Scotland-based British Energy Group, the largest power producer in the UK, has revealed that its financial problems worsened in 2004 as production problems damaged its operating profit margins.
For the first nine months of the current financial year, ending in March 2005, the company recorded a loss of GBP350 million, while for the third quarter, pre-tax losses were GBP87 million, compared to GBP10 million in the previous year. This is in spite of the fact that sales rose to GBP412 million from GBP369 million.
British Energy’s profitability, which has already been reduced by greater competition in the newly opened up market, has been eroded by problems at its production sites. This has resulted in lower efficiency and in some cases shut downs, such as at its Hartlepool and Heysham 1 stations.
The production problems increased operating unit costs to GBP21.5 per megawatt-hour in the third quarter, up from GBP17.2 a year earlier. Meanwhile, British Energy sold at a rate of GBP20.8 per megawatt-hour during the quarter.
The power station problems have been attributed by Jim Alexander, the chief executive of British Energy, to their age and a lack of investment in maintenance by previous administration. Therefore, one of Alexander’s improvement plans is to hire 230 new technical and engineering staff by March to increase production and reliability.
The poor results come just weeks after the company re-enlisted on the stock exchange after battling through bankruptcy problems last year. Already, 13% of British Energy’s share value has been eroded since trading re-commenced.