http://business.scotsman.com/index.cfm?id=1300782007

HAMISH RUTHERFORD CITY CORRESPONDENT hrutherford@scotsman.com

BRITISH Energy shares suffered again after production fell and it revealed two of its nuclear plants may never again reach full capacity.

The Livingston-based company reported its adjusted net profit for the first quarter had fallen to £91 million, down from £146m in the first quarter last year. A 14 per cent rise in realised prices to £40.80 per megawatt hour at Britain's largest electricity producer was more than offset by a fall in the amount of electricity it generated.

Production fell to 13.8 Terawatt hours (TWh) in the first quarter, down from 17TWh for the same period last year.

Most of the fall was caused by lost production from Hunterston B in Ayrshire and Hinkley Point B in Somerset.

British Energy has been hurt by lower production since last autumn when it found cracks in boiler pipes at both Hinkley Point and Hunterston, forcing lengthy closures. The advanced gas-cooled reactor stations, which both opened in 1976, have been undergoing extensive repairs.

Back up and running, the plants are operating at around 60 per cent load, which British Energy said would be increased to 70 per cent during the course of the year.

However, the company warned that Hunterston B and Hinkley Point B would not be returned to full power until a decision is made over whether to extend their usable life.

Both are currently due to be decommissioned in 2011 and a decision on an extension will be made by the end of March 2008.

Chief executive Bill Coley gave no certainty as to whether he expected the stations' usable life to be extended, or even whether it intended to take part in the next round of nuclear plant construction.

"Any significant investment we might make in new nuclear assets will be taken only when we are comfortable with the prospect of creating value for shareholders," he said.

Coley said performance from the rest of the fleet, including Torness in East Lothian, was "encouraging", with losses excluding the two troubled stations falling from 11 per cent to 6 per cent.

Unusually, British Energy did not name a production target for the year. Analysts had expected the company to produce around 54TWh for the full year, although some warned this could be cut by around 5 per cent after yesterday's results.

Coupled with a day of heavy losses across the markets, the FTSE 100 company fell 36.25p, or 8 per cent, to 417.25p.

Despite resuming dividend payments earlier this year, shares have fallen 29 per cent in three months.

Citigroup analyst Peter Atherton said that, while the bad news on plant performance was only incremental, it came on the back of already poor share performance. "Another disappointment regarding Hinkley and Hunterston will once again call into question British Energy's credibility in achieving its output goals", he said.

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