15 May, 2002 – UK nuclear power generator British Energy today reported a full-year pre-tax loss of £493m ($715m), compared to a profit of £57m in 2001, under pressure from continued weakness in the UK wholesale electricity market.
The downturn in results was affected by an exceptional charge of £535m made up of a £300m write-down in the value of a power station and a provision of £209m for commitments made to purchase electricity prior to the introduction of the New Electricity Trading Arrangements (Neta) last spring.
British Energy generates a fifth of the UK’s electricity but faces high fixed costs which have made operating in the UK since Neta more difficult. “Clearly, the main challenge facing our UK business is the dramatic fall in wholesale generation electricity prices,” the company said.
The company called for nuclear generation to be exempted from the Climate Change Levy in order to create a “level playing field”. Nuclear power generation does not involve carbon dioxide emissions, which the levy is designed to discourage.
British Energy’s North American nuclear operations, including Bruce Power in Canada, are performing well and therefore the company’s focus is likely to remain on its North American operations, and in particular its Canadian interests, where it sees most room for growth.
The company said it was making “good progress” in its bid to cut £150m of costs. It also planned to expand its direct sales business in its drive to improve UK performance.
Group turnover fell by £75m to £2.04bn.
British Energy’s share price has been beaten down by the falling wholesale electricity prices and concerns that it lacks the flexibility to prosper under the current market regime. There have also been concerns about dividend cuts, but Keith Lough, finance director, said the company aimed to maintain the dividend and push the share price up. “British Energy does have more opportunities in the UK to begin to develop higher margins, for example from its direct sales service.”
Talks are continuing with British Nuclear Fuels (BNFL) about the possibility of taking over the running of four of its six Magnox reactors, which would produce valuable fees for British Energy.
British Energy said its search for a chief executive would be completed by the end of the financial year.
A final dividend of 5.3p makes a total of 8p for the year, unchanged from 2000/01.