British Energy hit as output levels are cut:
British Energy's shares fell more than 8 per cent yesterday, as the City digested news that damaged nuclear reactors will take longer than expected to repair and that its output levels are to be cut as a result. The UK's largest electricity producer warned repairs to a unit at its Hunterston nuclear power plant in Ayrshire would take longer than previously thought, meaning additional loses equivalent to around 3 per cent of the company's annual production. British Energy produces almost 20 per cent of the total UK electricity output. The company said it will also bring forward a planned inspection at Hinkley Point in Somerset by several weeks, a measure it insists is simply prudence, with the damage to Hunterston believed to be specific to one unit. Investors took shock at the news, with predictions of heavy impact on its bottom line. Analysts at UBS warned the "outages" alone could see after tax-profits fall by around £60 million, even before any possible capital costs - with the potential that the units may need modification - are taken into account. There were also suggestions the government - which owns around two-thirds of British Energy after saving it from collapse - may shelve its plans to sell down its holding. The warning was first sent to the stock exchange after trading closed on Monday, meaning British Energy topped the FTSE 100 fallers yesterday. £300m was wiped off its value in the worst day since the company started trading again last January, with shares closing down more than 8 per cent, or 52.5p, to 582.5p. In August, the company warned that reaching its annual target of power output of 63TWh would be "very challenging", suggesting the company would miss its target for a third year in a row. Yesterday British Energy was keeping to the target despite the repairs announcement estimated to add a further 2TWh in unplanned losses, on top of unspecified losses originally anticipated from the closure. "We're sticking to the original," a spokesman said yesterday. "Obviously the top end of the target is going to be even more challenging than it was before." Two of the older plants in the company fleet, the sister stations at Hunterston and Hinkley Point were built in 1976 and are due to be decommissioned in 2011. The pair are the only two owned by British Energy which use the advanced gas reactor (AGR) design, but a spokesman insisted the problem was " not a fleet wide one". Two other units at Hunterston and Hinkley Point are of a similar design. "Once again this should bring home to investors the uncertainty that exists as to the operational performance of the unique AGR design reactors as they age," bankers Citigroup said in a research note. "Sustainable output improvements and life extensions are not foregone conclusions." British Energy would not say exactly how much impact the latest problems were expected to have or when production would be restored. However, chairman Adrian Montague is expected to expand on the existing statement at today's AGM in Edinburgh. He will be greeted at Murrayfield by nuclear protesters and shareholders who have watched their holdings fall by more than 20 per cent in five weeks. 21.9.06