BRITISH Energy, the nuclear power generator, has emerged from the shadows of its controversial government-sponsored rescue deal by announcing a move back into profit thanks to soaring power prices.

The company, which supplies around a fifth of the UK's energy needs, posted first-quarter profits of GBP64m, having relisted its shares in January. The figures, which showed revenues of GBP521m in the three-month period, are the first to come from British Energy since its restructuring was completed earlier this year following a debt-for-equity swop deal which wiped GBP1bn off its balance sheet.

In a statement, British Energy explained the results ref lected the underlying improvement in its performance as a result of ongoing changes.

Bill Coley, chief executive, said: "The company's improved profitability and positive cash contribution in the first quarter reflects higher realised prices for summer power contracts and underlines our confidence in British Energy's prospects."

British Energy has fixed 85-per cent of its planned output for the year to March 31, 2006, at an average contract price of GBP31.80 a megawatt hour. It maintained its forecast for 63 terrawatt hours of nuclear output for the next two years but conceded this goal was "more challenging" after raising its expected output loss from the Hartlepool and Heysham 1 power plants.

The group, which was saved from the brink of insolvency by a government loan, said it had achieved prices 37-per cent higher than in 2004 at GBP24.70 per megawatt hour. However, British Energy warned the recent shutdown of reactors at Heysham in Lancashire and Hartlepool could affect the level of output at fixed prices.

The two reactors were expected to resume service in the middle of October, following work undertaken in the wake of inspections to boiler closure units. The firm has an estate of eight nuclear stations with a capacity of 10,000 megawatts.

British Energy was hammered by a collapse in wholesale power prices during 2003 and needed a government-based restructuring to survive, which saw banks and bondholders write off around GBP1.3bn in debt in return for control of the group.

The Livingston-based group also has sites at Hinkley Point, Somerset; Hunterston, Ayrshire;

Sizewell, Suffolk; and Torness, East Lothian.

City analysts welcomed the results but remained cautious on the output forecasts. In a research note, UBS said: "The impact of results above expectations will be dampened by the increased loss of output from the current outages."

The shares fell 6p to 478p.