British Energy takes business rate fight to EC

British Energy disclosed yesterday that it has taken the UK Government to the European Commission in protest over the local rates it has to pay on its nuclear stations.

The nuclear generator said these were almost 50 per cent more than the rates paid by the operators of gas and coal-fired stations. If successful, the appeal could add £25m a year to British Energy's profits.

Robin Jeffrey, British Energy's executive chairman, said that without a favourable ruling, the company's aim of achieving £150m in cost savings by the end of this year would be put back by 12 months.

News of the appeal, lodged with the competition authorities in Brussels two months ago, came as British Energy plunged to a £493m loss last year after heavy one-off charges. Excluding exceptional charges to cover loss-making energy contracts the company has entered into and the write-down in the value of its Eggborough coal-fired station, profits rose by £32m to £42m.

Mr Jeffrey said this level of profitability was unacceptable for a business with £2bn of turnover and insufficient to enable it to even consider building a new generation of nuclear power stations.

The company's UK losses rose by £37m to £41m, mainly due to a further fall in electricity prices and higher fuel costs. But these were offset by a £66m increase in profits from British Energy's North American business.

Mr Jeffrey said he remained hopeful that the Government's continuing review of Britain's energy needs would eventually pave the way for the building of new nuclear stations to replace its ageing Magnox and AGR reactors.

A report in March into energy policy by the Cabinet Office's performance and innovation unit (PIU) left the question unanswered. But earlier this week the Government re-opened the issue by launching a consultation paper questioning whether Britain could meet its Kyoto targets to cut carbon emissions without new nuclear stations. Mr Jeffrey said: "I read into this that the Government was not too happy with the PIU report and wants a second bite at the cherry."

British Energy is still without a chief executive following the ousting of Peter Hollins a year ago. Mr Jeffrey said Executive Search, a firm of headhunters, had been hired and an appointment would be made this year.

Despite the heavy bottom line losses, British Energy said it would maintain the dividend, at a cost of £50m. The final dividend is 5.3p, making for an unchanged total for the year of 8p.

Mr Jeffrey said talks were going on with British Nuclear Fuels over reprocessing contracts, new nuclear build and the operation of BNFL's Magnox reactors. But he declined to elaborate on whether British Energy intended to take over the stations or assume responsibility for managing them.