRITISH ENERGY PLC

10 LOCHSIDE PLACE, EDINBURGH, EH12 9DF

(For the purposes of this Contract, “the Employer” means

British Energy plc)

AND

Name:	Sally Smedley
Address:	Willowbrook House,
	Manor View,
	Sibson,
	Nuneaton.
	CV13 6LF

1. TITLE AND DUTIES

During the continuance of your employment hereunder:-

(a) You will be employed by the Employer as Director of Human Resources based in Edinburgh from 8th February, 1999. You will be expected to buy or occupy a residence within reasonable travelling distance of Edinburgh. The Employer reserves the right to transfer and appoint you from time to time to any location reasonably required by the Employer.

(b) You will exercise such powers and perform such duties in relation to the business of the Employer or any associated Company as the Employer may from time to time give or assign to you and you shall comply with all reasonable orders and directions given to you by the Employer.

(c) You will (unless prevented by ill health or accident and except during holidays permitted by this contract) devote the whole of your time, attention and abilities to carrying out your duties hereunder.

(d) You will carry out your duties in a proper and efficient manner and will, faithfully and diligently, serve the Employer and will use your best endeavours to promote the interests and maintain and promote the reputation of the Employer and of any associated Company.

2. OTHER EMPLOYMENT

During the continuance of your employment hereunder, you will not (unless otherwise agreed in writing with the Employer) undertake any other business or profession or be or become an employee or agent of any other company, firm or person or assist or have any financial interest in any other business or profession, but nothing in this paragraph shall preclude you from acquiring or holding by way of bona fide investment only, shares or other securities of any company which are quoted on any recognised Stock Exchange, subject always to the Employer’s model share code for its own senior employees, unless the Employer shall require you not to do so in any particular case on the ground that such a company is or may be carrying on a business competing or tending to compete with the business of the Employer.

For the avoidance of doubt, the employer consents to your continuing as a Non-Executive Director of Cornwell Parker plc., and to your retaining your remuneration therefor, provided that any increase over the current level of commitment to that Company’s business shall be met by your taking holiday from the Employer and where your duties and obligations conflict in terms of time or business interest, you will always give priority to your duties and obligations to the Employer.

3. HOURS OF WORK

Your normal hours of work will be 37 per week between such starting and stopping times as may be the normal office hours determined for your appointed location from time to time. However you will be expected to work such additional hours as the duties of your post may require without any additional remuneration.

4. TRAVEL

Although based in Edinburgh, you will be required to travel extensively, within the United Kingdom and throughout the world.

5. TERM OF EMPLOYMENT

Subject to the further provisions of this contract your employment will be from a date to be determined until terminated thereafter either by the Company giving twelve months notice in writing or by you giving six months notice in writing. Unless otherwise terminated or extended your employment will automatically terminate on the day preceding your 63 birthday, being your normal retirement date.

6. PAY AND BENEFITS

(a) Your initial salary will be at the rate of £132,500 per annum, payable by equal monthly instalments in arrears on or about the 24th of each month, and shall be deemed to accrue from day to day. Your salary will be reviewed from time to time at the discretion of the Company. Such salary shall be inclusive of any other sums which you may be entitled to receive as fees or other remuneration associated with your employment and to give effect to this you shall pay over or procure to be paid over to the Employer all such fees or other remuneration received by you.

(b) You will, at the Company’s discretion, be able to participate in the British Energy Share Option Schemes. Share Options will be granted in accordance with the rules of the respective schemes.

(c) You will be entitled to participate in the Employer’s Performance Related Pay Scheme for certain senior staff on such terms and conditions as the Employer may from time to time determine. The maximum potential performance bonus payable to you is 40% of annual salary.

(d) Pension Scheme

You will be entitled to participate in the employer’s Pension Scheme (Scottish Nuclear Pension Scheme) on the standard terms for staff. In addition, the Company will put in place special arrangements so that, taking into account the Pension Scheme and special arrangements, your pension will accrue at a rate of 1/45th of base salary (which term excludes bonus, benefits in kind, share option schemes and the like), for each completed year of service. Above the level of the pensions cap, the Company may meet its obligations by an Unapproved Unfunded Retirement Scheme if it so wishes.

(e) Car

You will be entitled to participate in the Car Ownership Scheme provided by British Energy Finance Limited or its successors from time to time. Participants will at all times comply with the rules of the Car Ownership Scheme. If you decide not to participate, the Company will provide a cash alternative to the car. At the Company’s discretion, you may qualify for an interest-free loan to assist with car provision or otherwise. You will be entitled to free petrol for all private and business mileage undertaken using your company car.

(f) Private Healthcare

Provided, and for so long as you are able to comply on standard terms and premiums with the rules of the Scottish Health Plan or Private Patients Plan or any alternative private health scheme which the Employer may negotiate from time to time, you and your dependants will be entitled to received free cover thereunder.

(g) Telephone Allowance

You will be entitled to a telephone allowance (as specified by the Employer from time to time), which provides for the reimbursement of rental and business calls.

(h) Sick Pay

Subject to paragraph 10 below you will be entitled to be paid during any period of absence due to sickness or injury for a period of up to six months at full salary and a further six months at half salary, subject also to the undernoted conditions.

• Sickness allowance will be calculated on the first day of each period of sickness and by deducting any allowance utilised within the previous 12 months. In the event of you exhausting your Sickness Allowance, an uninterrupted period of six months at work must elapse before there is any renewed entitlement to full salary.

• Should you be unable to report for duty as a result of illness you must provide notification at the earliest opportunity and in accordance with any local administrative arrangements indicating, where possible, the expected duration of the illness. For illnesses lasting up to 7 calendar days, a sickness absence certificate should be completed upon return to work and submitted. If the illness continues beyond 7 calendar days then a medical certificate must be submitted as soon as possible. Medical certificates must then continue to be submitted at 7 day intervals, unless directed otherwise, whilst the absence continues.

• Any allowance paid by the Company will be subject to the proviso that the combined total of such an allowance and any statutory sick pay shall not exceed the equivalent of your full salary. (A married woman who has chosen not to pay full National Insurance contributions will be regarded as a full contributor when calculating the amount of any such deductions).

• The Company may, at its discretion and taking account of individual circumstances, extend payment of either full or half salary where the allowance set out above has been exhausted.

• Should you be absent as the result of an accident you will not be eligible to receive a sickness allowance if, in the opinion of the Company, an action for damages would lie against a third party. In such an event, the Company may, taking account of individual circumstances, decide to advance to you an amount not exceeding the allowance you would be eligible to receive under the sick pay scheme. This will be subject to you agreeing to refund this amount to the Company in full or in part in line with the proportion represented by any damages received. Where a full or partial refund is made, the corresponding period of absence shall not be recorded for the purposes of the sick pay scheme.

• The Company may require you to attend an examination by a medical practitioner nominated and paid for by the Company. Refusal to attend a medical examination could lead to the suspension of sick pay.

• The Company, based on advice from the Chief Medical Officer following consultation with your medical practitioner, retains the right to require you to undertake suitable alternative duties as an alternative to payment of sick allowance.

• If the Company has reason to believe that you have acted in a manner prejudicial to your recovery or have failed to observe the conditions relating to payment of a sickness allowance or where you have contributed to the absence or where there is negligence on your part or where you have refused alternative duties, then your sickness allowance may be withheld until investigations into the matter are completed. You will be told that investigations are being made and will have a right to make representations to the Company before any decision to suspend the sickness allowance is made.

• Where you have received medical advice or are required by the Company to remain absent from work due to contact with a notifiable diseases, then that period of absence will not be taken into account when calculating your sickness allowance. Subject to the Company being notified and agreeing in advance, any such absence shall be with full salary less any State benefits which may be payable during such absence.

• If you are sick whilst on Annual Leave and submit a medical certificate (not a self certificate) covering the relevant period, the period will be reckoned as sick leave.

• If you are sick on a Public Holiday and submit a medical certificate (not a self certificate) covering the period, you will be entitled to equivalent time off within the current leave year at a mutually convenient time.

(i) Holidays

You will be entitled to 33 days holiday with pay between 1 April and the next succeeding 31 March, the “holiday year”. You may not carry over holidays from one holiday year to the next. In addition you will be entitled to eight days’ holiday with pay in respect of Public Holidays to be taken as determined for your appointed location. On termination you will be entitled to receive pay in lieu of holidays which you have accrued but have not been taken during your final holiday year, or shall refund to the Employer payment in respect of any holidays taken in excess or your accrued entitlement.

(j) Expenses

You will be reimbursed subsistence, travelling and other expenses necessarily incurred by you in the performance of your duties in accordance with rates determined by the Employer from time to time.

A number of the above provisions may be regarded as benefits in kind and therefore subject to tax and National Insurance and details will be provided by the Employer to the Inland Revenue at the end of each tax year.

7. CONFIDENTIALITY

You will, both during the continuance of your employment with the Employer and also after the termination thereof, observe the utmost confidentiality in respect of all business information, secrets, secret processes, methods of manufacture, prices, accounts, dealings, transactions, affairs and other information of the employees and shall not without the prior written consent of the Employer disclose the same to any person otherwise than to a person to whom it is proper for you to make such disclosure in pursuance of your duties hereunder or save as may be ordered by a court of competent jurisdiction nor yourself use the same for any purpose otherwise than bona fide for the purposes and in the interests of the Employer.

On the termination of your employment or at the request of the Employer at any time during the course of your employment you shall surrender to the Employer all reports, manuals, files, accounts, documents or other material relating to and all notes and memoranda of any trade secrets or confidential information relating to the employer whether made or received by you during the course of your employment and all equipment and other property of the Employer received by you.

8. COMPANY INFORMATION

You shall at all times promptly give to the Employer (in writing if so requested) all such information and explanations as they may require in connection with your employment hereunder or with the business of any member of the group.

9. DISCIPLINE

During the continuance of your employment hereunder you will at all times observe and comply with the Disciplinary Rules and Code of Conduct of the Employer as amended from time to time, which specify the expected standards of behaviour of employees and give examples of misconduct which may warrant summary dismissal.

10. NON-COMPETITION

You shall not for one year after the termination of this contract without the consent of the employer in writing:-

(a) solicit or entice or endeavour to solicit or entice away from the Employer business with any person, firm or company with whom or with which you had contact and with whom or with which you dealt on behalf of the Employer at any time during the period of twelve months immediately prior to the end of your employment and which business was handled by the employer Group at any time during the last-mentioned period of twelve months, provided that nothing herein shall prevent you from soliciting any other business from any such person, firm or company, or,

(b) solicit or entice or endeavour to solicit or entice any employee of the Employer to leave such employment where such employee was an employee of the Employer at any time during the six months prior to the termination of your employment, whether or not such person would commit any breach of his contract by reason of leaving the service of the Employer.

11. INVENTIONS

(a) During the subsistence of this contract you will promptly disclose to the Employer:-

(i) All improvements, inventions and discoveries, whether the same shall be patentable or not, made by you (either alone or jointly with another) relating to the business of the Employer or which may be capable of being used or adapted for use therein or in connection therewith and any such shall be the absolute property of the Employer, and

(ii) All applications for patent and all patents filed or granted disclosing inventions made by you in whole or in part during the provision of the services and whether made during or outside the ordinary course of your duties and whether or not relating to the business or affairs of the Employer.

(b) Throughout the subsistence of this contract, if you shall at any time either alone or with any other person or persons make any improvements, invention or discovery, whether the same shall be patentable or not, or which would be taken to belong to the Employer by virtue of the provisions of Section 39 of the Patents Act 1977, you shall in relation thereto be a trustee for the Employer and will:-

(i) Not without the written consent of the Employer apply for patent or similar protection either in the United Kingdom or any other part of the world in respect of any such improvement, invention or discovery.

(ii) If and whenever required by the Employer, sign all such documents and do all such things as may be necessary or desirable for the purposes of obtaining patent or similar protection for any such improvement, invention or discovery in the United Kingdom or in any other part of the world and for vesting such patent or similar protection in the Employer absolutely as sole beneficial owner or as the Employer may direct.

(iii) If and whenever required by the Employer, apply as nominee of the Employer or jointly with the Employer for patent or similar protection for any such improvement, invention or discovery in the United Kingdom or in any other part of the world and sign all such documents and do all such things as may be necessary or desirable for the purposes of obtaining patent or similar protection and vesting the same in the Employer absolutely as sole beneficial owner or as the Employer may direct.

(c) Decisions as to the patenting and exploitation of any such improvement, invention or discovery as is referred to in sub-clause (b) above shall be at the sole discretion of the Employer.

(d) You hereby irrevocably appoint the Employer to be your attorney or agent and in its name and on its behalf to execute, sign and do all such instruments or things and generally to use your name for the purpose of giving to the Employer (or its nominee) the full benefit of the provisions of this clause and with respect to any third party a certificate in writing signed by the Chief Executive of the Employer that any instrument or act falls within the authority hereby conferred shall be conclusive evidence that such is the case.

(e) The Employer will pay all expenses in connection with any application for a patent made by you as nominee for or jointly with the Employer pursuant to the provisions of this clause and will indemnify you in respect of all liabilities in connection with or arising from such applications for a patent when granted.

12. COPYRIGHT AND REGISTERED DESIGNS

(a) If during the subsistence of this contract you shall at any time either alone or in conjunction with any other person originate any design (whether registerable or not) or other work in which copyright may subsist you shall forthwith disclose the same to the Employer and shall (subject to sub-clause (b) below) in relation thereto be a trustee for the Employer.

(b) You hereby assign to the Employer by way of future assignation of copyright the copyright and other proprietary rights if any for the full term thereof throughout the world in respect of all copyright works written, originated, conceived or made by you (except only those copyright works written, originated, conceived or made by you wholly outside your normal working hours hereunder and wholly unconnected with your work hereunder) during the subsistence of this contract.

(c) Without prejudice to the provisions of the Registered Companies Act 1949 (as amended) it is agreed that for the purposes of the proviso to Section 2(i) of The Registered Designs Act 1949 the sums payable under Clause 7 hereof shall as between the parties hereto be treated as good consideration and the Employer shall be treated for the purpose of that Act as the proprietor of any design of which you may be the author in the circumstances described in sub-clause (a) above.

(d) You agree and undertake that you will execute such deeds or documents and do all such acts and things as may be necessary or desirable to substantiate the rights of the Board in respect of the matters referred to in sub-clauses (b) and (c) above.

13. GRIEVANCES

If you have any grievance in relation to your employment including any disciplinary measure taken against you, you will be entitled to make representations to the Chief Executive. If the matter is not resolved by these means you have a right to make further representations to the Chairman.

14. ENTIRE AGREEMENTS

By your acceptance hereof you acknowledge that there are no agreements or arrangements, whether written, oral or implied, between the Employer, other than those expressly set out in this contract, and that you are not entering into this Agreement in reliance on any representation not expressly set out herein and that this contract supersedes all previous agreements relating to your employment with the Employer.

SIGNATURE

On behalf of British Energy plc

Date

I have read the foregoing Contract of Employment and wish to accept the appointment with the Employer on the terms and conditions set out or referred to therein.

SIGNATURE

Date

EX-15.5

Exhibit 15.05

13 October 2004

BRITISH ENERGY PLC

- and -

STEPHEN BILLINGHAM

SERVICE AGREEMENT

FOR EXECUTIVE DIRECTOR

CONTENTS

1.	COMMENCEMENT AND TERM OF EMPLOYMENT	3
2.	DUTIES	4
3.	OFFICE OF DIRECTOR	6
4.	REMUNERATION	6
5.	PENSION SCHEME	7
6.	MEDICAL EXPENSES	9
7.	PERSONAL ACCIDENT INSURANCE	10
8.	COMPANY CAR	10
9.	EXPENSES	10
10.	HOLIDAYS	11
11.	INCAPACITY	12
12.	RESTRICTIONS DURING EMPLOYMENT	12
13.	INVENTIONS	13
14.	CONFIDENTIALITY	15
15.	TERMINATION	17
16.	SUMMARY TERMINATION OF EMPLOYMENT	18
17.	RESIGNATION FROM DIRECTORSHIPS UPON TERMINATION	19
18.	RECONSTRUCTION OR AMALGAMATION	20
19.	EXECUTIVE DIRECTOR’S COVENANTS	20
20.	NOTICES	22
21.	DISCIPLINARY AND GRIEVANCE PROCEDURE	23
22.	STATUTORY INFORMATION	23
23.	MISCELLANEOUS	24

Page 2 of 25

T H I S    AG R E E M E N T is made between

(1) BRITISH ENERGY PLC whose registered office is 3 Redwood, Crescent, East Kilbride G74 5PR (the “Company”); and

(2) Stephen Billingham whose address is 1 Ridge Close, Lane End, High Wycombe, Buckinghamshire, HP14 3BX (the “Executive Director”).

WHEREAS it is agreed that the Company shall employ the Executive Director and the Executive Director shall serve the Company as Executive Director of the Company on the following terms and subject to the following conditions:

1. COMMENCEMENT AND TERM OF EMPLOYMENT

1.1 Subject to paragraph 1.2 below the employment of the Executive Director (subject to termination as provided below) shall commence on 16 September 2004 the “Commencement Date”).

1.2 The employment of the Executive Director (subject to termination as provided below) shall continue unless and until terminated by the Company giving not less than 12 months notice in writing to expire at any time after the Commencement Date or by the Executive Director giving not less than twelve months notice in writing at any time after the Commencement Date.

1.3 In the event that during the first year of employment the Executive Director’s employment is terminated other than for good cause without notice or if during the first year of employment notice is given which is shorter than the notice provided for in this contract or if during the first year of employment the appropriate notice is given but subsequently notice, then in relation to any claim for damages which the Executive Director may have against the Company in respect of the failure to give notice or the

Page 3 of 25

shortening of the notice period, the Company agrees the Executive Director shall be relieved of any duty or obligation to mitigate his loss in respect of the notice period or any balance of the notice period as the case may be.

1.4 The Executive Director’s continuous period of employment for statutory purposes shall commence on 25 August 2004.

2. DUTIES

2.1 The Executive Director shall during his employment under this Agreement:

2.1.1 serve the Company and its subsidiaries to the best of his ability in the capacity of Finance Director of British Energy plc or in such other equivalent capacity as the Board may from time to time determine; and

2.1.2 perform equivalent duties and exercise the powers which the Board may from time to time properly assign to him; and

2.1.3 in the absence of any specific directions from the Board (but subject always to the memorandum and articles of association of the Company) exercise general control and management of British Energy plc financial matters; and

2.1.4 do all in his power to promote, develop and extend the business of the Company and of its Subsidiaries and at all times and in all respects conform to and comply with the proper and reasonable directions and regulations of the Board (but subject always to the memorandum and articles of association of the Company); and

2.1.5 at all times keep the Board promptly and fully informed (in writing if so requested) of his conduct of the business,

Page 4 of 25

finances and affairs of the Company and shall provide such explanations and supply all information in his possession as the Board may require in connection with such conduct of the business, finances or affairs of the Company; and

2.1.6 if and so long as the Board so directs perform and exercise the said duties and powers on behalf of any Associated Company and act as a director or other officer of any Associated Company.

2.2 The Executive Director shall carry out his duties and exercise his powers jointly with any other director appointed by the Board to act jointly with him and the Board may at any time require the Executive Director to cease performing or exercising the said or any duties or powers without such requirement giving rise to a Breach of Contract by the Company.

2.3 In accordance with the Memorandum of Association of the Company the office of the Finance Director will be in Scotland and is currently at 3 Redwood Crescent, East Kilbride (scheduled to move to Systems House, Livingston at the end of 2004). It is anticipated however that the majority of the Executive Director’s time will be spent at the Company’s office at 1 Sheldon Square, London, W2 6TT (or such other address in London at which the Company have offices from time to time) with the remainder of time spent either in the office in Scotland or at any office within the United Kingdom which the Board may require for the proper performance and exercise of his duties and powers and he may be required to travel on the business of the Company or any of its Associated Companies and/or subsidiaries anywhere within the world.

2.4 The Company shall not be under any obligation to provide the Executive Director with any work and the Company may at any time during the continuance of his employment without notice, suspend the Executive Director and/or exclude him from all or any premises of the Company or any Associated Company for any period not exceeding 12 months provided that throughout such a period, the Executive Director’s salary and other contractual benefits shall continue to be paid or provided by the Company.

Page 5 of 25

2.5 The Executive Director shall at any time if directed to do so by the Board undergo a medical examination by a medical practitioner of the Company’s choice and at its expense. The Executive Director hereby authorises (such authorisation to be deemed to include the consent of the Executive Director for the purposes of Section 3 of the Access to Medical Reports Act 1988) such medical practitioner to disclose the results of such examination (whether in a medical report or otherwise) to the Company, subject to the Executive Director being informed by the Company of such request prior to it being made.

3. OFFICE OF DIRECTOR

During his employment under this Agreement the Executive Director shall not do anything that may result in him ceasing to be lawfully capable of holding the office of Director.

4. REMUNERATION

4.1 The remuneration of the Executive Director shall be a fixed salary (which shall accrue from day to day) payable from the Commencement Date and at the rate of £325,000 per year (or such higher rate as may be recommended by the Remuneration Committee of the Board and approved by the Company in General Meeting from time to time) inclusive of any Directors’ fees payable to him under the articles of association of the Company and the Associated Companies payable in arrears by equal monthly instalments on the 24th day of every month (or such other day as the Company may from time to time decide). In accordance with paragraph 5.4 the Executive Director will be required to sacrifice part of this as his contribution to the Pension Scheme

Page 6 of 25

4.2 The Executive Director will be entitled to participate in any Board Incentives Scheme which may be established varied or withdrawn from time to time by the Remuneration Committee at its discretion. Any award made in respect of the financial year ending 31 March 2005 will be made to the Executive Director on a full year basis.

4.3 Should this employment terminate for reasons other than those set out in paragraph 16 then the Executive Director shall be entitled to that proportion of any payment under the Board Incentive Scheme as may be required by the rules of the Scheme (as amended from time to time) subject always to the discretion of the Remuneration Committee.

4.4 A payment of £200,000 will be made in the Executive Director’s June 2005 salary. Provided that if he has voluntarily left the employment of British Energy plc before 30 June 2005, or his employment has been terminated or is under notice of termination in accordance with paragraph 16 of this Agreement on or before that date this payment will not be made.

4.5 In the event that the shares of British Energy Group Plc are not admitted to the official List of the London Stock Exchange by 31 March 2006 the Executive Director will receive a payment of £400,000 during April 2006. This payment will be offset against any awards due to the Executive Director under any bonus/incentive plans in operation for the financial years 2006/07 and 2007/08. This payment recognises that the Executive Director has foregone significant benefits by leaving his previous employer.

5. PENSION SCHEME

5.1 “The Pension Schemes” means the British Energy Generation Group (BEGG) of the Electricity Supply Pension Scheme (ESPS), the Special Arrangement and the UURB.

Page 7 of 25

The terms “Pensionable Pay” and “Final Pensionable Pay” will have the meanings assigned to them in the documents governing the British Energy Generation Group of the ESPS.

5.2 The Executive Director is assumed to be, is treated as and, where he has not been already, will be admitted as a contributing member of the British Energy Generation Group of the Electricity Supply Pension Scheme (“the ESP Scheme).

5.3 Participation in the British Energy Generation Group of the ESPS Scheme is on the standard terms for staff effective from 1 January 2001. In addition, the Company will put in place special arrangements (“the Special Arrangement”), so that, taking into account the benefits payable to the Executive Director in terms of the British Energy Generation Group of the ESPS and the Special Arrangement, the Executive Director’s cumulative pension benefits under both the British Energy Generation Group of the ESPS and the Special Arrangement will accrue at the rate of 1/30 of Final Pensionable Pay for each complete year of service subject to the amount payable being within the Inland Revenue Rules for approved arrangements.

Where the benefits to be provided in terms of the British Energy Generation Group of the ESPS and the Special Arrangement are in relation to Final Pensionably Pay that is in excess of the Permitted Maximum, defined in the section 590C of the Income and Corporation Taxes Act 1988, the Company may, if it so wishes, meet its obligation to provide such benefits by an Unapproved Unfunded Retirement Benefits arrangement (“the UURB). The benefits provided under the special arrangements and the UURB will be those set out in the Schedule attached.

5.4 From the commencement of the Executive Director’s employment with the Company, contributions to the Pension Scheme will be deducted in respect of the Executive Director at the rate of five per cent (5%) of his salary. For this purpose, salary will be calculated in the same way as Pensionable Pay is calculated for the purposes of the British Energy Generation Group of the ESPS, but without any limitation by reference to the Permitted Maximum.

Page 8 of 25

As indicated in paragraph 4.1 the Executive Director will be required to sacrifice part of his salary to fulfil the obligations of this clause. The amount to be sacrificed will be 5% of salary in 4.1 (as amended from time to time) less 5% of the Permitted Maximum.

5.5 These special arrangements are subject to the provision of all information regarding previous pension entitlements relating to previous periods of employment or self-employment whether approved or unapproved.

6. MEDICAL EXPENSES

6.1 Subject to his complying with and satisfying any applicable requirement of the relevant insurers, the Company shall during the continuance of his employment cover the cost of membership for the Executive Director and the Executive Director’s spouse and/or nominated partner, and while aged under 21 years children and stepchildren of a private patients medical plan with a reputable medical expenses insurance scheme as the Company shall in its absolute discretion decide from time to time.

Page 9 of 25

7. PERSONAL ACCIDENT INSURANCE

7.1 The Company shall provide the Executive Director with personal accident insurance with such reputable personal accident insurance scheme as the Company shall decide from time to time in accordance with the Company’s Personal Accident Insurance Policy.

8. COMPANY CAR

8.1 The Company will supply the Executive Director with a car deemed by the Board to be suitable for the performance of his duties under this Agreement in respect of which the Company will pay all running costs including insurance, petrol and maintenance.

8.2 The Executive Director shall take good care of the car and ensure that the provisions and conditions of any insurance policy relating to it are observed and shall return the car and its keys to the Company at its registered office (or any other place the Company may reasonably nominate) immediately upon the termination of his employment however arising.

8.3 Alternatively the Executive Director may opt for an allowance of £12,000 per annum. In these circumstances he will apply this allowance to provide a car suitable for business purposes. All running costs (except fuel) will be his responsibility. The Company will provide him with all fuel for both private and business use.

9. EXPENSES

9.1 The Company shall by way of reimbursement pay or procure to be paid to the Executive Director:

9.1.1 all reasonable travelling, accommodation, meal and other expenses wholly exclusively and necessarily incurred by him in or about the performance of his duties under this Agreement; and

Page 10 of 25

9.1.2 the cost of subscription to all professional bodies to which he is obliged to belong in order to maintain his professional qualifications provided that the Executive Director shall provide the Company with such appropriate evidence (including receipts, invoices, tickets and/or vouchers) of the expenditure in respect of which he claims reimbursement as the Company may reasonably require.

10. HOLIDAYS

10.1 The Executive Director shall (in addition to the usual public and bank holidays) be entitled to 25 days holiday in each holiday year (as specified by the Company) to be taken at a time or times convenient to the Company and as agreed with the Chief Executive

10.2 The Executive Director shall not be entitled to carry forward any annual holiday entitlement foregone by him for any reason during the holiday year in which it accrued without the prior written consent of the Board.

10.3 Upon the termination of his employment for reasons other than those set out in paragraph 16 the Executive Director’s entitlement to accrued holiday pay (which accrues at the rate of 2 days per month) shall be calculated on a pro rate basis in respect of each completed month of service in the holiday year in which his employment terminates and the appropriate amount shall be paid to the Executive Director provided that if the Executive Director shall have taken more days holiday than his accrued entitlement the Company is hereby authorised to make an appropriate deduction from the Executive Director’s final salary payment.

Page 11 of 25

11. INCAPACITY

11.1 During any period of absence from work due to Incapacity salary payable to the Executive Director under the terms of this Agreement shall be paid in full for the first twelve months of continuous absence (such payment to be inclusive of any statutory sick pay or social security benefits to which he may be entitled).

11.2 Thereafter the Executive Director shall continue to be paid salary only at the discretion of the Company.

11.3 If the Incapacity shall be or appear to be occasioned by actionable negligence of a third party in respect of which damages are or may be recoverable, then all sums paid by the Company during the period of absence in terms of paragraph 11.1 above shall constitute loans to the Executive Director who shall immediately notify the Board of that fact and shall use all reasonable endeavours to recover damages for loss over the period for which salary has been or will be paid to him by the Company and he shall notify the Board of any claim compromise settlement or judgement made or awarded in connection with it and shall give to the Board all particulars the Board may reasonably require and shall if required by the Board refund to the Company that part of any damages recovered relating to loss of earnings for the period of the Incapacity as the Board may reasonably determine provided that the amount to be refunded shall not exceed the amount of damages or compensation recovered by him less any costs borne by the Executive Director in connection with the recovery of such damages or compensation and shall not exceed the total remuneration paid to him by way of salary in respect of the period of the Incapacity.

12. RESTRICTIONS DURING EMPLOYMENT

12.1 During the continuance of his employment under this Agreement the Executive Director shall unless prevented by Incapacity

Page 12 of 25

devote all of his time, attention and skill as are necessary to properly perform his duties under this agreement and shall not without the prior written consent of the Board:

• engage in any other business; or

• be concerned or interested in any other business of a similar nature to or competitive with that carried on by the Company or any of its Associated Companies provided that nothing in this paragraph shall preclude the Executive Director from holding or being otherwise interested in any shares or other securities of any company which are for the time being quoted on any recognised investment exchange (as defined by section 207(1) Financial Services Act 1986) (or in respect of which dealing takes place in the Alternative Investment Market) provided such interest does not exceed 5% of the issued share capital of such Company.

13. INVENTIONS

13.1 The parties foresee that the Executive Director may make, discover or create Intellectual Property in the course of his duties under this Agreement. In addition, because of the nature of his duties and particular responsibilities arising thereform, the parties acknowledge that the Executive Director has a special obligation to further the interests of the Company. In this Agreement, “Intellectual Property” shall mean any and all intellectual or industrial property rights of any description in any country (whether registered or registrable or not) including, but not limited to, patents, registered design rights, unregistered design rights, copyright, database right, trademarks (whether registered or unregistered) and inventions in any form of media whatsoever.

13.2 If at any time in the course of his employment under this Agreement the Executive Director makes or discovers or participates in the making or discovery or any Intellectual Property relating to, or capable of, being used in the business for the time being carried on

Page 13 of 25

by the Company or any of its Subsidiaries or Associated Companies, full details of the Intellectual Property shall immediately be communicated by him to the Company and shall be the absolute property of the Company. The Executive Director shall hold all details relating to the Intellectual Property upon trust for the benefit of the Company and shall keep them confidential. At the request and expense of the Company, the Executive Director shall give and supply all such information, data, drawings and assistance as may be requisite to enable the Company to exploit the Intellectual Property to the best advantage and shall execute all documents and do all things which may be necessary or desirable for obtaining patent or other protection for the Intellectual Property in such parts of the world as may be specified by the Company and for vesting the same in the Company or as it may direct. The Executive Director assigns, by way of present assignation of future rights, all copyright, database right and design rights in all works made, originated or developed by him in the course of his employment with the Company (whether or not made, originated or developed during working hours) and any other proprietary rights capable of assignment by way of present assignation of future rights for the full term of such rights.

13.3 The Executive Director irrevocably appoints the Company to be his attorney in his name and on his behalf to sign execute or do any such instrument or thing and generally to use his name for the purpose of giving to the Company (or its nominee) the full benefit of the provisions of this paragraph 13 and for the purposes of any third party a certificate in writing signed by any director or the secretary of the Company that any instrument or act falls within the authority conferred by this paragraph 13 shall be conclusive evidence that such is the case.

13.4 If the Executive Director makes or discovers or participates in the making or discovery of any Intellectual Property during his employment under this Agreement but which is not the property of the Company under paragraph 13.2 the Company shall subject only to the provisions of the Patents Act 1977 have the right to acquire for itself or its nominee the Executive Director’s rights in the Intellectual Property within 3 months after disclosure pursuant to paragraph 13.2 on fair and reasonable terms to be agreed or settled by a single arbitrator.

Page 14 of 25

13.5 The Executive Director waives all of his Moral Rights as defined in the Copyright, Designs and Patents Act 1988 in respect of any a confidential information, inventions or other Intellectual Property developed or made or produced by him.

13.6 Rights and obligations under paragraph 13 shall continue in force after termination of this Agreement in respect of Intellectual Property made or discovered during the Executive Director’s employment under this Agreement and shall be binding upon his representatives.

14. CONFIDENTIALITY

14.1 The Executive Director is aware that in the course of employment under this Agreement he will have access to and be entrusted with information in respect of the business and financing of the Company and its dealings transactions and affairs and likewise in relation to its Associated Companies all of which information is or may be confidential.

Page 15 of 25

14.2 The Executive Director shall not (except in the proper course of his duties or except with the prior written consent of the Board or unless ordered by a court of competent jurisdiction) at any time during or after the period of his employment under this Agreement disclose or communicate or divulge to any person whatever or otherwise make use whether for his own benefit or for the benefit of any person other than the Company or an Associated Company of any confidential information which may come to his knowledge in the course of his employment and the Executive Director shall during the continuance of his employment use his best endeavours to prevent the unauthorised publication or misuse of any confidential information provided that such restrictions shall cease to apply to any confidential information which may enter the public domain other than through the default of the Executive Director.

14.3 All notes and memoranda of any confidential information concerning the business of the Company and the Associated Companies or any of its or their suppliers agents distributors or customers which shall have been acquired received or made by the Executive Director during the course of his employment shall be the property of the Company and shall be surrendered by the Executive Director to someone duly authorised in that behalf at the termination of his employment or at the request of the Board at any time during the course of his employment.

14.4 For the avoidance of doubt, and without prejudice to the generality of the foregoing, the following is a non-exhaustive list of matters which in relation to the Company and any Associated Company are considered confidential and must be treated as such by the Executive Director:-

• any trade secrets of the Company or any Associated Company; and

• any information in respect of which the Company or any Associated Company is bound by obligation of confidence to any third party; and

Page 16 of 25

• unpublished and price-sensitive information relating to securities listed on any recognised Stock Exchange; and

• customer lists and details of contacts with or requirements of customers; and

• marketing strategies, plans, customer lists, pricing strategies, discount rates and sales figures of the Company or any associated company, and

• lists of suppliers and rates of charge of the Company or any associated company; and

• any invention, technical data, know-how or other manufacturing or trade secret of the Company and/or of any Associated Company; and

• information concerning any litigation proposed, in progress or settled; and

• any information relating to the Company or any associated company made available to the Executive Director which is identified to the Executive Director as being of a confidential nature.

15. TERMINATION

15.1 Subject to the provision of paragraph 20, this Agreement shall terminate automatically in the event of the Executive Director ceasing to be a Director of the Company and in that event the Executive Director shall have no claim for damages against the Company unless the Company is not otherwise entitled to determine his employment under this Agreement.

Page 17 of 25

16. SUMMARY TERMINATION OF EMPLOYMENT

The employment of the Executive Director may be terminated by the Company without notice or payment in lieu of notice:

16.1 If the Executive Director is guilty of any gross default or gross misconduct in connection with or affecting the business of the Company or any Subsidiary or Associated Company to which he is required by this Agreement to render services; or

16.2 In the event of any serious or repeated breach or non-observance by the Executive Director of any of the stipulations contained in this Agreement; or

16.3 If the Executive Director has an interim receiving order made against him, becomes bankrupt or makes any composition or enters into any deed of arrangement with his creditors; or

16.4 If the Executive Director is convicted of any arrestable criminal offence (other than an offence under road traffic legislation in the United Kingdom or elsewhere for which a fine or non-custodial penalty is imposed); or

16.5 If the Executive Director is disqualified from holding office in another company in which he is concerned or interested because of wrongful trading under the Insolvency Act 1986; or

16.6 If the Executive Director is convicted of an offence under the Companies Securities (Insider Dealing) Act 1985 or under any other present or future statutory enactment or regulations relating to insider dealings; or

Page 18 of 25

16.7 If the Executive Director is guilty of conduct which brings or is likely to bring himself, the Company or any Associated Company into disrepute; or

16.8 If the Executive Director is, in the opinion of the Board, incapable by reasons of mental disorder of discharging his duties; or

16.9 If the Executive Director resigns as a director of the Company otherwise than at the request of the Company.

17. RESIGNATION FROM DIRECTORSHIPS UPON TERMINATION

Upon the termination by whatever means of this Agreement:

17.1 The Executive Director shall at the request of the Company immediately resign from office as a director of the Company and from such offices held by him in Associated Companies as may be so requested without claim for compensation for such loss of office (but without prejudice to any other claim for compensation which the Executive Director may have under this Agreement) and in the event of his failure so to do the Company is hereby irrevocably authorised to appoint some person in his name and on his behalf to sign and deliver such resignation or resignations to the Company and to each of the Associated Companies of which the Executive Director is at the material time a director or other officer; and

17.2 The Executive Director shall not without the consent of the Company at any time thereafter represent himself still to be connected with the Company or any of the Associated Companies; and

17.3 The Executive Director shall forthwith deliver to the Company all documents (including correspondence, lists, notes, memoranda, plans, reports, papers, drawings, charts and other materials of whatsoever nature whether original or copies) films

Page 19 of 25

computer hardware computer software tapes models photographs made or compiled by or received by the Executive Director during the course of his employment with the Company and concerning the business finances or affairs of the Company any Associated Company or any supplier or customer of such company and shall not retain any copies; and

17.4 The Executive Director shall forthwith return to the Company all property of the Company and of any Associated Company (including any monies which the Executive Director may hold to the Company of any Associated Company’s account) in the possession or under the control of the Executive Director.

18. RECONSTRUCTION OR AMALGAMATION

18.1 If the employment of the Executive Director under this Agreement is terminated by reason of the liquidation of the Company for the purpose of reconstruction or amalgamation and the Executive Director is offered employment with any concern or undertaking resulting from the reconstruction or amalgamation on terms and conditions not less favourable than the terms of this Agreement then the Executive Director shall have no claim against the Company in respect of the termination of his employment under this Agreement.

19. EXECUTIVE DIRECTOR’S COVENANTS

19.1 The Executive Director acknowledges that during the course of his employment with the Company he will receive and have access to confidential information of the Company (and its Associated Companies) and he will also receive and have access to detailed client/customer lists and information relating to the operations and business requirements to those clients/customers and accordingly he is willing to enter into the covenants described below in order to provide the Company and its associated companies with what he considers to be reasonable protection for those interests.

Page 20 of 25

19.2 The Executive Director covenants with the Company that he will not for the period of one year after ceasing to be employed under this Agreement without the prior written consent of the Board:

19.2.1 be concerned in connection with the carrying on of any business in competition with the business of the Company on his own behalf or on behalf of any person firm or company directly or indirectly; or

19.2.2 seek to produce orders from or do business with any person firm or company with whom he shall have done business on behalf of the Company within one year period immediately preceding such cesser; or

19.2.3 solicit or entice away or endeavour to solicit or entice away from the Company or any Associated Company any person who has at any time during the one year period immediately preceding such cesser been employed or engaged by the Company or any Associated Companies in a senior capacity and with whom the Executive Director had dealings in the course of his employment during the said one year period provided that nothing in this paragraph 19.2 shall prohibit the seeking or procuring of orders or the doing of business not relating or not similar to the business or businesses described above.

19.3 The Executive Director covenants with the Company that he will not within England and/or Wales and/or Scotland for the period of one year after ceasing to be employed under this Agreement without the prior written consent of the Board either alone or jointly with or as manager, agent, consultant or employee of any person firm or company (or in any other capacity including without limitation as a shareholder) directly or indirectly carry on or be engaged in any activity or business which shall be in competition with the business of the Company.

Page 21 of 25

19.4 The covenants contained in paragraphs 19.2.1, 19.2.2 and 19.3 are intended to be separate and severable and enforceable as such.

19.5 The Executive Director hereby undertakes that he will immediately notify the Company of any offer of employment or any other engagement or arrangement made to the Executive Director by any third party or parties which may give rise to a breach of one or more of the covenants contained in paragraphs 19.2.1, 19.2.2 and 19.3 (“Notifiable Offer”) and further undertakes that on receipt of any Notifiable Offer he will immediately inform the third party or parties responsible for that offer of the existence of those covenants.

20. NOTICES

20.1 Any notice required or permitted to be given under this Agreement shall be given in writing delivered personally or sent by first class post pre-paid recorded or registered delivery (air mail if overseas) or by fax to the party due to receive such notice at, in the case of the Company, its registered office from time to time and, in the case of the Executive Director his address as set out in this Agreement (or such address as he may have notified to the Company in accordance with this paragraph).

20.2 Any notice delivered personally shall be deemed to be received when delivered to the address provided in paragraph 20.1 and any notice sent by pre-paid recorded or registered delivery post shall be deemed (in the absence of evidence of earlier receipt) to be received 2 days after posting (6 days if sent air mail) and in proving the time of despatch it shall be sufficient to show that the envelope containing such notice was properly addressed, stamped and posted. A notice sent by fax shall be deemed to have been received on receipt by the sender of the correct “transmit receipt”.

Page 22 of 25

21. DISCIPLINARY AND GRIEVANCE PROCEDURE

21.1 For statutory purposes there is no formal disciplinary procedure in relation to the Executive Director’s employment. The Executive Director shall be expected to maintain the highest standards of integrity and behaviour. All disciplinary matters for Executive Directors are dealt with by the Board.

21.2 For statutory purposes there is no formal grievance procedure. The Executive Director should apply to the Board to seek redress for any grievance.

21.3 There is a right of appeal to the Board whose decision shall be final.

22. STATUTORY INFORMATION

For the avoidance of doubt this Agreement also constitutes the statement of particulars of terms and conditions of employment which is required to be given to the Executive Director by Section 1 Employment Rights Act 1996 as amended.

Page 23 of 25

23. MISCELLANEOUS

23.1 In this Agreement unless the context otherwise requires the following expressions shall have the following meanings:

“Associated Company”	a Subsidiary and any other company which is for the time being a holding company (as defined by the Companies Acts 1985 and 1989) or the Company or another subsidiary of any such holding company;
“Board”	the Board of Directors for the time being of the Company.

by and shall be construed in accordance with the laws of Scotland;

23.2 The parties to this Agreement submit to the exclusive jurisdiction of the Scottish courts;

23.3 This Agreement contains the entire understanding between the parties and supersedes all previous agreements and arrangements (if any) relating to the employment of the Executive Director by the Company (which shall be deemed to have been terminated by mutual consent).

23.4 The expiry or determination of this Agreement howsoever arising shall not affect such of the provisions hereof as are expressed to operate or have effect after the termination of this Agreement and shall be without prejudice to any right of action already accrued to either party in respect of any breach of this Agreement by the other party. For the avoidance of doubt the clauses of this Agreement that operate after the termination of this Agreement are 13, 14, 15, 17, 18, 19 and 20

Page 24 of 25

IN WITNESS whereof this Agreement has been duly executed the day and year first above written:

(Name of Person)	Witness
	Name
	Address
For and on behalf of British Energy PLC
Director	Witness

Page 25 of 25

EX-15.6

Exhibit 15.06

05 October 2004

BRITISH ENERGY PLC

- and -

ROY A. ANDERSON

SERVICE AGREEMENT

FOR EXECUTIVE DIRECTOR

CONTENTS

1.	COMMENCEMENT AND TERM OF EMPLOYMENT	3
2.	DUTIES	4
3.	OFFICE OF DIRECTOR	6
4.	REMUNERATION	6
5.	PENSION SCHEME	7
6.	MEDICAL EXPENSES	9
7.	PERSONAL ACCIDENT INSURANCE	9
8.	COMPANY CAR	9
9.	EXPENSES	10
10.	HOLIDAYS	11
11.	INCAPACITY	11
12.	RESTRICTIONS DURING EMPLOYMENT	12
13.	INVENTIONS	13
14.	CONFIDENTIALITY	15
15.	TERMINATION	17
16.	SUMMARY TERMINATION OF EMPLOYMENT	17
17.	RESIGNATION FROM DIRECTORSHIPS UPON TERMINATION	18
18.	RECONSTRUCTION OR AMALGAMATION	19
19.	EXECUTIVE DIRECTOR’S COVENANTS	19
20.	NOTICES	21
21.	DISCIPLINARY AND GRIEVANCE PROCEDURE	22
22.	STATUTORY INFORMATION	22
23.	MISCELLANEOUS	23

Page 2 of 24

T H I S    A G R E E M E N T is made between

(1) BRITISH ENERGY PLC whose registered office is 3 Redwood, Crescent, East Kilbride G74 5PR (the “Company”); and

(2) Roy Anderson, whose address is Barnett Way, Barnwood (the “Executive Director”)

WHEREAS it is agreed that the Company shall employ the Executive Director and the Executive Director shall serve the Company as Executive Director of the Company on the following terms and subject to the following conditions:

1. COMMENCEMENT AND TERM OF EMPLOYMENT

1.1 Subject to paragraph 1.2 below the employment of the Executive Director (subject to termination as provided below) shall commence on 16 September 2004 (the “Commencement Date”).

1.2 The employment of the Executive Director (subject to termination as provided below) shall continue unless and until terminated by the Company giving not less than 12 months notice in writing to expire at any time after the Commencement Date or by the Executive Director giving not less than twelve months notice in writing at any time after the Commencement Date.

Page 3 of 24

1.3 In the event that during the first year of employment the Executive Director’s employment is terminated other than for good cause without notice or if during the first year of employment notice is given which is shorter than the notice provided for in this contract or if during the first year of employment the appropriate notice is given but subsequently notice, then in relation to any claim for damages which the Executive Director may have against the Company in respect of the failure to give notice or the shortening of the notice period, the Company agrees the Executive Director shall be relieved of any duty or obligation to mitigate his loss in respect of the notice period or any balance of the notice period as the case may be.

1.4 The Executive Director’s continuous period of employment for statutory purposes shall commence on 1 July 2004.

2. DUTIES

2.1 The Executive Director shall during his employment under this Agreement:

2.1.1 serve the Company and its subsidiaries to the best of his ability in the capacity of Chief Nuclear Officer of British Energy plc or in such other equivalent capacity as the Board may from time to time determine; and

2.1.2 perform equivalent duties and exercise the powers which the Board may from time to time properly assign to him; and

2.1.3 in the absence of any specific directions from the Board (but subject always to the memorandum and articles of association of the Company) exercise general control and management of the Company’s nuclear generation division; and

Page 4 of 24

2.1.4 do all in his power to promote, develop and extend the business of the Company and of its Subsidiaries and at all times and in all respects conform to and comply with the proper and reasonable directions and regulations of the Board (but subject always to the memorandum and articles of association of the Company); and

2.1.5 at all times keep the Board promptly and fully informed (in writing if so requested) of his conduct of the business, finances and affairs of the Company and shall provide such explanations and supply all information in his possession as the Board may require in connection with such conduct of the business, finances or affairs of the Company; and

2.1.6 if and so long as the Board so directs perform and exercise the said duties and powers on behalf of any Associated Company and act as a director or other officer of any Associated Company.

2.2 The Executive Director shall carry out his duties and exercise his powers jointly with any other director appointed by the Board to act jointly with him and the Board may at any time require the Executive Director to cease performing or exercising the said or any duties or powers without such requirement giving rise to a Breach of Contract by the Company.

2.3 The Executive Director shall be based at Barnett Way, Barnwood, Gloucester, GL3 4RS, or in any other place within the United Kingdom which the Board may require for the proper performance and exercise of his duties and powers and he may be required to travel on the business of the Company or any of its Associated Companies and/or Subsidiaries anywhere within the world.

2.4 The Company shall not be under any obligation to provide the Executive Director with any work and the Company may at any time during the continuance of his employment without notice, suspend the Executive Director and/or exclude him from all or any premises of the Company or any Associated Company for any period not exceeding 12 months provided that throughout such a period, the Executive Director’s salary and other contractual benefits shall continue to be paid or provided by the Company.

Page 5 of 24

2.5 The Executive Director shall at any time if directed to do so by the Board undergo a medical examination by a medical practitioner of the Company’s choice and at its expense. The Executive Director hereby authorises (such authorisation to be deemed to include the consent of the Executive Director for the purposes of Section 3 of the Access to Medical Reports Act 1988) such medical practitioner to disclose the results of such examination (whether in a medical report or otherwise) to the Company, subject to the Executive Director being informed by the Company of such request prior to it being made.

2.6 In the event that the Company invokes its rights under paragraph 2.4 of this Agreement then the Executive Director’s responsibilities/liabilities as Chief Nuclear Officer will be suspended for the period that he is away from work.

3. OFFICE OF DIRECTOR

During his employment under this Agreement the Executive Director shall not:

3.1 voluntarily resign as a director of the Company;

3.2 voluntarily do or refrain from doing any act whereby his office as a Director of the Company is or becomes liable to be vacated;

3.3 do anything that would cause him to be disqualified from continuing to act as a Director.

4. REMUNERATION

4.1 The remuneration of the Executive Director shall be a fixed salary (which shall accrue from day to day) payable from the Commencement Date and at the rate of £423,000 per year (or such higher rate as may be recommended by the Remuneration Committee of the Board and approved by the Company in General Meeting from time to time) inclusive of any Directors’ fees payable to him under the articles of association of the Company and the Associated Companies payable in arrears by

Page 6 of 24

equal monthly instalments on the 24th day of every month (or such other day as the Company may from time to time decide). In accordance with paragraph 5.4 the Executive Director will be required to sacrifice part of this as his contribution to the Pension Scheme

4.2 The Executive Director will be entitled to participate in any Board Incentives Scheme which may be established varied or withdrawn from time to time by the Remuneration Committee at its discretion.

4.3 Should this employment terminate for reasons other than those set out in paragraph 16 then the Executive Director shall be entitled to that proportion of payment under any Board Incentive Scheme as may be required by the rules of the Scheme (as amended from time to time) subject always to the discretion of the Remuneration Committee.

5. PENSION SCHEME

5.1 “The Pension Schemes” means the British Energy Generation Group (BEGG) of the Electricity Supply Pension Scheme (ESPS), the Special Arrangement and the UURB.

The terms “Pensionable Pay” and “Final Pensionable Pay” will have the meanings assigned to them in the documents governing the British Energy Generation Group of the ESPS.

5.2 The Executive Director is assumed to be, is treated as and, where he has not been already, will be admitted as a contributing member of the British Energy Generation Group of the Electricity Supply Pension Scheme (“the ESP Scheme).

Page 7 of 24

5.3 Participation in the British Energy Generation Group of the ESPS Scheme is on the standard terms for staff effective from 1 January 2001. In addition, the Company will put in place special arrangements (“the Special Arrangement”), so that, taking into account the benefits payable to the Executive Director in terms of the British Energy Generation Group of the ESPS and the Special Arrangement, the Executive Director’s cumulative pension benefits under both the British Energy Generation Group of the ESPS and the Special Arrangement will accrue at the rate of 1/30 of Final Pensionable Pay for each complete year of service subject to the amount payable being within the Inland Revenue Rules for approved arrangements.

Where the benefits to be provided in terms of the British Energy Generation Group of the ESPS and the Special Arrangement are in relation to Final Pensionably Pay that is in excess of the Permitted Maximum, defined in the section 590C of the Income and Corporation Taxes Act 1988, the Company may, if it so wishes, meet its obligation to provide such benefits by an Unapproved Unfunded Retirement Benefits arrangement (“the UURB). The benefits provided under the special arrangements and the UURB will be those set out in the Schedule attached.

5.4 From the commencement of the Executive Director’s employment with the Company, contributions to the Pension Scheme will be deducted in respect of the Executive Director at the rate of five per cent (5%) of his salary. For this purpose, salary will be calculated in the same way as Pensionable Pay is calculated for the purposes of the British Energy Generation Group of the ESPS, but without any limitation by reference to the Permitted Maximum.

As indicated in Paragraph 4.1 the Executive Director will be required to sacrifice part of his salary to fulfil the obligations of this clause. The amount to be sacrificed will be 5% of the salary in 4.1 (as amended from time to time) less 5% of the Permitted Maximum.

5.5 These special arrangements are subject to the provision of all information regarding previous pension entitlements relating to previous periods of employment or self-employment whether approved or unapproved.

Page 8 of 24

6. MEDICAL EXPENSES

6.1 Subject to his complying with and satisfying any applicable requirement of the relevant insurers, the Company shall during the continuance of his employment cover the cost of membership for the Executive Director and the Executive Director’s spouse and/or nominated partner, and while aged under 21 years children and stepchildren of a private patients medical plan with a reputable medical expenses insurance scheme as the Company shall in its absolute discretion decide from time to time.

7. PERSONAL ACCIDENT INSURANCE

7.1 The Company shall provide the Executive Director with personal accident insurance with such reputable personal accident insurance scheme as the Company shall decide from time to time in accordance with the Company’s Personal Accident Insurance Policy.

8. COMPANY CAR

8.1 The Company will supply the Executive Director with a car deemed by the Board to be suitable for the performance of his duties under this Agreement in respect of which the Company will pay all running costs including insurance, petrol and maintenance.

8.2 The Executive Director shall take good care of the car and ensure that the provisions and conditions of any insurance policy relating to it are observed and shall return the car and its keys to the Company at its registered office (or any other place the Company may reasonably nominate) immediately upon the termination of his employment however arising.

Page 9 of 24

9. EXPENSES

9.1 The Company shall by way of reimbursement pay or procure to be paid to the Executive Director:

9.1.1 all reasonable travelling, accommodation, meal and other expenses wholly exclusively and necessarily incurred by him in or about the performance of his duties under this Agreement; and

9.1.2 the cost of subscription to all professional bodies to which he is obliged to belong in order to maintain his professional qualifications provided that the Executive Director shall provide the Company with such appropriate evidence (including receipts, invoices, tickets and/or vouchers) of the expenditure in respect of which he claims reimbursement as the Company may reasonably require.

9.2 Provided that the Executive Director remains in employment for at least 3 years and he leaves the Company in good standing then the Company will reimburse all legal tax and reasonable relocation costs necessary to repatriate him to the US. The costs payable by the Company will be reduced to the extent that they are met by any prospective employer. If the Company terminates his employment in accordance with Paragraph 1 of this Agreement the costs of repatriation to East Coast USA will be paid in accordance with this section 9.2.

9.3 The Company will reimburse the Executive Director for the costs of one Business Class return journey for him and his wife for each of the first three years of employment.

Page 10 of 24

10. HOLIDAYS

10.1 The Executive Director shall (in addition to the usual public and bank holidays) be entitled to 25 days holiday in each holiday year (as specified by the Company) to be taken at a time or times convenient to the Company and as agreed with the Chief Executive.

10.2 The Executive Director shall not be entitled to carry forward any annual holiday entitlement foregone by him for any reason during the holiday year in which it accrued without the prior written consent of the Board.

10.3 Upon the termination of his employment for reasons other than those set out in paragraph 16 the Executive Director’s entitlement to accrued holiday pay (which accrues at the rate of 2 days per month) shall be calculated on a pro rate basis in respect of each completed month of service in the holiday year in which his employment terminates and the appropriate amount shall be paid to the Executive Director provided that if the Executive Director shall have taken more days holiday than his accrued entitlement the Company is hereby authorised to make an appropriate deduction from the Executive Director’s final salary payment.

11. INCAPACITY

11.1 During any period of absence from work due to Incapacity salary payable to the Executive Director under the terms of this Agreement shall be paid in full for the first twelve months of continuous absence (such payment to be inclusive of any statutory sick pay or social security benefits to which he may be entitled).

11.2 Thereafter the Executive Director shall continue to be paid salary only at the discretion of the Company.

Page 11 of 24

11.3 If the Incapacity shall be or appear to be occasioned by actionable negligence of a third party in respect of which damages are or may be recoverable, then all sums paid by the Company during the period of absence in terms of paragraph 11.1 above shall constitute loans to the Executive Director who shall immediately notify the Board of that fact and shall use all reasonable endeavours to recover damages for loss over the period for which salary has been or will be paid to him by the Company and he shall notify the Board of any claim compromise settlement or judgement made or awarded in connection with it and shall give to the Board all particulars the Board may reasonably require and shall if required by the Board refund to the Company that part of any damages recovered relating to loss of earnings for the period of the Incapacity as the Board may reasonably determine provided that the amount to be refunded shall not exceed the amount of damages or compensation recovered by him less any costs borne by the Executive Director in connection with the recovery of such damages or compensation and shall not exceed the total remuneration paid to him by way of salary in respect of the period of the Incapacity.

12. RESTRICTIONS DURING EMPLOYMENT

12.1 During the continuance of his employment under this Agreement the Executive Director shall unless prevented by Incapacity devote all of his time, attention and skill as are necessary to properly perform his duties under this agreement and shall not without the prior written consent of the Board:

• engage in any other business; or

• be concerned or interested in any other business of a similar nature to or competitive with that carried on by the Company or any of its Associated Companies provided that nothing in this paragraph shall preclude the Executive Director from holding or being otherwise interested in any shares or other securities of any company which are for the time being quoted on any recognised investment exchange (as defined by section 207(1) Financial Services Act 1986) (or in respect of which dealing takes place in the Alternative Investment Market) provided such interest does not exceed 5% of the issued share capital of such Company.

Page 12 of 24

12.2 During the period up to 30 June 2005 the Executive Director may continue his involvement with PSEG on the basis of a quarterly one day meeting in the USA with intervening monthly meetings by video conference, provided that such meetings are arranged so as not to interfere with British Energy Board or Executive Committee or other significant meetings. The costs of such meetings to be borne by PSEG.

13. INVENTIONS

13.1 The parties foresee that the Executive Director may make, discover or create Intellectual Property in the course of his duties under this Agreement. In addition, because of the nature of his duties and particular responsibilities arising thereform, the parties acknowledge that the Executive Director has a special obligation to further the interests of the Company. In this Agreement, “Intellectual Property” shall mean any and all intellectual or industrial property rights of any description in any country (whether registered or registrable or not) including, but not limited to, patents, registered design rights, unregistered design rights, copyright, database right, trademarks (whether registered or unregistered) and inventions in any form of media whatsoever.

13.2 If at any time in the course of his employment under this Agreement the Executive Director makes or discovers or participates in the making or discovery or any Intellectual Property relating to, or capable of, being used in the business for the time being carried on by the Company or any of its Subsidiaries or Associated Companies, full details of the Intellectual Property shall immediately be communicated by him to the Company and shall be the absolute property of the Company. The Executive Director shall hold all details relating to the Intellectual Property upon trust for the benefit of the Company and shall keep them confidential. At the request and expense of the Company, the Executive Director shall give and supply all such information, data, drawings and assistance as may be requisite to enable the Company to exploit the Intellectual Property to

Page 13 of 24

the best advantage and shall execute all documents and do all things which may be necessary or desirable for obtaining patent or other protection for the Intellectual Property in such parts of the world as may be specified by the Company and for vesting the same in the Company or as it may direct. The Executive Director assigns, by way of present assignation of future rights, all copyright, database right and design rights in all works made, originated or developed by him in the course of his employment with the Company (whether or not made, originated or developed during working hours) and any other proprietary rights capable of assignment by way of present assignation of future rights for the full term of such rights.

13.3 The Executive Director irrevocably appoints the Company to be his attorney in his name and on his behalf to sign execute or do any such instrument or thing and generally to use his name for the purpose of giving to the Company (or its nominee) the full benefit of the provisions of this paragraph 13 and for the purposes of any third party a certificate in writing signed by any director or the secretary of the Company that any instrument or act falls within the authority conferred by this paragraph 13 shall be conclusive evidence that such is the case.

13.4 If the Executive Director makes or discovers or participates in the making or discovery of any Intellectual Property during his employment under this Agreement but which is not the property of the Company under paragraph 13.2 the Company shall subject only to the provisions of the Patents Act 1977 have the right to acquire for itself or its nominee the Executive Director’s rights in the Intellectual Property within 3 months after disclosure pursuant to paragraph 13.2 on fair and reasonable terms to be agreed or settled by a single arbitrator.

13.5 The Executive Director waives all of his Moral Rights as defined in the Copyright, Designs and Patents Act 1988 in respect of any a confidential information, inventions or other Intellectual Property developed or made or produced by him.

Page 14 of 24

13.6 Rights and obligations under paragraph 13 shall continue in force after termination of this Agreement in respect of Intellectual Property made or discovered during the Executive Director’s employment under this Agreement and shall be binding upon his representatives.

14. CONFIDENTIALITY

14.1 The Executive Director is aware that in the course of employment under this Agreement he will have access to and be entrusted with information in respect of the business and financing of the Company and its dealings transactions and affairs and likewise in relation to its Associated Companies all of which information is or may be confidential.

14.2 The Executive Director shall not (except in the proper course of his duties or except with the prior written consent of the Board or unless ordered by a court of competent jurisdiction) at any time during or after the period of his employment under this Agreement disclose or communicate or divulge to any person whatever or otherwise make use whether for his own benefit or for the benefit of any person other than the Company or an Associated Company of any confidential information which may come to his knowledge in the course of his employment and the Executive Director shall during the continuance of his employment use his best endeavours to prevent the unauthorised publication or misuse of any confidential information provided that such restrictions shall cease to apply to any confidential information which may enter the public domain other than through the default of the Executive Director.

Page 15 of 24

14.3 All notes and memoranda of any confidential information concerning the business of the Company and the Associated Companies or any of its or their suppliers agents distributors or customers which shall have been acquired received or made by the Executive Director during the course of his employment shall be the property of the Company and shall be surrendered by the Executive Director to someone duly authorised in that behalf at the termination of his employment or at the request of the Board at any time during the course of his employment.

14.4 For the avoidance of doubt, and without prejudice to the generality of the foregoing, the following is a non-exhaustive list of matters which in relation to the Company and any Associated Company are considered confidential and must be treated as such by the Executive Director:-

• any trade secrets of the Company or any Associated Company; and

• any information in respect of which the Company or any Associated Company is bound by obligation of confidence to any third party; and

• unpublished and price-sensitive information relating to securities listed on any recognised Stock Exchange; and

• customer lists and details of contacts with or requirements of customers; and

• marketing strategies, plans, customer lists, pricing strategies, discount rates and sales figures of the Company or any associated company, and

• lists of suppliers and rates of charge of the Company or any associated company; and

• any invention, technical data, know-how or other manufacturing or trade secret of the Company and/or of any Associated Company; and

• information concerning any litigation proposed, in progress or settled; and

• any information relating to the Company or any associated company made available to the Executive Director which is identified to the Executive Director as being of a confidential nature.

Page 16 of 24

15. TERMINATION

15.1 Subject to the provision of paragraph 20, this Agreement shall terminate automatically in the event of the Executive Director ceasing to be a Director of the Company and in that event the Executive Director shall have no claim for damages against the Company unless the Company is not otherwise entitled to determine his employment under this Agreement.

16. SUMMARY TERMINATION OF EMPLOYMENT

The employment of the Executive Director may be terminated by the Company without notice or payment in lieu of notice:

16.1 If the Executive Director is guilty of any gross default or gross misconduct in connection with or affecting the business of the Company or any Subsidiary or Associated Company to which he is required by this Agreement to render services; or

16.2 In the event of any serious or repeated breach or non-observance by the Executive Director of any of the stipulations contained in this Agreement; or

16.3 If the Executive Director has an interim receiving order made against him, becomes bankrupt or makes any composition or enters into any deed of arrangement with his creditors; or

16.4 If the Executive Director is convicted of any arrestable criminal offence (other than an offence under road traffic legislation in the United Kingdom or elsewhere for which a fine or non-custodial penalty is imposed); or

16.5 If the Executive Director is disqualified from holding office in another company in which he is concerned or interested because of wrongful trading under the Insolvency Act 1986; or

Page 17 of 24

16.6 If the Executive Director is convicted of an offence under the Companies Securities (Insider Dealing) Act 1985 or under any other present or future statutory enactment or regulations relating to insider dealings; or

16.7 If the Executive Director is guilty of conduct which brings or is likely to bring himself, the Company or any Associated Company into disrepute; or

16.8 If the Executive Director is, in the opinion of the Board, incapable by reasons of mental disorder of discharging his duties; or

16.9 If the Executive Director resigns as a director of the Company otherwise than at the request of the Company.

17. RESIGNATION FROM DIRECTORSHIPS UPON TERMINATION

Upon the termination by whatever means of this Agreement:

17.1 The Executive Director shall at the request of the Company immediately resign from office as a director of the Company and from such offices held by him in Associated Companies as may be so requested without claim for compensation for such loss of office (but without prejudice to any other claim for compensation which the Executive Director may have under this Agreement) and in the event of his failure so to do the Company is hereby irrevocably authorised to appoint some person in his name and on his behalf to sign and deliver such resignation or resignations to the Company and to each of the Associated Companies of which the Executive Director is at the material time a director or other officer; and

17.2 The Executive Director shall not without the consent of the Company at any time thereafter represent himself still to be connected with the Company or any of the Associated Companies; and

Page 18 of 24

17.3 The Executive Director shall forthwith deliver to the Company all documents (including correspondence, lists, notes, memoranda, plans, reports, papers, drawings, charts and other materials of whatsoever nature whether original or copies) films computer hardware computer software tapes models photographs made or compiled by or received by the Executive Director during the course of his employment with the Company and concerning the business finances or affairs of the Company any Associated Company or any supplier or customer of such company and shall not retain any copies; and

17.4 The Executive Director shall forthwith return to the Company all property of the Company and of any Associated Company (including any monies which the Executive Director may hold to the Company of any Associated Company’s account) in the possession or under the control of the Executive Director.

18. RECONSTRUCTION OR AMALGAMATION

18.1 If the employment of the Executive Director under this Agreement is terminated by reason of the liquidation of the Company for the purpose of reconstruction or amalgamation and the Executive Director is offered employment with any concern or undertaking resulting from the reconstruction or amalgamation on terms and conditions not less favourable than the terms of this Agreement then the Executive Director shall have no claim against the Company in respect of the termination of his employment under this Agreement.

19. EXECUTIVE DIRECTOR’S COVENANTS

19.1 The Executive Director acknowledges that during the course of his employment with the Company he will receive and have access to confidential information of the Company (and its Associated Companies) and he will also receive and have access to detailed client/customer lists and information relating to the operations and business requirements to those clients/customers and accordingly he is willing to enter into the covenants described below in order to provide the Company and its associated companies with what he considers to be reasonable protection for those interests.

Page 19 of 24

19.2 The Executive Director covenants with the Company that he will not for the period of one year after ceasing to be employed under this Agreement without the prior written consent of the Board:

19.2.1 be concerned in connection with the carrying on of any business in competition with the business of generating electricity and/or of any nuclear business carried on by the Company on his own behalf or on behalf of any person firm or company directly or indirectly; or

19.2.2 seek to produce orders from or do business with any person firm or company with whom he shall have done business on behalf of the Company within one year period immediately preceding such cesser; or

19.2.3 solicit or entice away or endeavour to solicit or entice away from the Company or any Associated Company any person who has at any time during the one year period immediately preceding such cesser been employed or engaged by the Company or any Associated Companies in a senior capacity and with whom the Executive Director had dealings in the course of his employment during the said one year period provided that nothing in this paragraph 19.2 shall prohibit the seeking or procuring of orders or the doing of business not relating or not similar to the business or businesses described above.

19.3 The Executive Director covenants with the Company that he will not within England and/or Wales and/or Scotland for the period of one year after ceasing to be employed under this Agreement without the prior written consent of the Board either alone or jointly with or as manager, agent, consultant or employee of any person firm or company (or in any other capacity including without limitation as a shareholder) directly or indirectly carry on or be engaged in any activity or business which shall be in competition with the business of electricity generating and/or of any nuclear business carried on by the Company.

Page 20 of 24

19.4 The covenants contained in paragraphs 19.2.1, 19.2.2 and 19.3 are intended to be separate and severable and enforceable as such.

19.5 The Executive Director hereby undertakes that he will immediately notify the Company of any offer of employment or any other engagement or arrangement made to the Executive Director by any third party or parties which may give rise to a breach of one or more of the covenants contained in paragraphs 19.2.1, 19.2.2 and 19.3 (“Notifiable Offer”) and further undertakes that on receipt of any Notifiable Offer he will immediately inform the third party or parties responsible for that offer of the existence of those covenants.

20. NOTICES

20.1 Any notice required or permitted to be given under this Agreement shall be given in writing delivered personally or sent by first class post pre-paid recorded or registered delivery (air mail if overseas) or by fax to the party due to receive such notice at, in the case of the Company, its registered office from time to time and, in the case of the Executive Director his address as set out in this Agreement (or such address as he may have notified to the Company in accordance with this paragraph).

20.2 Any notice delivered personally shall be deemed to be received when delivered to the address provided in paragraph 20.1 and any notice sent by pre-paid recorded or registered delivery post shall be deemed (in the absence of evidence of earlier receipt) to be received 2 days after posting (6 days if sent air mail) and in proving the time of despatch it shall be sufficient to show that the envelope containing such notice was properly addressed, stamped and posted. A notice sent by fax shall be deemed to have been received on receipt by the sender of the correct “transmit receipt”.

Page 21 of 24

21. DISCIPLINARY AND GRIEVANCE PROCEDURE

21.1 For statutory purposes there is no formal disciplinary procedure in relation to the Executive Director’s employment. The Executive Director shall be expected to maintain the highest standards of integrity and behaviour. All disciplinary matters for Executive Directors are dealt with by the Board.

21.2 For statutory purposes there is no formal grievance procedure. The Executive Director should apply to the Board to seek redress for any grievance.

21.3 There is a right of appeal to the Board whose decision shall be final.

22. STATUTORY INFORMATION

For the avoidance of doubt this Agreement also constitutes the statement of particulars of terms and conditions of employment which is required to be given to the Executive Director by Section 1 Employment Rights Act 1996 as amended.

Page 22 of 24

23. MISCELLANEOUS

23.1 In this Agreement unless the context otherwise requires the following expressions shall have the following meanings:

“Associated Company”	a Subsidiary and any other company which is for the time being a holding company (as defined by the Companies Acts 1985 and 1989) or the Company or another subsidiary of any such holding company;
“Board”	the Board of Directors for the time being of the Company.

by and shall be construed in accordance with the laws of Scotland;

23.2 The parties to this Agreement submit to the exclusive jurisdiction of the Scottish courts;

23.3 This Agreement contains the entire understanding between the parties and supersedes all previous agreements and arrangements (if any) relating to the employment of the Executive Director by the Company (which shall be deemed to have been terminated by mutual consent).

23.4 The expiry or determination of this Agreement howsoever arising shall not affect such of the provisions hereof as are expressed to operate or have effect after the termination of this Agreement and shall be without prejudice to any right of action already accrued to either party in respect of any breach of this Agreement by the other party. For the avoidance of doubt the clauses of this Agreement that operate after the termination of this Agreement are 13, 14, 15, 17, 18, 19 and 20

Page 23 of 24

IN WITNESS whereof this Agreement has been duly executed the day and year first above written:

(Name of Person)	Witness
		Name
		Address
For and on behalf of British Energy PLC
Director	Witness

Page 24 of 24

EX-15.7

Exhibit 15.07

BRITISH ENERGY plc

- and -

DAVID STUART GILCHRIST

SERVICE AGREEMENT

FOR EXECUTIVE DIRECTOR

CONTENTS

Clause
1.	COMMENCEMENT AND TERM OF EMPLOYMENT	3
2.	DUTIES	3
3.	OFFICE OF DIRECTOR	5
4.	REMUNERATION	5
5.	PENSION SCHEME	5
6.	MEDICAL EXPENSES AND PERMANENT HEALTH INSURANCE	6
7.	PERSONAL ACCIDENT INSURANCE	6
8.	COMPANY CAR	6
9.	EXPENSES	6
10.	HOLIDAYS	7
11.	INCAPACITY	7
12.	RESTRICTIONS DURING EMPLOYMENT	8
13.	INVENTIONS	8
14.	CONFIDENTIALITY	9
15.	TERMINATION OF DIRECTORSHIP	10
16.	SUMMARY TERMINATION OF EMPLOYMENT	11
17.	RESIGNATION FROM DIRECTORSHIPS UPON TERMINATION	11
18.	RECONSTRUCTION OR AMALGAMATION	12
19.	EXECUTIVE DIRECTOR’S COVENANTS	12
20.	NOTICES	13
21.	DISCIPLINARY AND GRIEVANCE PROCEDURE	14
22.	STATUTORY INFORMATION	14
23.	GOVERNING LAW AND JURISDICTION	14
24.	MISCELLANEOUS	15

2

T H I S    A G R E E M E N T is made BETWEEN:

(1) BRITISH ENERGY plc whose registered office is at 3 Redwood Crescent, East Kilbride, G74 5PR (the “Company”); and

(2) David Stuart Gilchrist, 15 Aytoun Road, Pollokshields, Glasgow. G41 5RL (the “Executive Director”).

WHEREAS it is agreed that the Company shall employ the Executive Director and the Executive Director shall serve the Company as Executive Director of the Company on the following terms and subject to the following conditions:

1. COMMENCEMENT AND TERM OF EMPLOYMENT

1.1 Subject to paragraph 1.3 below the employment of the Executive Director (subject to termination as provided below) shall commence on 1 September 2001 (the “Commencement Date”).

1.2 The employment of the Executive Director (subject to termination as provided below) shall continue unless and until terminated by the Company giving not less than 12 months notice in writing to expire on or any time after the Commencement Date or by the Executive Director giving not less than six months notice in writing at any time after the Commencement Date.

1.3 The Executive Director’s continuous period of employment for statutory purposes commenced on 4 November 1991.

2. DUTIES

2.1 The Executive Director shall during his employment under this Agreement:

2.1.1 serve the Company and its subsidiaries to the best of his ability in the capacity of Managing Director, Generation, of the Company or in such other capacity as the Board may from time to time determine; and

2.1.2 perform the duties and exercise the powers which the Board may from time to time properly assign to him; and

2.1.3 in the absence of any specific directions from the Board (but subject always to the memorandum and articles of association of the Company) exercise general control and management of the Company’s Generation Division operations.

2.1.4 do all in his power to promote, develop and extend the business of the Company and of its Subsidiaries and at all times and in all respects conform to and comply with the proper and reasonable directions and regulations of the Board (but subject always to the memorandum and articles of association of the Company); and

3

2.1.5 at all times keep the Board promptly and fully informed (in writing if so requested) of his conduct of the business, finances and affairs of the Company and in particular the Generation Division and shall provide such explanations and supply all information in his possession as the Board may require in connection with such conduct of the business, finances or affairs of the Company; and

2.1.6 if and so long as the Board so directs perform and exercise the said duties and powers on behalf of any Associated Company and act as a director or other officer of any Associated Company.

2.2 The Executive Director shall carry out his duties and exercise his powers jointly with any other director appointed by the Board to act jointly with him and the Board may at any time require the Executive Director to cease performing or exercising the said or any duties or powers.

2.3 The Executive Director shall be based at 3 Redwood Crescent, East Kilbride, or in any other place within the United Kingdom which the Board may require for the proper performance and exercise of his duties and powers and he may be required to travel on the business of the Company or any of its Associated Companies and/or Subsidiaries anywhere within the world.

2.4 The Company shall not be under any obligation to provide the Executive Director with any work and the Company may at any time during the continuance of his employment without notice, suspend the Executive Director and/or exclude him from all or any premises of the Company or any Associated Company for any period not exceeding 12 months provided that throughout such a period, the Executive Director’s salary and other contractual benefits shall continue to be paid or provided by the Company.

2.5 The Executive Director shall at any time if directed to do so by the Board undergo a medical examination by a medical practitioner of the Company’s choice and at its expense. The Executive Director hereby authorises (such authorisation to be deemed to include the consent of the Executive Director for the purposes of Section 3 of the Access to Medical Reports Act 1988) such medical practitioner to disclose the results of such examination (whether in a medical report or otherwise) to the Company, subject to the Executive Director being informed by the Company of such request prior to it being made.

4

3. OFFICE OF DIRECTOR

During his employment under this Agreement the Executive Director shall not:

3.1 voluntarily resign as a director of the Board;

3.2 voluntarily do or refrain from doing any act whereby his office as a director of the Board is or becomes liable to be vacated;

3.3 do anything that would cause him to be disqualified from continuing to act as a director.

4. REMUNERATION

4.1 The remuneration of the Executive Director shall be a fixed salary (which shall accrue from day to day) payable from the Commencement Date and at the rate of £165,000 per year (or such higher rate as may be recommended by the Remuneration Committee of the Board and approved by the Company in General Meeting from time to time) inclusive of any directors’ fees payable to him under the articles of association of the Company or the Associated Companies payable in arrears by equal monthly instalments on the 24th day of every month (or such other day as the Company may from time to time decide). The Executive Director’s salary shall be subject to review no less than annually commencing with effect from 1 July 2002 which shall be the date of the first review.

4.2 The Executive Director will be entitled to participate in any Board Bonus Scheme which may be established varied or withdrawn from time to time by the Remuneration Committee at its discretion. The current arrangements provide for members of the Board Bonus Scheme to earn up to an additional 50% of base salary.

4.3 Should this employment terminate for reasons other than those set out in paragraph 16 then the Executive Director shall be entitled to that proportion of his bonus as corresponds to the part of the Company’s financial year which the Executive Director has worked at the date of termination.

5. PENSION SCHEME

5.1 The Executive Director will continue to participate in the employer’s Pension Scheme (British Energy Generation Group of the Electricity Supply Pension Scheme) on the standard terms for staff. In addition, the Company will put in place special arrangements so that, taking into account the Pension Scheme and special arrangements, his pension will accrue at a rate of up to 1/30th of base salary (which term excludes bonus, benefits in kind, share option schemes and the like), for each completed year of service after 1 July 2001. Above the level of the pensions cap, the Company will meet its obligations by an Unapproved Unfunded Retirement Benefits Scheme.

5

5.2 The special arrangements are subject to the provision of all information regarding previous pension entitlements relating to previous periods of employment or self-employment whether approved or unapproved.

6. MEDICAL EXPENSES AND PERMANENT HEALTH INSURANCE

6.1 Subject to his complying with and satisfying any applicable requirement of the relevant insurers the Company shall during the continuance of his employment cover the cost of membership for the Executive Director and the Executive Director’s spouse and/or nominated partner, and while aged under 21 years children and stepchildren of a private patients medical plan with a reputable medical expenses insurance scheme as the Company shall in its absolute discretion decide from time to time.

7. PERSONAL ACCIDENT INSURANCE

The Company shall provide the Executive Director with personal accident insurance with such reputable personal accident insurance scheme as the Company shall decide from time to time in accordance with the Company’s Personal Accident Insurance Policy.

8. COMPANY CAR

8.1 The Company will supply the Executive Director with a car deemed by the Board to be suitable for the performance of his duties under this Agreement in respect of which the Company will pay all running costs including insurance, petrol and maintenance.

8.2 The Executive Director shall take good care of the car and ensure that the provisions and conditions of any insurance policy relating to it are observed and shall return the car and its keys to the Company at its registered office (or any other place the Company may reasonably nominate) immediately upon the termination of his employment however arising.

9. EXPENSES

The Company shall by way of reimbursement pay or procure to be paid to the Executive Director:

9.1 all reasonable travelling, accommodation, meal and other expenses wholly exclusively and necessarily incurred by him in or about the performance of his duties under this Agreement; and

9.2 the cost of subscription to all professional bodies to which he is obliged to belong in order to maintain his professional qualifications provided that the Executive Director shall provide the Company with such appropriate evidence (including receipts, invoices, tickets and/or vouchers) of the expenditure in respect of which he claims reimbursement as the Company may reasonably require.

6

10. HOLIDAYS

10.1 The Executive Director shall (in addition to the usual public and bank holidays) be entitled to 33 days holiday in each holiday year (as specified by the Company) to be taken at a time or times convenient to the Company and as agreed with the Chief Executive.

10.2 The Executive Director shall not be entitled to carry forward any annual holiday entitlement foregone by him for any reason during the holiday year in which it accrued without the prior written consent of the Board.

10.3 Upon the termination of his employment for reasons other than those set out in paragraph 16 the Executive Director’s entitlement to accrued holiday pay (which accrues at the rate of 2 ³/4 days per month) shall be calculated on a pro rata basis in respect of each completed month of service in the holiday year in which his employment terminates and the appropriate amount shall be paid to the Executive Director provided that if the Executive Director shall have taken more days holiday than his accrued entitlement the Company is hereby authorised to make an appropriate deduction from the Executive Director’s final salary payment.

11. INCAPACITY

11.1 During any period of absence from work due to Incapacity salary payable to the Executive Director under the terms of this Agreement shall be paid in full for the first twelve months of continuous absence (such payment to be inclusive of any statutory sick pay or social security benefits to which he may be entitled).

11.2 Thereafter the Executive Director shall continue to be paid salary only at the discretion of the Company.

11.3 If the Incapacity shall be or appear to be occasioned by actionable negligence of a third party in respect of which damages are or may be recoverable the Executive Director shall immediately notify the Board of that fact and shall use all reasonable endeavours to recover damages for loss over the period for which salary has been or will be paid to him by the Company and he shall notify the Board of any claim compromise settlement or judgement made or awarded in connection with it and shall give to the Board all particulars the Board may reasonably require and shall if required by the Board refund to the Company that part of any damages recovered relating to loss of earnings for the period of the Incapacity as the Board may reasonably determine provided that the amount to be refunded shall not exceed the amount of damages or compensation recovered by him less any costs borne by the Executive Director in connection with the recovery of such damages or compensation and shall not exceed the total remuneration paid to him by way of salary in respect of the period of the Incapacity.

7

12. RESTRICTIONS DURING EMPLOYMENT

12.1 During the continuance of his employment under this Agreement the Executive Director shall unless prevented by Incapacity devote all of his time, attention and skill as are necessary to properly perform his duties under this Agreement and shall not without the prior written consent of the Board:

(a) engage in any other business; or

(b) be concerned or interested in any other business of a similar nature to or competitive with that carried on by the Company or any of its Associated Companies

provided that nothing in this paragraph shall preclude the Executive Director from holding or being otherwise interested in any shares or other securities of any company which are for the time being quoted on any recognised investment exchange (as defined by section 207(1) Financial Services Act 1986) (or in respect of which dealing takes place in the Alternative Investment Market) provided such interest does not exceed 5% of the issued share capital of such company.

13. INVENTIONS

13.1 The parties foresee that the Executive Director may make, discover or create Intellectual Property in the course of his duties under this Agreement and agree that in this respect the Executive Director has a special obligation to further the interests of the Company.

13.2 In accordance with the provisions of the Patents Act 1977, the Registered Designs Act 1949 and the Copyright, Designs and Patents Act 1988, if at any time in the course of his employment under this Agreement the Executive Director makes or discovers or participates in the making or discovery of any Intellectual Property relating to or capable of being used in the business for the time being carried on by the Company or any of its Subsidiaries or Associated Companies full details of the Intellectual Property shall immediately be communicated by him to the Company and shall be the absolute property of the Company. At the request and expense of the Company the Executive Director shall give and supply all such information, data, drawings and assistance as may be requisite to enable the Company to exploit the Intellectual Property to the best advantage and shall execute all documents and do all things which may be necessary or desirable for obtaining patent or other protection for the Intellectual Property in such parts of the world as may be specified by the Company and for vesting the same in the Company or as it may direct.

8

13.3 The Executive Director irrevocably appoints the Company to be his attorney in his name and on his behalf to sign execute or do any such instrument or thing and generally to use his name for the purpose of giving to the Company (or its nominee) the full benefit of the provisions of this paragraph 13 and in favour of any third party a certificate in writing signed by any director or the secretary of the Company that any instrument or act falls within the authority conferred by this paragraph 13 shall be conclusive evidence that such is the case.

13.4 If the Executive Director makes or discovers or participates in the making or discovery of any Intellectual Property during his employment under this Agreement but which is not the property of the Company under paragraph 13.2 the Company shall subject only to the provisions of the Patents Act 1977 have the right to acquire for itself or its nominee the Executive Director’s rights in the Intellectual Property within 3 months after disclosure pursuant to paragraph 13.2 on fair and reasonable terms to be agreed or settled by a single arbiter.

13.5 The Executive Director waives all of his Moral Rights as defined in the Copyright, Designs and Patents Act 1988 in respect of any acts of the Company or any acts of third parties done with the Company’s authority in relation to the Intellectual Property which is the property of the Company by virtue of paragraph 13.2 hereof.

13.6 Rights and obligations under this paragraph 13 shall continue in force after termination of this Agreement in respect of Intellectual Property made or discovered during the Executive Director’s employment under this Agreement and shall be binding upon his representatives.

14. CONFIDENTIALITY

14.1 The Executive Director is aware that in the course of employment under this Agreement he will have access to and be entrusted with information in respect of the business and financing of the Company and its dealings transactions and affairs and likewise in relation to its Associated Companies all of which information is or may be confidential.

14.2 The Executive Director shall not (except in the proper course of his duties or except with the prior written consent of the Board or unless ordered by a court of competent jurisdiction) at any time during or after the period of his employment under this Agreement disclose or communicate or divulge to any person whatever or otherwise make use whether for his own benefit or for the benefit of any person other than the Company or an Associated Company of any confidential information which may come to his knowledge in the course of his employment and the Executive Director shall during the continuance of his employment use his best endeavours to prevent the unauthorised publication or misuse of any confidential information provided that such restrictions shall cease to apply to any confidential information which may enter the public domain other than through the default of the Executive Director.

9

14.3 All notes and memoranda of any confidential information concerning the business of the Company and the Associated Companies or any of its or their suppliers agents distributors or customers which shall have been acquired received or made by the Executive Director during the course of his employment shall be the property of the Company and shall be surrendered by the Executive Director to someone duly authorised in that behalf at the termination of his employment or at the request of the Board at any time during the course of his employment.

14.4 For the avoidance of doubt, and without prejudice to the generality of the foregoing, the following is a non-exhaustive list of matters which in relation to the Company and any Associated Company are considered confidential and must be treated as such by the Executive Director:-

(a) any trade secrets of the Company or any Associated Company; and

(b) any information in respect of which the Company or any Associated Company is bound by an obligation of confidence to any third party; and

(c) unpublished and price-sensitive information relating to securities listed on any recognised Stock Exchange; and

(d) customer lists and details of contracts with or requirements of customers of the Company or any associated company; and

(e) marketing strategies, plans, customer lists, pricing strategies, discount rates and sales figures of the Company or any associated company, and

(f) lists of suppliers and rates of charge of the Company or any Associated Company; and

(g) any invention, technical data, know-how or other manufacturing or trade secret of the Company and/or of any Associated Company; and

(h) information concerning any litigation proposed, in progress or settled; and

(i) any information relating to the Company or any associated company made available to the Executive Director which is identified to the Executive Director as being of a confidential nature.

15. TERMINATION OF DIRECTORSHIP

Subject to the provisions of paragraph 18, this Agreement shall terminate automatically in the event of the Executive Director ceasing to be a director of the Board and in that event the Executive Director shall have no claim for damages against the Company unless the Company is not otherwise entitled to determine his employment under this Agreement.

10

16. SUMMARY TERMINATION OF EMPLOYMENT

The employment of the Executive Director may be terminated by the Company without notice or payment in lieu of notice:

16.1 if the Executive Director is guilty of any gross default or gross misconduct in connection with or affecting the business of the Company or any Subsidiary or Associated Company to which he is required by this Agreement to render services; or

16.2 in the event of any serious or repeated breach or non-observance by the Executive Director of any of the stipulations contained in this Agreement; or

16.3 if the Executive Director has an interim receiving order made against him, becomes bankrupt or makes any composition or enters into any deed of arrangement with his creditors; or

16.4 if the Executive Director is convicted of any arrestable criminal offence (other than an offence under road traffic legislation for which a fine or non-custodial penalty is imposed); or

16.5 if the Executive Director is disqualified from holding office in another company in which he is concerned or interested because of wrongful trading under the Insolvency Act 1986; or

16.6 if the Executive Director is convicted of an offence under the Companies Securities (Insider Dealing) Act 1985 or under any other present or future statutory enactment or regulations relating to insider dealings; or

16.7 if the Executive Director is guilty of conduct which brings or is likely to bring himself, the Company or any Associated Company into disrepute; or

16.8 if the Executive Director is, in the opinion of the Board, incapable by reasons of mental disorder of discharging his duties; or

16.9 if the Executive Director resigns as a director of the Company otherwise than at the request of the Company.

17. RESIGNATION FROM DIRECTORSHIPS UPON TERMINATION

Upon the termination by whatever means of this Agreement:

17.1 the Executive Director shall at the request of the Company immediately resign from office as a director of the Board and from such offices held by him in Associated Companies as may be so requested without claim for compensation for such loss of office (but without prejudice to any other claim for compensation which the Executive Director may have under this

11

Agreement) and in the event of his failure so to do the Company is hereby irrevocably authorised to appoint some person in his name and on his behalf to sign and deliver such resignation or resignations to the Company and to each of the Associated Companies of which the Executive Director is at the material time a director or other officer; and

17.2 the Executive Director shall not without the consent of the Company at any time thereafter represent himself still to be connected with the Company or any of the Associated Companies; and

17.3 the Executive Director shall forthwith deliver to the Company all documents (including correspondence lists notes memoranda plans reports papers drawings charts and other materials of whatsoever nature whether original or copies) films computer hardware computer software tapes models photographs made or compiled by or received by the Executive Director during the course of his employment with the Company and concerning the business finances or affairs of the Company any Associated Company or any supplier or customer of such company and shall not retain any copies; and

17.4 the Executive Director shall forthwith return to the Company all property of the Company and of any Associated Company (including any monies which the Executive Director may hold to the Company of any Associated Company’s account) in the possession or under the control of the Executive Director.

18. RECONSTRUCTION OR AMALGAMATION

If the employment of the Executive Director under this Agreement is terminated by reason of the liquidation of the Company for the purpose of reconstruction or amalgamation and the Executive Director is offered employment with any concern or undertaking resulting from the reconstruction or amalgamation on terms and conditions not less favourable than the terms of this Agreement then the Executive Director shall have no claim against the Company in respect of the termination of his employment under this Agreement.

19. EXECUTIVE DIRECTOR’S COVENANTS

19.1 The Executive Director acknowledges that during the course of his employment with the Company he will receive and have access to confidential information of the Company (and its Associated Companies) and he will also receive and have access to detailed client/customer lists and information relating to the operations and business requirements to those clients/customers and accordingly he is willing to enter into the covenants described below in order to provide the Company and its associated companies with what he considers to be reasonable protection for those interests.

19.2 The Executive Director covenants with the Company that he will not for the period of one year after ceasing to be employed under this Agreement without the prior written consent of the Board:

19.2.1 be concerned in connection with the carrying on of any business in competition with the business of generating electricity and/or of any nuclear business carried on by the Company on his own behalf or on behalf of any person firm or company directly or indirectly; or

12

19.2.2 seek to produce orders from or do business with any person firm or company with whom he shall have done business on behalf of the Company within one year period immediately preceding such cesser; or

19.2.3 solicit or entice away or endeavour to solicit or entice away from the Company or any Associated Company any person who has at any time during the one year period immediately preceding such cesser been employed or engaged by the Company or any Associated Companies in a senior capacity and with whom the Executive Director had dealings in the course of his employment during the said one year period.

provided that nothing in this paragraph 19.2 shall prohibit the seeking or procuring of orders or the doing of business not relating or not similar to the business or businesses described above.

19.3 The Executive Director covenants with the Company that he will not within England and/or Wales and/or Scotland and/or The Province of Ontario in Canada and/or that area of the USA covered by the Philadelphia-New Jersey-Maryland Interconnection LLC (PJM) and the Mid-America Interconnected Network (MAIN) electricity markets for the period of one year after ceasing to be employed under this Agreement without the prior written consent of the Board either alone or jointly with or as manager, agent, consultant or employee of any person firm or company (or in any other capacity including without limitation as a shareholder) directly or indirectly carry on or be engaged in any activity or business which shall be in competition with the business of electricity generating and/or of any nuclear business carried on by the Company.

19.4 The covenants contained in paragraphs 19.2.1, 19.2.2, 19.2.3 and 19.3 are intended to be separate and severable and enforceable as such.

19.5 The Executive Director hereby undertakes that he will immediately notify the Company of any offer of employment or any other engagement or arrangement made to the Executive Director by any third party or parties which may give rise to a breach of one or more of the covenants contained in Paragraphs 19.2.1, 19.2.2, 19.2.3 or 19.3 (“Notifiable Offer”) and further undertakes that on receipt of any Notifiable Offer he will immediately inform the third party or parties responsible for that offer of the existence of those covenants.

20. NOTICES

20.1 Any notice required or permitted to be given under this Agreement shall be given in writing delivered personally or sent by first class post pre-paid recorded or registered delivery (air mail if overseas) or by fax to the party due to receive such notice at,

13

in the case of the Company, its registered office from time to time and, in the case of the Executive Director his address as set out in this Agreement (or such address as he may have notified to the Company in accordance with this paragraph).

20.2 Any notice delivered personally shall be deemed to be received when delivered to the address provided in paragraph 20.1 and any notice sent by pre-paid recorded or registered delivery post shall be deemed (in the absence of evidence of earlier receipt) to be received 2 days after posting (6 days in sent air mail) and in proving the time of despatch it shall be sufficient to show that the envelope containing such notice was properly addressed, stamped and posted. A notice sent by fax shall be deemed to have been received on receipt by the sender of the correct “transmit receipt”.

21. DISCIPLINARY AND GRIEVANCE PROCEDURE

21.1 For statutory purposes there is no formal disciplinary procedure in relation to the Executive Director’s employment. The Executive Director shall be expected to maintain the highest standards of integrity and behaviour. All disciplinary matters for Executive Directors are dealt with by the Remuneration Committee.

21.2 For statutory purposes there is no formal grievance procedure. The Executive Director should apply to the Remuneration Committee to seek redress for any grievance.

21.3 There is a right of appeal to the Board whose decision shall be final.

22. STATUTORY INFORMATION

For the avoidance of doubt this Agreement also constitutes the statement of particulars of terms and conditions of employment which is required to be given to the Executive Director by Section 1 Employment Protection (Consolidation) Act 1978 as amended.

23. GOVERNING LAW AND JURISDICTION

23.1 This Agreement is governed by, and shall be construed in accordance with, the Law of Scotland.

23.2 Each of the Executive Director and the Company irrevocably prorogates the exclusive jurisdiction of the courts of Scotland to settle any dispute arising from or connected with this Agreement.

14

23.2 The Executive Director and the Company agree that the courts of Scotland are the most appropriate and convenient courts to settle any dispute arising from or connected with this Service Contract, and accordingly, will not argue to the contrary.

24. MISCELLANEOUS

24.1 In this Agreement unless the context otherwise requires the following expressions shall have the following meanings:

“Associated Company”	a subsidiary and any other company which is for the time being a holding company (as defined by the Companies Acts 1985 and 1989) or the Company or another subsidiary of any such holding company;
“Board”	the board of directors for the time being of the Company;
“Intellectual Property”	patents, registered and unregistered designs, copyright and all other intellectual property protection, including trademarks, wherever enforceable;
“Subsidiaries”	those companies which are subsidiaries for the purposes of section 736 of the Companies Act, 1985 as amended.

24.2 This Agreement contains the entire understanding between the parties and supersedes all previous agreements and arrangements (if any) relating to the employment of the Executive Director by the Company (which shall be deemed to have been terminated by mutual consent).

24.3 The expiry or determination of this Agreement howsoever arising shall not affect such of the provisions hereof as are expressed to operate or have effect after the termination of this Agreement and shall be without prejudice to any right of

15

action already accrued to either party in respect of any breach of this Agreement by the other party. For the avoidance of doubt the paragraphs of this Agreement that operate after the termination of this Agreement are 13, 14, 15, 17, 18, 19, 20, 23 and 24.

IN WITNESS whereof this Agreement comprising this and the preceding 15 pages as follows:-

David Gilchrist	Witness
	Name
	Address

Date                      2001

For and on behalf of British Energy PLC

Director	Witness
	Name
	Address

Date                      2001

16

EX-15.8

Exhibit 15.08

1 DECEMBER 2003

BRITISH ENERGY PLC

- and -

MARTIN GATTO

SERVICE AGREEMENT

FOR EXECUTIVE DIRECTOR

CONTENTS

1.	COMMENCEMENT AND TERM OF EMPLOYMENT	3
2.	DUTIES	3
3.	OFFICE OF DIRECTOR	5
4.	REMUNERATION	5
5.	EXPENSES	6
6.	HOLIDAYS	6
7.	RESTRICTIONS DURING EMPLOYMENT	7
8.	INVENTIONS	7
9.	CONFIDENTIALITY	9
10.	SUMMARY TERMINATION OF EMPLOYMENT	10
11.	RESIGNATION FROM DIRECTORSHIPS UPON TERMINATION	12
12.	RECONSTRUCTION OR AMALGAMATION	13
13.	EXECUTIVE DIRECTOR’S COVENANTS	13
14.	NOTICES	15
15.	DISCIPLINARY AND GRIEVANCE PROCEDURE	15
16.	STATUTORY INFORMATION	16
17.	MISCELLANEOUS	16

2

T H I S    A G R E E M E N T is made on the FIRST DAY OF DECEMBER 2003

BETWEEN:

(1) BRITISH ENERGY PLC whose registered office is at 3 Redwood Crescent, East Kilbride, G74 5PR (the “Company”); and

(2) Martin Gatto whose address is, 11 Cavendish Lodge, Cavendish Road, Bath BA1 2UD (the “Executive Director”).

WHEREAS it is agreed that the Company shall employ the Executive Director and the Executive Director shall serve the Company as Executive Director of the Company on the following terms and subject to the following conditions:

1. COMMENCEMENT AND TERM OF EMPLOYMENT

1.1 Subject to paragraph 1.2 below the employment of the Executive Director (subject to termination as provided below) shall be for a period of 6 months commencing on 8 December 2003.

1.2 The contract will either terminate on 31 May 2003 or by either party giving the other 6 weeks notice in writing.

1.3 The Executive Director’s continuous period of employment for statutory purposes commenced on 1 December 2003.

2. DUTIES

2.1 The Executive Director shall during his employment under this Agreement:

2.1.1 serve the Company and its subsidiaries to the best of his ability in the capacity of Finance Director or in such other capacity as the Board may from time to time determine; and

3

2.1.2 perform the duties and exercise the powers which the Board may from time to time properly assign to him; and

2.1.3 in the absence of any specific directions from the board (but subject always to the memorandum and articles of association of the Company) exercises general control and management of British Energy plc financial matters.

2.1.4 do all in his power to promote, develop and extend the business of the Company and of its Subsidiaries and at all times and in all respects conform to and comply with the proper and reasonable directions and regulations of the Board (but subject always to the memorandum and articles of association of the Company); and

2.1.5 at all times keep the Board promptly and fully informed (in writing if so requested) of his conduct of the business, finances and affairs of the Company and shall provide such explanations and supply all information in his possession as the Board may require in connection with such conduct of the business, finances or affairs of the Company; and

2.1.6 if and so long as the Board so directs perform and exercise the said duties and powers on behalf of any Associated Company and act as a director or other officer of any Associated Company.

2.2 The Executive Director shall carry out his duties and exercise his powers jointly with any other director appointed by the Board to act jointly with him and the Board may at any time require the Executive Director to cease performing or exercising the said or any duties or powers.

2.3 The Executive Director shall be based at the Company’s offices in London and Scotland or in any other place within the United Kingdom which the Board may require for the proper performance and exercise of his duties and powers and he may be required to travel on the business of the Company or any of its Associated Companies and/or Subsidiaries anywhere within the world.

4

2.4 The Company shall not be under any obligation to provide the Executive Director with any work and the Company may at any time during the continuance of his employment without notice, suspend the Executive Director and/or exclude him from all or any premises of the Company or any Associated Company.

2.5 The Executive Director shall at any time if directed to do so by the Board undergo a medical examination by a medical practitioner of the Company’s choice and at its expense. The Executive Director hereby authorises (such authorisation to be deemed to include the consent of the Executive Director for the purposes of Section 3 of the Access to Medical Reports Act 1988) such medical practitioner to disclose the results of such examination (whether in a medical report or otherwise) to the Company, subject to the Executive Director being informed by the Company of such request prior to it being made.

3. OFFICE OF DIRECTOR

During his employment under this Agreement the Executive Director shall not:

3.1 voluntarily resign as a director of the Company;

3.2 voluntarily do or refrain from doing any act whereby his office as a director of the Company is or becomes liable to be vacated;

3.3 do anything that would cause him to be disqualified from continuing to act as a director.

4. REMUNERATION

4.1 The remuneration of the Executive Director shall be a fixed salary (which shall accrue from day to day) payable from the Commencement Date and at the rate of £1,500 per working day (normally Monday to Friday) (or such higher rate as may

5

be recommended by the Remuneration Committee of the Board and approved by the Company in General Meeting from time to time) inclusive of any directors’ fees payable to him under the articles of association of the Company and the Associated Companies payable in arrears by equal monthly instalments on the 24th day of every month (or such other day as the Company may from time to time decide).

4.2 In respect of any salary based Board Bonus Scheme introduced and payable by the Company for performance achieved in the year commencing 1 April 2003, or any subsequent year, the Executive Director’s entitlement to any bonus under that scheme will be calculated on the basis of 60% of notional base salary equivalent to £224,000 per annum pro-rata to the period worked.

5. EXPENSES

The Company shall by way of reimbursement pay or procure to be paid to the Executive Director:

5.1 all reasonable travelling, accommodation, meal and other expenses wholly exclusively and necessarily incurred by him in or about the performance of his duties under this Agreement; and

provided that the Executive Director shall provide the Company with such appropriate evidence (including receipts, invoices, tickets and/or vouchers) of the expenditure in respect of which he claims reimbursement as the Company may reasonably require.

6. HOLIDAYS

6.1 The Executive Director shall (in addition to the usual public and bank holidays) be entitled to 25 days holiday in each holiday year (as specified by the Company) to be taken at a time or times convenient to the Company.

6.2 Where the Executive Director is employed for only part of a holiday year, the entitlement will be pro-rata to the period worked.

6

6.3 The Executive Director shall not be entitled to carry forward any annual holiday entitlement foregone by him for any reason during the holiday year in which it accrued without the prior written consent of the Board.

7. RESTRICTIONS DURING EMPLOYMENT

7.1 During the continuance of his employment under this Agreement the Executive Director shall unless prevented by Incapacity devote all of his time, attention and skill as are necessary to properly reform his duties to the business of the Company and shall not within the prior written consent of the Board:

(a) engage in any other business; or

(b) be concerned or interested in any other business of a similar nature to or competitive with that carried on by the Company or any of its Associated Companies

provided that nothing in this paragraph shall preclude the Executive Director from holding or being otherwise interested in any shares or other securities of any company which are for the time being quoted on any recognised investment exchange (as defined by section 207(1) Financial Services Act 1986) (or in respect of which dealing takes place in the Alternative Investment Market).

8. INVENTIONS

8.1 The parties foresee that the Executive Director may make, discover or create Intellectual Property in the course of his duties under this Agreement and agree that in this respect the Executive Director has a special obligation to further the interests of the Company.

8.2 In accordance with the provisions of the Patents Act 1977, the Registered Designs Act 1949 and the Copyright, Designs and Patents Act 1988, if at any time in the course of his employment under this Agreement the Executive Director makes or discovers or participates in the making or discovery of any Intellectual Property relating to or capable of being used in the

7

business for the time being carried on by the Company or any of its Subsidiaries or Associated Companies full details of the Intellectual Property shall immediately be communicated by him to the Company and shall be the absolute property of the Company. At the request and expense of the Company the Executive Director shall give and supply all such information, data, drawings and assistance as may be requisite to enable the Company to exploit the Intellectual Property to the best advantage and shall execute all documents and do all things which may be necessary or desirable for obtaining patent or other protection for the Intellectual Property in such parts of the world as may be specified by the Company and for vesting the same in the Company or as it may direct.

8.3 The Executive Director irrevocably appoints the Company to be his attorney in his name and on his behalf to sign execute or do any such instrument or thing and generally to use his name for the purpose of giving to the Company (or its nominee) the full benefit of the provisions of this paragraph 8 and in favour of any third party a certificate in writing signed by any director or the secretary of the Company that any instrument or act falls within the authority conferred by this paragraph 14 shall be conclusive evidence that such is the case.

8.4 If the Executive Director makes or discovers or participates in the making or discovery of any Intellectual Property during his employment under this Agreement but which is not the property of the Company under paragraph 8.2 the Company shall subject only to the provisions of the Patents Act 1977 have the right to acquire for itself or its nominee the Executive Director’s rights in the Intellectual Property within 3 months after disclosure pursuant to paragraph 8.2 on fair and reasonable terms to be agreed or settled by a single arbitrator.

8.5 The Executive Director waives all of his Moral Rights as defined in the Copyright, Designs and Patents Act 1988 in respect of any acts of the Company or any acts of third parties done with the Company’s authority in relation to the Intellectual Property which is the property of the Company by virtue of paragraph 8.2 hereof.

8

8.6 Rights and obligations under this paragraph 8 shall continue in force after termination of this Agreement in respect of Intellectual Property made or discovered during the Executive Director’s employment under this Agreement and shall be binding upon his representatives.

9. CONFIDENTIALITY

9.1 The Executive Director is aware that in the course of employment under this Agreement he will have access to and be entrusted with information in respect of the business and financing of the Company and its dealings transactions and affairs and likewise in relation to its Associated Companies all of which information is or may be confidential.

9.2 The Executive Director shall not (except in the proper course of his duties or except with the prior written consent of the Board or unless ordered by a court of competent jurisdiction) at any time during or after the period of his employment under this Agreement disclose or communicate or divulge to any person whatever or otherwise make use whether for his own benefit or for the benefit of any person other than the Company or an Associated Company of any confidential information which may come to his knowledge in the course of his employment and the Executive Director shall during the continuance of his employment use his best endeavours to prevent the unauthorised publication or misuse of any confidential information provided that such restrictions shall cease to apply to any confidential information which may enter the public domain other than through the default of the Executive Director.

9.3 All notes and memoranda of any confidential information concerning the business of the Company and the Associated Companies or any of its or their suppliers agents distributors or customers which shall have been acquired received or made by the Executive Director during the course of his employment shall be the property of the Company and shall be surrendered by the Executive Director to someone duly authorised in that behalf at the termination of his employment or at the request of the Board at any time during the course of his employment.

9

9.4 For the avoidance of doubt, and without prejudice to the generality of the foregoing, the following is a non-exhaustive list of matters which in relation to the Company and any Associated Company are considered confidential and must be treated as such by the Executive Director:-

(a) any trade secrets of the Company or any Associated Company; and

(b) any information in respect of which the Company or any Associated Company is bound by an obligation of confidence to any third party; and

(c) unpublished and price-sensitive information relating to securities listed on any recognised Stock Exchange; and

(d) customer lists and details of contacts with or requirements of customers; and

(e) marketing strategies, plans, customer lists, pricing strategies, discount rates and sales figures, and

(f) lists of suppliers and rates of charge; and

(g) any invention, technical data, know-how or other manufacturing or trade secret of the Company and/or of any Associated Company; and

(h) information concerning any litigation proposed, in progress or settled; and

(i) any information made available to the Executive Director which is identified to the Executive Director as being of a confidential nature.

10. SUMMARY TERMINATION OF EMPLOYMENT

The employment of the Executive Director may be terminated by the Company without notice or payment in lieu of notice:

10.1 if the Executive Director is guilty of any gross default or gross misconduct in connection with or affecting the business of the Company or any Subsidiary or Associated Company to which he is required by this Agreement to render services; or

10

10.2 in the event of any serious or repeated breach or non-observance by the Executive Director of any of the stipulations contained in this Agreement; or

10.3 if the Executive Director has an interim receiving order made against him, becomes bankrupt or makes any composition or enters into any deed of arrangement with his creditors; or

10.4 if the Executive Director is convicted of any arrestable criminal offence (other than an offence under road traffic legislation in the United Kingdom or elsewhere for which a fine or non-custodial penalty is imposed); or

10.5 if the Executive Director is disqualified from holding office in another company in which he is concerned or interested because of wrongful trading under the Insolvency Act 1986; or

10.6 if the Executive Director is convicted of an offence under the Companies Securities (Insider Dealing) Act 1985 or under any other present or future statutory enactment or regulations relating to insider dealings; or

10.7 if the Executive Director is guilty of conduct which brings or is likely to bring himself, the Company or any Associated Company into disrepute; or

10.8 if the Executive Director is, in the opinion of the Board, incapable by reasons of mental disorder of discharging his duties; or

10.9 if the Executive Director resigns as a director of the Company otherwise than at the request of the Company.

11

11. RESIGNATION FROM DIRECTORSHIPS UPON TERMINATION

Upon the termination by whatever means of this Agreement:

11.1 the Executive Director shall at the request of the Company immediately resign from office as a director of the Company and from such offices held by him in Associated Companies as may be so requested without claim for compensation for such loss of office (but without prejudice to any other claim for compensation which the Executive Director may have under this Agreement) and in the event of his failure so to do the Company is hereby irrevocably authorised to appoint some person in his name and on his behalf to sign and deliver such resignation or resignations to the Company and to each of the Associated Companies of which the Executive Director is at the material time a director or other officer; and

11.2 the Executive Director shall not without the consent of the Company at any time thereafter represent himself still to be connected with the Company or any of the Associated Companies; and

11.3 the Executive Director shall forthwith deliver to the Company all documents (including correspondence lists notes memoranda plans reports papers drawings charts and other materials of whatsoever nature whether original or copies) films computer hardware computer software tapes models photographs made or compiled by or received by the Executive Director during the course of his employment with the Company and concerning the business finances or affairs of the Company any Associated Company or any supplier or customer of such company and shall not retain any copies; and

11.4 the Executive Director shall forthwith return to the Company all property of the Company and of any Associated Company (including any monies which the Executive Director may hold to the Company of any Associated Company’s account) in the possession or under the control of the Executive Director.

12

12. RECONSTRUCTION OR AMALGAMATION

If the employment of the Executive Director under this Agreement is terminated by reason of the liquidation of the Company for the purpose of reconstruction or amalgamation and the Executive Director is offered employment with any concern or undertaking resulting from the reconstruction or amalgamation on terms and conditions not less favourable than the terms of this Agreement then the Executive Director shall have no claim against the Company in respect of the termination of his employment under this Agreement.

13. EXECUTIVE DIRECTOR’S COVENANTS

13.1 The Executive Director acknowledges that during the course of his employment with the Company he will receive and have access to confidential information of the Company (and its Associated Companies) and he will also receive and have access to detailed client/customer lists and information relating to the operations and business requirements to those clients/customers and accordingly he is willing to enter into the covenants described below in order to provide the Company and its associated companies with what he considers to be reasonable protection for those interests.

13.2 The Executive Director covenants with the Company that he will not for the period of 6 months after ceasing to be employed under this Agreement without the prior written consent of the Board in connection with the carrying on of any business in competition with the business of generating electricity and/or of any nuclear business carried on by the Company on his own behalf or on behalf of any person firm or company directly or indirectly:

13.2.1 seek to produce orders from or do business with any person firm or Company with whom he shall have done business on behalf of the Company within the 6 month period immediately preceding ceasing to be employed.

13

13.2.2 solicit or entice away or endeavour to solicit or entice away from the Company or any Associated Company any person who has at any time during the 6 month period immediately preceding ceasing to be employed been employed or engaged by the Company or any Associated Companies in a senior capacity and with whom the Executive Director had dealings in the course of his employment during the said 6 month period.

provided that nothing in this paragraph 13.2 shall prohibit the seeking or procuring of orders or the doing of business not relating or not similar to the business or businesses described above.

13.3 The Executive Director covenants with the Company that he will not within England and/or Wales and/or Scotland for the period of 6 months after ceasing to be employed under this Agreement without the prior written consent of the Board either alone or jointly with or as manager, agent, consultant or employee of any person firm or company (or in any other capacity including without limitation as a shareholder) directly or indirectly carry on or be engaged in any activity or business which shall be in competition with the business of electricity generating and/or of any nuclear business carried on by the Company.

13.4 The covenants contained in paragraphs 13.2.1, 13.2.2 and 13.3 are intended to be separate and severable and enforceable as such.

13.5 The Executive Director hereby undertakes that he will immediately notify the Company of any offer of employment or any other engagement or arrangement made to the Executive Director by any third party or parties which may give rise to a breach of one or more of the covenants contained in Paragraphs 13.2.1, 13.2.2 and 13.3 (“Notifiable Offer”) and further undertakes that on receipt of any Notifiable Offer he will immediately inform the third party or parties responsible for that offer of the existence of those covenants.

14

14. NOTICES

14.1 Any notice required or permitted to be given under this Agreement shall be given in writing delivered personally or sent by first class post pre-paid recorded or registered delivery (air mail if overseas) or by fax to the party due to receive such notice at, in the case of the Company, its registered office from time to time and, in the case of the Executive Director his address as set out in this Agreement (or such address as he may have notified to the Company in accordance with this paragraph).

14.2 Any notice delivered personally shall be deemed to be received when delivered to the address provided in paragraph 14.1 and any notice sent by pre-paid recorded or registered delivery post shall be deemed (in the absence of evidence of earlier receipt) to be received 2 days after posting (6 days in sent air mail) and in proving the time of despatch it shall be sufficient to show that the envelope containing such notice was properly addressed, stamped and posted. A notice sent by fax shall be deemed to have been received on receipt by the sender of the successful transmission form.

15. DISCIPLINARY AND GRIEVANCE PROCEDURE

15.1 For statutory purposes there is no formal disciplinary procedure in relation to the Executive Director’s employment. The Executive Director shall be expected to maintain the highest standards of integrity and behaviour. All disciplinary matters for Executive Directors are dealt with by the Board.

15.2 For statutory purposes there is no formal grievance procedure. The Executive Director should apply to the Board to seek redress for any grievance.

15.3 There is a right of appeal to the Board whose decision shall be final.

15

16. STATUTORY INFORMATION

For the avoidance of doubt this Agreement also constitutes the statement of particulars of terms and conditions of employment which is required to be given to the Executive Director by Section 1 Employment Protection (Consolidation) Act 1978 as amended.

17. MISCELLANEOUS

17.1 In this Agreement unless the context otherwise requires the following expressions shall have the following meanings:

“Associated Company”	a Subsidiary and any other company which is for the time being a holding company (as defined by the Companies Acts 1985 and 1989) or the Company or another subsidiary of any such holding company;
“Board”	the Board of Directors for the time being of the Company.

by and shall be construed in accordance with the laws of England;

17.2 The parties to this Agreement submit to the exclusive jurisdiction of the English courts.

17.3 This Agreement contains the entire understanding between the parties and supersedes all previous agreements and arrangements (if any) relating to the employment of the Executive Director by the Company (which shall be deemed to have been terminated by mutual consent).

16

17.4 The expiry or determination of this Agreement howsoever arising shall not affect such of the provisions hereof as are expressed to operate or have effect after the termination of this Agreement and shall be without prejudice to any right of action already accrued to either party in respect of any breach of this Agreement by the other party. For the avoidance of doubt the clauses of this Agreement that operate after the termination of this Agreement are 7, 8, 9, 11, 12, 13 and 14.

IN WITNESS whereof this Agreement has been duly executed the day and year first above written

Martin Gatto	Witness
	Name
	Address

For and on behalf of British Energy PLC

Director	Witness
	Date