British Energy slumps after fault found in nuclear reactor

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British Energy's shares went into meltdown yesterday after the UK's largest power producer found a second faulty wire on one of its nuclear reactors.

The discovery of the failure of a reinforcing wire surrounding the cooling unit at its Heysham 1 nuclear reactor comes just two weeks after the same problem was uncovered at its Hartlepool reactors. The four reactors at the two sites, which account for about a quarter of the company's nuclear capacity, are now shut. British Energy's inability to predict when the problems would be resolved sent its shares down 7 per cent on the day, closing at 515p per share.

"This is a complex issue and a timetable for the return to service of these units can only be formed when inspections and a full assessment of the situation have been completed," the company said.

Andrew Wright, an analyst at UBS, suggested the reactors would be out of commission for up to five months. Assuming that they do not begin operating again before the end of the year, British Energy's yearly power output could drop by as much as 10 per cent, which would translate into loss of 12.5p per share this year and next.

Mr Wright said: "The discovery of a second failure means that it is unlikely that these are isolated issues. [British Energy] will need to undertake further inspections, possibly remedial work and the development of a robust safety case."

It is not the first time the company has been laid low by corrosion issues at its sites. British Energy said last month that production had fallen by nearly 4 per cent due to previous reactor problems, and in August the generator reduced its production forecast for the remainder of the year. The company said it would continue its inspections at Heysham and Hartlepool over the next few days.

"This is a legacy issue of the initial construction, identified during the course of baseline inspections," the company said. "While this component of the plant was not originally designed to be inspected, improved technology and innovative inspection techniques have been developed which have now allowed inspection as part of the improvement programme.

The revelations come just a day after prime minister Gordon Brown revealed in the Queen's Speech a package of bills that were widely interpreted as paving the way for a new generation of nuclear reactors to be built in the UK. Even under the most optimistic scenarios however the prospect of new nuclear power flowing into the grid is still a decade away.

British Energy expects to next update investors on the situation when it gives its financial results on 13 November.