Money: Energy Shares/ British Energy has the power to remain stable
Political change is not the organisation's main threat, says Ken Welsby
Wednesday 12 June 1996
Last year, Professor Littlechild almost ruined the pounds 3.6bn sale of the Government's remaining holdings in National Power and PowerGen by announcing a review of electricity pricing on the second day of trading, prompting share prices to crash. This time, he has said he will not make any announcements that could affect the share price for three months. Most of its output in England and Wales is sold into the "pool", where prices fluctuate hourly to balance supply and demand.
The threat of a long-term fall in the pool price is more serious. This week the company said that a change in the average price of as little as 0.1p per kilowatt-hour of electricity sold could make a difference of up to pounds 61m to its annual profits.
Although new power stations are being built, older stations are being phased out. Demand, however, is growing slowly: at an annual rate of 1.4 per cent, according to a recent forecast from the National Grid.
So the best bet among the number-crunchers in the City is that pool prices, and therefore British Energy's sale prices, will remain at around current levels.
British Energy's stations all have a longish life ahead of them, so the cost of decommissioning them can be spread over many years. That leaves the issue of safety. Britain has evolved a unique approach to its safety that other countries are following. Before you can operate any nuclear installation, you must obtain a licence from the Nuclear Installations Inspectorate, which. The cost of compliance with the NII's rules is about pounds 20m per station, but for a business with assets counted in billions, and a turnover of pounds 15bn this year, this can hardly be regarded as a burden.
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