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NUCLEAR REPAIRS BLAST BRITISH ENERGY PRICES

Bill Coley

Thursday August 14,2008

By Andrew Johnson

Takeover target British Energy, the UK’s biggest nuclear power group, yesterday said a higher than expected repair bill halved profits for the first quarter to June.

But chief executive Bill Coley said that a sale of the group to French energy giant EDF may yet come off, revealing “advanced discussions” were continuing.

Underlying profits fell from £253million to £129million for the three months to June.

The plunge reflected the continued closure of boilers at two of its eight nuclear power stations, which hit electricity output. British Energy repair bills will rocket from £50million to £115million for this financial year.

A further £280million to £305million will be invested in the ageing nuclear plants and new equipment this year.
The shares rose 1dp to 706dp, partly because the figures were better than the City had expected.

British Energy has maintained talks with EDF in case the French group’s £12billion bid can be resurrected.
The 765p-a-share offer was rejected by M&G and Invesco, holders of 22 per cent of British Energy’s shares. They said the price did not reflect rising electricity prices.

The company is the largest owner of sites for which planning permission for nuclear power stations already exists.
Nuclear power is a key plank of Government policies to cut UK carbon emissions but the plants are in desperate need of an overhaul.

EDF is unlikely to pay more if it will have to spend millions on improvements. It hopes to tempt British Energy investors with a performance-based profit-share deal.

British Gas owner Centrica has a £22.5billion cash-and-shares merger proposal but it will be put forward only if the EDF deal fails completely. Even then, Centrica is likely to bring EDF in as partner in building some of the new nuclear power stations needed.

Analysts said they were encouraged by British Energy’s figures, which showed it was making more on energy being generated and succeeding in locking in today’s high prices on future contracts.