British Energy is a company in the right place at the right time.
It hardly deserves such a favoured strategic position; Thursday’s disappointing news about its two oldest power stations was the latest in a series of problems that have driven the share price down 43 per cent in the past year.
However, it is its good fortune to have two assets that are in limited supply and increasingly heated demand: sites on which to build new nuclear power stations and people to run them.
Its position as Britain’s leading nuclear generator at a time when the country is poised to embark on a round of investment in new reactors makes British Energy an important player. It could ensure a future for the company beyond the life of the power stations that it operates today, of which all but three are due to close by the end of the next decade.
Defeated in court in February over its failure to consult properly on its energy policy, the government has been forced to hold a round of consultations on nuclear power. However, it has made it clear that its intention is to put in place a framework that will be attractive enough to persuade the private sector to invest in new reactors.
Already, more than half a dozen companies, including EDF Energy, Eon and RWE Npower, have signalled interest in being involved in new nuclear build.
Others, such as Centrica, owner of British Gas, have suggested they might commit to buying nuclear electricity.
If all this interest is to come to fruition, however, the companies investing in new reactors need sites – which seem certain to be ones that have already been used for nuclear facilities – and skilled staff.
British Energy’s sites are not the only possible locations for new nuclear power stations but they are probably the best. In a consultants’ report for the government on possible locations published in May, the top seven were all British Energy sites. For nuclear engineers, there is growing demand around the world. With a staff of 6,100, says Bill Coley, chief executive, “fundamentally we represent the nuclear generation workforce of the country”.
Aspiring nuclear generators looking for staff will have trouble finding them elsewhere. Mr Coley says it is talking to “more than 10” companies about potential partnerships, ranging from joint operating agreements to equity participation to long-term supply contracts. But many are going to be disappointed.
When British Energy reaches agreement on partnerships early next year, he says, it is likely to be involved in only “one or two” projects.
“It would stretch the construction capability of the country to pursue more than that number of projects simultaneously, given all the other infrastructure demands that exist,” he adds.
With a commanding position in that narrow gap through which so many electricity generators want to squeeze, Mr Coley is in a position to make a deal on some favourable terms. However, the company still faces many challenges.
Mr Coley says he has not seen any reasons not to extend the lives of Hinkley Point B and Hunterston B, the two 1976 vintage power stations that are scheduled to close in 2011.
A decision needs to be taken by early next year. But these are the stations that were shut for inspections for nine months after cracks were found in boiler tubes and are still being restricted to well below full capacity for safety reasons.
Rising uranium costs are a further pressure, created by the global upsurge of interest in nuclear power.
However, the company is looking at a future with some genuinely exciting possibilities. It is now up to Mr Coley and his team to show they can realise that potential.
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