UK - Difficulties Inside Electricity Generator Puts Heat on Energy Chief : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

[Fair use for education and research purpose only]

Title: Results Put Heat on British Energy Chief Source: The Sunday Herald Publication date: 2000-05-14

INVESTOR pressure is mounting on British Energy's chief Peter Hollins after a week of dismal results which highlighted the increasing difficulties inside the UK's largest electricity generator.

Two City banks are reported to be particularly unhappy with the management's performance and questions are being raised about whether Hollins and other board members will survive the annual meeting due for July 13.

One utility analyst said: "It looks as if the management has taken its eye off the ball. There has been a great deal of internal upheaval and this throws into question the future position of Peter Hollins."

Insiders say there is growing friction between the mild-mannered Hollins and abrasive chairman Sir John Robb. The company recently announced job losses and a cost-cutting move out of its high-rent headquarters in prestigious Edinburgh Park back to East Kilbride. Scottish Nuclear was based there after it was privatised in 1996.

Robb, a former Wellcome chairman before the Glaxo takeover, is not afraid to shirk tough decisions and this month dumped Alistair Napier at Hewden Stuart, Britain's largest plant hire group. Napier was forced out after a "very disappointing" performance.

However, Hollins has defiantly defended his record at the company which generates more than a fifth of the UK's electricity from its eight nuclear power stations.

"At British Energy, the management team has been concentrating on delivering the things which are under our control," he said. "We can't really worry too much about what is outside our control and, in particular, the falling electricity price."

Hollins said that Hunterston power station, on the Clyde, was recording record low outages (the time a station is out of service for maintenance). He added that Torness and Hartlepool nuclear power stations were also breaking records and the joint venture with Peco Energy, in Philadelphia, where they now own the Three Mile Island power stations at Harrisburg, was progressing well.

This pioneering acquisition of an American nuclear power station has broken new ground, says Hollins, who, only last year, ins was feted for making the "boldest single investment of the year" and commended for doing the right job for the shareholders.

But there has been a serious of mishaps for the utility, culminating in last week's decision to cut the dividend after a profits warning. The decision to halve the payout to 8p just after buying back #82 million of shares has not done much to boost confidence.

Hollins does not hide the fact that there have been series problems at the Dungeness power stations on the Kent coast. "We had to shutdown to deal with a welding fault which dated back to the construction phase in 1967," said Hollins. "We have detailed the weld and we know its history and who did the work.

"We had to close Dungeness A and then B reactors to inspect every weld. The older power station is back on stream and work on the newer one completed last week. We expect it to be restarted in September."

He continued: "As soon as there is a hint of a problem we shut down. Safety is our number one priority. There is no doubt that British Energy carries an enhanced amount of cost because of the higher risks in nuclear power stations."

While British Energy continues to generate cash, pre-tax profits fell 19% to #241m, which Robb put down to the unplanned generating station outages at Dungeness and Heysham, in Cumbria, and electricity prices falling faster than the implementation of cost savings.

Although there had been a profits warning in March, the City was surprised by the dividend reduction. Sales of nuclear generated electricity fell 12% to #1.62 billion with output 9% lower at 63 TWh, largely as a consequence of difficulties at Heysham 2 and Dungeness B stations.

Hollins said he had tried to be honest and open with the shareholders. "We have tried to alert them to any changes but electricity prices have changed more rapidly."

There has also been high level changes at the company. Mike Low, the executive director and managing director of the nuclear generating division, announced he was leaving last month and Hollins has taken over his responsibilities. "As we go through the transition to the New Electricity Trading Arrangements, I am keen to personally steer our core business through this period of change," he said.

A week previously, Edwin Hamilton, director of business development, left the company after setting up a partnership with the Home Directory internet service.

Now British Energy faces another hurdle when fixed contracts, which guarantee sales, are phased out by 2005, although ScottishPower executives last week were hinting that this might end sooner, causing major problems.

For Hollins, the hot seat will become more unbearable as the months continue.


-- (, May 16, 2000

Moderation questions? read the FAQ