North America beckons as nuclear power generator's profits more than treble to #191m Energy in abundance

The monopoly nuclear power generator saw pre-tax profits more than treble from #61m to #191m, thanks in part to receiving prices 4% above the pool and reduced station down time. And it is paying a special 10p dividend in

addition to the 14.7p total payout.

This reflects the renegotiation of contracts with British Nuclear Fuels, which added #30m to profits.

Chief executive Peter Hollins pledged the headquarters of what is now Britain's biggest generator - with 21% of the market - will remain in Edinburgh despite the proposed merger of Scottish Nuclear with Nuclear Electric. The change of management structure will lead to fewer than 200 job losses out of an expected

payroll total of 5000 people by the year 2000.

The main focus for expansion at present is North America, the company is seen in pole position to take over operation of the Ontario Hydro nuclear plants in 2000 with its joint venture partner Peco.

That is generally seen as a more imminent prospect than a deal in America, where British Energy is extremely anxious that any previous liabilities - such as the suggested purchase of Three Mile Island - would be ring-fenced as far as the AmerGen joint venture with Peco is concerned. The Ontario provincial government is looking for a private-public partnership but AmerGen is seeking a 50% stake and an overall private majority shareholding in an operation with around 20 nuclear plants and greater generating power than British Energy owns in Britain.

To that end, it has sent Robin Jeffrey, previously chairman and chief executive of Scottish Nuclear, to Toronto to seek out North American opportunities.

Hollins would say little about how much British Energy would be prepared to spend, other than that the return would have to be in excess of 12% on monies invested.

There are probably two or three other serious contenders for Ontario Hydro which would meet the technical and financial criteria to upgrade the technology and generate substantially greater cash flows.

Robb added that the share price performance had dispelled the notion that it was a ''privatisation too far''.

The City is looking for British Energy to institute a share buy-back. Philip Hollobone of broker Panmure Gordon said that not only were the results excellent but he had pencilled in a share price target of 700p within 12 months. He has upgraded his profits forecast for this year and next to #220m and #245m respectively.

Hollobone added that profits were helped by the life extensions of Hunterston B and Hinckley Point B stations from 30 years to 35 years, adding #20m to annual profits. This process will be repeated this year, with extensions at another two stations.

He pointed out that the lives of the state-owned Magnox nuclear plants are 40 years.

British Energy is also looking at the potential for diversification in Britain and is particularly interested in the Government signalling that it would like a split between generation and distribution. It would be keen to look at some of the regional electricity companies where the US buyers are said to be less than enthralled with their purchases. An option has also been taken on a greenfield site in England to develop a combined cycle gas turbine generating station, although its location is being kept under wraps because of possible local opposition.

The ending of the coal subsidy from the end of March will mean prices paid to Scottish Nuclear by ScottishPower and Hydro-Electric will fall in total by about #20m. British Energy has 55% of the Scottish electricity market and 17% in England and Wales.

There is a #25m exceptional charge relating to the purchase of shares for employee options. British Energy has an exceptionally high participation rate of 98%.

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