Fresh delays in nuclear repairs hurt British Energy shares

NUCLEAR power giant British Energy has suffered another day of heavy falls after confirming a worst case scenario in the repair of two of its reactors.

The Livingston-based company - Britain's largest electricity producer - yesterday revealed that repairs to its Hunterston B plant in Ayrshire and Hinkley Point B in Gloucestershire would not be completed until at least March, and even then they would only run at 70 per cent capacity.

When it posted interim results last month, the firm said the repairs could be finished as soon as this month, or as late as March.

The firm yesterday said it hoped to bring forward the work intended for the planned outage of both units at Hunterston B in May 2007, which would have a positive impact in its next financial year.

Nevertheless, British Energy shares fell as much as 8.5 per cent yesterday, recovering to close down more than 6 per cent at 538.25p, wiping some 200 million from its market value.

In recent weeks, the stock has been recovering as analysts upgraded British Energy shares which fell as low as 400p when it announced the defects were worse than initially thought in November, when it announced the departure of chief nuclear officer Roy Anderson.

SG analyst Mark Hives, who has advised clients to sell their shares in the company, said British Energy had "repeatedly disappointed". "It's disappointing again and could disappoint in the future," he added.

JP Morgan analyst Ian Mitchell retained an "overweight" rating, with strong prospects because of high electricity costs and the rising price of gas. However, he noted that the announcement was another example of results being at least as bad or worse than the company's guidance.

Last month, the firm said the repair work would cut annual output to between 48 and 56 terawatt hours (TWh) - some 11 to 23 per cent lower than previously anticipated. Yesterday, it confirmed that the drop in production would still fall within its estimates.

British Energy has eight nuclear plants and one coal plant, capable of supplying up to a fifth of the UK's electricity needs.

The company was bailed out by the UK government in 2002 as power prices slumped and the bill to clear up its ageing nuclear reactors drove it to near collapse. Despite buoyant energy prices it has been beset by repeated outages.

The government had announced it would look to sell all or part of its 65 per cent stake in the firm, which it gained after agreeing to shoulder 5 billion in plant decommissioning liabilities in a debt-for-equity deal completed in January 2005.

However, British Energy last month admitted its repair and output problems were likely to affect the timing of any sale.