British Energy said today that it was almost certain to build the UK’s first new nuclear power plants for 20 years in the South of England, as it revealed that partners for the £5 billion programme would be selected by March.

The group, which generates a fifth of the UK’s electricity, has held talks with at least ten energy firms, including the British-Gas owner Centrica, about co-funding two new nuclear power stations next to existing sites.

Bill Coley, the chief executive, said that a final decision on which firms to work with on the two new builds would be taken by the end of the current financial year, in seven months’ time.

However, he added that it was increasingly likely that any new build would take place in the South of England given the higher demand for electricity in and around London.

At present British Energy runs eight nuclear power plants, and three — Sizewell, Hinkley and Dungeness — are in the South.

Mr Coley said: “If you look at the need for new capacity at the southern end of the UK or towards the London area, you have a greater load centre and a need for capacity first.

“Public opinion is another consideration, and we have very supportive communities in each of the areas around our existing sites in the South.”

The comments came as power outages at two of its oldest plants, Hinkley, in Somerset, and Hunterston, in Scotland, pushed first-quarter profits down 12 per cent to £253 million.

Operating profits fell by nearly a quarter to £168 million.

Both plants are operating at only 60 per cent capacity after repairs to cracked boiler pipes.

It meant that output across the group fell nearly 19 per cent in the three months to July 1.

Realised prices were nearly 5 per cent higher at £40.8 per megawatt hours.

The group acknowledged that it was still too early to say whether it would hit City expectations of an output of 54 terawatt hours this year.

Shares fell 5 per cent, or 24p, to 530p.

The Government opened consultation on the future of the UK’s nuclear power sector in May, but industry experts agree that at least two new nuclear plants will be needed as older sites reach the end of their operating life.

Mr Coley said yesterday that it was clear the UK needed to fill a potential capacity gap and added that he was confident British Energy would extend the life of Hinkley and Hunterston beyond 2011.

“It’s important we find a way forward for both Hinkley and Hunterston,” he said. “We have not yet identified a single factor as to why we cannot extend their life.”

Edmund Reid, an analyst at Cazenove, said that the first-quarter performance had exceeded expectations.

He added: “The continued problems with Hinkley and Hunterston mask an exceptionally strong performance from the other plants.

“We see some upward pressure on output numbers for this year given the performance in the first four months, but it is still early days.”

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