British Energy Earnings Fall Less Than Estimated

By Paul Dobson

Aug. 13 (Bloomberg) -- British Energy Group Plc, the nuclear power producer that rejected a bid from Electricite de France SA, reported a smaller decline in profit for the first quarter than analysts estimated.

Earnings before interest, tax, depreciation and amortization for the three months through June fell 49 percent to 129 million pounds ($245 million), beating the 88.5 million- pound median estimate of four analysts surveyed by Bloomberg. The company sold electricity from its coal-fed Eggborough plant at higher rates.

Production was hit by the shutdowns at the Heysham-1 and Hartlepool plants since late last year following the discovery of corroded wires. The repairs are on schedule, Chief Executive Officer Bill Coley said on a conference call today. He declined to comment on the takeover offer.

East Kilbride, Scotland-based British Energy spurned a 12 billion-pound bid from Electricite de France on Aug. 1, two people with knowledge of the talks said. Rivals want to buy the utility to capture rising power prices and build reactors adjacent to its eight nuclear plants. Atomic energy avoids rising fossil fuel costs and penalties for carbon dioxide emissions.

The company left the door open for more talks with Electricite de France after U.K. Business Secretary John Hutton backed the French utility's approach. It's not in discussions about alternative arrangements, Coley, 65, said on a conference call with analysts.

Shares Gain

British Energy rose as much as 10 pence, or 1.4 percent, to 715 pence in London trading and was at 711 pence as of 10:21 a.m. local time.

Net income for the three months through June fell to 62 million pounds, or 6 pence a share, from 179 million pounds, or 25.4 pence a year ago, the company said today in a statement. Its reactors produced 27 percent less power in the quarter compared with the year-earlier period.

``We have been able to benefit from the higher power prices prevailing during the period through the sales of previously uncontracted volumes,'' and wider profit margins from the coal- fired Eggborough power plant, the company said.

British Energy revised up cost estimates for repairs to the Heysham-1 and Hartlepool reactors to 115 million pounds from 50 million pounds and said it plans to start all four reactors in the third quarter of its financial year, the three months from October.

Average Prices

The company's average realized price was 45.70 pounds a megawatt hour, up from 40.80 pounds a megawatt hour the year earlier. It's sold 42.2 terawatt-hours of power for the current year at an average 47 pounds a megawatt hour and 33.3 terawatt- hours for the next year at an average 42 pounds a megawatt hour. It may sell more power at higher prices after completing repairs to its power plants.

U.K. power for delivery this winter, when prices are highest, has more than doubled in the past year to 85.35 pounds a megawatt hour, boosted by higher fuel costs and reduced volumes of spare production capacity.

The U.K. government, which owns 35.6 percent of British Energy, supports the building of new reactors that will replace older plants without increasing carbon-dioxide emissions. The U.K. said it was disappointed by the failure to reach a deal with Paris-based Electricite de France. There was a big difference between the offer price and the price some shareholders wanted, Hutton said.

Centrica Plc, the U.K.'s biggest electricity and gas supplier, has said it would consider merging with British Energy should its attempt to acquire a minority stake in the nuclear power producer fail.

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net