British Energy calls on Blair to give nuclear go-ahead next year

Tony Blair must give the go-ahead for a new generation of nuclear power stations by the end of next year if the Government is to meet its climate-change targets and safeguard security of supply, the chief executive of British Energy, Bill Coley, said yesterday.

His comments follow the Prime Minister's announcement at the Labour conference this week of a wide-ranging review of Britain's energy needs which would assess "all options, including civil nuclear power".

Mr Coley said that even if British Energy, the country's main nuclear electricity generator, extended the lives of most of its stations, the contribution from nuclear energy would dip sharply by 2020, making the UK more reliant on imported gas and jeopardising its targets for cutting greenhouse gas emissions.

"It is going to take 10 years from the point when a decision is made to get new nuclear capacity built and operating so the sooner there is a decision, the better," Mr Coley said. Asked whether that meant by 2007 or 2008, he replied: "It really needs to be earlier."

Mr Coley added that it would be possible to build a new generation of nuclear stations without direct financial support from government, because of the increased efficiency and lower cost of new reactor designs. Including financing and construction costs, new nuclear stations were capable of earning a 8-10 per cent rate of return, making them competitive with combined cycle gas-fired plant.

But he indicated the Government would have to provide some kind of guarantees to those financing and developing new stations, such as long-term supply contracts for the baseload power they produce.

He also said the Government would have to address the issue of nuclear waste disposal, for which there is still no agreed policy much less an agreed site where the waste could be stored, although British Nuclear Fuel's Sellafield plant in Cumbria is seen by many as the obvious location.

Mr Coley was speaking as British Energy unveiled a turnaround in its financial performance since last January's capital reconstruction of the business which transferred £4bn in historic liabilities to the taxpayer and wiped out £1bn of debt.

The company returned to the black for the three months to 3 July, recording a £64m pre-tax profit compared with losses the year before. The improvement was due, in large part, to soaring wholesale electricity prices and increased output which lifted British Energy's revenues during the period by 7 per cent to £521m.

The company said it now fixed 85 per cent of its planned output for the year to next March at an average price of 31.8p a unit. However, British Energy cautioned that unplanned shutdowns of its Hartlepool and Heysham 1 reactors, would increase the amount of lost output to 1.5 terrawatt hours.

As a result of the government-backed bail-out, the taxpayer took just under 65 per cent of British Energy's free cash-flow for the period and the company reiterated that it did not intend to resume dividend payments to shareholders until after March, 2007.