The Government's lingering hopes of selling off part of its shareholding in British Energy this year were crushed yesterday when the nuclear power generator admitted to a catalogue of problems at its reactors.
The warning caused British Energy shares to plunge by a quarter and made it inconceivable that the share sale will take place for the foreseeable future.
British Energy, which has eight nuclear stations supplying about a fifth of the country's electricity, said that in addition to cracks in boiler tubes at the Hunterston B and Hinkley B stations, it had discovered a leak in underground pipes at its Hartlepool reactor. The company also said output from the Dungeness B station in Kent would be affected by problems with fuel assembly. Only one of the stations, Torness, is operating at normal output levels.
The profits warning was the third from British Energy in the past three months and prompted a 24 per cent fall in its share price. The stock market capitalisation of the company has fallen by 43 per cent since its peak in August, wiping some £3.5bn from the value of the Government's 65 per cent shareholding.
Ministers had hoped to raise £2.5bn to £3.5bn by cashing in on soaring wholesale electricity prices and selling off between one-third and a half of the Government's remaining shareholding. But the price of power and British Energy shares have both fallen sharply since the summer.
Chris Huhne, the Liberal Democrats' environment spokesman, described the news as "another blow" to attempts to revive nuclear power generation.
Friends of the Earth urged ministers to "wake up to reality" instead of wasting time on plans for new nuclear power stations.
British Energy warned in August that cracks in boiler tubes on one of the reactors at Hunterston B in Scotland could knock 2 TWh from its output this year. In September, it said safety inspections at Hinkley Point to check for a similar problem could reduce output by a further 2 TWh. Yesterday the company revealed that, while not as extensive as the cracks found at Hunterston, the cracking at Hinkley Point was at the "high end" of range.
The company also warned that more extensive underground pipe replacement might be needed at Hartlepool and that the problem might also require work at its sister station, Heysham 1.
British Energy declined to say how much further output wold be reduced by the latest problems. Analysts estimate that the cost of buying electricity on the wholesale markets to meet supply contracts will reduce the company's profits this year by about £200m.
More worrying for the Government is the damage to the company's reputation, which had been recovering after last year's state bail-out. This involved the taxpayer shouldering £5bn of British Energy's liabilities in return for a 65 per cent stake in the business. Along with the sale of the Tote, the British Energy share offer was one of the two key state asset sell-offs announced by Gordon Brown in this year's Budget.Reuse content