The troubled auction of British Energy suffered a fresh blow yesterday after the group admitted that it had been forced to shut down its second nuclear reactor in a little over 24 hours, further eroding confidence in its assets.

The company said last night that one of its two reactors, at Hunterston, Scotland, had been forced to close shortly before 2pm yesterday because of a technical issue. This followed the unplanned closure of its reactor at Sizewell B in Suffolk on Tuesday over a problem with faulty instrumentation.

British Energy, which forms the backbone of the Government's plans to build a new generation of reactors, made the announcement as it revealed that underlying profits plunged by more than a quarter last year because of rising costs associated with maintaining its eight ageing nuclear plants and one coal-fired station.

The latest shutdowns at Hunterston and Sizewell have left the Government's efforts to stimulate a competitive auction in fresh trouble.

One industry source said: “This is terrible timing for them. It will be hard to get any bidder to pay a full price, taking all this into account.” During the due diligence process British Energy's largest reactor at Torness, Scotland, was forced to shut down.

Potential bidders, including Vattenfall of Sweden and Suez of France, have already dropped out of the process. France's state-owned EDF and a combination of Iberdrola of Spain and RWE, the German utility, are the only serious contenders.

Only EDF submitted a firm offer before a deadline set by NM Rothschild, the investment bank, which is handling the sale.

Bill Coley, the chief executive of British Energy, sought to play down the shutdowns yesterday and said that the problems at Sizewell were nothing significant. He refused to comment on the company's takeover prospects.

However, the Government wants to use the sale of its 35 per cent stake in British Energy to kickstart a campaign to build a new generation of nuclear plants.

The nuclear generator said that the maintenance problems at its power stations had cut 24 per cent of its capacity in the year, and wiped 28 per cent off British Energy's underlying earnings. Its underlying earnings fell from £1.2 billion to £882 million in the year to the end of March.

The company said that the result was slightly better than forecast since the price of electricity jumped in the final quarter of the year as the soaring price of oil was passed on to domestic energy consumers.

While British Energy pointed out that Sizewell could be back in service by this morning, the UK-wide shutdowns yesterday and on Tuesday triggered a warning about the fragility of Britain's power infrastructure.

The incident caused a series of blackouts that left 500,000 homes without power on Tuesday - the most serious disruption to the UK's supply network in more than 20 years.

Two other British Energy stations, at Hartlepool and Heysham 1, were already out of service before this week. The company is dealing with a problem of corroding wires in the pressure wall that surrounds the reactors and they will not return to service until towards the end of this year.

Meanwhile, Hinckley Point B and Hunterston B had been shut for maintenance and returned to service last year but are operating at only 70 per cent or less of their full capacity.

British Energy's shares fell 12p by close of trading yesterday to 725p.

Mr Coley said that the prospects for British Energy were encouraging because rising oil prices had delivered a significant boost to the nuclear industry. He said that the economics of generating power from nuclear stations had improved greatly.

National Grid insisted that conditions in the UK energy market had returned to normal after the upheaval on Tuesday.

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