Nov. 17 (Bloomberg) -- British Energy Group Plc, the country's largest power producer, ousted its top nuclear executive and said production will be at least 8.2 percent a year lower than forecast because of cracks in reactor boilers.

The removal of Chief Nuclear Officer Roy Anderson after declines in generation may undermine Prime Minister Tony Blair's argument that new reactors can meet the U.K.'s energy needs while cutting greenhouse gases. Six of British Energy's 16 reactors are shut to repair parts of the plants, some of which are more than 30 years old. Production at two generators will be cut for at least 16 months.

``It's bad to change management when things are going wrong,'' said Lakis Athanasiou, an analyst at Collins Stewart Ltd. in London. ``Further output cuts will reduce value.''

Britain's 12 nuclear power stations can provide a fifth of the country's electricity. In France, 58 atomic plants owned by Electricite de France SA generate 84 percent of the country's electricity demand. About 20 percent of U.S. power production comes from nuclear energy.

Annual production will be reduced by 5 terawatt hours or more until at least March 2008, Livingston, Scotland-based British Energy said today in a statement. Earnings before interest, tax, depreciation and amortization for the six months ended Sept. 30 more than doubled, missing analysts' estimates.

Nuclear Delay

The output problems may delay government plans to sell part of its stake in British Energy, which amounts to about two thirds of the company, through the Nuclear Liabilities Fund.

``We clearly need to take into account the position at Hinkley Point B and Hunterston B when considering any potential share sale,'' Nick Turton, a Department of Trade and Industry spokesman, said by phone today. He declined to comment further.

British Energy shares rose 8.5 pence, or 1.8 percent, to close at 477 pence a share in London. They traded as low as 465.5 pence earlier today. The stock has plunged 37 percent since the company said on Aug. 16 that an annual production goal would be difficult to reach because of longer-than-expected repairs at one of its plants.

Cracked boiler tubes at Hunterston B, on the west coast of Scotland, and Hinkley Point B, on the coast of Somerset in southwestern England, will have a ``significant impact on output for this financial year,'' British Energy said. The company also owns Eggborough, a coal-fired power plant, in addition to eight nuclear power stations.

Executive Departs

Anderson's departure ``is a joint decision with the company,'' Bill Coley, chief executive officer, said during a conference call with reporters. ``It's a good time for a transition.''

Anderson was appointed chief nuclear officer in July 2004 by then CEO Mike Alexander. Before joining British Energy, Anderson was president of PSGS Energy Holding LLC's nuclear division in the U.S. He has also worked at General Electric Co.

The closures will ``impact output significantly in the second half of the year,'' Coley said. The CEO will assume Anderson's responsibilities, British Energy said.

The company's latest full-year production target is to generate 61 to 63 terawatt hours of electricity. British Energy declined to reiterate or give a new annual forecast.

Athanasiou in a note estimated that British Energy's full year output will be in a range from 48 terawatt hours to 56 terawatt hours.

CEO Coley

Coley, 63, was appointed chief executive officer last year after a 37-year career at Duke Power Co. in the U.S. He succeeded Alexander, who oversaw the government-sponsored bailout that gave control to bondholders.

British Energy's shares have risen 189 percent since they started trading on Jan. 17, 2005. Over the same period, Europe's largest utility E.ON AG's shares have risen 32 percent. Europe's third-largest utility RWE AG's shares have risen 49 percent over the same period. Shares in Electricite de France, Europe's biggest power producer, have increased 54 percent since the company's shares started trading on Nov. 21 2005.

British Energy's output compares with total U.K. 2005 power production of 398 terawatt-hours, according to figures on the Department of Trade and Industry's Web site.

Energy Mix

British Energy's faulty reactors may set back government efforts to commission new nuclear power stations, replacing ones that will end their useful life in the next two decades.

The government has said nuclear power should be part of Britain's energy mix as the country tries to reduce emissions and prevent energy shortages when aging plants are taken out of service. By 2025, the U.K. will move from producing 80 percent of its natural gas to importing 80 percent, Blair's office estimates.

British Energy has 38 percent of its nuclear capacity out of service, or 3,620 megawatts from a total of 9,568 megawatts.

The company said it hopes to restart one unit at Hunterston and one reactor at Hinkley by the end of December. The remaining two units, one at each site, are scheduled to restart by the end of January, British Energy said.

The four reactors will run at 70 percent of maximum capacity. ``It is prudent to assume this will continue for the period up to the end of March 2008,'' British Energy said. The plants will also be inspected every two years, up from a three-year maintenance cycle, the company said.

Unscheduled stoppages also forced British Energy to shut down the Hartlepool nuclear power plant in September. The two units at Hartlepool will resume production in December, the company said.

British Energy is about two-thirds controlled by the government and owns all but four of the U.K.'s 12 operating nuclear power plants. The only non-nuclear unit in the company's generation fleet, the Eggborough coal-fired station, has a capacity of 1,960 megawatts.

To contact the reporters on this story: Lars Paulsson in London at lpaulsson@bloomberg.net; Paul Dobson in London pdobson2@bloomberg.net

Last Updated: November 17, 2006 12:09 EST