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U.K. Government Cuts British Energy Stake, as Profit Rises

Britain said on Wednesday it planned to sell a 25% stake in British Energy as the nuclear power firm posted a 44% rise in underlying profit and announced its first dividend since a state bail-out.

The Department for Trade and Industry said it planned to sell 400 million shares in British Energy, the country's biggest electrical power producer, cutting its stake to 39percent.

It will use the proceeds -- around 2.2 billion pounds ($4.4 billion) at the current share price -- to help fund the decommissioning of the British Energy's existing nuclear plants.

British Energy shares were down 3.7% at 548 pence.

The government gained a 64% interest in British Energy in 2002, when it led a rescue of the company driven to the brink of collapse by tumbling power prices and a big nuclear clean-up bill. British Energy, whose eight nuclear plants and one coal-fired station are capable of producing about a fifth of the country's electricity needs, has since bounced back, helped by a sharp recovery in energy prices. But its ageing power stations have suffered a string of faults.

The firm received a big boost last week when the government came out in support of building a new generation of nuclear power stations, as it looks to reduce its reliance on imported fuels and cut carbon emissions.

British Energy announced in February that it was inviting potential partners to help build new nuclear plants on its land, and said on Wednesday it had received plenty of interest.

"The interest is far broader and far deeper than I would have expected," Chief Executive Bill Coley told reporters.

He declined to say how many parties it was talking to, or to name them. But he said they included firms with existing nuclear interests, which could include Germany's RWE and E.ON, and some looking to expand into the sector, which analysts said could include utility Centrica.

He also said it was talking to large users of electricity which might want to invest in new nuclear plants, as well as a number of foreign companies, which analysts said was likely to include France's Suez, EDF and Areva.

Profit, Dividends

British Energy said it made adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of1.22 billion pounds ($2.42 billion) in the year ended March31, as higher selling prices more than offset a fall in output.

Forecasts ranged from 1.07 billion to 1.26 billion pounds, according to a Reuters Estimates survey of 13 analysts.

Output fell to 58.4 terawatt hours (TWh) from 68.4 TWh the year before as the firm was hit by a series of unplanned repairs. But fixed contract prices rose to an average 44.2 pounds per megawatt hour (MWh) from 32 pounds the year before.

The firm said it had fixed price contracts in place for about 57 TWh of output for the current financial year at an average of 42 pounds a megawatt hour and for about 33 TWhof output for fiscal 2008-9 at the same price.

Citigroup analysts said this was slightly ahead of their forecasts. But they also said a they were likely to cut their 55 TWh forecast for nuclear output this financial year because of longer-than-expected repairs at the Hunterston and Hinkley plants and noted that the firm was warning of higher costs.

British Energy said its central projection for nuclear output this financial year was around 53.5 TWh, up from 51.2 TWh the year before, and that investment would be toward the higher end of its 250 million to 300 million pound forecast range.

The government said it could sell a further 50 million shares as part of its offering, but that it intended tokeep "a strategic interest" of 29.9% or more.

It said it was using Lazard & Co Ltd as financial adviser and that Citigroup, Deutsche Bank and Merrill Lynch would be book runners for the share sale, which will close at 5:30 pm CET on Thursday.