British Energy Group Plc's shares had their biggest decline in 10 months after the U.K.'s biggest power generator cut its production forecast and said it's running two nuclear plants at lower rates than expected.
The company's shares fell 8 percent, or 36.25 pence, to close at 417.75 pence in London. That's the lowest since March 6. The Dow Jones Stoxx Utilities Index fell 2.2 percent.
Lost output at the Livingston, Scotland-based company's eight nuclear plants will probably cause production to drop for a second straight year. The stock fell to a 19-month low in February after halts at Hinkley Point B and Hunterston B atomic plants. The setbacks may hamper government efforts to build new nuclear plants.
“Another disappointment regarding Hinkley Point and Hunterston will once again call into question British Energy's credibility in achieving its output,'' Peter Atherton, an analyst at Citigroup Inc. in London, said today in a note to clients.
The reactors were allowed to start again in May. Temperature restrictions have forced the company to run them at 60 percent of capacity instead of an estimated 70 percent. They will probably never return to full output, British Energy has said.
Output Drops
British Energy's nuclear output declined by 15 percent in the quarter through June, Chairman Adrian Montague said last month at the company's annual general meeting. The company produced 13 terawatt-hours at its atomic units, down from 15.3 a year earlier. That meant it had less electricity to sell compared with the same quarter last year.
The company's maximum output from its nuclear plants this year is now expected to be 55.5 terawatt-hours, according to its Web site. The previous forecast was 57.5 terawatt-hours. Minimum output is forecast at 44.5 terawatt-hours.
“Output was lower and earnings were down as a result,'' Bill Coley, British Energy's chief executive officer, said on a conference call today. “The good news is that we have returned to service'' the four Hinkley Point B and Hunterston reactors.
Earnings before interest, taxes, depreciation and amortization in the quarter ended July 1 fell 12 percent to 253 million pounds ($502 million), from 289 million pounds a year earlier, the company reported today. A Bloomberg survey of six analysts showed a median estimate of 206 million pounds.
First-quarter net income rose to 179 million pounds, or 25.8 pence a share, from 75 million pounds, or 13.2 pence, a year ago.
Boiler balancing work during planned halts over the next year will be aimed at gradually increasing output at Hinkley Point B and Hunterston B to 70 percent. Capital investment to expand capacity further won't be undertaken this year, the company said.
More Plants Urged
British Energy is seeking proposals from potential partners to build reactors in the U.K., in response to government measures to speed up investment in new and cleaner electricity generation. Electricite de France SA, E.ON AG and RWE AG have all said they want to build reactors in Britain, either on their own or through partnerships. British Energy said today it will make an announcement on partners later in the year.
The U.K. government in June sold 450 million shares in British Energy worth about 2.4 billion pounds, reducing its stake to less than 36 percent. That meant the company had to pay only 171 million pounds into a fund for nuclear cleanup instead of 305 million for the financial year 2006-2007. That gave it a credit of 134 million pounds, the company said.
The government took over responsibility for the cost of closing the company's plants and cleaning up the sites. It created a Nuclear Liabilities Fund to pay for decommissioning costs. The fund gets cash flow equivalent to the size of the state's holding in the company.
