British Energy posted a 49 per cent fall in first-quarter profits yesterday because of reduced production at five of its eight aging nuclear power stations.
Earnings before internet, tax, deductions and amortisation for the three months to June were £129m compared with £253m last year. Overall output from the group's eight nuclear stations was down by 3.5 terawatt hours (TWh) year on year, and operating costs were considerably higher at £39.60 per megawatt hour, compared with £27 in the first quarter of 2007.
But Bill Coley, the chief executive of British Energy, remained upbeat and stressed that the maintenance programmes at the five problem stations are going according to plan, despite a £50m rise in the project costs, taking the total budget to £115m. "We have lower output and higher costs but they are both understandable and we have still delivered financial results in excess of predictions," Mr Coley said.
The key to the above-expectation performance is the price of gas. Despite a major increase in the cost of coal – up from $122 per tonne to $208 per tonne in the past three months alone – the gas price has risen faster, pushing up overall energy prices and absorbing at least some of the impact on wholesalers. With its nuclear output so reduced, British Energy has more than doubled production from 0.8 TWh to 1.9 TWh at its single coal-fired power station, Eggborough, to make the most of the rising prices. "Market conditions have allowed us to run Eggborough at a higher margin," Mr Coley said. "I don't see anything that suggests global energy prices are going to be driven down again dramatically."
British Energy made little reference to a possible takeover deal with EDF beyond confirming that talks are on-going despite the collapse of the proposed £12bn-plus deal this month. The government, which owns 36 per cent of British Energy, is keen to press ahead, as part of its plans for a programme of new-build nuclear power stations in the UK. But other major shareholders objected to EDF's suggested price.
Investors were unsurprised by yesterday's financial results and the share price firmed 1.5p to 706.5p. One City analyst said: "There was not much new news, except for the rise in maintenance programme costs, and even that is easily absorbed by a group on the scale of British Energy. As to the problems with the old nuclear power stations, they would be better blamed on Tony Benn [energy minister in the late 1960s] for stopping the purchase of new US technology. Successive attempts since then have failed to coax more out of the old facilities."Reuse content