BRITISH Energy, the nuclear generator, will say this week that it returned to profit in the first half of the year following its £1bn debt for equity swap and relisting on the stock market in January.
The Livingston-based group, which generates around one-fifth of the UK's electricity, was saved from falling into administration in 2003 by a £5bn government rescue package after being hit by falling power prices and high operating costs.
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e Bank expects BE to report on Tuesday that it made profits before tax and exceptional items of £127m and earnings per share of 13.4p in the six months to September 30.
BE is expected to say output from its eight nuclear plants - including Torness in East Lothian and Hunterston B in Ayrshire - and its coal-fired plant at Eggborough in Yorkshire rose from 31.7 terawatt hours in the first half of last year to 33.2 terawatt hours in the first half of this year.
The average price BE receives for its electricity is expected to have risen from £17.80 per MWh last year to £25.30 per MWh in the first half of 2005.
In a research note, Deutsche said: "Because BE contracts energy forward, it takes time for higher wholesale prices to impact financials - forward electricity prices for next summer are currently trading at around £41 per MWh."
Citigroup says there is a 96% correlation between the price of power and the performance of BE's shares, and there have been concerns that the price of power may fall this winter.
Citigroup recently described BE as "the most difficult stock in our European coverage list" because of the scale of its restructuring and because of the impact that fluctuations in wholesale power prices has on its shares. BE's shares closed down 0.5p at 486.75p on Friday.
Deutsche Bank rates BE a "buy" and has a price target of 600p. Deutsche is forecasting earnings before interest, tax, depreciation and amortisation of £979m in 2006, £1.24bn in 2007 and £1.5bn in 2008.
