Nuclear power station trouble has fallout for BE

LIVINGSTON-BASED power producer British Energy has warned that the rest of its current trading year would be "significantly impacted" by problems it was having at two of its nuclear power stations.

But it attempted to sweeten the blow with prospects of an additional dividend to shareholders, albeit one that would be determined by the current operating difficulties, as it unveiled the blow.

Costs associated with the problems are expected to run to at least £50 million, with the firm having forked out £30m so far to buy out disrupted contracts.

The group, which owns Torness power station in East Lothian, delivered the warning as it posted a rise in underlying half-year earnings to £511m from £481m a year earlier, helped by higher power prices. Revenue rose 2.3 per cent to £1.39 billion.

Britain's biggest power provider, which delivers around a fifth of the country's electricity needs, has been hit by recent closures at sites at Hartlepool and Heysham 1 in Lancashire, which together are capable of supplying over 1.5m homes.

That followed on from outages and subsequent load restrictions at Hinkley Point B and Hunterston B, in Ayrshire, after the group repaired boiler cracks there.

The company, which manages eight nuclear power stations built since 1965 to a unique UK design, has in recent years struggled with cracks in boilers and other issues linked to ageing.

New problems emerged in recent weeks at its Hartlepool and Heysham 1 plants, where corrosion was discovered in eight concrete and steel plugs in the top of the boilers that surround the reactor cores.

British Energy said inspections continued, but could give little new information. Analysts think closures could run to as much as six months.

Bill Coley, the group's chief executive, said: "The remainder of the financial year will be significantly impacted by the boiler closure unit issue at Hartlepool and Heysham 1."

The company said its realised power price for the half-year was £38.40 pence per megawatt hour (MWh), up eight per cent on the period a year ago.

However, Mr Coley remained upbeat and said: "The first half of the year has shown many operating metrics across the entire fleet at 'best ever' recorded levels.

"That is a tribute to the operational focus of our employees and the investments made in improving the material condition of our plant."

British Energy said it would take account of its recent problems when setting a special dividend in February.

Analyst Edmund Reid at Cazenove said: "Despite the continuing operational problems, the macro outlook for British Energy is increasingly positive."

"UK forward electricity prices have rallied on the back of tightening reserve margins and higher gas prices and new nuclear in the UK is getting ever nearer, in our view."