British Energy will lose almost £1billion in revenue as a result of having two of its biggest nuclear power stations closed for nearly a year.

The generator confirmed yesterday that its Hartlepool and Heysham reactors would remain closed until the second half of this year, reducing the company's total nuclear output for the year by about 16 terawatt hours at a time when wholesale electricity prices are climbing.

At forward wholesale market prices of £60 per megawatt hour, the cost of such a decrease in output rises to almost a £1 billion. Analysts at Deustche Bank have cut their earnings forecast for the power generator for 2008-09 from 50.7p to 33.9p.

British Energy said yesterday that remedial work would take place to enable the return to service of all four reactors at Hartlepool and Heysham. The work will be phased over the second and third quarters of the company's 2008-09 financial year.

Separately, analysts at ABN Amro have told clients that they estimate that British Energy will have to stump up £90million extra to buy power on the open market as a result of the closures.

The £90million bill arises because British Energy is contracted to provide 58.6 terawatt hours of power to energy suppliers and industrial customers at a cost of £41 per megawatt hour. However, it will have to buy a significant proportion of power in the wholesale market, where electricity is trading at present at around £53 per megawatt hour, to meet its commitments.

On top of this bill and the lost revenue from selling its power, British Energy will have to pay £50million for the remedial engineering work and £20 million for the initial investigation of its fleet of power stations.

The nuclear generator was forced to close two power stations in October after it discovered a corroded steel wire in the concrete casing of one of two reactors at its Hartlepool power station, which supplies 1.5million homes with electricity.

The outages represented another blow for British Energy, which was also hit by technical problems at Hinkley Point B, Somerset, and Hunterston B, Ayrshire, in 2006. Those sites returned to service in May, but output is still being affected by load restrictions.

British Energy has been in close discussion with the regulator over returning the problem reactors to service.

The company needed a state bail-out in 2002 after a slump in power prices and a big nuclear clean-up bill drove it to near-collapse.

Under-reacting

Closed
Heysham 1 (two reactors) — Corrosion of wires in the boiler of the cooling system
Heysham 2 (two reactors) — Problem with a water pump
Hartlepool (two reactors) — Corrosion of wires in the boiler cooling system

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