Mild winter would discontent British Energy

Published on Sunday 24 July 2005 01:23

BRITISH Energy, the nuclear generator, will this week try to calm market jitters over falling power prices when it reports its maiden annual results since relisting in January following a £1bn debt for equity swap.

Shares in the Livingston-based group lost 3.5% of their value on Friday, with investors concerned at falling wholesale energy prices for winter.

Citigroup says there is a 96% correlation between the price of power and the performance of BE's shares, and predicts power prices may fall further. The price of energy for winter delivery was trading at 53.50 per MWh at close of business on Friday - down 20% from two weeks ago.

On Wednesday, British Energy will announce results for the two-and-a-half months to March 31 and the unaudited annual results for the year to March 31. Citigroup is forecasting pre-tax losses of 15m on revenues of 1.7bn, compared to pre-tax profits of 72m on revenues of 1.5bn last year.

BE, which generates around one fifth of the UK's electricity, is being restructured after almost going into administration in 2003. The company blamed falling power prices for its problems at the time.

Citigroup describes BE as "the most difficult stock to value in our European coverage list" because of the scale of its restructuring and because of the influence that fluctuations in wholesale power prices has on its shares.

Gas and electricity prices have started to come off the boil in recent weeks as fears that the UK is heading for a gas shortage in the winter have faded.

Citigroup predicts BE will make pre-tax profits of 831m on revenues of 2.74bn in 2006.