ABSTRACT
In September 2002, BE ran out of money. It is tempting to assume that financial policy must have been to blame. This is unfair; if a company cannot generate a cash surplus then no financial policy can save it from insolvency. But the board’s decision in 1999 to return £432 million of capital to shareholders contributed critically to putting the company at risk ahead of the collapse in electricity prices that began in 2000. That decision, combined with the £775 million of investment just a few months later, turned a very strong balance sheet into a dangerously stretched one.
