August 2002
Nuclear newbuild at risk
Guardian Unlimited, August 14, 2002
David Gow, industrial editorOriginal address: http://www.guardian.co.uk/nuclear/article/0,2763,774220,00.html
[Posted 14/08/2002]
Markets punish British Energy for second reactor shutdown in Scotland.
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 running.
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 damaged.
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 in November.
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 incident."
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 future.
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.
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