BE performance, earnings down
Technical problems at some of its nuclear reactors resulted in lower output and earnings for British Energy during the 2007-2008 financial year, despite overall operational improvements. Speculation continues about the future of the UK nuclear generator, currently up for sale.
Technical problems at some of its nuclear reactors resulted in lower output and earnings for British Energy during the 2007-2008 financial year, despite overall operational improvements. Speculation continues about the future of the UK nuclear generator, currently up for sale.
The company's fleet of 15 advanced gas-cooled reactors (AGRs) at eight sites produced a total of 50.3 TWh for the year, down on the previous year's 51.2 TWh. This was mostly due to what BE chief executive Bill Coley described as "significant challenges" posed by the so-called boiler closure unit issue which has taken out four units and caused the lowering of loads at a further four. Net profits for the year, at £335 million ($660 million), were down on the previous year's £465 million ($916 million).
Boiler issues crucial; Sizewell does well
BE's fleet of AGRs are starting to show their age. Units at four sites have all experienced boiler-related issues over the last two financial years. According to the company, boilers are seen as the plant system at most risk of causing generation losses across the fleet and therefore it is placing "considerable investment focus" on mitigating such risks.
The boiler closure units – or BCUs – which have been causing problems are unique to the Hartlepool and the Heysham 1 sites. A broken wire winding was discovered on a BCU at Hartlepool unit 1 during a planned inspection in September 2007, and BE decided to take its sister units at Hartlepool and Heysham 1 out of service for inspection and assessment. BE expects the four reactors to return to service during the second half of the 2008-2009 financial year. The company has spent about £20 million ($39 million) over the year in connection with the BCUs, and expects the remediation work to cost a further £50 million ($98 million).
The other units experiencing boiler-related problems, at Hinkley Point B and Hunterston B, all returned to service during May and June 2007 following repairs but have had to operate at reduced loads to limit boiler tube temperatures. Two of the reactors - Hunterston B unit 3 and Hinkley Point B unit 4 - are now operating at load factors of around 70%; Hinkley Point B unit 3 is currently running at around 64% and Hunterston B unit 4 is currently off line for a statutory boiler outage.
The UK's sole pressurised water reactor (PWR) at Sizewell B went some way towards making up for the AGR disappointments by achieving a record continuous reactor run of 516 days between its statutory and refuelling outages in September 2006 and March 2008.
Futuregazing
BE's management are upbeat about the central role the company will play in the construction of the UK's new nuclear power plants. It owns eight sites next to existing licensed nuclear facilities, described as among the best potential candidates for new nuclear plants, and has identified four as priority sites for the first new build units: Sizewell, Hinkley Point, Dungeness and Bradwell, all in the south of England. Exactly how BE will fit into the new build is still a matter open to some speculation.
In March 2008, the company announced that it was in talks on a takeover or merger, with various European utilities including EOn, RWE, Electricité de France (EdF) and Iberdrola, as well as the UK's Centrica, reported to be interested in acquiring a stake in BE. Earlier this month, BE reported that none of the bids it had received had been above the prevailing share price and did not represent "value for shareholders." EdF was widely reported as the most serious bidder, making a conditional bid priced between 680p and 700p ($13.30-$13.70) per share - below the 735p ($14.50) per share threshold BE is looking for.
If a sale does not go through, then BE would most likely return to seeking partnerships with companies that want to build new reactors in the UK. All the companies reported to have shown an interest in buying into BE have also expressed a desire to be involved with UK new build, with EdF going as far as to purchase its own land near the Hinkley Point site.
