LONDON - Britain must keep its ageing nuclear power stations running as long as possible if it is to avoid a damaging shortage of power in five to seven years' time, British Energy Chief Executive Bill Coley said on Thursday.

The nuclear power firm is assessing the economics of extending the lives of its Hinkley Point plant in southwest England and Hunterston plant in Scotland, both due to close in 2011.

"What is critically important for the country is to operate all these units as long as we can," Coley told Reuters in an interview.

"When I take the company view of long-term power prices ... prices would support life extensions," he added. "Although it's unlikely we'll come out with 10-year extensions."

Britain is close to deciding whether to back a new generation of nuclear plants, which would boost the global industry as it recovers from the 1986 explosion at Chernobyl.

Carbon-free power is essential to help Britain meet its goal of cutting CO2 emissions 20 percent below 1990 levels by 2020, but some environmentalists say nuclear is still too risky to consider.

"Our company is the single largest contributor in the UK to the reduction of CO2," said Coley, adding that 33.7 million tonnes of CO2 was avoided last year by way of its carbon-free power.

British Energy said in February it was looking for partners to build new nuclear power stations in Britain if given the go ahead. "More than 10 entities responded," said Coley, adding talks had reached a second round without any party dropping out.

"The interest was robust -- a lot of megawatts of capacity," he said.


NEW REACTORS

Germany's E.ON AG and RWE AG, France's EDF and Britain's Centrica Plc and Scottish and Southern Energy Plc have all previously confirmed an interest in playing a role.

"There are others who are not now in the UK who have also expressed an interest," said Coley.

Britain's electricity network might struggle to handle new 1.6 gigawatt reactors, limiting any new nuclear stations to around 1.3 gigawatts, he added.

Such a plant would cost 1.6 billion pounds to 1.7 billion at current market prices.

"I would think it would be hard to support the construction of more than two at any one time, partly due to workforce constraints," said Coley.

A new generation of nuclear power stations could not be operational before 2016, but a decline in Britain's North Sea gas reserves and power generating capacity alongside continued economic growth could lead to a supply crunch in five to seven years time, he added.

That combined with strong international competition for liquefied gas imports, particularly from the United States, India and China, should support power prices in the future.

"We may see more volatility in short-term prices and generally an uplift in long-term prices," he said."I don't see them returning to the very low levels of 2002."

Falling power prices in 2002, to below 20 pounds per megawatt hour, took British Energy to the brink of collapse, forcing a financial restructuring.

British Energy has suffered minor teething problems with Hunterston and Hinkley since they were shut down last autumn to repair boiler cracks, and the issue has overshadowed significant improvements in the performance of its six other nuclear plants.

"We've seen the precursors of improvements coming through," said Coley when asked whether the change was due to luck or judgement. "I've been pleased with their performance, but we're not across the goal line yet."