newbuild at risk
Guardian Unlimited, August 14, 2002
David Gow, industrial editor
Original address: http://www.guardian.co.uk/nuclear/article/0,2763,774220,00.html
Markets punish British Energy for second reactor shutdown
Britain's atomic power industry yesterday suffered
another serious blow to its revival strategy when British Energy, the
country's biggest electricity producer, was forced to shut another of
its 15 reactors.
Its decision to close down a second nuclear reactor at Torness in east
Scotland because of coolant problems that had caused its sister reactor's
shutdown in mid-May saw the already struggling group lose almost a third
of its value on the stock market. Twelve of its 15 reactors are now
The company, beset by plummeting wholesale power prices, warned that
this and other unplanned "outages", or closures, would cut
its output forecast for the year from 67.5 terawatt hours to 63TWh and
cost up to £25m to put right.
With power prices at below £12 a megawatt hour compared with
the £19 BE needs to earn money, analysts warned that the group
would be forced to cut its dividend again and see its profits substantially
It lost £41m before tax on its UK nuclear operations last year
and is known to be losing substantially more this year.
Robin Jeffrey, executive chairman and project manager for Torness during
the 1980s, has already said a 10% cut in power prices this year will
chop £140m off BE's earnings.
The company added to investors' anxiety by being unable to say when
its full complement of reactors would be fully operational.
Yesterday's events, coming on top of BE's decision earlier this month
to shut down its Dungeness B reactor in Kent for unplanned maintenance,
were grist to the mill of anti-nuclear campaigners, who claimed that
nuclear power was unsafe and unreliable.
But a BE spokesman insisted that the decision to close down Torness
- and to carry out inspections at a similar reactor at Heysham, Lancashire
- was entirely precautionary and not for safety reasons. "We trip
the reactors on any sign of mechanical malfunction."
The problems at Torness were caused, the company said, by vibrations
in two of 16 gas circulators which help to cool the two reactors.
The Heysham reactor, they said, was operating normally and safely.
The company insisted that some of the £25m cost of dealing with
the circulators would be borne in the next financial year and any decision
on the interim dividend would be taken when first half figures are published
It also said the cost of lost generation would be partially offset
by insurance for business interruption.
Senior officials said the shutdowns would have no impact on the case
for nuclear new-build. "We are still buoyant about nuclear and,
in terms of what's happened at Torness, this is a relatively minor operational
But investors - who saw BE's share price hit 749p in 1999 - took fright,
with the stock down to just 47p at its lowest yesterday before closing
30% lower at 63p. BE was floated at 105p in 1996.
BE's finances in Britain are so unstable that it is lobbying for exemption
from the Treasury's climate change levy - which, it says, costs it £80m
a year - and is pressing the European commission to ensure that all
generators pay the same business rates. BE says it pays 50% more than
gas and coal generators, at a cost of a further £20m.
The renaissance man
Compact and gregarious, a lover of Burns songs and malt whiskies, Robin
Jeffrey has emerged as chief protagonist of a renaissance of the British
atomic power industry in the face of widespread opposition.
Dr Jeffrey, 63, ousted Peter Hollins as chief executive of British
Energy last year after his lacklustre predecessor had seen the group's
market value more than halved and its profits slashed to near-zero in
three years. Now executive chairman, Dr Jeffrey was the architect of
BE's expansion strategy in north America where he bought stakes in three
US plants and took over six in Canada - and where he sees a profitable
Dr Jeffrey has launched a series of high-profile lobbying campaigns
to persuade the government that the nuclear industry is the key to solving
greenhouse gas emissions and securing long-term supply.
But his efforts, backed by considerable arm-twisting, have so far come
to nought as problems of radioactive waste management remain unsolved,
a series of mishaps at power stations grab headlines and depressed prices
make the economic case for nuclear revival unviable.